Tom Moeller

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100202a.jpg" style="width: 353px; height: 265px;" align="right">
Home sales
recovered during December after falling sharply in November with the
(since-extended) expiration of an $8,000 first-time home buyers tax
credit. The National Association of Realtors (NAR) reported that
December pending home sales rose 1.0% from November. Home sales
remained up 20.1% from the January low and the latest increase matched
Consensus expectations.</p><p> Modest monthly gains in home sales were
recorded across the country.&nbsp;</p><p>These home sales figures are analogous
to the new home sales data from the Commerce Department in that they
measure existing home sales when the sales contract is signed, not at
the time the sale is closed. The series dates back to 2001 and the data
is available in Haver's <b>PREALTOR </b>database.<span style="font-weight: bold;"></span></p><p><span style="font-weight: bold;"></span><b>Recent
Development in Mortgage Finance </b>from the Federal Reserve
Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2009/el2009-33.html">here</a>.</p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100202b.jpg" style="width: 312px; height: 265px;">
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<th scope="col" class="firstcol"><b><a ;="" href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM" style="color: white;">Pending Home Sales (2001=100)&nbsp;</a></b></th>
<th scope="col"><b>December</b></th>
<th scope="col"><b>November</b></th>
<th scope="col"><b>October</b></th>
<th scope="col"><b>Y/Y</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
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<td class="firstcol">Total</td>
<td>98.6</td>
<td>95.6</td>
<td>114.3</td>
<td>&nbsp;&nbsp;10.9%</td>
<td>95.1</td>
<td>86.8</td>
<td>95.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>76.1</td>
<td>74.4</td>
<td>100.2</td>
<td>15.0</td>
<td>76.6</td>
<td>73.1</td>
<td>85.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Midwest</td>
<td>86.9</td>
<td>82.6</td>
<td>110.3</td>
<td>8.6</td>
<td>88.7</td>
<td>80.6</td>
<td>89.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>98.4</td>
<td>96.3</td>
<td>115.1</td>
<td>14.8</td>
<td>98.2</td>
<td>89.6</td>
<td>107.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; West</td>
<td>119.9</td>
<td>124.6</td>
<td>128.1</td>
<td>18.6</td>
<td>111.5</td>
<td>99.5</td>
<td>92.3</td>
</tr>
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Home sales recovered during December after falling sharply in November with the (since-extended) expiration of an $8,000 first-time home buyers tax credit. The National Association of Realtors (NAR) reported that December pending home [...]

U.S. Pending Home Sales Improve

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The U.S. Treasury Department reported a U.S. government budget surplus of $27.0 billion during June, which compared to a deficit of $71.0 billion twelve months earlier. The Action Economics Forecast Survey expected a $43.5 deficit. During the first nine months of the current fiscal year, the government ran a budget deficit of $1.337 trillion versus a deficit of $1.273 trillion in the first nine months of FY’24.

Overall revenues in the first nine months of FY’25 increased 6.8% y/y compared to a 10.0% y/y rise in the first nine months of last year. Customs duties surged 94.3% y/y in the first nine months of FY’25 after an 8.0% y/y decline last fiscal year. Individual income tax receipts rose 9.2% y/y compared to last year’s 11.3% y/y gain. The level of corporate tax receipts fell 6.7% y/y so far this year after a 28.4% y/y rise in the first nine months of FY’24. Social insurance revenues increased 3.1% y/y after a 5.2% y/y rise in the first nine months of FY’24, while excise taxes rose 17.3% y/y so far in FY’25 compared to an 8.1% gain in the first nine months of last fiscal year.

Federal government outlays grew 6.3% y/y so far in FY’25 versus a 4.6% y/y rise in the first nine months of FY’24. Defense spending rose 6.0% y/y after a 5.5% y/y rise in the first nine months of last fiscal year. Social Security outlays rose 8.4% y/y in the first nine months of FY’25 versus an 8.2% increase last fiscal year. Interest payments rose 9.7% y/y so far in FY’25 after a 38.1% rise in the first nine months of last fiscal year. Health program spending rose 6.7% y/y after falling 0.5% in the first nine months of FY’24 while Medicare payments surged 15.0% y/y versus a 1.0% y/y decline last year. Income security outlays rose 9.2% y/y in the first nine months of this year compared to an 18.5% y/y decline last year.

