home sales, prices, inventory all rangebound

 

 - by New Deal democrat

With the continuing desert of official data, the NAR’s existing home sales report - which normally is of secondary importance - temporarily becomes our best look at the housing market. 

To repeat what I’ve mentioned an number of times in the past, after the Fed began hiking rates in 2022, mortgage rates also rapidly rose from 3% to the 6%-7% range, where they have remained ever since. Since sales follow mortgage interest rates, existing home sales rapidly declined to 4.0 million annualized, and have remained in that range, generally +/-0.20 million for the past 3.5+ years - and they did so again this month:

In September, sales came in at 4.06 Million annualized (blue, right scale), a mere 6,000 annualized above August’s rate. As of our last look one month ago, new home sales (gray, left scale) similarly declined and have similarly stabilized in the 625,000-725,000 annualized range. 

In the past several years I have been looking for the new and existing homes markets to rebalance. Existing home inventory has been removed from the market for over 10 years (likely due in part to absentee rental owners buying increasing chunks of inventory), and really accelerated during the pandemic. This caused an acute shortage of houses for sale, which in turn led to bidding wars among buyers and a spike in prices.

A rebalancing of the market more than anything would require an increase in inventory at least to pre-COVID levels, and a deceleration of price increases, or even outright decreases. Which means that the level of sales themselves was far less important than what the median price for an existing home and inventory are telling us about the ongoing rebalancing of the housing market.

The secular decline in inventory reached a nadir in 2022. This series is not seasonally adjusted, so it must be looked at YoY. In September inventory crept up by 5,000 to 1.550 million, exceeding its 2020 level for the same month by 9,000:

Inventory was typically in the 1.7 million to 1.9 million range before the pandemic, which means that the chronic shortage still exists.

But even more important is what happened, and has continued to happen, with prices. As shown in the below graph, the average price of a new home (gray, left scale, not seasonally adjusted) rose almost 40% between June 2019 and June 2022 before slowly declining about -7% through June 2025. Meanwhile, the average price of an existing home (blue, right scale, not seasonally adjusted) rose about 45% between July 2019 and July 2022 and another 5% through July of this year, as was reported last Monet:

With seasonal adjustments are not made, my rule of thumb is that a peak (or trough) occurs when the YoY% change is less than half of its maximum change in the past 12 months. Here are the comparisons in the past 12 months:

September 2.9%

October 4.0%

November 4.7%

December 6.0%

January 4.8%

February 3.6%

March 2.7%

April 1.8%

May 1.3%

June 2.0%

July 0.2%

August 2.2%

September 2.1%

While YoY price increases have crept up since July, they remain well below their past 12 month peak of 6.0%, so it is fair to conclude that, if we could seasonally adjust, house prices are softer than they were last winter and spring.

With softened prices and increasing inventory on a YoY and even 5 years basis, the rebalancing of the housing market appears well underway. Still, with prices of existing homes up about 50% from their pre-pandemic levels, there is still some distance to go.

Redbook, Philly Fed: a whiff of consumer weakening?

 

 - by New Deal democrat

The government shutdown is continuing. The only significant national economic news will be the NAR’s existing home sales report on Thursday. Additionally, the remaining regional Fed surveys will come at the end of this week or next week.

And, as I am still on vacation, don’t be surprised if I play hooky until then.

In the meantime, there are a couple of nuggets with a whiff of a suggestion that the consumer services sector is weakening.

First, the Philadelphia Fed’s nonmanufacturing report was very week. Here’s a graph of employment (blue), new orders (red), and prices paid (gold):

Services inflation has accelerated this year, while employment has been flat, and shrank a little this month, while the new orders component came in at one of the lowest readings in the survey’s entire 15 year history.

Additionally (via Renaissance Macro), the general outlook and diffusion indexes in the survey also came in at among the lowest readings outside of the pandemic lockdowns and the Tariff backlash earlier this year:

Finally, after a strong September, Redbook’s national retail spending survey came in at a weak +5.1% YoY this week:

Well within the range of weekly readings in the past 18 months for this survey, so of course it could very well just be noise.

