Current Climate – June 2021
Employment – Total non-farm payroll employment rose by
559,000 in May and the unemployment rate
declined by 0.3 percentage points to 5.8%.
The largest job gains were in leisure and hospitality,
public and private education, and health care/social assistance.
Construction employment dropped by 20,000 largely
reflecting job losses in non-residential specialty trades.
Employment in construction is now 225,000
lower than it was in February 2020.
Economy – The U.S. Bureau of Economic Analysis (BEA) reports
that real gross domestic product (GDP) increased at an annual
rate of 6.4% in Q121, reflecting continued economic recovery,
the reopening of establishments, and continued
government response related to the pandemic.
The Conference Board (CB) Leading Economic Index® (LEI)
for April increased 1.6% to 113.3 (2016 = 100) following
a 1.3% increase in March and a 0.1 percent decline in February.
CB had previously projected U.S. Real GDP growth of 3.0%
(annualized) for Q121 and 5.5% over the year.
It now forecasts real GDP could grow 8% to 9%
(annualized) in Q2 with year-over-year economic
growth reaching 6.4%. https://conference-board.org/us/
Based on Census Bureau estimates, the U.S. population
is growing at the slowest pace since 1930.
The U.S. population was 331,449,281 as of April 1, 2020,
reflecting an increase of 7.4% since 2010 or 0.74% per year, on average.
Existing Home Sales – Existing home sales declined
for the third consecutive month in April as
housing supply continued to fall short of demand.
Just one major region saw an increase in April on a
month-over-month basis, but all four U.S. regions recorded
double-digit year-over-year gains.
Sales in April were down 2.7% month-over-month but
up 33.9% year-over-year bringing total (annualized) sales
to 5.85 million. On a year-over-year basis, regional
sales growth ranged from 13.2% in the Midwest to
53.8% in the West, averaging +34.1% overall.
The median existing home sales price for all housing types
was $341,600 in April, up 19.1% year-over-year.
Prices rose in every region.
April marked a record high and 110 consecutive
months of year-over-year gains.
Single-family home sales were at an annual rate of
5.13 million in April for a 28.9% year-over-year increase.
Existing condominium and co-op sales recorded
an annualized rate of 720,000 units
reflecting an 84.6% year-over-year increase.
The median single-family home sales price was $347,400 in April,
up 20.3% year-over-year, while the condo/co-op median sales
price was $300,400 for a 12.6% y/y increase.
NAR reports that sold homes had five offers, on average,
and nearly 50% of homes sold for more than their list price
during the four weeks ending May 16th.
Housing inventory stood at 1.16 million units in April,
down 20.5% from one year ago.
At the current sales pace, unsold inventory represents
a 2.4-month supply.
Properties typically remained on the market for 17 days
in April, down from 27 days a year prior.
88% of homes sold in April were on the market less than a month.
Individual investors/second home buyers purchased 17%
of homes and first-time buyers were responsible for 31%
of sales in April.
While investor/second homebuyer activity was up
seven (7) percentage points year-over-year,
the first-time homebuyer share was down four percentage
points due to the short supply of affordable options
and competition from cash buyers.
New Home Sales – There were 683,000 new homes sold in 2019
and the current pace of sales is on track to exceed that figure this year.
Sales of new single-family homes in April were at
a seasonally adjusted annual rate of 863,000.
While 5.9% below the revised March rate of 917,000,
sales were 48.3% above the April 2020 estimate of 582,000.
Inventory now stands at 316,000 for a 4.4-month supply.
The median sales price of new homes sold in April was
$372,400 and the average was $435,400.
Government regulations on new homes now account
for $93,870 or 23.8% of the current average sales price.
Of that, $41,330 is attributable to regulation during the
planning and development process and $52,540 is
due to regulations imposed during construction.
For perspective, regulatory costs for a new home averaged
$65,000 in 2011 reflecting a 44% increase over the past ten years.
New Residential Construction – Construction activity appears
to be in seasonal moderation but nonetheless outpaced
last year’s activity as COVID continues to be contained.
Building permits in April were at a seasonally adjusted
annual rate of 1.76 million, flat (+0.3%) month-over-month
but up a significant 60.9% year-over-year, reflecting last
year’s bleak pandemic environment.
Housing starts in April were at 1.569 million, down 9.5%
month-over-month but up 67.3% year-over-year
while housing completions were at an annual rate of
1.449 million, down 4.4% month-over-month
but up 21.7% year-over-year.
Homebuilder confidence remained unchanged in the
latest National Association of Home Builders (NAHB)
Wells Fargo Housing Market Index (HMI) report,
holding steady at 83 for new single-family construction in May.
Pending (Existing) Home Sales – The National Association
of Realtors® Pending Home Sales Index (PHSI)
fell in April to a reading of 106.2.
The national month-over-month rate of decline was 4.4% and
all but one region experienced month-over-month declines
ranging from 2.6% in the West to 12.9% in the Northeast.
Only the Midwest enjoyed a month-over-month increase (3.5%).
On a year-over-year basis, transactions jumped 51.7% nationally
as last year’s pandemic stalled sales to an all-time low.
All regions saw significant increases ranging from 39.4%
in the Midwest to 96.5% in the Northeast.
Realtor.com reports that of the largest 40 metros,
the most improved over the past year (as of May 13th)
are Detroit, Tampa, Austin, Jacksonville, and Riverside, CA.
The Zonda (Meyers Research) New Home Pending Sales
Index (NHPSI) came in at 158.2 in March
(the most current data available)
representing a 50.0% increase over the year
but a 6.1% loss month-over-month.
The most impacted markets in March were Denver (+94%);
Philadelphia (+90.9%); and Raleigh (+86.6%).
Zonda Chief Economist Ali Wolfe notes:
“New home trends are going to get hard to decipher
over the coming months.”
“For example, the New Home Pending Sales Index posted
a 50% increase year-over-year, but the growth rate is
based off the weak March 2020 levels.”
“In addition, the index dropped 6.1% month-over-month,
but the drop is largely a function of sales caps and limited inventory.”
Mortgage Activity – According to the latest report
(week ending May 21st) from the Mortgage Bankers
Association (MBA), mortgage applications dropped
4.2% after two straight weeks of increases.
At the same time, mortgage rates popped back up
above 3% after more than a month of sub-3% rates.
Since then, mortgage rates dropped 5 basis points to 2.95%
Ciao for now.
Stay safe, be well, wear a mask or get a shot.