Economy Watch: Pending Home Sales Dip; Oil Prices Spike Due to International Jitters
- Aug 29, 2013
Upward-creeping mortgage interest rates seem to be affecting home sales, or least pending sales in some markets. According to the National Association of Realtors on Wednesday, its Pending Home Sales Index dropped from 110.9 in June to 109.5 in July, though it’s still higher than a year ago. Pending sales, a forward-looking indicator based on contacts signed but not closed, have stayed above year-ago levels for the past 27 months.
NAR chief economist Lawrence Yun noted that there’s an uneven pattern to pending sales around the country. “The modest decline in sales is not yet concerning, and contract activity remains elevated, with the South and Midwest showing no measurable slowdown,” he said in a statement. “However, higher mortgage interest rates and rising home prices are impacting monthly contract activity in the high-cost regions of the Northeast and the West.”
The organization also projects that existing-home sales will increase 10 percent for all of 2013 compared with last year, totaling about 5.1 million units, and reach about 5.2 million units next year. With ongoing supply imbalances, the national median existing-home price is expected to grow nearly 11 percent this year, but moderate to a gain of 5 percent to 6 percent in 2014, with rising construction taking some of the heat off of home prices.
Oil Prices Spike Because of International Jitters
The crisis in Syria, and especially the prospect of U.S. military force being brought into the situation, seems to be pushing the price of crude oil upward. On Tuesday, the benchmark crude West Texas Intermediate closed at $109.01 a barrel for October delivery on the New York Mercantile Exchange, up $3.09 from the day before and up from less than $95 in late June; on Wednesday, the price was up to $110.10 a barrel, the highest level in more than two years. Brent North Sea crude, another benchmark, was higher as well.
Syria isn’t a major oil-producing nation, but some of its neighbors are. Oil traders might worry that supply from places, such as Iran, will be disrupted. Lost in the hubbub are indications that supply is still meeting demand, such as a report by the U.S. Department of Energy on Wednesday that said that American oil reserves rose by about 3 million barrels in the week ending Aug. 23. Normally, news like that has a soothing effect on traders.
One question remains for the U.S. economy: will the run-up in crude oil prices have an impact on gas prices? The answer is a definite maybe. Gas prices have been going down lately, as they tend to do toward the end of summer. According to AAA, the average U.S. price for a gallon of regular was $3.546 on Wednesday. A month ago, the average was $3.624.
On Wednesday, Wall Street seemed less worried about armed conflict and made a modest recovery from Tuesday’s slide, with the Dow Jones Industrial Average up 48.38 points, or 0.33 percent. The S&P 500 gained 0.27 percent and the Nasdaq rose 0.41 percent.