Current Climate – 12.27.21
Employment – Total nonfarm payroll employment rose by a disappointing 210,000 in November resulting in a decline in the unemployment rate to 4.2%. This is the tenth consecutive month of net payroll gains, however employment has yet to return to pre-pandemic levels. The largest job gains were in professional services, transportation and warehousing, construction, and manufacturing.
The construction sector got a boost in November with the addition of 31,000 jobs. Nevertheless, construction employment is 115,000 jobs below the February 2020 level. Growth was largely driven by specialty contractors while those employed in construction of buildings and engineering rose by 10,000 and 8,000 jobs respectively. Of the 10,000 construction of building jobs, 4,100 were in the residential sector, and of the specialty trade contractor jobs 6,200 were in residential construction.
The U.S. Department of Homeland Security and the Department of Labor will reportedly issue a “joint temporary final rule” to make available an additional 20,000 H-2B temporary nonagricultural worker visas for fiscal year 2022. The supplemental cap is welcome news to many industries, particularly hospitality and construction.
Economy – Annual GDP growth predictions are all over the map. While the Bureau of Economic Analysis (BEA) reports that real gross domestic product (GDP) increased at an annual rate of 2.3% in Q321 (down from 6.7% in Q221) the Federal Reserve Bank GDPNowcast called for an annual growth rate of 7.2% as of December 16th. We should have the real picture sometime in February.
The Conference Board Leading Economic Index® (LEI) for the U.S. increased by 1.1% in November to 119.9 (2016 = 100), following a 0.9% increase in October and a 0.3% increase in September. “The U.S. LEI rose sharply again in November, suggesting the current economic expansion will continue into the first half of 2022,” said Ataman Ozyildirim, Senior Director of Economic Research.
The Conference Board forecasts real GDP growth to strengthen in Q4 2021 to about 6.5 percent (annualized rate), before moderating to a still healthy rate of 2.2 percent in Q1 2022. TCB also reports that its Consumer Confidence Index® decreased in November after increasing in October. The Index now stands at 109.5 (1985=100), down from 111.6 in October. The decline reflects pessimistic job and income expectations and concerns about inflation.
Inflation pushed November’s Consumer Price Index up 0.8%, and the yearly inflation rate hit 6.8% for a 40-year high. A surge in prices across the board fueled the inflation rate. The indexes for gasoline, shelter, food, used cars and trucks and new vehicles were among the largest contributors. November was the sixth month in a row for price increases.
Existing Home Sales – Existing home sales rose for the third month in a row in November, up 1.9% month-over-month to an annual rate of 6.46 million. However, sales were down 2.0% year-over-year. On a year-over-year basis only the South saw a sale increase, up 1.1%. All other regions saw declines ranging from -0.7% in the Midwest to -11.6% in the Northeast. Conversely, prices rose across all regions ranging from 4.7% in the Northeast to 18.4% in the South, the only region to see double-digit price growth.
Single-family home sales rose 1.6% month-over-month to an annual rate of 5.75 million in November while year-over-year sales declined 2.2%. Existing condominium and co-op sales recorded an annualized pace of 710,000 units, equal to one year ago.
The median existing single-family home sale price was $362,600 in November, up 14.9% year-over-year. The condo/co-op median sale price was $283,200 for an annual increase of 4.4%.
Housing inventory stood at 1.11 million units at the end of November, down 9.8% from October and -13.3% from a year ago. Unsold inventory sat at a 2.1-month supply at the November sales pace, down month-over-month and year-over-year.
Properties typically remained on the market for 18 days in November, equal to October and down from 21 days in November 2020; 83% of homes sold in November were on the market less than a month
Individual investors/second home buyers purchased 15% of homes in November, down from 17% in October and up 14% year-over-year. First-time buyers were responsible for 26% of sales in November, down from 32% one year prior.
New Home Sales – Sales of new single-family homes in November were at a seasonally adjusted annual rate of 744,000. While 12.4% above the revised October rate, the pace is 14.0% below the November 2020 estimate of 865,000. New home inventory stood at 402,000 at the end of November, representing a 6.5-month supply at the current sales pace. The current inventory is 38.6% greater (290,000 units) than it was in November 2020.
