• Retail Sales Rise, Homebuilder Confidence Drops, Mortgage Applications Rebound

    Retail Sales Rise

    U.S. stores, restaurants and other business providers received some positive momentum heading into the holiday shopping season, as October’s retail sales rose 1.3% from the prior month and 8.3% from October 2021, the Commerce Department reported Wednesday.

    Spending on merchandise, restaurant meals and other types of services totaled $694.5 billion in October. Spending in stores was up 7.5% for the year, with gasoline station expenditures rising 17.8% and food service outlays gaining 14.1%. Analysts said the numbers point to continued resilience among consumers in the face of rising rents and mortgage interest rates and historically high inflation.

    “October’s performance is a strong foothold as we go into the holiday season,” Jack Kleinhenz, chief economist at the National Retail Federation trade group, said in a statement. “Spending has gradually slowed but remains solid.” He said the trend will probably continue, with consumers being helped by a strong employment market with rising wages as shoppers also access accumulated savings.

    Matthew Shay, the trade group’s CEO, said retailers are expecting “a solid five-day holiday shopping weekend” later this month, though the group is also watching for potential logistics disruptions from ongoing talks between national railroad operators and labor unions, as negotiators look to avert a strike for the second time in two months.

    For the first 10 months of 2022, retail categories showing the biggest year-over-year spending gains in the latest Commerce Department report included gas stations at 34.4%, building material and supply sellers at 7.6%, food and beverage stores at 7.6%, and clothing and accessories sellers at 7.3%.

    Homebuilder Confidence Drops

    Elevated interest rates, declining housing affordability and high costs for building materials have combined to send U.S. homebuilder confidence to its lowest level since June 2012, the National Association of Home Builders trade group reported Wednesday.

    The group’s monthly survey, conducted with Wells Fargo, showed the November confidence index at 33, down five points from the prior month and marking the 11th straight monthly decline, with numbers below 50 indicating negative sentiment. November’s reading was the lowest in the past decade, with the exception of spring 2020 in the first weeks of the pandemic.

    “Higher interest rates have significantly weakened demand for new homes as buyer traffic is becoming increasingly scarce,” Jerry Konter, the homebuilder group’s chairman, said in a statement.

    The trade group found builders increasingly deploying incentives over the past two months to get new homes sold, with 37% of respondents cutting prices by an average of 6% during November. Just 26% were offering such discounts in September, though average price cuts are still well below the 10% to 12% seen during the Great Recession in 2008.

    Builders are also being squeezed by rising labor costs and supply chain bottlenecks that are keeping material prices elevated. “Although some materials costs have moderated, other costs are still climbing steeply, while contractors are incurring added expenses from delays caused by supply-chain disruptions, shortages of skilled labor, and rising interest rates,” Ken Simonson, chief economist for the Associated General Contractors trade group, said in a statement Tuesday.

    Mortgage Applications Rebound

    Mortgage applications for the week ended Nov. 11 rose 2.7% from the prior week, driven by what appeared to be at least a temporary respite from steadily rising interest rates, the Mortgage Bankers Association trade group reported Wednesday.

    “Mortgage rates decreased last week as signs of slower inflation pushed Treasury yields lower,” Joel Kan, the trade group’s deputy chief economist, said in a statement. Kan noted 30-year, fixed-rate loans “saw the largest single-week decline since July 2022, dropping to 6.9%.”

    The bankers group said purchase application volume last week rose 4% from a week earlier but was down 46% from the comparable week of 2021. Refinance applications were down 2% for the week and declined 88% from the year earlier.

    Interest rates for most types of home loans remain significantly elevated from year-earlier levels. Analysts have noted that single-family pricing and interest trends can affect apartment demand by keeping prospective buyers in the rental pool while waiting for conditions to improve.

    Source: www.CoStar.com