Economic Advisor -February


Last Week's Economic News in Review
February 26, 2020
Sales of existing homes declined, housing starts dipped, and layoffs increased.

Existing Home Sales

Existing home sales continued to yo-yo in January, with transactions of existing single-family homes, townhomes, condos and co-ops declining 1.3 percent for the month to fall to an annual rate of 5.46 million, the National Association of Realtors reported last week. Compared to the same period a year ago, sales were 9.6 percent higher than January 2019's pace of 4.98 million.

First-time buyers continued to make up an increasing share of purchases, representing 32 percent of all sales in January. This was up from December's 31 percent and January 2019's 29 percent.

''It is good to see first-time buyers slowly stepping into the market,'' said NAR Chief Economist Lawrence Yun in a public statement. ''The rise in the homeownership rate among the younger adults, under 35, and minority households means an increasing number of Americans can build wealth by owning real estate. Still, in order to further expand opportunities, significantly more inventory and home construction are needed at the affordable price points.''

Looking at cost, January's median price for existing homes of all types was $266,300, which was 6.8 percent higher than January 2019's price of $249,400. Looking at inventory, the number of existing homes for sale at the end of January was 1.42 million units, representing a 3.1-month supply at January's sale pace. Compared to a year ago, January's amount was down from January 2019's total of 1.59 million homes, which represented a 3.8

''Mortgage rates have helped with affordability, but it is supply conditions that are driving price growth,'' Yun added.

Housing Starts

Continuing to look at supply, starts on the construction of new homes fell to an annual rate of 1.567 million, which was 3.6 percent below December's rate of 1.626 million, according to last week's joint report from the Census Bureau and Department of Housing and Urban Development. However, when compared to the same period a year ago, January's starts were 21.4 percent higher than January 2019's rate of 1,291,000.

Starts on single‐family homes starts in January fell to an annual rate of 1.01 million, which was 5.9 percent down from December's starts of 1.073 million. Meanwhile, starts on buildings with five housing units or more hit an annual rate of 547,000 in January, which was 3 percent higher than December's pace of 531,000.

The bright spot is that there is growing momentum to build, permits to build private housing issued in January grew to an annual rate of 1.551 million, which 9.2 percent higher than December's rate of 1.420 million. Permits for single‐family homes rose to a rate of 987,000 in January, which was 6.4 percent higher than December's pace of 928,000. That said, some housing market watchers cautioned any over-exuberance over January's permit figures.

''Let's wait until the spring when new home starts would normally jump before getting too pumped up about a potential home construction boom,'' Joel Naroff, chief economist at Naroff Economics, told the Associated Press.

Jobless Claims

Looking at layoffs, first-time claims for unemployment benefits filed by recently unemployed Americans during the week ending Feb. 15 grew to 210,000, a gain of 4,000 claims from the previous week's total of 206,000, the Employment and Training Administration reported last week.

The four-week moving average, which is considered a more stable measure of jobless claims, declined to 209,000, which was 3,250 claims down from the preceding week's average of 212,250 claims.

The Administration's latest report marked the 259th straight week that initial claims have come in below the 300,000-claim level, which economists consider an indicator of a growing job market.

This week, we can expect a light calendar of economic releases:
  • Tuesday - 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 - Consumer sentiment for February from the University of Michigan Surveys of Consumers; personal incomes and spending for January from the Bureau of Economic Analysis.