Regionally, sales of new homes were down in the Midwest (-44.8%) and the South (-21.2%), and up in the West (+14.2%) and the Northeast (+8.8%), on a seasonally adjusted basis.
The median sale price of new homes sold in November was $416,900, 18.8% higher than one year ago. The average sales price of new homes in November was $481,700 reflecting a 21% year-over-year increase. The current median and average pricing reflects a preponderance of higher priced homes.
Pending (Existing) Home Sales – The National Association of Realtors® Pending Home Sales Index (PHSI) rebounded month-over-month in October, up 7.5% to 125.2. However, on a year-over-year basis, contractual commitments fell 1.4%.
On a regional basis, contract signings rose month-over-month in all regions while dropping year-over-year. The Midwest saw the greatest month-over-month increase (+11.8%), followed by the South, up 8.0%, the Northeast (+6.9%), and the West, (+2.1%). Year-over-year, the South and the Midwest saw increases of 0.6% and 5.1%, respectively, while the Northeast and West reported declines of 10.0% and 6.1%, respectively.
According to Zonda’s New Home Pending Sales Index (NHPSI) the housing market is closing 2021 on a high note as buyer demand slowed only marginally for this time of year. After five months of activity trending below 2020 levels, the NHPSI rose 2.0% year-over-year and 3.6% month-over-month to a reading of 166.1. New York, NY, Orlando, FL and Seattle, WA saw the greatest achievements up +40.8%, +30.6% and +29.9%, respectively.
Home Purchase Sentiment – Fannie Mae’s Home Purchase Sentiment Index (HPSI) decreased 0.8 points to 74.7 in November. As of the last reading, the HPSI is down 5.3 points year-over-year. Attitudes and motivations are relatively subtle:
29% of respondents to the survey believe it is a good time to buy a home, down from 20%
74% believe that it’s a good time to sell a home,
45% of respondents believe prices will go up in the
next 12 months, up from 39%
58% of respondents believe mortgage rates will go up reflecting a 3-point increase
While job concerns were not prevalent,
incomes remain flat
Forecasting – Zillow projects existing home sales will total 6.35 million in the coming year compared to an estimated 6.12 million this year, the highest number of home sales in any year since 2006. Zillow also predicts 11% home value growth in 2022, a decrease from the projected 19.5% for this year. This concurs with a recent report by Redfin that shows homebuyer competition dropping to its lowest level in 11 months in November when 59.5% of Redfin agents faced bidding wars. November was the first time the bidding war rate was below 60% since December 2020. While the rate was down significantly from the pandemic high of 74.6% in April 2021, it remains higher than the 57.3% rate reported in November 2020.
Mortgage Activity – According to the Mortgage Bankers Association, the Market Composite Index, a measure of mortgage loan application volume, decreased 4.0% week-over-week for the week ending December 15rd. The unadjusted Purchase Index decreased 4% on the heels of a 28% decline one week prior, and was 9% lower than the same week one year ago. The average 30-year fixed rate mortgage remained unchanged at 3.30%. A year prior, the 30-year rate averaged 2.782%.
Equity Continues to Grow – ATTOM Data Solutions reports that 39.5% of mortgaged residential properties in the U.S. were considered equity-rich in Q321 reflecting an increase of 5.1 percentage points over Q221 and 11.2 percentage points over Q3 2020. Across the country, 46 states including the District of Columbia saw equity-rich levels increase quarter-over-quarter while seriously underwater percentages decreased in 39 states. Year-over-year, equity-rich levels rose in 49 states including the District and seriously underwater percentages dropped in 47 states including the District.
The largest shares of equity-rich homes are in the West and the least are in the Midwest and South. Eight of the top 10 states with the highest levels of equity-rich homes were in Q321 were in the West. The 10 metros
with the lowest percentages were in
the Midwest and South.
Ciao for now.
Stay safe and be well.