The economic calendar was relatively quiet during the last week of 2020, but there was important data from the housing and labor sectors before we rang in the New Year. The government also 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?
Another 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 Appreciate
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 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.