Jobless Claims Remain Elevated While Homes Remain in High Demand
January 1, 2023
5 min read
Nearly a year into the pandemic, the number of people filing for unemployment benefits for the first time remains elevated, unfortunately. The housing market continues to be a bright spot in our economy, with homes in high demand around the country, though record low inventory remains a challenge for many buyers.
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 country.
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.