Market Update – 1/4/2021

The last week of the longest year in history brought important data from the housing and labor sectors just before we rang in what will hopefully be prosperous and Happy New Year! 

Initial Jobless Claims declined by 19,000 in the latest week, with 787,000 people filing for unemployment benefits for the first time. Continuing and Pandemic Unemployment Assistance Claims also declined but unfortunately, the declines may be for the wrong reason as noted below.  

Home prices continue to appreciate nationwide, per the Case-Shiller Home Price Index, which showed that home prices rose 8.4% on an annual basis in October. This was up from an already strong reading of 7.0% in September. Phoenix (+12.7%), Seattle (+11.7%) and San Diego (+11.6%) reported the highest annual gains among the 20 cities. 

Home prices have appreciated in part due to low inventory and this lack of supply has also impacted sales. Pending Home Sales, which measures signed contracts on existing homes, came in below expectations, falling 2.6% from October to November. Perhaps more significantly, sales were 16.42% higher than November of last year – even though the supply of existing homes is down 22% over that same period.  

Quite simply, if more homes were available, there would be more signed contracts and more sales. 

Lastly, the government began sending the second round of stimulus payments to qualified recipients as part of the latest COVID relief package that was signed into law. 

Jobless Claims Decline in Latest Week … But Why? 

 jobless claimsAnother 787,000 people filed for unemployment benefits for the first time during the week ending December 26, which is a decrease of 19,000 from the previous week. 

Continuing Claims, which are delayed a week, also decreased, falling by 103,000 to 5.2 million. Pandemic Unemployment Assistance Claims declined as well, dropping by 811,000 to 8.5 million. Remember that when regular benefits expire, people can file for pandemic unemployment assistance, which extends their benefits for another 13 weeks. 

Unfortunately, the decrease in these claims is likely due to benefits expiring rather than people finding employment. 

Home Prices Continue to Appreciat 

 Case Shiller

The Case-Shiller Home Price Index, which is considered the “gold standard” for appreciation, showed that home prices rose 8.4% on an annual basis in October nationwide. This was up from an already strong reading of 7.0% in September.  

The 20-city Index rose at the quickest pace in six years, rising from 6.6% to 7.9% year over year, with all of the cities showing strong gains. Phoenix (+12.7%), Seattle (+11.7%) and San Diego (+11.6%) reported the highest annual gains among the 20 cities.  

The national reading of 8.4% is an extremely strong reading for appreciation. Look at it this way. Someone buying a $300,000 home that gains 8.4% in appreciation would benefit by just over $25,000 in just one year on appreciation alone. The equity gain with amortization would be even greater.  

Low Inventory Impacts Pending Home Sales 

 pending home salesPending Home Sales, which measures signed contracts on existing homes, were down 2.6% in November from October. This was lower than the 0.3% drop expected, but sales are still up 16.42% year over year.  

It’s important to note that the month-over-month decline was not due to a lack of demand, but a lack of supply, as the supply of existing homes is down 22% compared to November of last year.  

Quite simply, if there were more homes on the market, there would be even more sales. Nonetheless, it is still impressive that sales are up 16.42% year over year with inventory down 22% through that same period. 

Family Hack of the Week  

Finding a snack that’s both healthy and delicious may seem like a challenge, but this homemade granola bar recipe from Allrecipes makes it easy. Plus, it’s a fun recipe to make if you’re looking for a cooking project to do as a family. 

Preheat oven to 325 degrees Fahrenheit. Grease a 9-inch square baking dish. 

Spread 2 cups of rolled oats and 1/2 cup of shredded coconut evenly on a baking sheet. Toast until browned, approximately 10 minutes, and then transfer to a large mixing bowl.  

Mix 1/2 cup honey, 2 tablespoons peanut butter, 1 teaspoon vanilla extract, and 1/8 teaspoon salt in a saucepan over medium-low heat. Cook and stir until smooth and then pour over the oats and coconut. Stir to coat. Spread the mixture evenly into the prepared baking dish. 

Bake until granola bars begin to dry. For crunchy granola bars, about 15 minutes, for chew granola bars about 10 to 12 minutes.  

Cool completely before cutting and then enjoy! 

What to Look for This Week  

News from the labor sector dominates the first full week of the new year. On Wednesday, we’ll get an update on private payrolls with the ADP Employment Report for December. Thursday brings the latest weekly Jobless Claims figures, as usual. And on Friday, we’ll get the highly anticipated Bureau of Labor Statistics Jobs Report for December, which includes Non-farm Payrolls and the Unemployment Rate. 

There will also be an update Tuesday on manufacturing with the ISM Index for December.  

Technical Picture 

The Fed’s ongoing purchases of Mortgage Backed Securities continues to provide stability to the markets. Mortgage Bonds have tested their all-time high at 103.953 and remain just below this tough ceiling of resistance. 

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