Builder Confidence Slips but Remains High in February

By Mark Lieberman

Managing Director and Senior Economist

Data Highlights:

  • Housing Market Index SLIPPED one point in February to a still-high 74 (out of 100);
  • Each of the components of the HMI FELL one point;
  • Regionally, the index IMPROVED in two of the four census regions, slipping five points in the Midwest and four in the West while increasing five points in the Northeast and two in the South.

Trends:

  • The total HMI fell for two straight months for the first time since the end of 2018;
  • All three components fell month-month for the first time since last June;
  • The current sales measure has declined in three of the last four months.

Data Source: National Association of Home Builders (NAHB)

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Despite continued low-interest rates, the National Association of Home Builders’ Housing Market Index slipped for the second straight month in February but remained at a solid 74 (out of 100).

The index has been above the “break-even” point of 50 for 64 months – since June 2014.

Even though builder confidence has improved, sales of new single-family homes have declined for three straight months and the inventory of new homes for sale remains low. The number of new homes for sales during 2019 averaged 331,000 per month. In the last pre-recession year, 2007, the number of new homes for sale averaged 531,000 per month.

Similarly, builders are adjusting to a new normal in new single-family construction. In 2019, the seasonally adjusted annual rate of single-family starts averaged 894,000 per month down 13.7 percent from 1,036 in 2007.

Builder confidence rose to its highest level in 20 years in early December (based on sentiment at the end of November) as the outlook for current sales, for sales six months forward and buyer traffic all rose.

The increase in confidence has come despite relatively weak new home sales. In the ten years since the end of the Great Recession, new home sales have averaged about 483,000 per month. In the same time span before the Recession began, new home sales averaged 992,000 per month.

The explanation appears to be the Recession itself which discouraged younger families from homownership, reducing construction of new homes. In addition to supply-and-demand mechanics, younger would-be homeowners have redefined the American Dream from a home with a backyard to apartment-style multi-family living closer to jobs and a reduced demand on resources.

Hear Mark Lieberman every Friday on P.O.T.U.S. radio, Sirius-XM 124, at 6:20 am Eastern Time. Follow Mark Lieberman on Twitter at @ foxeconomics.

New Home Sales Fall for 3rd Straight Month

By Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • Pace of contracts for new home sales EDGED DOWN 0.4 percent in December to a seasonally adjusted annual rate (SAAR) of 694,000 but was up 23 percent (130,000) in the last year;
  • The November sales pace originally reported as 719,000 was REVISED DOWN to 697,000
  • The inventory of unsold new homes ROSE 5,000 in December to 327,000;
  • The months’ supply of new homes for sale ROSE to 5.7 in December from 5.5 in November;
  • Median price of a new home RECOVERED to $331,400 in December, up $10,500 after falling $2,500 in November;
  • Year-year the median price of a new home is UP 0.5 percent or $1,700.

Trends:

  • The sales pace for new single-family homes fell for the third straight month
  • The month-month increase in homes for sale was the largest in a year (up 12,000 in December 2018) but the inventory was 19,000 less than December 2018;
  • The number of homes for sale has fallen in eight of the last 12 months.

Data Source: Census Bureau and Department of Housing and Urban Development

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Sales of new single-family homes continued to slip and slide in December, dropping for the third straight month. the Census Bureau and Department of Housing and Urban Development reported Monday. November’s sharp increase in the sales pace was revised down.

Only a sharp surge of new home sales in the West – homes built to replace those destroyed during summer wildfires – prevented the sales data from marking a complete wipeout in sales. (The government report tallies contracts for sale, not closings.) The pace of sales in the West nearly doubled to 241,000 in December from 121,00 a year ago.

A new home sale occurs when a sales contract is signed or a deposit is accepted. The home can be in any stage of construction: not yet started, under construction or completed. In addition to adjusting for seasonal effects, the December reading of 694,000 units is the number of homes that would sell if this pace continued for the next 12 months.

In a report on existing home sale closings, the National Association of Realtors reported a 190,000 or 3.6 percent increase for December with the pace of existing home sales reaching the highest level since March 2018, 21 months.

But new home sales, though up from a year ago, continue to struggle despite builder confidence remaining at high levels. The National Association of Home Builders reported last week an uptick in multi-family construction following a preference by younger buyers for apartments closer to where they work.

New home sales though have been helped by mortgage rates which fell to and have remained near historic lows., offsetting the recent increase in prices.

According to Freddie Mac, the average rate for a 30-year fixed rate loan in December was 3.72 percent, up just a smidgen for 3.70 percent in November.

