Housing Flexes Its Muscles Again: January 18 – 22

The demand for housing remains very strong. Here are the five things we learned from U.S. economic data released during the week ending January 22.

2020 was the best year for home sales since 2006. The National Association of Realtors tells us that existing home sales grew 0.7 percent in December to a seasonally adjusted annualized rate (SAAR) of 6.76 million. Sales rose in the Northeast (+4.5 percent) and South (+1.1 percent), held steady in the Midwest, and slipped 1.4 percent in the West. Home sales were up a startling 22.2 percent from a year earlier, with double-digit percentage gains in all four Census regions. Inventories of homes on the market tightened even further in December as the count of homes on the market—1.070 million—was down 16.4 percent from November and 23.0 percent from December 2019 and represented a mere 1.9 months supply. The median home price of $309,800 was up 12.9 percent from a year earlier. The press release notes NAR’s expectation that the housing “momentum is likely to carry into the new year.”

Housing starts rose as 2020 ended. According to the Census Bureau, housing starts to increase 5.8 percent in December to a seasonally adjusted annualized rate of 1.669 million. Starts were 5.2 percent ahead of their year-ago pace. Single-family home starts advanced 12.0 percent during the month and 27.8 percent versus a year earlier. Conversely, multi-family home starts slumped 15.2 percent in December and were 40.0 percent under year-ago levels. The annualized count of issued building permits jumped 4.5 percent to 1.635 million (+17.3 percent versus December 2019). Single-family home building permits were up 30.4 percent from a year earlier, while the 12-month comparable for multi-family homes (with at least five units) was -7.8 percent. Housing completions rose 15.9 percent to an annualized 1.417 million homes (+8.0 percent versus December 2019).

Homebuilders were slightly less confident in January. The Housing Market Index (HMI) from the National Association of Home Builders lost three points during the month to a still solid reading of 83 (seasonally adjusted). The HMI, which has lost seven points over the past two months, has been above a reading of 50—which indicates more builders view the housing market as “good” than see it as “bad”—for eight straight months. The HMI fell in all four Census regions, with the sharpest drops in the Northeast and South. Also losing pace from December were measures of present sales of single-family home sales (down two points to 90), expected sales over the next six months (falling two points to 83), and traffic of prospective buyers (off five points to 68). The press release suggested the drop in the HMI partially resulted from “a shortage of buildable lots” and increased costs.

Jobless claims remained elevated in mid-January. The Department of Labor estimates there were a seasonally adjusted 900,000 first-time claims made for unemployment insurance benefits during the week ending January 16. This was a decline of 26,000 for the week, but remaining well above pre-pandemic levels (e.g., the year-ago reading was 220,000). The four-week moving average, which helps control some of the data series’s volatility, came in at 848,000, nearly quadruple that of one year earlier. There were 424,734 initial claims made for Pandemic Unemployment Assistance, up 138,848 from the prior week.

Foreign investors expanded their holdings of U.S. securities in November. The Department of the Treasury reports that net foreign acquisitions of long-term securities, short-term U.S. securities, and banking flows represented a net Treasury International Capital (TIC) inflow of $214.1 billion, a strong bounce from the $11.1 billion net TIC outflow in October. This included net foreign purchases of long-term U.S. securities of $125.8 billion, up from +$31.4 billion during the prior month. Net private foreign purchases of long-term U.S. securities totaled $112.5 billion (October: -$5.4 billion), while net public purchases of the same were $13.3 billion (October: +$36.8 billion).

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