Last Week’s Economic News in Review-Oct 28 2020
Existing home sales shot up, as did housing starts. Meanwhile, layoffs declined, but remained at very high levels.
Existing Home Sales
Sales of existing single-family homes, townhomes, condos and co-ops rose 9.4 percent in September to hit an annual rate of 6.54 million, the National Association of Realtors reported last week. Compared to the same period a year ago, September’s existing home sales were 20.9 percent higher than September 2019’s pace of 5.42 million.
This jump in growth seems counter-intuitive during a pandemic as well as for typical seasonal existing home sales activity. What’s going on?
“Home sales traditionally taper off toward the end of the year, but in September they surged beyond what we normally see during this season,” NAR Chief Economist Lawrence Yun wrote in comments accompanying last week’s report. “I would attribute this jump to record-low interest rates and an abundance of buyers in the marketplace, including buyers of vacation homes given the greater flexibility to work from home.”
To Yun’s point, NAR reported that sales in vacation destination counties have grown since July and posted a 34 percent year-over-year gain in September.
Looking at price, September’s median price for existing homes of all types was $311,880, which was 14.8 percent higher than September 2019’s median of $271,500, marking the 103rd consecutive month of year-over-year price increases.
While prices were up, supply contracted, with the number of new homes for sale at the end of September at 1.47 million units, representing a 2.7-month supply at September’s sales rate. September’s supply was 1.3 percent below from August and down 19.2 percent from September 2019’s 1.82 million inventory.
Housing Starts
On the housing supply side, starts on the construction of private housing in September reached an annual rate of 1.415 million, which was 1.9 percent over August’s rate of 1.388 million, according to last week’s report from the Census Bureau and Department of Housing and Urban Development. Compared to the same period a year ago, this was 11.1 percent higher than September 2019’s pace of 1.274 million.
Starts on single-family homes rose to an annual rate of 1.108 million in September, which was 8.5 percent over August’s pace of 1.021 million. Starts on buildings with five units or more fell to a rate of 295,000, which was 14.7 percent below August’s rate of 346,000.
While the increase in housing starts gave room for optimism, NAR’s Yun cautioned that inventory is historically low.
“To their credit, we have seen some homebuilders move to ramp up supply, but a need for even more production still exists,” he noted in his comments regarding existing home sales.
Initial Jobless Claims
Initial jobless claims filed by recently unemployed Americans during the week ending October 17th fell to 787,000, a decrease of 55,000 claims from the previous week’s average of 842,000 claims, the Employment and Training Administration reported last week.
The four-week moving average, which is considered a more stable measure of jobless claims, fell to 811,250, which was 21,500 claims below the preceding week’s average of 832,750 claims.
“The claims remain very elevated, and the lack of continuing fiscal aid for the unemployed is going to weigh on consumer attitudes and consumer spending,” Oxford Economics’ chief U.S. financial economist Kathy Bostjancic told the New York Times. “It’s a very painful reality for those households who were relying on it.”
This week, we can expect:
Monday – New homes sales for September from the Census Bureau and Department of Housing and Urban Development.
Tuesday – Durable goods orders for September from the Census Bureau; consumer confidence for October from The Conference Board.
Wednesday – Advance trade in goods for September from the Census Bureau..
Thursday – Third quarter GDP from the Bureau of Economic Analysis; initial jobless claims for last week from the Employment and Training Administration.
Friday – Personal incomes and spending for September from the Bureau of Economic Analysis; consumer sentiment for October from the University of Michigan’s Surveys of Consumers.
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