Economic Snapshot: GDP grows 5.0 percent, highest rate in 11 years

New home sales are unfortunately down from the previous year, but hopefully the strongest GDP growth in over a decade and some positive year-over-year gains in existing-home sales will keep everyone feeling cheerful for the holidays.

GDP

Third-quarter GDP was revised much higher than last month’s estimate, now reporting an increase of 5.0 percent for the strongest rate since 2003.

This large increase is primarily due to positive contributions from personal consumption expenditures, residential and nonresidential fixed investment, federal government spending, exports and state and local government spending. Imports decreased in the third quarter.

The price index rose 1.4 percent, unchanged from last month’s estimate. Real personal consumption expenditures climbed 3.2 percent, compared to 2.5 percent in the second quarter.

Interestingly, real federal government consumption expenditures and gross investment increased 9.9 percent in the third quarter, a huge jump compared to the 0.9 percent decrease in the previous quarter. National defense increased 16.0 percent.

Real final sales increased 5.0 percent in the third quarter, compared to 3.2 percent in the second quarter.

Existing-home sales

Existing-home sales dropped 6.1 percent to an annual rate of 4.93 million in November, falling to their lowest annual pace since May when sales were at 4.91 million. However, existing-home sales are now up 2.1 percent over November 2013, marking the second consecutive month of year-over-year gains of 2.1 percent.

Total housing inventory fell 6.7 percent to 2.09 million existing homes for sales. This represents a 5.1-month supply at the current sales pace, which is unchanged from the previous month. Unsold inventory remains 2.0 percent higher than the previous year, when there were 2.05 million existing homes available.

The median existing-home price for all housing types in November was $205,300. This is 5.0 percent higher than November 2013 and marks the 33rd consecutive month of YOY price gains.

The percentage of first-time buyers climbed to 31.0 percent, up from 29.0 percent in October and is the highest percentage in two years.

Distressed sales – foreclosures and short sales – were unchanged in November at 9.0 percent and are down from 14 percent last year. This is the fourth consecutive month of single-digit percentages of distressed sales.

New home sales

New home sales were at a seasonally adjusted annual rate of 438,000 in November, 1.6 percent below October and 1.6 percent below November 2013.

New home sales in almost every region declined this month. Sales in the Northeast dropped 12.0 percent and are down 33.3 percent from November 2013. In the South, new home sales decreased 6.4 percent and are 4.1 percent lower than the previous year.

New home sales in the Midwest dropped 6.3 percent this month but are still up 3.5 percent YOY. The West is seeing the strongest new home sales growth, up 14.8 percent this month and 10.7 percent higher than November 2013.

The median price of new homes was $280,900 and the average sales price was $321,800. This represents a 5.8-month supply of new homes at the current sales rate. It should be noted that a normal sales rate is 6.0-month or less supply and the all-time record is 12.1 months of supply, in January 2009.