The challenges to home sales have been slowly disappearing but not enough to anticipate a sharp uptick in sales of new or existing homes. That said, the inventory of existing homes for sale fell to an all-time low in December which could drive more potential buyers to consider new homes.

Hear Mark Lieberman on P.O.T.U.S. (Sirius-XM 124) Friday at 6:20 am Eastern Time. You can follow Mark Lieberman on Twitter at @foxeconomics.

Unemployment insurance Claims Increase

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 211,000 1st-time claims for unemployment insurance for the week ended January 18, 2020, an INCREASE of6,000from the previous week’s upwardly revised 205,000 (from 204.000);
  • The four-week moving average of initial claims FELL 3,250 to 213,350;
  • Four-week moving average represented 0.136 percent of employment, DOWN from 0.138 percent one week earlier;
  • The number of continued claims – individuals who had been collecting unemployment insurance — reported on a one-week lag, was 1,767,000 for the week ended January 11, DOWN 37,000 from the previous week’s UPWARDLY REVISED 1,768,000 (from 1,767,000)
  • The four-week moving average of continued claims ROSE 2,000 to 1,757,750.

Trends:

  • The four-week moving average of first-time claims for unemployment insurance FELL for the third straight week;
  • The four-week moving average of continued claims for unemployment insurance ROSE for the sixth straight week and has increased in 14 of the last 16 weeks;
  • The four-week moving average of continued claims rose to its HIGHEST LEVEL since May 2018

Data Source: Department of Labor

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First-time claims for unemployment insurance blipped up by 6,000 during the week ended January 18, the only blemish in an otherwise positive report on unemployment insurance claims, the Department of Labor reported Thursday.

In another positive development, the Labor Department reported a drop in continued claims for unemployment insurance implying improvement in hiring prospects for long term unemployed. That’s a reversal from two weeks ago when continued claims jumped more than 4 percent, the largest week-week increase since the week ended November 3, 2012

The sharp jump in continued claims followed an equally sharp increase in first-time claims which rose 49,000 in the week ending last December 3, primarily due to California wildfires.

This week’s report offered a first glimpse at indicators for the February 7 Employment Situation release indicating first-time claims for unemployment insurance rose 23,000 from mid-December to mid-January but the four-week moving average fell 12,500 from mid-December to mid-January. That movement suggests little if any change to the 3.5 percent unemployment rate.

You can hear Mark Lieberman Friday mornings at 6:20 am on POTUS’ Morning Briefing, Sirius-XM 124. You can follow him on Twitter at @foxeconomics. 7

Inventory of Homes for Sale Falls to All-time Low

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • The pace of existing home sales – closed sales – ROSE 3.6 percent, 190,000, in December to a seasonally adjusted annual sales rate of 5.54 million;
  • Sales pace for October was unchanged;
  • The inventory of homes for sales FELL 14.6 percent, (240,000) to 1.4 million; the months’ supply of homes for sales dropped 0.7 months to 3.0 months.
  • Median price of an existing single-family home ROSE 1.2 percent, $3,200, to $274,500;
  • Year-year the median price is up 7.8 percent or $19,800;

Trends:

  • Year-year sales were UP 2.7 percent, the fifth consecutive month of year-to year increases after 16 months of year-year declines;
  • The inventory of homes for sales fell for the seventh straight month to its lowest level since the NAR began publishing its home sales report in 1999
  • The months’ supply of homes for sale also fell to the lowest level on record;
  • The annual sales pace of existing single-family homes rose to its highest level since March 2018 (5.6 million);

Data Source: National Association of Realtors (NAR)

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With near record low mortgage rates existing home sales jumped up in December but that could be a temporary blip.

The monthly report of the National Association of Realtors also showed a record low inventory of homes for sale and the months’ supply of homes on the market.

The good news for realtors and sellers alike came with an increase in prices as the median price of an existing single-family home rose 1.2 percent in December, the second straight month-month increase after four straight months of decline.

For those shopping by payment, the price increase was essentially offset by all but flat interest rates. The average rate for a 30-year fixed rate loan in December was 3.72 percent, up a smidgen for 3.70 percent in November.

The decline in inventory could be reversed with the price increase as would-be sellers are enticed back into the market. That would be good news not just for retailers but appliance and furniture retailers who have seen revenues suffer with weak home sales.

For all of 2019, the average pace of home sales was 5,341.000 up just 0.13 percent for 2018 when the average sales pace was 5,334,000.

