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Home is where the reports are

By Mark Hamrick ·
Monday, February 17, 2014
Posted: 6 am ET

Home is where the heart is for this week's readings on the economy. Housing is at the center of most of the upcoming releases, which are jammed into four days instead of five because of the Presidents Day holiday.

What's on tap?

Here's what's coming up:

  • The National Association of Home Builders releases its housing market index, Tuesday at 10 a.m. (all times Eastern).
  • The Commerce Department reports on January housing starts/building permits, Wednesday at 8:30 a.m.
  • The Labor Department reports on the January Consumer Price Index, Thursday at 8:30 a.m.
  • The National Association of Realtors releases January existing-home sales, Friday at 10 a.m.

More of winter's chill?

Between construction that's put on ice and prospective buyers who don't want to look for homes when the driving is dicey, weather has shifted the economy into a lower gear. Since we've already passed the midway point of the first quarter, growth will be challenged for the first three months of the year, taken together.

We'll see whether the eventual emergence of spring helps the economy gain better traction. Jobs reports over the previous two months have been disappointing.

Builders bullish

We can basically divide the week's housing reports into two similar themes:

  • Construction on new homes.
  • Sales of previously owned homes.

On the new construction side, builder sentiment has been on the rise over the past year, and the outlook is bullish.

David Crowe, the chief economist for the National Association of Home Builders, expects a rise in housing starts this year. "The trajectory is a continuing upswing. I have a pretty aggressive forecast for the year. I think the year for '14 will come in at 1.16 million total starts," he says. That's up from the recent rate of about 1 million starts per year.

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New vs. not-so-new

What about the mix of new and existing home sales? Sales of previously owned homes have dominated more than usual since the financial crisis. That's been helped by the bargain prices of foreclosed homes.

Over the past few decades, new homes typically accounted for about 16 percent of all home sales, Crowe says. Now, new homes represent 8 percent of total sales, which he notes is about half the level where they should be.

But Crowe isn't expecting existing-home sales to show an increase in the upcoming report. What's holding them back? Ultimately, it involves home prices.

"There are still a few people underwater," he says. "I think there are still a fair number of people, while they are above water, they do not have enough equity to trade to the next home."

Darn you polar vortex!

The crazy winter weather has become the villain blamed for lackluster economic data.

Perhaps the biggest recent disappointment was word last week that retail sales fell 0.4 percent in January. Some of those sales will be made up when the weather warms, but meals at frozen-out restaurants are mostly lost forever.

Writing on her blog, economist Diane Swonk with Mesirow Financial said, "We need to start assessing how much of what was lost can be fully recouped, given the seemingly relentless nature of weather disruptions this winter."

Or, in the words of Jack Kleinhenz, the chief economist for the National Retail Federation: "No one can jump to any solid conclusion until we shovel out of the snow.”

This week in business history

Feb. 19, 2008, was the date of a DVD war surrender. That was when Toshiba threw in the proverbial towel on its HD-DVD format. It surrendered in the format war to Sony, which prevailed with Blu-ray technology.

Digital downloads and streaming of movies have since become increasingly popular. That raises the question of how much longer Blu-ray itself will be able to keep going.

What do you think? Are DVDs headed for the home entertainment scrap heap?

Follow me on Twitter: @Hamrickisms.


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