Market Matters
This week we saw the S&P and Nasdaq make new highs, while the 10-year has moved away from the highs it made last week. As we move closer to September, we can expect the election to take a bigger stage on impacting financial markets in the next month or two. We are still seeing the same themes as last week, as markets are moved by the coronavirus, U.S.-China relations and how the re-opening is going throughout the economy, along with extending the pandemic benefits for laid off workers and states.
Initial Jobless Claims
Initial Jobless Claims for the week ending August 15th surprisingly rose by +135k to 1.106mln vs. the prior week’s upwardly revised 971k print. This is the first increase in claims in three weeks; however, claims are still down around -325k from the last week in July. Continuing claims, which lag a week, fell -636k to 14.844mln, which is the lowest since the 11.914mln mark back in the first week of April. Looking ahead, the next few weeks will be interesting as continued claims have fallen -636k, 610k, and -861k in each of the past 3 weeks. While some of the improvement in continuing claims is certainly related to the slow, but persistent decline in the number of new weekly claims, a portion of the drop is also related to expiration of benefits offered through regular state programs. The increase in claims this week is worrisome, but further highlights the uncertainty around the economy and begs the question on how slow the recovery will in fact be.
Philly Fed Index
The Philly Fed General Business Outlook Index fell from 24.1 in July to 17.2 in August. Within the report, the New Orders index slipped -4 points to 19.0, while the Shipments index dropped -5.9 points to 9.4. The Unfilled Orders index fell into the negative in August at -.6%, after printing 3.9 in July. The Prices Paid index moved -.4-point lower to 15.3, whereas the Prices Received index moved +.9-point higher to 12.4, which suggests improved margins overall. The Number of Employees Index fell by -11.1 points to 9.0 in August, which means that factory hiring will be close to flat this month. In addition, the Average Employee Workweek index declined by -5.9 points to 11.3. Finally, looking ahead six-months, the Future General Business Conditions increased to 38.8 from 36.0, although most of the internals moved lower.
Housing Starts
Housing starts in July increased by +22.6% to a seasonally adjusted rate of 1.496mln. Data for June was revised up to a 1.22mln unit pace from the originally reported 1.186mln. For context, the pre-pandemic pace of starts in February was 1.567mln. Within the report, the multi-family sector was exceptionally strong, as starts jumped +58%, while permits gained +23%. However, the single-family sector also posted stronger results with starts up +8.2% and permits higher by +17%. Broken out by region, starts rose by +35.3% in the Northeast, +33.2% in the South, and up by +5.8% in both the West and Mid-West. On the permit side, we see an increase in the West by +29.1%, up +23.8% in the Mid-West, the Northeast up +14.8%, and the South up +13.7%. Overall, the rise in permits points to some positive results ahead, while home builder sentiment is on record highs and mortgage rates continue to post record lows. Housing data continues to suggest more of a V-shaped recovery in play, but in any case, the gains in housing look to be sustained and longer-lasting.
Existing Home Sales
According to the National Association of Realtors, existing home sales in July rose sharply by +24.7% to a seasonally adjusted annual rate of 5.86mln. This is now the strongest monthly gain in the history of the survey, which dates back to 1968. This is also the highest sales pace since December 2006. Looking YoY, existing home sales are now +8.7% higher vs. July 2019. The supply of existing homes fell by -21.1% on an annual basis with only 1.5mln homes for sale at the end of July. This represents roughly a 3.1-month supply at the current sales pace, down from a 4.2 month supply last year in July. This shortage has driven the median price of a home sold in July up to $304,100, which is a +3.3% gain on the month, and +8.5% annually. This is also the first time ever that the national median home price has broken the $300k mark. The average price for an existing home sold in July was $337.5k, an increase of +2.5% MoM, and +6.5% increase annually. Looking at the regional breakout, sales MoM in the Northeast were up +30.6%, the Midwest jumped +27.5%, the South increased +19.4%, with the West up +30.5%. “The housing market is well past the recovery phase and is now booming with higher home sales compared to the pre-pandemic days,” said Lawrence Yun, NAR’s chief economist. “With the sizable shift in remote work, current homeowners are looking for larger homes and this will lead to a secondary level of demand even into 2021.”
