Redbook Sales Solid, MBA Applications, & Pending Home Sales

Redbook Sales - Same-Store Sales Growth Moderates

Redbook sales year over year same-store sales growth rate of 5.4% last week supported the strong consumer sentiment reading. 

Growth fell to 5.2% this week which is still above the 4.6% growth of 2 weeks ago. The deceleration from 9.3% in December has stalled for now. Growth in the mid-single digits is very strong, so remaining at this level is a big positive. 

Retail sales and Redbook weren’t on the same page in December, but it seems obvious the retail sales report was way off. I expect solid retail sales growth in February. Retail sales might not be as strong in January because of the government shutdown.

Redbook Sales - Very Solid MBA Applications

MBA mortgage applications index was great in the week of February 22. It countered the Conference Board reading which stated consumers weren’t in the mood to buy houses or much of anything. 

Personally, I trust applications more than a sentiment reading. That’s because it’s possible people change their minds flippantly. Someone can say they went from wanting to buy a house to pulling back, but unless we see action, it’s immaterial.

It’s easy to measure why housing demand will change. The main factors are the labor market and housing affordability. Real wage growth is still strong, interest rates have fallen, and house price growth has fallen. 

Zillow, which has a great forecasting track record, projects national home price growth will fall from 4.7% to 4.4% in January which would be the weakest growth rate since July 2015. If that’s the case, housing is still becoming less affordable, but at a lower rate. Average weekly wage growth on a non-seasonally adjusted basis was 3.2% in January. 

With wage growth increasing and house price growth falling, their paths will soon cross which would make housing more affordable. If jobless claims remain stable, we could see the housing market improve.

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