But without national economic numbers, this is the best information we have. Once more regional Fed’s report, we’ll have a more reliable average.

Initial claims lower than one year ago, an important positive point for the economy

 

 - by New Deal democrat

As per my introduction the past several weeks, despite the government shutdown we can recreate the initial and continuing claims data, because it is based on reporting by the States, plus DC, Puerto Rico, and the Virgin Islands.

Since my forecasting method relies on the YoY% changes, it is almost never an affected by seasonality. Further, by using the same seasonal adjustment for the equivalent week one year ago, we can arrive at a good estimate of what the weekly changes would be.

Tabulating the 53 jurisdications’ reports, for the week ending October 11, unadjusted initial claims totaled 210,639 vs. 225,245 in 2024, which is -6.5% less. 

Last year this week the seasonal multiplier was *1.0655:

Applying it gives us an estimated seasonally adjusted number of 224,000, a decline of -4,000 from one week ago. 

Similarly, adding it to the three previous weeks of data we arrive at a four week moving average of 222,000, which is -14,750, or -6.2% lower than the number of 236,750 one year ago.

As with last year, there is an important caveat about last year in that these were affected by hurricane related layoffs, particularly in Florida and North Carolina. 

Using the same methodology, unadjusted continuing claims for the week ending September 27, totaled 1,654,456 vs. 1,598,184 last year, or 3.5% higher.

The seasonal adjustment for the applicable week last year was *1.16945. Applying it gives us an estimate of 1.935 million continuing claims, or -3,000 lower than one week ago.

As with one week ago, absent hurricane distortions, this continues the general neutral trend of initial and continuing claims, forecasting a weak but not contracting economy in the next several months.

To give you a graphic idea of how this data shakes out, here are initial claims (blue), the four week average (red), and continuing claims (gold) all normed to 0, compared with their readings in the past two years before the shutdown:

 I will continue to estimate this data for the duration of the shutdown

Weekly Indicators for October 13 - 17 at Seeking Alpha

 

 - by New Deal democrat

My “Weekly Indicators” post is up at Seeking Alpha.

About 90% of the high frequency data comes from non-Federal government sources and so is unaffected by the shutdown. It continues to signal no particular stress. But there is no denying that the loss of the monthly official data series (for things like housing, productioin, and employment) means that to a great extent we are “flying blind.” 

But clicking over and reading will bring you about as close as possible as being up to the virtual moment on the state of the economy, and will reward me ever so slightly for organizing the data for you.

DOGE layoffs hit, but still no significant change in initial or continuing jobless claims

 

 - by New Deal democrat

We continue our exercise in flying blind (into terrain?) as the government shutdown prevented the release of housing permits, starts, and construction this morning; and the Fed did not have the data necessary to update industrial production and capacity utilization. The only current information we have on the housing sector is that mortgage applications declined for the third straight week (but are still 20% higher than one year ago), and prospective buyer traffic remains paltry.

The States did report their initial and continuing jobless claims, and these were updated by FRED this morning. I’ll have a complete report on Monday, but here are two preliminary comments.

First, claims from the DOGE layoffs in the Federal government are now showing up. Here’s the non-seasonally adjusted number of initial claims from DC, Virginia, and Maryland in the past year:

These have increased about 3,000 in the past several weeks to a new 12 month high in Virginia, and close to those highs in DC and Maryland.

Next, here are the YoY% changes in initial and continuing claims for the 4 biggest States: CA, FL, TX, and NY, which together make up about 1/3rd of the total:

Initial claims are higher by 1.1%, and continuing claims (with the typical one week delay) are higher by 0.6%.

As a preliminary matter, the bottom line is that there has been no significant increase in jobless claims in the past few weeks - a neutral reading suggesting a slow, but still expanding, economy.