News & Events

Economic Advisor: June 27, 2018
June 27, 2018


Existing home sales continued to decline, while housing starts grew, and layoffs continued to fall.

Existing Home Sales

For the second month in a row, sales of existing single-family homes, townhomes, condominiums and co-ops fell in May, dropping 0.4 percent to an annual rate of 5.43 million, the National Association of Realtors reported last week. Compared to the same period a year ago, May’s sales were three percent below May 2017.

NAR Chief Economist Lawrence Yun chalked up May’s drop to poor inventory, saying that with the current economy and job market, sales volume across the nation should be much higher than where it’s at.

“Closings were down in a majority of the country last month and declined on an annual basis in each major region,” he explained in a public statement. “Incredibly low supply continues to be the primary impediment to more sales, but there’s no question the combination of higher prices and mortgage rates are pinching the budgets of prospective buyers, and ultimately keeping some from reaching the market.”

The reason why inventory is a key factor is that limited supply translates to higher prices. To that point, May’s median price for existing homes of all types hit an all-time high of $264,800, which was 4.9 percent higher than May 2017’s $252,500 and marks the 75th consecutive monthly year-over-year price increase.

That said, the inventory of existing homes at the end of May grew 2.8 percent to 1.85 million units, which is encouraging, but was 6.1 percent lower than May 2017’s 1.97 million existing homes. Inventory has dropped year-over-year for 36 straight months.

Housing Starts

In related housing inventory news, starts on construction of private housing in May hit an annual rate of 1.35 million, which was five percent higher than April’s pace of 1.28 million, according to last week’s joint report from the Census Bureau and the Department of Housing and Urban Development.

Compared to the same period a year ago, May’s housing starts were 20.3 percent higher than May 2017’s pace of 1.12 million. Also, starts on single-family homes grew to an annual rate of 936,000 in May, which was 3.9 percent over April’s pace of 901,000.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed during the week ending June 16 dropped to 218,000, a decline of 3,000 claims over the prior week’s total of 221,000, according to last week’s report from the Employment and Training Administration.

The four-week moving average, which is considered a more stable measure of jobless claims, fell to 221,000, a drop of 4,000 claims from the preceding week’s average of 225,000 claims.

This latest report marked the 172nd straight week that initial claims have come in below the 300,000-claim level, which economists consider an indicator of a growing job market.

This week, we can expect:

  • Monday — New home sales for May from the Census Bureau and Department of Housing and Urban Development.
  • Tuesday — Consumer confidence for June from The Conference Board.
  • Wednesday — Durable goods orders for May from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration.
  • Friday — Personal incomes and spending for May from the Bureau of Economic Analysis; consumer sentiment for June from the University of Michigan Surveys of Consumers.

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