Tucson Mortgages Home Loan News 1-25-2021

By Todd Abelson NMLS #180858 on .

Week of January 18th, 2021 in Review

Nearly a year into the pandemic, the number of people filing for unemployment benefits for the first time remains elevated, unfortunately, as Initial Jobless Claims were reported at 900,000 in the latest week. While the number of people continuing to receive regular benefits, Pandemic Emergency benefits or Pandemic Unemployment Assistance benefits did each decline, the drops were likely due to benefits expiring rather than people finding employment.

The housing market continues to be a bright spot in our economy, with homes in high demand around the country. Existing Home Sales, which measures closings on existing homes, were up 0.7% from November to December and 22% year over year. Sales would be even higher if there was more inventory, which currently sits at a record-low of just a 1.9 months’ supply. Typically, a 6-months’ supply is reflective of a healthy housing market.

However, there was some good news for homebuyers on the inventory front. Housing Starts, which measure the start of construction on homes, were up 5.8% in December, much stronger than expected. Perhaps even more importantly, starts on single-family homes (which are in especially high demand) were up 12% from November to December and nearly 28% year over year. Building Permits, which are a good future indicator of Housing Starts, were also up in December.

While builder confidence fell in January due in part to concerns about a changing regulatory environment, sentiment remains at a strong level. The National Association of Home Builders Housing Market Index, which is a real-time read on builder confidence, fell 3 points from December’s revised figure of 86 to 83 in January. However, any number over 50 signals expansion so this is still a positive reading.

Lastly, there was some good news from the manufacturing sector, as the Philadelphia Fed Index was reported at 26.5 for January, which was much higher than expected.

 

Initial Jobless Claims Remain Elevated

Another 900,000 people filed for unemployment benefits for the first time during the week ending January 16. While this was a decline of 26,000 from the previous week, Initial Jobless Claims remain extremely elevated nearly a year into the pandemic.

Continuing Claims, which are delayed a week and which measure people who continue to receive benefits, also declined by 127,000 to 5.1 million.

Pandemic Unemployment Assistance Claims, which provides benefits to people who would not usually qualify, dropped by 1.7 million after falling 941,000 in the previous week. That figure now stands at 5.7 million. Pandemic Emergency Claims, which extends claims by 13 weeks after regular benefits expire, decreased by 1.4 million to 3 million.

Unfortunately, with the surge in COVID cases around the country, the declines are likely due to benefits expiring. However, it’s unclear if people will be able to reapply as some of these benefits have been extended in the latest stimulus package. It will be important to monitor if these declines are temporary in upcoming Jobless Claims reports in the weeks ahead.

 

Inventory of Existing Homes Hits Record Low

 Existing Home Sales, which measures closings on existing homes, were up 0.7% from November to December, which was stronger than expectations of a 2% drop. Sales were also up 22% year over year.

Low inventory remains the biggest challenge for homebuyers, as there were only 1.07 million homes for sale at the end of December, equaling a record low of just a 1.9-months’ supply. This lack of supply helped homes sell fast in December, as they averaged just 21 days on the market, while foot traffic was up 24% year over year.

First-time buyers accounted for 31% of sales in December, down slightly from 32% in November. All-cash sales decreased from 20% in November to 19% in December, but still remain at a high level.

The median home price was $309,800, up 12.9% from December 2019. Note, this is not the same as appreciation. It simply means half the homes sold were above that price and half were below it. In December, sales of lower-priced homes were down 15%, while sales of homes above $1 million were up 90%. This dragged the median home price higher.

 

Strong Housing Starts a Good Sign for Low Inventory

Housing Starts, which measure the start of construction on homes, were up 5.8% from November to December, much stronger than the 0.8% gain expected. Starts were also up 5.2% compared to December of last year.

Perhaps even more importantly, starts on single-family homes were up 12% from November to December and nearly 28% year over year. This rise in starts will certainly help with the many homes that have been contracted but not built yet. And while more building is needed, the increase in starts is a positive step in the right direction to help with the low inventory challenges that persist around the county.

Building Permits, which are a good future indicator of Housing Starts, were also on the rise, up 4.5% from November to December and 17.3% year over year. Again, there was good news when it comes to permits for single-family homes, as they rose nearly 8% from November to December and 30.4% year over year.

 

Homebuilder Confidence Declines But Remains Strong

The National Association of Home Builders Housing Market Index, which is a real-time read on builder confidence, fell 3 points from December’s revised figure of 86 to 83 in January.

However, when we look at this number in context, it’s important to note that any reading above 50 signals expansion so confidence remains at extremely high levels overall. In addition, there are only three other readings higher over the past year, 85 in October, 90 in November and 86 in December. The reason for the drop in January is that builders are concerned about a changing regulatory environment.

All three components of the index declined in January, but they remain over 50 and in expansion territory. Current sales conditions fell two points to 90, sales expectations in the next six months dropped two points to 83, and prospective buyer traffic declined five points to 68.

 

Family Hack of the Week

If you’re looking for a fun and unique activity to do with your kids this winter, this easy to make ice lantern from Parents.com is sure to be a hit!

First, help your kids attach a balloon to a faucet and slowly fill it with water. Tie the balloon once it’s mostly filled. If you don’t have any balloons on hand, a bowl or bucket can work as well.

Next, place the balloon in your freezer, or outside if temperatures are below freezing. Set a timer and check the balloon with your kids ever two hours until the outer shell is frozen but a cavity of water remains in the middle. Depending on the temperature this may take six to eight hours, so a countdown clock could also be fun to watch during the day.

Once the outer shell is frozen, place the balloon in the sink and then cut it away. Help your kids turn the globe over to pour out the water.

After it gets dark, place an LED light or candle in the cavity of the globe and then put the globe outside on your porch. The globe should last several hours, depending how cold it is outside.

 

What to Look for This Week

More housing news is ahead this week, beginning Tuesday with November’s home price appreciation data from both the Case-Shiller Home Price Index and the Federal Housing Finance Agency House Price Index. December’s New Home Sales data follows on Thursday and Pending Home Sales will be reported on Friday.

The first Federal Open Market Committee meeting of the year begins Tuesday, with the policy statement to follow on Wednesday, which always has the potential to move the markets. Wednesday also brings news on Durable Goods Orders for December.

On Thursday, the latest Jobless Claims figures remain crucial to monitor while we’ll also get a look at fourth quarter Gross Domestic Product.

Inflation news ends the week on Friday when December’s Personal Consumption Expenditures is released, along with data on Personal Income and Personal Spending. We’ll also get an update on regional manufacturing with the Chicago PMI for January.

 

Technical Picture

The Fed continues to provide stability to the markets with its ongoing purchases of Mortgage Backed Securities. Mortgage Bonds remain in a range between support at the 103.053 Fibonacci level and a ceiling of resistance at the 100-day Moving Average.

Todd Abelson - Tucson Mortgages