Economic activity continues to build, but housing is hitting some barriers. Here are the five things we learned from U.S. economic data released during the week ending May 21.
Forward-looking indicators point to further economic strengthening. The Conference Board’s Leading Economic Index (LEI) added 1.7 points in April to a reading of 113.3 (2016=100). Eight of ten LEI components improved during the month, led by jobless claims and stock prices. The coincident index grew by 3/10ths of a point of 104.1, with all four of its components making positive contributions (led by nonfarm payrolls and industrial production). The lagging index surged by 1.9 points to 104.7 even as only three of seven components made positive contributions. The Conference Board expects the U.S. economy will expand between eight and nine percent during the current quarter and a very robust 6.4 percent for all of 2021.
Declining affordability weighs on sales of previously owned homes. The National Association of Realtors indicates that existing home sales dropped 2.7 percent in April to a seasonally adjusted annualized 5.85 million. The measure had not been below 6 million since last August. Sales dropped in three regions—Northeast, South, and West—but edged up in the Midwest. Sales were way up (+33.9 percent) from a year earlier when the comparables are from the opening days of the pandemic. Inventories expanded 10.5 percent to 1.160 million homes, which translated into a very tight 2.4 month supply. As a result, the median sales price of $341,600 was up a startling 19.1 percent from a year earlier. NAR anticipates more homes will come on the market as vaccinations rise and “potential home sellers become more comfortable listing and showing their homes.”
Housing starts slumped in April. The Census Bureau tells us that housing starts slowed 9.5 percent during the month to a seasonally adjusted annualized rate (SAAR) of 1.569 million units. Starts remained 67.3 percent ahead of the pandemic-suppressed April 2020 pace. Single-family home starts plummeted 13.4 percent while those of multi-family homes (with five or more units) grew 4.0 percent. Looking towards the future, the annualized count of building permits grew 0.3 percent to 1.760 million (+60.9 percent). Single-family permits dropped 3.8 percent. Housing completions declined 4.4 percent to an annualized 1.449 million.
Homebuilder sentiment remained strong in May. The Housing Market Index, from the National Association of Homebuilders, held steady during the month at a seasonally adjusted reading of 83. The HMI has remained above a reading of 50—indicative of more homebuilders viewing the housing market as “good” versus being “poor”—for 11 straight months. The HMI improved in the South, held steady in the West but declined in both the Northeast and Midwest. The index tracking single-family sales remained at 88, while the expected sales index added a point (to 81) and the measure for the traffic of prospective buyers slipped a point to 73. The press release warned that “cost hikes associated with increasingly scarce material availability” put many homebuyers “at risk.”
Payroll growth occurred in relatively few states in April. The Bureau of Labor Statistics finds that nonfarm employment grew in nine states and the District of Columbia during the month, led by California, New York, and Colorado. Payrolls contracted in two states (Michigan and Alabama) while “essentially” holding steady in the remaining 39 states. By contrast, payrolls were up versus the prior year in all 50 states and the District of Columbia compared to April 2020, when employment contracted by historical levels due to the pandemic’s start. The states reporting the largest year-to-year percentage increases were Michigan (+21.1 percent), Nevada (+17.6 percent), and Rhode Island (+17.1 percent).
Other U.S. economic data released over the past week:
- Jobless Claims (Week ending May 15, First-Time Claims, seasonally adjusted): 444,000, -34,000 vs. the previous week, -1,705,000 vs. the same week a year earlier). 4-week moving average: 504,750 (-81.1% vs. the same week a year earlier).
- Treasury International Capital Flows (March 2021, Net Foreign Purchases of U.S. Securities, not seasonally adjusted): +$208.1 billion (vs. February 2021: -$7.3 billion, vs. March 2020: -$241.8 billion).
- FOMC Minutes
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What We Learned About the U.S. Economy Last Week 