Forex Investment and Currency Trading

The housing vacancy survey showed signs that the imbalance in the housing market is in the process of correcting. The homeowner vacancy rate, which measures the proportion of homeowner inventory that is vacant for sale, declined to 2.5% in Q2 from 2.7% in Q1 and the lowest level since Q3 06. Indeed, the number of vacant homes for sale fell to 1.9 million. In a normal housing market, trend growth in housing stock would imply about 1.5 million vacant homes, suggesting that the excess of vacant homes has shrunk to 400,000 from a high of 750,00 at the end of last year. The decline in the stock of vacant homes, which are largely foreclosed properties or new construction, implies that fewer vacant homes entered the market than have left. The fact that these homes are successfully clearing the market is a positive sign, showing demand for these homes, albeit due to deep discounts. Since foreclosures are likely to continue to flood the market, analysts expect it to take some time for vacant inventory to return to normal levels; but, as long as sales continue to recover, inventory should trend lower. While the homeowner vacancy rate declined, the rental vacancy rate jumped to a new record high of 10.6% in Q2. This is likely a result of inventory being shifted from the for-sale market to the rental market. The excess supply in the rental market puts downward pressure on rental prices and therefore overall inflation.

Also released with this report was the homeownership rate, which slipped to 67.3% in Q2 from 67.4% in Q1, the lowest level since early 2000. The retreat in homeownership does not come as a surprise given the weak pace of home sales and rise in foreclosures.

Michigan consumer sentiment rises in the July final report, but still down from prior two months

The index of consumer sentiment rose to 66.0 in the July final survey, up from 64.6 in the July preliminary release, but still down from 70.8 in June. The main driver of the increase between the preliminary and final survey was the expectations component, which rose to 63.2 from 60.9. Despite the gain in the final survey, consumer sentiment remains depressed relative to June and May. The least amount of respondents in the history of the survey reported recent income gains while the number of consumers experiencing declines in income was at a record high. As a result of falling wealth and uncertain future job prospects, the index of buying plans for homes, vehicles, and household durables also dropped in July to 111 from 121 in June. In terms of inflation, one-year median inflation expectations slipped to 2.9% from 3.1% in June while long-run inflation expectations held at 3.0%.