Last Week’s Economic News in Review February 24, 2021
February 24, 2021
Existing home sales grew while housing starts fell and layoffs rose.
Existing Home Sales
Existing home sales rose again in January, with transactions of existing single-family homes, townhomes, condos and co-ops growing 0.6 percent from December to an annual rate of 6.69 million, according to last week’s report from the National Association of Realtors. Compared to the same period a year ago, this was 23.7 percent higher than January 2020’s pace of 5.41 million.
This was the highest sales pace since October, and the second-highest pace since 2006, during the housing boom. However, inventory remains a hindrance to overall sales volume, according to NAR Chief Economist Lawrence Yun.
“Home sales continue to ascend in the first month of the year, as buyers quickly snatched up virtually every new listing coming on the market,” Yun noted in comments accompanying NAR’s report. “Sales easily could have been even 20 percent higher if there had been more inventory and more choices.”
Looking at inventory, the number of existing homes for sale at the end of January dropped to 1.04 million units, which represented a 1.9-month supply at January’s sales pace. January’s inventory was 1.9 percent below December’s and 25.7 percent below January 2020’s supply of 1.4 million units.
This tight inventory continues to force prices upward, which attenuates volume, per Yun’s comments. January’s median price for all existing homes of all types was $303,900, which marked a 14.1 percent increase over January 2020’s median price of $266,300. This was the 107th consecutive month of year-over-year gains.
Housing Starts
Starts on the construction of private housing in January fell to an annual rate of 1.58 million, which was 6 percent below December’s rate of 1.68 million, according to last week’s report from the Census Bureau and Department of Housing and Urban Development. This was the first drop since August. When compared to the same period a year ago, this was 2.3 percent lower than January 2020’s pace of 1.617 million.
Starts on single-family homes dropped to an annual rate of 1.162 million in January, which was 12.2 percent down from December’s pace of 1.323 million.
The big driver for the drop in housing starts was a historic jump in lumber prices, which surpassed $1,000 per 1,000 board feet for the first time.
“Lumber now costs more than double what it did this time last year – a fact that has reportedly caused some builders to stop some projects mid-way,” Zillow economist Matthew Speakman wrote in a public statement. “Land and labor shortages also continue to hinder the ability to take on new projects.”
On the positive side, building permits issued for the construction of private homes rose to an annual rate of 1.881 million in January, which was 10.4 percent over December’s rate of 1.704 million. Permits for single-family homes hit a rate of 1.269 million for the month, which was 3.8 percent over December’s pace of 1.223 million.
Initial Jobless Claims
First-time claims for unemployment benefits filed by recently unemployed Americans during the week ending February 13th rose to a four-week high of 861,000, which was 13,000 claims down from the preceding week’s revised total of 848,000 (which was previously reported at a much smaller 793,000), the Employment and Training Administration reported last week.
That said, the four-week moving average – regarded as a more reliable measure of jobless claims – fell to 833,250 claims, which was 3,500 claims below the previous week’s revised average of 836,750.
While the downward turn in the four-week average is good news, the continuing high volume of weekly claims undermines any signs of a recovery.
“We’re going in the wrong direction,” Grant Thornton Chief Economist Diane Swonk told the New York Times. “It’s hard to get away from the fact that week after week, we keep hoping for better, and this is like a sucker punch.”
This week, we can expect:
Monday – Leading economic indicators of January from The Conference Board.
Tuesday – Year-over-year home prices for December from the Federal Housing Finance Agency; consumer confidence for February from The Conference Board.
Wednesday – New home sales for January from the Census Bureau and Department of Housing and Urban Development.
Thursday – Initial jobless claims for last week from the Employment and Training Administration; durable goods orders for January from the Census Bureau; fourth-quarter GDP from the Bureau of Economic Analysis.
Friday – Personal incomes and spending for January from the Bureau of Economic Analysis; consumer sentiment for February from the University of Michigan Surveys of Consumers.
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