Implications: Forget about existing home sales for a minute. Initial unemployment claims came in at 2.44 million last week, continuing the recent spate of extremely high readings since March. However, initial claims have dropped for seven weeks in a row after peaking at 6.87 million in late March, including a decline of 249,000 last week. We are also following continuing claims, data for which lag initial claims by one week. Continuing claims hit a record high of 25.07 million two weeks ago and are likely to rise again in next week's report. At present, we are forecasting that continuing claims peak in late May or early June, signaling a bottom for the overall US economy. Turning our attention back towards housing, existing home sales in April posted the largest monthly drop since 2010. We expect more softness in the near term as social distancing and government-mandated lockdowns weigh on activity, although April was likely the weakest month for sales. While it's true that many realtors are using virtual-tour technology to show homes to potential buyers, most people still want to see things in-person before they make one of the biggest purchasing decisions of their lives. Current quarantine restrictions and social distancing measures are also going to hold back a recovery in the inventory of existing homes, as fewer potential sellers list their properties. Inventories in April were down 19.7% versus a year ago (the best measure for inventories given the seasonality of the data). The good news is that demand for existing homes is strong enough that 56% of homes sold in April were on the market for less than a month. One other interesting piece of data in today's report was that despite all the disruptions, the median price of existing homes rose 2.2% in April and is now up 7.4% in the past year, an acceleration from the 3.5% gain over the 12 months ending in April 2019. This is in sharp contrast to the 2008 Financial Crisis when the pace of home price growth began falling well ahead of the recession. The coming months will continue to offer us a murky picture of the housing market. However, we expect a rebound in activity as states continue to reopen and people get back to work. In other news this morning, the Philly Fed Index, a measure of East Coast factory sentiment, rose to -43.1 in May from -56.6 in April. While the negative reading still signals contraction, it also means things were getting worse at a slower rate. This may not seem like much to cheer, but it's a necessary step before output starts improving.
Click here for PDF version