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  Existing Home Sales Declined 2.7% in April
Posted Under: Employment • Housing • Inflation
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Implications:  Existing home sales fell for a third consecutive month in April, as low inventories and sky-high prices continued to weigh on closings.  Notably, even with the recent declines sales are still up 2.6% from the February 2020 pre-pandemic high.  Looking ahead, there are reasons to believe the worst of the inventory crunch may be behind us.  New home construction still remains strong even after April's decline, and now that the pandemic seems to be ending and vaccines are widely available, it's likely that more sellers will feel comfortable listing their homes.  In fact, inventories jumped 10.5% in April, the largest monthly gain since 2015.  While inventories are still down 20.5% from a year ago (the most accurate measure for inventories given the seasonality of the data) that is a significant improvement from the declines of 29.5% for the year ending in February and March.  This has helped push up the months' supply (how long it would take to sell today's inventory at the current sales pace) of existing homes for sale to 2.4 in April from March's reading of 2.1, though these readings still remain near record lows.  Despite the shortage of listings, it looks like there is still significant pent-up demand from the pandemic, with buyer urgency so strong in April that 88% of the existing homes sold were on the market for less than a month. The combination of strong demand and sparse supply has pushed median price growth to 19.1% in the past year, the fastest rate on record going back to 2000.  However, despite these issues we expect sales in 2021 to ultimately post the best year since 2006.  Why?  First, more construction and listings as the pandemic ends should help alleviate the worst of the supply crunch and help keep a lid on price growth.  Moreover, a trend toward work-from-home is likely to remain in place even as pandemic-related measures are eased around the country.  That means people who were previously tied to specific locations, typically in urban areas, will have more flexibility, making more space in the suburbs an attractive proposition.  Finally, there are significant demographic tailwinds coming together for home sales for the foreseeable future.  Census Bureau population projections show that the key homebuying population of those 30-49 years old is set to grow significantly through 2039.  In other recent news, initial jobless claims fell 34,000 last week to 444,000.  Meanwhile continuing claims rose by 111,000 to 3.751 million. On the manufacturing front, the Philadelphia Fed Index, a measure of factory sentiment in that region, fell to a still very robust 31.5 in May from 50.2 in April, which was the highest reading since 1973.  Early signs suggest the US economy will grow even faster in the second quarter than it did in the first.  Notably, inflationary pressures were readily apparent in the report, with the prices paid measure rising to the highest reading since 1980 and the prices received measure posting the highest reading since 1981.

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Posted on Friday, May 21, 2021 @ 1:06 PM • Post Link Print this post Printer Friendly

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
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