Hear Mark Lieberman every Friday, on the Morning Briefing on P.O.T.U.S. radio @sxmpotus, Sirius-XM 124, at 6:20 am Eastern Time. You can follow Mark Lieberman on Twitter at @foxeconomics.

Job Openings Fell Sharply in November as New Jobs Dipped

By Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • Job openings at the end of November PLUNGED 7.6 percent to 6.8 million;
  • Hiring in November ROSE 0.7 percent from October to 5.82 million
  • The ratio of job openings per unemployed FELL to 1.17 in November from 1.26 in October

Trends:

  • Job openings dropped in November to the lowest level since February 2018: 6.53 million
  • Number of job openings was down year-year for the sixth straight month for the first time since the end of 2009
  • November hires represented 79.1 percent of end-of-October job openings, weakest percentage since May/June 2019;
  • Job openings per unemployed fell to the lowest level since March

Data Source: Bureau of Labor Statistics

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Despite a strong November jobs report, there were more warnings about the job market Friday in the Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey (JOLTS) report.

Employers managed to add 145,000 new jobs in November even though job openings fell to their lowest level in 21 months. And employers managed to fill almost 80 percent of those openings. Still the hiring record for 2019 looks blotchy. The month-month change in the number of hires has been negative in six of the first 11 months of 2019, compared with just two negative months in 2018.

Still, the projected number of hires for all of 2019 is on track to exceed 2018 hires by 1.5 percent, though the number of separations is also on course to exceed 2018.

And, the ratio of job openings per unemployed, a key measure of employment though well-below Great Recession levels, fell for the first time in four months hinting that getting a job from unemployment is becoming more challenging. That conclusion is borne out by the consistent growth of the four-week moving average of continued unemployment insurance claims.

That ratio fell in several key industry sectors dimming the outlook for growth in trade, manufacturing, and transportation – although the last may be seasonal. The number of job openings in the leisure and hospitality sector fell sharply in November ahead of a seasonal hiring spurt.

Despite slight dips, the number of job openings remained strong in construction, manufacturing and information sectors with an even stronger outlook for transportation, financial activities and traded where the number of job openings rose.

You can hear Mark Lieberman on P.O.T.U.S Morning Briefing (Sirius 124) every Friday at 6:20 am Eastern Time. Follow him on Twitter at @foxeconomics.

Housing Starts Hit 13-year High in December

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • Homebuilding activity, measured by housing starts ROSE sharply in December hitting the highest level in 13 years,
  • The seasonally adjusted annual rate of total starts ROSE 16.9 percent or 233,000 to1.61 million;
  • Starts for new single-family homes ROSE 11.2 percent or 106,000 to 1.05 million;
  • The rate of total housing permits FELL 58,000 or 3.9 percent in December to 1.42 million;
  • The pace of single-family permits fell 5,000 or 0.5 percent to 916.000;
  • The SAAR of all housing completions ROSE 62,000 or 5.1 percent to 1.28 million while the pace of new single-family completions ROSE 6,000 or 0.7 percent to 912,000.

Trends:

  • The month-month increase in total housing starts was the largest since October 2016;
  • Single-family starts rose to the highest level since June 2007;
  • Single-family housing starts were up year-year for the seventh straight month.

 Data Source: Census Bureau and Department of Housing and Urban Development

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Single-family homebuilding moved higher again in December, reinforcing solid builder confidence levels according to the Census Bureau and Department of Housing and Urban Development.

The HUD-Census report showed housing activity reaching new post-recession highs, suggesting a comeback for housing. The home-building data supports strong builder confidence as suggested by the National Home Builders Association’s housing market index. That index slipped one point in January but remains at a solid 75 the NAHB reported Thursday.

Even with the month-month decline in housing permits, single-family permits accounted for 64.7 percent of all permits, up from 62.5 percent in November. For the year, single-family permits represented 63.0 percent of all permits, down from 64.6 percent in 2017 and 2018.

Single-family starts represented 69.0 percent of all starts in 2019, down from 69.9 percent in 2018 and 70.5 percent in 2017.

The downward trend of single-family home building suggests builders are becoming more prudent and more closely matching construction to sales trends. New home sales represented 80.9 percent of starts in the first 11 months of 2019 compared with 73.5 percent in 2017-18.

The report on December 2019 new home sales is scheduled for release on Jan 27.

Builder confidence, as reflected in the National Association of Home Builders’ Housing Market Index, showed a slight slippage in the outlook for current sales of new single-family homes in its January reading though the “buyer traffic” component of the index rose in January.