Haver's data on Federal Government receipts & outlays are contained in **USECON**. The expectations figure is in the **AS1REPNA** database.

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- Federal receipts strengthen while outlays decline.
- Customs duties increase but interest payments slow.
- Year-to-date deficit increases.

U.S. Federal Government Posts Budget Surplus in June

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The National Association of Realtors' Fixed Rate Mortgage Housing Affordability Index (HAI) declined 3.8% (+5.3% y/y) during May to 97.2 after falling an unrevised 2.3% in April to 101.0, following moderate gains in each of the prior four months. The recent high was 104.9 in September of last year. The level of home affordability remained 8.1% higher than its low of 89.9 in October 2023. The latest level was 45.8% below the high of 179.2 in April 2020.

The decline in affordability in May occurred as the median price of an existing single-family home rose 2.3% (1.3% y/y) to $427,800, and mortgage rates rose to 6.90% from 6.81% in April. The price compared to the record $432,900 in June 2024. The rise in mortgage rates left them above their a low of 6.26% in September of last year, though below a 7.70% high in October of 2023. They remained well above a December 2020 low of 2.73%. In May, the principal & interest payments rose 3.3% (-1.1% y/y) to $2,254 per month, well above the most recent low of $984 in February 2020. Monthly mortgage payments averaged a higher 25.7% of income during May, up from a low of 14.0% of income in April 2020.

The rise in housing costs in May was accompanied by a deterioration in median family income. It fell 0.6% (+4.1% y/y) to $105,204 after rising 1.0% in April. Qualifying income rose 3.3% (-1.1% y/y) to $108,192 after rising 3.5% in April.

Housing affordability declined m/m across the country in May. The index fell 5.7% (+3.1% y/y) to 122.7 in the Midwest, though it remains the most affordable region of the country. In the South, the index declined 2.5% (+7.5% y/y) to 103.0 and the affordability index in the Northeast declined 6.4% (-1.3% y/y) to 86.1. In the West, where homes are the least affordable, the index fell 2.4% (+5.6% y/y) to 69.3 in May.

The Housing Affordability Index (HAI) equals 100 when a median-income borrower qualifies for an 80% mortgage on a median-priced existing single-family home. The HAI had exceeded 100 in each month since July 1990 and reached its all-time high of 213.3 in January 2013.

Data on Housing Affordability can be found in Haver’s **REALTOR** database. Median home sales prices are also available in **USECON**. Higher frequency interest rate data are found in **SURVEYS**, **WEEKLY**, and **DAILY**.

**Demystifying the Federal Reserve's Balance Sheet** from Fed Governor Christopher J. Waller can be found [here](https://www.federalreserve.gov/newsevents/speech/waller20250710a.htm).

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- Home prices & mortgage rates continue to rise.
- Median income declines.
- Affordability falls across country.

U.S. Housing Affordability Weakens in May

Robert Brusca

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French inflation jumped in June, rising by 0.4% in the month on the HICP metric, the same as the monthly rise for France’s CPI and its CPI excluding energy. Not surprisingly the monthly diffusion reading tracks the breadth of inflation rise monthly to 72.7% in June affirming that the breadth of the gain in monthly inflation was substantial. Breadth is sharply higher in June after looking very weak at 18.2% in May. But the month of May followed a broad acceleration with breadth at 90.9% in April. Monthly breadth reading can be quite unstable. Diffusion values above 50% revel inflation acceleration period a period in which inflation acceleration is more common than deceleration.

However, breadth over the sequential periods 3-months, 6-months and 12-months shows inflation acceleration is creeping up as the breadth reading advances on the timeline from 36.4% over 12 months, to 54.5% over 6 months, and to 63.6% over 3 months.

France has been an inflation success story and a growth failure story. The HICP headline inflation last higher than 2% in August 2024 and the domestic CPI excluding energy was over 2% for its 12-month gain in March of 2024. And while the HICP has signs of ongoing slowing, the domestic CPI excluding energy has been relatively stable since September 2024. The CPI excluding energy inflation is running at a weak and well contained pace of 1.6% over 12 months and the weakening HICP undoubtedly has benefited from the ongoing drop in energy prices where Brent costs in euro-terms show an 18.5% drop over 12 months.

