Existing home sales: trends of increasing prices, invcreasing inventory, and flat sales all continue

 

 - by New Deal democrat

Existing home sales have been flat in the general range of 3.85 -4.10 million annualized for two years, and that continued in January, as on a monthly basis sales decreased -4.9% to 40.8 million from an upwardly revised December number of 4.29 million annualized:

The slightly better numbers in the past few months are of a piece with the slight uptrend in housing permits and starts we saw earlier this week, likely driven by recent lower mortgage rates (which have now ended).

Earlier in 2024 we saw a deceleration in the YoY% change in prices, but that reversed in autumn, as after a 4.0% YoY increase in October, the pace re-accelerated and in December prices were up 6.0%. In January that moderated to up 4.8% YoY, but considering that January is typically the low for annual prices, as shown in the below graph which shows the non-seasonally adjusted data, there is no sign of any real moderation in that trend:

Finally, there has been a decade-long trend of lower inventory than in the past. That trend accelerated during the COVID shutdowns. After briefly turning negative YoY in early 2023, making a low of -3.0% YoY that May, inventory has gradually turned higher. Typically December and January are the annual lows in inventory. In January inventory increased to 1.18 million from December’s low of 1.15 million.  This is the highest inventory for January since 2020 (note: graph below is not updated through January)::

This contrasts with the low of 860,000 in January 2022, vs. the best January level in the past 10 years of 1.86 million in 2015.

As was the case last month, in summary on a non-seasonally adjusted basis sales, prices, and inventory were all up from one year ago, meaning that the market is continuing to slowly recover from the pandemic collapse. The continuing issue is whether enough supply will come back onto the market to allow competition to attenuate YoY price growth that has made existing homes relative to new homes relatively speaking the least affordable ever.

Jobless claims: possibly the final “steady as she goes” report

 

 - by New Deal democrat

Let’s take our weekly look at jobless claims. These are a short leading labor market indicator. Also, it is likely that the firings in the federal labor force will shortly be reflected in this data.

This week initial claims rose 5,000 to 219,000, while the four week average declined -1,000 to 215,250. With the typical one week delay, continuing claims rose 24,000 to 1.869 million:

As usual, the YoY% changes are more important for forecasting purposes. So measured, initial claims were up 9.5%, the four week average up 1.4%, and continuing claims up 4.6%:

These are neutral readings, suggesting a slowly growing economy.

Finally, let’s look at what these suggest about the unemployment rate in the next several months. On a biweekly basis, both initial claims and the composite initial + continuing claims are higher by about 4%. Since the three month average of the unemployment rate one year ago was 3.8%, that suggests an unemployment rate trending to 4.0%:

Here is the absolute version of the same, using the initial + continuing composite:

This is another example of “steady as she goes.” But I suspect that the story might start to change significantly for the worse as early as next week, especially since the outlier low initial claims reading from January 25 will drop out of the four week average.

Housing construction declines further into recessionary territory

 

 - by New Deal democrat

As promised, economic data resumed this morning, and with it my extended posts.

First, the usual point that housing is a very important and leading sector of the economy, typically turning down more than a year before a recession begins. And with higher mortgage rates as well as surging prices, housing has indeed turned down.

This morning the Census Bureau reported that housing permits, the most leading of these metrics, rose 1,000 annualized, while starts, which are noisier and typically lag permits by a month or two, declined -149,000 back into their general 2024 range (although their three month average, which smooths out some of the noise, rose to a 12 month high):

The trend is slightly higher compared with this past summer, but within a limited range over the past two years.

But as I always point out as well, the *real* economic measure of housing is total construction. That had levitated for almost two years after permits peaked before turning down last year. And they declined more this month, down -20,000, or -17.8% percent from their peak (gold, right scale):

Housing construction is now down well into the range where in the past a recession was more likely than not to occur in the near future.

But as I wrote about last week, before a recession begins the even more lagging measure of housing construction employment almost always turns down as well. And as I wrote last week, that measure is *still* levitating, with job growth continuing right up through the latest employment report:

Finally, turning to the metric that leads even permits, here is a look at mortgage rates averaged monthly (blue, left scale) compared with single family permits (red, right scale), which are the least noisy most leading measure of all, and which were unchanged at their 10 month high):

With mortgage rates back hovering around 7%, I expect more of the same from housing permits and starts: very little room to improve in the next few months, and more likely to stagnate or turn back down slightly.

If housing construction is a drag on the economy, and manufacturing is no more than treading water, that makes services all the more important. And I read yesterday that one way to really put a damper on employment and spending is to lay off 100,000’s of federal workers, putting fear into the decisions of not only the workers not laid off, but all of the people likely to be caught up in the ripple effects thereof.

Data drought continues

 

 - by New Deal democrat

There is no new significant economic data today, and I am on the road. Meaningful reporting should resume tomorrow with housing permits, starts, and construction.

In the meantime, here is a look at a high frequency series I keep track of: Redbook retail sales, for the past year:

There are some peaks and valleys, generally around Holidays like Thanksgiving, Christmas, and the like, but the average over four weeks has stayed fairly steady at +5% YoY, which is about normal during expansions.

Since consumer inflation, especially ex-housing prices, has remained in the 2%-3% range, this means there has been a fairly steady increase in consumer spending that has continued over the past year.

In other words, “steady as she goes.” And since the consumer economy is about 70% of the whole economy, that has pretty much been the story for the entire economy.

Weekly Indicators for February 10 -14 at Seeking Alpha

 

 - by New Deal democrat

There’s no significant economic news today. Since I didn’t publish a link to my “Weekly Indicators” post up at Seeking Alpha over the weekend, here it is now.

Left to its own devices, as I’ve written a number of times recently, the economy is in “steady as she goes” mode, with few significant moves in any of the indicators, with the short term forecast and the nowcast both continuing to look good.

Of course, it’s the “left to its own devices” which is, shall we say, chancy at the moment. But in the meantime, clicking over and reading will bring you up to the virtual moment as to the state of the economy, and reward me with some lunch money as well.