Housing Shines Amid Economic Rebound

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The following analysis was recently published in the bi-weekly e-newsletter Eye On the Economy by NAHB Chief Economist Robert Dietz:

If you needed more evidence that housing was a bright spot for the economy, August home sales data provided definitive proof: Single-family new home sales climbed 4.8% to a 1.01 million seasonally adjusted annual rate — the highest pace since 2006. The August sales rate marks a 43% gain compared to August 2019, and leaves year-to-date new home sales 15% higher for 2020 compared to 2019.

Lean Inventory

The accelerated sales pace combined with a 40% year-over-year decline in new inventory has resulted in a very lean 3.3-month supply. Moreover, sales of homes that have not yet started construction are up 69% compared to a year ago. And it's not just new home sales that are surging. Existing home sales reached a 14-year high in August. Total resales increased by 2.4% from the prior month, and were 10.5% higher than a year ago despite inventory remaining tight at just a 3-month supply.

Record-High Confidence

The lack of inventory — for both new and existing homes — points to solid levels of single-family construction in the months ahead. Single-family starts were up 4% in August, rising to a 1.02 million rate, and are now 3.8% higher on a year-to-date basis. And builder confidence, as measured by the NAHB/Wells Fargo Housing Market Index, is at an all-time high of 83. 

Waning Employment 

While housing adds momentum to the economy’s third quarter GDP rebound, there are signs that outside the residential sector the rate of improvement is slowing. For example, the number of new jobless claims increased by 4,000 to 870,000. Since early August, the economy has averaged 800,000 to 1 million jobless claims per week. Though relatively small in contrast to the 4 million to 6 million weekly claims made in April, the current numbers remain elevated compared to the 200,000 to 300,000 weekly totals from before March. These job losses will ultimately slow the rate of improvement for unemployment.

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