Pollack: Housing

The Monday Morning Quarterback
A quick analysis of important economic data released over the last week

By Elliot D. Pollack & Co. | Rose Law Group Reporter

At the end of this week, we will get our first peek at GDP growth for the first quarter of 2021. GDP growth is expected to be above 6.0%, which is well above any level seen in the last few decades. Through the first quarter, the U.S. economy has gained 1.6 million jobs, the unemployment rate is down to 6%, and initial claims have dropped by 216,000 claims from late December. The ISM’s indices measuring the services and manufacturing indices both reached their highest level in decades. As we mentioned last week, the effects of fiscal stimulus have appeared in the U.S. retail sales report, with annual gains of 9.6%, 6.7% and 27.7% for the first three months of the year. And then there’s housing.

Housing will continue to make headlines for the foreseeable future. This level of activity and interest has not been seen since the mid-2000s. It is difficult not to compare these two periods. We went through our first recession since the Great Recession and the effects of that recession are still fresh in our minds. Yet, this is different. Measures were taken to keep people afloat and avoid a large number of foreclosures so far. Job growth has been steady and has made a significant recovery since last year. The number of listings is at a decade low and demand is outpacing supply, causing upward pressure on prices. Mortgage rates remain at historical lows and have allowed buyers to buy more and maintain affordability (Greater Phoenix and Greater Tucson) to a certain extent. And housing does not appear to be slowing down yet. We have seen an increase in permitting activity across the country and in Arizona, especially in its biggest metro areas.

U.S. Snapshot:

  • Initial claims dropped to the lowest level since the pandemic began in late March of last year. The 547,000 initial claims in the week ending on April 17th were down 87% from a year ago.
  • Leading indicators increased significantly in March. The index was up 1.3% after a slight decrease of 0.1%. All components had positive contributions to the index and point to consistent growth for the rest of the year.
  • The Conference Board forecasted GDP growth of 6.0% in 2021.
  • The average 30-year mortgage rates dipped below 3% for the first time in seven weeks for the week ending April 22nd (2.97%).
  • According to NAR’s March data, existing home sales across the country continue to soar. Annually, the median sales price is up 17.2% for all existing homes and 18.4% for single family homes. The seasonally-adjusted annual rate dropped to 6.01 million sales in March but is up 12.3% from a year ago. Single family sales are up 17.2%.
  • The latest U.S. Census estimates for new home sales show an increase in the seasonally-adjusted annual rate by 20.7% from February and a whopping 66.8% from a year ago, reaching the highest level since 2006.

Arizona Snapshot:

  • RL Brown’s latest data shows housing activity across Greater Phoenix and Greater Tucson continuing to grow. Permits were up 41.8% and 53.9% from a year ago in Greater Phoenix and Greater Tucson, respectively. Year-to-date permits are up 27.5% in Greater Phoenix and 45.8% in Tucson for the first three months of the year. Increased permit activity is a welcomed relief to the lack of supply.
  • Prices continued to increase in both metros. Greater Tucson’s median sales price increased to $272,000 for resales and $335,150 for new homes. The median sales price reached $350,000 for resales and $358,990 for new homes in Greater Phoenix. The price gap between new and resales has decreased to the lowest level in over a decade.
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