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November 2016 Real Estate Economic Review

Sales of existing homes grew to their highest point since 2007, while new home sales ticked down, and layoffs rebounded from a considerable decline, but remained low overall. Existing Home Sales Existing home sales grew for the second straight month in October to hit their highest level since February 2007, with transactions of single-family homes, townhomes, condominiums and co-ops growing 2 percent to an annual rate of 5.6 million, the National Association of Realtors reported. Compared to last year, October’s performance was 5.9 percent higher than October 2015’s pace of 5.29 million. “October’s strong sales gain was widespread throughout the country and can be attributed to the release of the unrealized pent-up demand that held back many would-be buyers over the summer because of tight supply,” NAR Chief Economist Lawrence Yun said. “Buyers are having more success lately despite low inventory and prices that continue to swiftly rise above incomes. “The good news is that the tightening labor market is beginning to push up wages and the economy has lately shown signs of greater expansion,” he continued. “These two factors and low mortgage rates have kept buyer interest at an elevated level so far this fall.” Looking at prices and supply, October’s median price for existing homes of all types was $232,200, which was 6 percent higher than October 2015’s price of $219,100. (As proof of continued price increases, October’s price gains marked the 56th straight month of year-over-year gains.) Housing inventory at the end of October notched down 0.5 percent to 2.02 million homes for sale, which was 4.3 percent lower than October 2015’s supply of 2.11 million. October’s unsold inventory represented a 4.3-month supply of existing homes for sale at October’s sales pace, which was down from September’s 4.4-month supply. Yun said he was hopeful that October’s sizable increase in housing starts (see last week’s Economic Advisor) will help temper prices. “A prolonged continuation of the robust single-family starts pace seen last month (869,000) would go a long way in giving homeowners much-needed assurance that they can list their home for sale and find a new home to buy within a reasonable timeframe,” he said. New Home Sales While existing home sales surged, new home sales took a hit. Transactions of new, single-family homes in October dropped 1.9 percent from September to an annual rate of 563,000, according to last week’s joint report from the Census Bureau and the Department of Housing and Urban Development. Still, compared to the same period last year, October’s sales were 17.8 percent higher than October 2015’s pace of 478,000. Looking at prices and supply, the median price for new homes sold in October was $304,500 and the average price came in at $354,900. The inventory of new homes for sale at the end of October totaled 246,000, which represented a 5.2-month supply at October’s sales rate. “Home sales are well-positioned for sustained growth in the year ahead,” TD Securities Inc. Macro Strategist Brittany Baumann told the Wall Street Journal. “While the recent jump in mortgage rates may dampen sales activity in the near term, rates remain near historically low levels and barring a significant move higher, sales activity should remain supported by ongoing job growth, rising incomes and a further pickup in single-family residential construction.” Initial Jobless Claims After hitting a 43-year low, lay-offs bounced back, but still remained well within safe territory. First-time claims for unemployment benefits filed during the week ending November 19 surged to 251,000, a large step up of 18,000 claims from the preceding week’s total of 233,000, the Employment and Training Administration reported. Still this kept claims well below the 300,000 mark, which economists consider an indicator of a growing job market. Why the large jump? Economists had actually expected the sizable increase. Why did it happen? Last week’s surge was near Veteran’s Day, and floating holidays can often skew initial jobless claims data. Meanwhile, the four-week moving average — considered a more stable measure of lay-off activity — dipped to 251,000, a decline of 2,000 claims from the prior week’s average of 253,000. This was the 90th straight week of initial claims below 300,000, and the longest such streak since 1970. This week we can expect:

  • Tuesday — Consumer confidence for November from The Conference Board.

  • Wednesday — Personal incomes and spending for October from the Bureau of Economic Analysis.

  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; construction spending for October from the Census Bureau; car and truck sales for November from the auto manufacturers.

  • Friday — Unemployment rate, payrolls, hourly earnings and average workweek for November from the Bureau of Labor Statistics.

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