Hear Mark Lieberman every Friday at 6:20 am on POTUS Morning Briefing, Sirius-XM 124. You can follow him on Twitter at @foxeconomics.

Builder Confidence Slips but Remains High in January

By Mark Lieberman

Managing Director and Senior Economist

Data Highlights:

  • Housing Market Index SLIPPED one point in January to a still lofty 75 (out of 100);
  • Current sales component of the HMI FELL three points to 81;
  • The outlook for future sales (six months out) in the near term was UNCHANGED at 79
  • The measure of buyer traffic ROSE one point to 58
  • Regionally, the index IMPROVED in all four census regions, reaching a three-year high of 86 in the West.

Trends:

  • The total HMI had not fallen month-month since it dipped two points in June to 64;
  • The month-month drop in the total index was only the second in the last 13 months;
  • The three-point slide in current sales was the largest since that measure fell six points in December 2018.

Data Source: National Association of Home Builders (NAHB)

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The National Association of Home Builders’ Housing Market Index teetered back ever-so-slightly to realty as the builder confidence index slipped one point in January to a still high 75.

The index has been above the “break-even” point of 50 for 80 straight months, almost as long as it was mired below 50 – 85 months – in the aftermath of the Great Recession.

During the 80 months, residential construction employment has jumped 36 percent, from 2.15 million to 2.92 million. In the same period – since March 2013 – new home sales have risen 60 percent from a seasonally adjusted annual rate of 449,000 to 719.000 and the median price of a new home is up 32.1 percent, from $250,500 to $330,800.

During that period too the now home market has shifted from single- to multi-family as indicated by government reports on new housing permits and starts.

In March 2013, 65 percent of new building permits were for single-family homes while most recently that share dropped to 61.9 percent. The homeownership rate has fallen too, though not as sharply – from 65 percent to 64.1 percent.

Builder confidence rose to its highest level in 20 years in early December (based on sentiment at the end of November) as the outlook for current sales, for sales six months forward and buyer traffic all rose.

The increase in confidence has come despite relatively weak new home sales. In the ten years since the end of the Great Recession, new home sales have averaged about 483,000 per month. In the same time span before the Recession began, new home sales averaged 992,000 per month.

Hear Mark Lieberman every Friday on P.O.T.U.S. radio, Sirius-XM 124, at 6:20 am Eastern Time. Follow Mark Lieberman on Twitter at @ foxeconomics.

Retail Sales Improve in December on Price Increases, Boosting Holiday Sales

By Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • Retail sales (measured by prices) ROSE 0.33 percent or $1.8 billion in December;
  • Retail sales for November were revised down slightly to show an increase of $527.8 million from October instead of the originally reported $528,0 million.
  • Sales improved at every store category, offsetting a $1.37 billion drop in auto sales;
  • Percentage sales increases were led by a 2.8 percent increase at gasoline stations (where prices declined by 1.7 percent) followed by a 1,6 percent increase in sales at clothing stores;
  • Non-store retailers (essentially online sales) accounted for 12.6 percent of all retail activity in December, up from 12.2 percent in December 2018;
  • All retail activity was up 5.9 percent year-year in December – compared with 3.5 percent in November — while the Consumer Price Index rose 2.3 percent from December 2018 to December 2019.

 Trends:

  • Total retail sales improved month-month in all but two months in 2019 compared with 2018 when sales fell month-month in six of 12 months;
  • BLS reported the number of retail jobs ROSE in December for the third straight month (after seven straight months of decline),

Data source: Census Bureau  

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Consumer spending – measured by retail sales grew $1.8 billion in  December producing a  gain of 4.7 percent for the November-December holiday shopping season over 2018.

The largest (percentage) gain in sales came at furniture stores consistent with the year-end uptick in both new and existing home sales. Appliance stores registered a 0.6 percent December increase, wiping out the 0.3 percent dip in November.

The Census Bureau report on retail activity is not adjusted for price changes which means an increase in prices shows up as an increase in sales, assuming no change in volume. Witness gasoline station sales which rose 2.8 percent in December though the average price of a gallon of gasoline fell 1.7 percent suggesting consumers may have reacted to the lower prices by driving more during the holiday season.

The 3.3 percent year-year increase in furniture store sales in December, followed year-year gains in both new- and existing-home sales though those sales increases have not pushed up sales at appliance stores.

