News & Events

Economic Advisor: September 27, 2017
September 27, 2017


 

Existing home sales continued their slump, while housing starts were down and layoffs fell.

Existing Home Sales

Sales of existing single-family homes, townhomes, condominiums and co-ops fell 1.7 percent in August to an annual rate of 5.35 million, down from 5.44 million in July, according to last week’s report from the National Association of Realtors. This is the fourth monthly drop in five months, and NAR Chief Economist Lawrence Yun chalked the slump up to poor supply, which is pushing up prices. While the demand is there, the prices are pushing homes out of reach for enough buyers that it is cutting sales volume.

“Steady employment gains, slowly rising incomes and lower mortgage rates generated sustained buyer interest all summer long, but unfortunately, not more home sales,” Yun explained. “What’s ailing the housing market and continues to weigh on overall sales is the inadequate levels of available inventory and the upward pressure it’s putting on prices in several parts of the country. Sales have been unable to break out because there are simply not enough homes for sale.”

And that inventory continued to drop. August’s number of new homes for sale dropped 2.1 percent, falling to 1.88 million units, which constituted a 4.2-month supply at August’s sales rate. Looking at prices, August’s median price for existing homes of all types hit $253,500, which marked a 5.6 percent gain over August 2016’s price of $240,000. This was the 66th consecutive month of year-over-year price increases.

“Market conditions continue to be stressful and challenging for both prospective first-time buyers and homeowners looking to trade up,” Yun noted. “The ongoing rise in home prices is straining the budgets of some of these would-be buyers, and what is available for sale is moving off the market quickly because supply remains minimal in the lower- and mid-price ranges.”

Housing Starts

Turning to construction to gauge the possibility of increased housing inventory, we can see that there’s work to be done. Starts on construction of private housing dipped 0.8 percent in August to fall to an annual rate of 1.18 million, the Census Bureau reported last week. That said, when compared to a year ago, starts were up 1.4 percent over August 2016’s rate of 1.164 million.

Building permits issued for the construction of private housing during August hit an annual rate of 1.3 million, which was 5.7 percent higher than July’s rate of 1.23 million. Moreover, when compared against last year, this was 8.3 percent higher than August 2016’s pace of 1.2 million.

Looking specifically at single-family homes, starts on construction of homes grew 1.6 percent in August to hit 851,000, up from July’s starts of 838,000. Authorizations for construction of single-family homes retreated in August to a rate of 800,000, which was 1.5 percent below July’s permits of 812,000.

Initial Jobless Claims

Once again, hurricanes Harvey and Irma impacted the most recent lay-offs report from the Employment and Training Administration. First-time claims for unemployment benefits filed by the newly unemployed during the week ending September 16 dropped to 259,000, a considerable drop of 23,000 claims from the preceding week’s total of 282,000, the Administration reported last week.

The four-week moving average — regarded as a more reliable measure of initial jobless claims — was thrown as well, notching up to 268,750 claims, a gain of 6,000 claims from the prior week’s average of 262,750. Despite the storm, this marked the 133rd week in which initial claims were below the 300,000-claim level, which economists consider an indicator of a growing job market.

This week, we can expect:

  • Tuesday – New home sales for August from the Census Bureau.
  • Wednesday – Durable goods orders for August from the Census Bureau.
  • Thursday – Initial jobless claims for last week from the Employment and Training Administration; second quarter GDP from the Bureau of Economic Analysis.
  • Friday – Personal incomes and spending for August from the Bureau of Economic Analysis; consumer sentiment for September from the University of Michigan Surveys of Consumers.

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