The headline HICP for France shows a mixed trend from 12-months to 6-months to 3-months. The domestic CPI is closer to showing steady acceleration. The CPI excluding energy shows persistent acceleration. But the domestic CPI gauge also shows inflation at a pace of just 2.2% over 6 months and 2.6% over 3 months compared to a low 12-month pace of 1.6%. The acceleration in French inflation is mild and the pace of inflation is really controlled.

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France does not look like a percolating pot of inflation, but it may be migrating more to a 2% mode. Much of the improved inflation performance has been on the back of weak economic conditions. France has logged S&P composite PMI readings below 50%, indicating private sector contraction in the economy, since May 2023.

France is the weakest of the big four EMU economies on the PMI metric and on GDP especially since early 2023. Italy, and Spain have PMI readings over 50% going back five-months; for Spain reading is over 50% back to the end of 2023. Germany has posted five composite PMI readings above 50 over the last six months. Even the U.K. that has been struggling has PMI readings above 50% back to 2023 with just one exception.

The EU Commission indexes have Germany as the weakens EMU economy among the Big Four since late 2023; however, that survey has France worsening sharply in weakening in the current month and showing a weaker reading than German in June.

Now that growth in Europe is set to take root, we will see where fundamental inflation progress is able to persist. The Trump tariff threats are still out here and the deadline for imposition is approaching. Trump seems willing to put relatively large tariffs in place. Trump tariffs are going to be a big factor in how all of this will shake out. And a good part of that is going to be how much other countries want to retaliate. The U.S. is simply a huge source of demand for the global economy. If the U.S. current account deficit were a county it would be the 13th largest country in the world; if its imports were a county, they would be the fifth or sixth largest country in the world. The U.S. is a massive source of global demand. And the international community has leaned on the U.S. to provide demand and export markets and jobs for them. But the U.S. now finds itself with massive current account deficit- one that has existed for 33 years in a row. And the U.S. also faces large fiscal deficits. It is in a position where the goose needs to attend its own diet if it is to continue to produce golden eggs. So, the evolution of U.S. tariffs, global growth, and future inflation, all are intertwined. The future remains obscure.

France

French Inflation Moves Up But Stays Low

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Initial claims for unemployment insurance declined to 227,000 (+2.3% y/y, SA) in the week ended July 5, from 232,000 in the previous week, which was revised from 233,000. Initial claims have declined for four straight weeks. The Action Economics Forecast Survey expected 234,000 initial claims for last week. The four-week moving average of initial claims weakened to 236,000 from 241,000. It was the lowest level since the last week of May.

In the week ended June 28, the total number of unemployment insurance beneficiaries – also known as “continuing claims” – rose to 1.965 million (5.9% y/y) in the last week of June after easing to 1.955 million in the prior week. The figure has risen sharply since a low of 1.833 million in the second week of April. 

At the end of June, the insured rate of unemployment (the number of beneficiaries as a percent of covered employment) was 1.3% for the fifth straight week. It has increased from 1.2% since the beginning of 2023 and 1.0% in November 2022.

The insured unemployment rate varied greatly across individual states and territories. In the week ended June 21, the highest unemployment rates were in New Jersey (2.27%) California (2.15%), Washington (2.02%), Massachusetts (1.94%) and Pennsylvania (1.83%). The lowest were in South Dakota (0.28%), Florida (0.39%), Alabama (0.49%) and Virginia & Kentucky, both at 0.53%. Rates in other notable states include Tennessee (0.60%), Texas (1.25%) and Illinois (1.67%). These state data are not seasonally adjusted.

Data on weekly unemployment claims are from the Department of Labor itself, not the Bureau of Labor Statistics. They begin in 1967 and are contained in Haver’s **WEEKLY** database and summarized monthly in **USECON**. Data for individual states are in **REGIONW** back to December 1986. The expectations figure is from the Action Economics Forecast Survey in the **AS1REPNA** database.

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- Unexpected decline to lowest level since mid-May.
- Continuing claims continue to rise.
- Insured unemployment rate remains elevated.

U.S. Initial Unemployment Insurance Claims Fall in Latest Week