Market Matters

As we enter Memorial Day weekend, the same themes have moved the markets, as the U.S. is slowly opening back up and as tensions with the U.S. and China continue to escalate. U.S. stocks continue to rebound from the March lows, while the 10-year continues in its range of 0.54%-0.78%. We think this range will continue to hold until there is a significant change in the outlook for the U.S. economy to move the range.

 

Initial Jobless Claims

Initial jobless claims for the week ending on May 16th fell by -249k to 2.438mln, now the seventh consecutive weekly decline, but the ninth consecutive historically high report. Looking at total new claims over this time period, the U.S. is now up to 38.9mln. We did see a downward revision to the prior week’s numbers by -294k, putting that week’s total at 2.687mln versus the originally reported 2.981mln. These changes now put the 4-week moving average at 3.042mln, a decline of -501k from the previous week’s revised level of 3.543mln (orig. 3.616mln). Finally, continuing claims rose a sharp 2.525mln to a new record high of 25.073mln.

 

Existing Home Sales

Existing Home Sales for April fell by -17.8%, posting down -17.2% YoY. Single-family home sales dropped -16.9% for the month, but condo sales fell much wider, down by -26.4%. The April headline is now the largest one-month decline since July 2010, when the homebuyer tax credit, a federal stimulus resulting from the subprime mortgage crash, expired. The supply of homes for sale in April fell by -19.7% annually to 1.47mln units, which is the lowest April inventory figure on record. That drop in inventory pushed prices to a new record high, with the median price of an existing home sold in April now up +7.4% annually to $286,800. Regionally, sales in the Northeast fell -16.9% monthly, and are down -18.2% annually. In the Midwest, sales were down -12% monthly, and down -8.3% from a year ago. In the South, sales dropped -17.9% monthly, and -16.8% annually. In the West, sales fell the most, down -25% monthly and down -27% from a year ago. “Certainly, with the lock-down occurring from mid-March, and given the shakiness from the stock market in February, that hurt pending contracts, so now we are seeing an almost 20% decline in existing homes sales,” said Lawrence Yun, chief economist for the Realtors. “April activity will be down, but what we are hearing from Realtors is they are getting busy as governors are opening the economy.”

 

Housing Starts

Housing Starts for April fell by -30.2% to a seasonally adjusted rate of 891k, hitting their lowest since February 2015. Looking YoY, starts have dropped -29.7%in April. Single-family starts dropped by -25.4% to 650k, while multi-family starts fell -40.5% to 241k. Housing Permits declined -20.8% to a rate of 1.074mln units in April, which included single-family permits down -24.3% to 669k, and multi-family down -14.2% to 405.1k. Looking at total starts/permits by region, the Northeast fell -43.6%/-45.5%, the West -43.4%/-28%, the South down -26%/-14.7%, and the Midwest declined by -14.9%/-16.1%. Joel Kan, AVP of economic and industry forecasting at the MBA noted, “While our forecast is for a rapid rebound in housing activity later in the year as home buyer traffic returns, housing supply remains very tight. Today’s news, combined with the April employment report showing almost one million construction job losses, may potentially slow the rebound in new construction that will be needed to completely revive the housing market.”

 

National Association of Home Builders/Wells Fargo Housing Market Index

According to the National Association of Home Builders/Wells Fargo Housing Market Index, confidence in the market for single-family, newly built homes rose by +7 points to 37 in May. Although a positive result this morning and up from the dismal -42 point drop back in April, the index still is well below the 50 neutral mark. For comparison, the index hit 66 in May 2019, with a high result of 76 back in December 2019. Within the report, all sectors rose to better levels, with current sales conditions up +6 points to 42, sales expectations in the next 6 months were up by +10 points to 46, and buyer traffic rose +8 points to 21. Regionally, homebuilder sentiment increased by +7 points to 32 in the Midwest, the South rose +8 points to 42, the West was up +12 points to 44, while sentiment was weakest in the Northeast, falling -2 points to 17. “As many states and localities across the nation lift stay-at-home orders and more furloughed workers return to their jobs, we expect this demand will strengthen,” said NAHB chief economist Robert Dietz. “However, high unemployment and supply-side challenges including builder loan access and building material availability are near-term limiting factors.”