Current Climate

Current Climate – 11.08.21

Employment – Total nonfarm payroll employment beat expectations in October with the addition of 531,000 jobs, on the heels of a disappointing 194,000 in September. Year-to-date, monthly job growth has averaged 582,000 and the unemployment rate how sits at 4.6%. October was the tenth  consecutive month of net payroll gains, and job growth was widespread. Notable job gains occurred in leisure and hospitality, professional and business services, manufacturing and transportation and warehousing.

Economy – Real gross domestic product (GDP) increased at an annual rate of 2.0% in Q321 according to the advance estimate released by BEA. Real GDP increased 6.7% in Q2. Increases in GDP in Q3 reflected increases in private inventory investment, personal consumption expenditures, state and local government spending and nonresidential fixed investment, which was partially offset by decreases in residential fixed investment, federal government spending, and exports.

The Conference Board Leading Economic Index® (LEI) for the U.S. increased 0.2% in September to 117.5 (2016 = 100) following a 0.8% increase in August and a 0.9% increase in July.

The rising LEI (though at a slower rate) suggests the economy remains on a more moderate growth
trajectory compared to the first half of the year.

Instigators include the Delta variant, rising inflation fears, and supply chain disruptions, all of which
are creating headwinds for the US economy.

Despite the LEI’s slower growth in recent months,
the strengths among the components remain widespread, and The Conference Board continues to forecast strong growth ahead: 5.7% year-over-year for 2021, and 3.8% for 2022.

Kiplinger reports that the current 12-month inflation rate (5.4%) is expected to rise to 6.1% by the end of the year. This will be the highest rate of inflation since 1990. Going forward, inflation is expected to ease in 2022 to 3% as shortages fade, but that will be still be higher than the 2% yearly average from 2016 to 2019, prior to the pandemic. Kiplinger predicts that stronger inflation is likely
to remain with us for a while.

Existing Home Sales – Existing home sales rebounded in September, rising 7% month-over-month but declined 2.3% to an annual rate of 6.29 million over the year. Each of the four major U.S. regions  either lost ground or remained flat on the basis of year-over-year sales while prices rose across the board, falling within a range of
8.3% in the West to 14.8% in the South.

The median existing home sale price for all housing
types was $352,800 in September, up 13.3%
year-over-year marking 115 consecutive months
of year-over-year price gains.

Single-family home sales decreased to an annual rate
of 5.59 million in September reflecting a
3.1% year-over-year decline,
while existing condominium and co-op sales
recorded an annualized pace of 700,000 units
for a 4.5% year-over-year increase.   

The median existing single-family home sale price was $359,700 in September, up 13.8% year-over-year
and the condo/co-op median sale price was $297,900
for an annual increase of 9.3%.

Housing inventory stood at 1.27 million units at
the end of September, down 0.8% from August
and -13.0% from a year ago.

Unsold inventory sat at a 2.4-month supply
at the current sales pace, down from
2.7 months one year ago.  

Properties typically remained on the market for 17 days
in September, unchanged from July and August
but down from 21 days in September 2020.
86% of homes sold in September 2021 were on
the market less than a month.

Individual investors/second home buyers purchased
13% of homes in September, down from 15%
in August but up from 12% in September 2020.

First-time buyers accounted for 28% of sales in September, down from 31% one year prior.

New Home Sales – Sales of new single-family homes
in September were at a seasonally adjusted annual
rate of 800,000. While 14.0% above the revised
August rate, the pace was 17.6% below the
September 2020 estimate of 971,000.

New home inventory stood at 379,000 at the end
of September representing a 5.7-month supply
at the current sales pace. 

The median sale price of new homes sold in September was $408,800, 18.7% higher than one year ago.

The average sales price of new homes was $451,700 reflecting an 11.5% year-over-year increase.

On a regional basis, the Northeast exhibited a 7.9% increase in sales while the Midwest saw a 34%
decrease, followed by the West, down 27.6%,
and the South (-11.7%).  

Home Ownership Rate – According to the U.S. Census Bureau, the Q3 2021 homeownership rate
was 65.4, down from 67.4 in Q3 2020.

Homeownership rates in the South and West
were lower year-over-year while the
Northeast and Midwest were not statistically different.

Coincidentally, Q3 2021 rental vacancy was lower
year-over-year, dropping to 5.8% from 6.4%.

Pending (Existing) Home Sales – The National Association of Realtors® Pending Home Sales Index (PHSI) dropped 2.3% in September to a reading of 116.7. While 8% lower than a year ago, the PHSI is up 7% from September 2019. 

On a regional basis, contract signings dropped month-over-month and year-over-year in all regions ranging from -5.8% in the Midwest and South to -18.5% in the Northeast. The West nestled in the middle, down 7.2% y/y.

The Zonda New Home Pending Sales Index (NHPSI) came in at 152.5 in September, reflecting a 6.9% month/month increase but a -9.6% year-over-year decline. Sales in six of the 25 select markets rose year/year led by San Francisco (+12.2%), Seattle (+4.4%), and New York (+3.6%).

Mortgage Activity – According to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending October 29, 2021, mortgage applications had decreased 3.3% on a seasonally adjusted basis from one week earlier. Purchase mortgage activity has been on a slight downward trend since September.

As of October 28th, the average 30-year fixed rate mortgage was trending upward, rising five basis points
to 3.14%, according to Freddie Mac’s most current
PMMS survey.

Following the money is arguably the most fluid exercise we conduct. At the time, rates had risen roughly 20 basis points over the month and were expected to continue to rise. By the following week, the 30-year fixed mortgage rate was down to 3.09%.

Ciao for now.
Stay safe and be well.