This was the headline from yesterday - “Sales of existing U.S. homes in November rose to the highest level in almost three years as first-time buyers rushed to take advantage of a government tax credit and lower prices.”


This is what we are hearing today - “U.S. new-home sales in south fall to lowest level since 1991”


I suspect that the difference in the performance in existing home sales and new home sales has to do with pricing.  The homebuilders still need to make a margin on the sale of a home versus a consumer wanting out of his/her house.


Last night after the close, the ABC consumer confidence index improved to -42 from -45 last week.    Today, the U. of Michigan consumer confidence final reading for December improved for the first time in three months.  The Reuters/University of Michigan final index of consumer sentiment rose to 72.5, from 67.4 in November. The figure was lower than the preliminary 73.4 reading in early December. 


While most consumers have little confidence in the job market and more than 7 million consumers are unemployed versus this time last year the 23% YTD move in the S&P 500 is benefiting consumer confidence – to a degree. 


The U. of Michigan December reading suggests a lower-high from the 73.5 reading in September 2009.


As I said yesterday, there are a number of sectors in the economy that are bouncing along the bottom and housing is one of them.  Importantly, without Government tax incentives, the housing market would likely still be in a decline.


The river card on this week’s MACRO calendar will be tomorrow’s weekly jobless claims report.  Although the consensus estimate suggests that the number will fall by 10,000 to 470,000, I suspect more Americans than anticipated will have filed first-time claims for unemployment benefits last week.  Last week we were reminded that the labor market will take time to strengthen and that there are parts of the economy that are still struggling.


Howard Penney

Managing Director





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