The increase in sales also reflects higher prices from tariff increases in the Administration’s ongoing efforts to improve the nation’s trade deficit by hiking tariffs on goods (and materials) especially those from China.

Consumer spending represents about two-thirds of the economy and retail sales about 55 percent of consumer activity. The retail report suggests good news for fourth-quarter GDP as retailers head into the holiday shopping season though many large retailers have already announced cutbacks.

Hear Mark Lieberman every Friday on the Morning Briefing on P.O.T.U.S. radio @sxmpotus, Sirius-XM 124, at 6:20 am Eastern Time. You can follow him on Twitter at @foxeconomics.  

Unemployment insurance Claims Fall Back but Hiring Backlog Persists

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 204,000 1st-time claims for unemployment insurance for the week ended January 11, 2020, a DECLINE of 10,000from the previous week’s unrevised 214,000;
  • The four-week moving average of initial claims FELL 7,750 to 224,000;
  • Four-week moving average represented 0.136 percent of employment, DOWN from 0.141 percent one week earlier;
  • The number of continued claims – individuals who had been collecting unemployment insurance — reported on a one-week lag, was 1,767,000 for the week ended January 4, DOWN 37,000 from the previous week’s UPWARDLY REVISED 1,804,000 (from 1,803,000)
  • The four-week moving average of continued claims ROSE 10,500 to 1,755,500.

Trends:

  • The number of first-time claims for unemployment insurance fell for the fifth straight week for the first time since last March-April;
  • The four-week moving average of continued claims for unemployment insurance rose for the fifth straight week and has increased for 13 of the last 15 weeks;
  • The four-week moving average of continued claims rose to its highest level since last March

Data Source: Department of Labor

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The pathway from employment to a new job remains clogged according to data from the Labor Department on continued claims for unemployment insurance, suggesting a continued mismatch between available jobs and the newly unemployed.

The increase in the four-week moving average of continued claims represents the backlog in the number of individuals unable to escape from unemployment rolls by getting a new job. Indeed, the data are consistent with statistics in the monthly Employment Situation showing a steady decline in the number of “re-entrants” to the labor force (from unemployment rolls). Since January, the number of re-entrants to the labor force has dropped almost 16 percent and last month represented 28.9 percent of the total number of persons unemployed, down from 31.3 percent a year earlier.

The data suggest strongly unemployed individuals are unable to requalify for the jobs they once had.

The statistics are like those in the monthly Job Openings and Labor Turnover Survey which have been showing gaps between job openings and hires in the same industries.

You can hear Mark Lieberman Friday mornings at 6:20 am on POTUS’ Morning Briefing, Sirius-XM 124. You can follow him on Twitter at @foxeconomics. 7

New Unemployment Insurance Claims Drop but Continued Claims Shoot Up

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 214,000 1st-time claims for unemployment insurance for the week ended January 4, 2020, a DECREASE of9,000from the previous week’s upwardly revised 223,000 (from 222000);
  • The four-week moving average of initial claims FELL 9,500 to 224000;
  • Four-week moving average represented 0.144 percent of employment, UP from 0.142 percent one week earlier;
  • The number of continued claims – individuals who had been collecting unemployment insurance — reported on a one-week lag, was 1,803,000 for the week ended December 28, UP 75,000 from the previous week’s UNREVISED 1,728,000;
  • The four-week moving average of continued claims ROSE 33,000 to 1,744,750.

Trends:

  • The number of initial claims for unemployment fell for the fourth straight week for the first time since March-April last year;
  • The four-week moving average of first-time unemployment insurance claims fell for the first time in five weeks;
  • The week-week increase in continued unemployment insurance claims was the largest since the week ended November 28, 2015 when continued claims rose 80,000.

Data Source: Department of Labor

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First-time claims for unemployment insurance fell back for the fourth straight week, the Labor Department reported Thursday, returning to the recent normal range.

But, the lasting nature of those who lost their jobs in the preceding four weeks showed up in continued claims which jumped 75,000 to the highest level since April 2018.

The job losses came largely in California in the wake of wildfires ravaging that state.

The Labor Department report will have no impact on the Employment Situation release from the Bureau of Labor Statistics due Friday.

That report is expected to continue to show strength. The monthly report from payroll processing firm ADP showed an increase of 202,000 private sector jobs in December. At the same time, the government has begun adding Census workers which should show up as a jump in federal employment in December.

You can hear Mark Lieberman Friday mornings at 6:20 am on POTUS’ Morning Briefing, Sirius-XM 124. You can follow him on Twitter at @foxeconomics. 7