Market Matters
We saw a large jump in rates this week on Tuesday, this seemed to be mostly a selloff due to fear than fundamental reasons. This broke our upward channel that the 10-year was in since August and now we are in a new, steeper upward sloping channel. This seems like a very quick runup and we would like to see the 10-year move lower, looking at 1.273% first and then at 1.222%. Heading into next week, it is a good idea to be very defensive and keep getting loans locked.
Initial Jobless Claims
Initial Jobless Claims increased by +13k to 861k for the week ending January 13th vs. the upwardly revised print from the prior week of 848k (orig. 793k). The 4-week moving average is now sitting at 833.3k, which is down from the 836.8k in the previous week. Continuing claims, which lag by a week, fell by -64k to 4.494mln, while the prior week’s count was revised higher by +13k to 4.558mln. The 4-week average of continued claims fell by -120k to 4.632mln, which is now the lowest level since the start of the pandemic.
Housing Starts
Housing Starts for January fell by -6% to 1.58mln vs. the upward revision to 1.68mln in December (originally 1.669mln). Single-family starts fell -12.2% to 1.162mln, which is now a 4-month low print, while multi-family starts were up +16.2% to 402k, a 6-month high. Building permits shot up +10.4% to 1.881mln annualized units, running at their best since May 2006, and up +22.5% YoY. Single-family permits were up +3.8% to 1.269mln on the month, while multi-family permits increased +28% to 557k, the highest since June 2015.
Existing Home Sales
According to the National Association of Realtors, existing home sales for January increased by +.6% to an annualized rate of 6.69mln units. Looking YoY, this is +23.7% higher vs. January 2020, and is the second highest sales pace since April 2006. “Home sales are continuing to play a part in propping up the economy,” said Lawrence Yun, chief economist for the NAR. “With additional stimulus likely to pass and several vaccines now available, the housing outlook looks solid for this year.” While looking solid on headline, inventory remains the biggest issue ahead. There were 1.04mln homes for sale at the end of January, which is a -26% drop from a year ago. At the current sales pace, there is now a 1.9-month supply, the lowest since 1982 when tracking began. With a lack of supply and high demand, prices have continued to increase as well. The median price of an existing home sold in January was $303,900, a +14.1% increase from January 2020, and the highest January print in history. “We need to build more homes,” said Yun. “Even though housing starts show a decline, it is interesting that the housing permits, the desire to build homes, remains at the highest in over a decade.” We also see that activity was the slowest on the very low end of the market, with sales of homes priced below $100,000 down -28% YoY, and sales of million-dollar homes up +77%. In addition, the number of days on the market continued to be very swift, with homes selling on average in 21 days, compared with last January at 43 days. Finally, the regional breakouts showed declines in the West (-4.4% to 1.31mln) and Northeast (-2.2% to 870k), with gains in the South (+3.2% to 2.94mln) and Midwest (+1.9% to 1.57mln).
Retail Sales
Retail Sales for January rose by +5.3% on headline, ex-autos sales were higher by +5.9%, and were up +6.0% when looking at the control group which excludes food services, autos, gas stations, and building materials. Within the January report, gains were spread across many sectors including electronics/appliances (+14.7%), furniture (+12%), non-store retailers (+11%), and sporting goods/hobby (+8%). Motor vehicle and parts dealers saw a +3.1% rise, while food and drinking places also even saw an increase, up +6.9% on the month. Looking at some YoY changes in top sectors, bars and restaurants are down -16.6%, clothing/accessories down -11.1%, and electronics/appliances off by -3.5%. Overall, these are very strong numbers for last month, most likely due to more consumer confidence on income expectations and the promise of more stimulus.
