Last Week’s Economic News in Review-Sep 30 2020
September 30, 2020
Existing home sales continued growing, and new home sales hit pre-Great Recession levels. However, jobless claims gave room for caution.
Existing Home Sales
Sales of existing single-family homes, townhomes, condos and co-ops grew 2.4 percent in August, hitting an annual rate of 6 million, the National Association of Realtors reported last week.
This marked the third straight month of growth, and when compared to the same period a year ago, August’s sales were 10.5 percent higher than August 2019’s rate of 5.43 million.
Home sales continue to side-step the COVID-19 economy.
“Home sales continue to amaze, and there are plenty of buyers in the pipeline ready to enter the market,” NAR’s Chief Economist Lawrence Yun remarked in the report. “Further gains in sales are likely for the remainder of the year, with mortgage rates hovering around 3 percent and with continued job recovery.”
Looking at supply, the number of new homes for sale at the end of August totaled 1.49 million units, marking a three-month inventory at August’s sale pace. This was down 0.7 percent from July’s inventory and when compared to the same period a year ago, was 18.6 percent below August 2019.
The median price for existing homes of all types grew to $310,600 in August, which was marked an 11.4 percent gain over August 2019’s median price of $278,800. This was the 102nd consecutive month of year-over-year price gains. Again, supply and price are joined at the hip, Yun reminded.
“Over recent months, we have seen lumber prices surge dramatically,” he explained. “This has already led to an increase in the cost of multifamily housing and an even higher increase for single-family homes.”
New Home Sales
Sales of new single-family homes rose to an annual rate of 1.011 million in August of 2020, according to last week’s report from the Census Bureau and the Department of Housing and Urban Development. This marked the fastest pace for new home sales since 2006.
August’s sales rate was 408 percent over July’s pace of 965,000, and, when compared to a year ago, marked a surprising 43.2 percent gain over August 2019’s rate of 706,000.
In terms of inventory, the number of new homes for sale at the end of August totaled 282,000, representing a 3.3-month inventory at August’s sales pace. The median price for new homes sold in August 2020 dropped to $312,800, which was 4.3 percent below August 2019’s median price of $327,000.
So what’s going on here? Why are new home sales skyrocketing to pre-Great Recession levels? For the answer, scroll back up to the existing home sales news. The dearth of existing homes is causing homebuyers to seek out new homes.
“Already, more new homes have sold in 2020 than did in all of 2019,” Realtor.com Chief Economist Danielle Hale noted in comments on the news. “With the number of existing homes for sale down consistently and considerably from a year ago, new homes are an important segment of opportunity for home shoppers.”
Initial Jobless Claims
While home sales activity was positive, employment news wasn’t as cheery. First-time claims for unemployment benefits filed by recently unemployed Americans during the week ending September 19 rose to 870,000, which was 4,000 claims higher than the preceding week’s total of 866,000, the Employment and Training Administration reported last week.
The four-week moving average – regarded as a more reliable measure of jobless claims – fell to 878,250 claims, which was 35,250 claims below the previous week’s average of 913,500.
Applications for unemployment insurance have generally been trending down since June, but at a very slow rate. Moreover, it’s important to keep in mind that these figures are incredibly high.
“Compared to April, they’re trending down, but if you’re comparing to the pre-COVID era they are still so high,” Indeed.com Economist AnnElizabeth Konkel told the New York Times. “We’re losing steam, which is definitely not good heading into the winter.”
This week, we can expect:
- Tuesday – Consumer confidence for September from The Conference Board’ trade in goods for August from the Census Bureau.
- Thursday – Initial jobless claims for last week from the Employment and Training Administration; construction spending for August from the Census Bureau and Department of Housing and Urban Development; car and truck sales for September from the auto manufacturers; personal incomes and spending for August from the Bureau of Economic Analysis.
- Friday – Payrolls, unemployment and hourly earnings for September from the Bureau of Labor Statistics; factory orders for August from the Census Bureau; consumer sentiment for September from the University of Michigan’s Surveys of Consumers.
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