Initial Jobless Claims rose slightly in the latest week
Another 742,000 people filed for unemployment benefits for the first time during the week ending November 14. However, the number of people continuing to receive benefits did decline again, with Continuing Claims falling by 430,000 to 6.4 million. This decline in Continuing Claims does come with a caveat, namely the increase reported in the number of Pandemic Emergency Unemployment Compensation (PEUC) claims, as explained below.
There was more evidence that the housing sector remains the backbone of our economic recovery, as the National Association of Home Builders (NAHB) Housing Market Index, which is a real-time read on builder confidence, set a record high for the third month in a row. All three components of the index, including current sales conditions, sales expectations in the next six months and buyer traffic, moved higher.
In addition, Housing Starts (which measure the start of construction on homes) also came in strong in October, up 4.9% from September and beating expectations. All of the gain was among starts for single-family homes, which is the crucial area where supply is needed and which reached their highest level in 13.5 years. Building Permits, which are a good future indicator of Starts, were flat from September to October, but they did rise 2.8% year over year. Permits for single-family homes were also up 0.6% from September.
There was also news on existing homes, as sales were up 4.3% from September to October per the National Association of Realtors (NAR). Sales were also nearly 27% higher than October of last year. Low inventory remains the biggest challenge for buyers, sitting at a record low of 2.5 months’ supply. By comparison, a 6 months’ supply is considered reflective of a healthy housing market.
Lastly, Retail Sales will be important to monitor in the coming months, as sales were less than expected in October, rising just 0.3% from September’s downwardly revised rate. While the initial stimulus package and additional unemployment benefits certainly helped people earlier this year, we may see a continued pull back in spending if we don’t have another stimulus deal and as unemployment benefits expire. In addition, ongoing shutdowns may also affect sales as several states, including California, Washington, Michigan and Oregon, have implemented stiffer rules.
Initial Jobless Claims Rise in the Latest Week
Another 742,000 people filed for unemployment benefits for the first time during the week ending November 14, which was an increase of 31,000 people from the prior week’s revised report. California (+158K), Illinois (+46K) and New York (+43K) reported the largest increase.
Continuing Claims, which measure people continuing to receive benefits, improved by 430,000 to 6.4 million. While this number has been declining in recent weeks, it’s important to note that people can file for Pandemic Emergency Unemployment Compensation (PEUC) when their regular benefits expire. PEUC extends benefits for another 13 weeks.
The number of PEUC claims increased by 233,000, so while the drop in continuing claims is positive, it does need to be taken in context. In addition, we don’t know if the decrease in Continuing Claims is reflective of people who are going back to work or people whose benefits are just expiring. And unfortunately, with the recent shutdown announcements from many states, the jobless claims picture may start to get worse.
Builder Confidence Reaches Record High
The NAHB Housing Market Index rose 5 points to 90 in November, setting a record high for the third month in a row. All three components of the index increased, with current sales conditions rising 6 points to 96, sales expectations for the next six months up 1 point to 89, and buyer traffic notching 3 points higher to 77. Any reading above 50 indicates expansion, and given that the index runs from 1-100, confidence among builders can’t get much higher.
NAHB Chairman Chuck Fowke noted, “Historically low mortgage rates, favorable demographics and an ongoing suburban shift for home buyer preferences have spurred demand and increased new home sales by nearly 17 percent in 2020 on a year-to-date basis.”
Meanwhile, October Housing Starts (which measure the start of construction on homes) were up 4.9% from September, coming in stronger than expectations. They were also 14.2% higher than October of last year. All of the gain was among starts for single-family homes, which is the area crucial for supply, as single-family starts were up 6.4% from September to October and a whopping 29.4% compared to October of last year. Single-family starts are at their highest level in 13.5 years.
Building Permits, which are a good future indicator of Starts, were flat from September to October, but they did rise 2.8% year over year. Single-family permits were up 0.6% from September.
The bottom line is that the increase in single-family starts and permits will help to meet some of the demand among homebuyers. However, there is so much more demand than supply right now and this imbalance will continue to support home prices.
Existing Home Sales Rise but Inventory Challenges Remains
Existing Home Sales, which measures closings on existing homes, were up 4.3% in October, which was well above expectations of a 1.2% decline and the fifth consecutive month of gains. Sales were also nearly 27% higher than October of last year, and the level of sales is near the all-time high set in 2006 when there were twice as many homes for sale.
Speaking of inventory, challenges remain on the supply front as inventory is down nearly 20% from last October with a record low 2.5 months’ supply. By comparison, a 6 months’ supply is considered reflective of a healthy housing market. In addition, homes were only on the market for 21 days on average, with 72% of homes selling in October in under 30 days.
The median home price was reported at $313,000, which is another record and up 15.5% year over year. Note that this doesn’t mean homes are not affordable. It just means the middle-priced home that sold was $313,000, with half the homes selling below and half above that price. In October, a greater number of higher-priced homes sold (including twice as many million-dollar homes selling compared to last year), and as a result, the median home price moved higher.
Despite the strong competition for lower-priced homes, first-time buyers made up 32% of sales, a tick up from the 31% reported in September.
NAR chief economist Lawrence Yun noted, “Considering that we remain in a period of stubbornly high unemployment relative to pre-pandemic levels, the housing sector has performed remarkably well this year.”
Family Hack of the Week
Thanksgiving gatherings may be smaller than usual this year. If you’re looking for ideas for scaling down your serving of stuffing, this “Stuffin Muffin” recipe from Delish can help.
Preheat oven to 375 degrees Fahrenheit, then grease a 12-cup muffin tin with cooking spray.
In a medium skillet, melt 4 tablespoons of butter over medium heat. Add 1 pound of pork sausage (with casings removed) and cook until browned, breaking up with a wooden spoon as it cooks. Add 1 medium diced onion and 1 1/2 cups of diced celery and stir for about 5 minutes until the vegetables have softened. Add 2 cloves of minced garlic, and 1 teaspoon each of thyme, rosemary and ground sage. Season with salt and pepper and then remove from heat and let cool slightly.
In a large bowl, combine 8 cups of bread cubes (about 1 loaf), the sausage mixture, 1 lightly whisked egg and 2 cups of chicken broth. Season with salt and pepper to taste, then spoon evenly into muffin tins.
Bake until warmed through and golden on top, about 25-30 minutes and enjoy!
What to Look for This Week
A full slate of data will be released ahead of the Thanksgiving holiday on Thursday.
In the housing sector, Tuesday brings an update on appreciation with the Case-Shiller Home Price Index and the Federal Housing Finance Agency House Price Index for September. October New Home Sales follow on Wednesday.
Also on Wednesday, look for the latest Initial Jobless Claims, third Quarter Gross Domestic Product as well as the following reports for October: Durable Goods Orders, Personal Consumption Expenditures (the Fed’s favored inflation reading), Personal Spending and Personal Income. The minutes from the Fed’s meeting earlier this month will also be released.
Technical Picture
The Fed continues to provide stability to the markets with its ongoing purchases of Mortgage Backed Securities. Mortgage Bonds continue to trade in a wide range between a dual-layer of support at their 25-day and 50-day Moving Averages and overhead resistance near the all-time high of 103.875.