It’s not surprising that reports of the impressive – actually, astounding – increase in the nation’s third quarter growth rate were drowned out by the pre-and post-election noise.
On the other hand, while the 33.1 percent annualized growth in the Gross Domestic Product (GDP) set records, it still left the economy well below its pre-pandemic levels, with increasing evidence that the recovery is slowing amid disturbing signs that the virus is resurging nationwide.
Overcoming the combined first and second-quarter GDP losses would have required a growth rate of 45.1 percent, Ian Shepherdson, chief economist for Pantheon Economics, told clients in a research note. The actual third-quarter gain, while record-setting, “does not mean that all the damage has been undone,” he added.
The October employment report reflected the pandemic’s loosening but still inhibiting impact on the economy. Employers added 638,000 workers to their payrolls, pushing the unemployment rate just below 7 percent, soundly beating more conservative forecasts. But the October gain still leaves the labor market with a net jobs deficit of 10 million positions since the pandemic hit in March.
Continuing Claims
While continuing unemployment claims have been declining, new applications remain well above pre-pandemic peaks, and analysts caution that the decline in continuing claims could be attributed in part to workers losing their eligibility for coverage, which is typically capped at six months or less.
Another disturbing sign, analysts say, is the increase in the number of people who have been out of work for 27 weeks or more. That total reached 2.4 million in September, the highest level thus far in the pandemic, the Bureau of Labor Statistics reported, while another 800,000 unemployed workers moved into the long-term unemployment category, the largest one-month increase ever in this metric.
The failure to resolve the Congressional impasse over a second round of stimulus payments is heightening concerns about the economic outlook, with many analysts warning that the increasing strain on household finances could upend the recovery. Layoff announcements from American Airlines, Walt Disney and AT&T, among others, have underscored those concerns.
Housing Rising Above
The housing market, meanwhile, continues to follow a separate path, if not rising above the pandemic, then at least navigating successfully around it. Existing home sales increased by 9.4 percent in September compared with August, the fourth monthly gain, with no signs of the pause that typically begins in the fall.
Year-over-year, sales were up by almost 21 percent, the National Association of Realtors (NAR) reported. Lawrence Yun, the NAR’s chief economist, attributed the uncharacteristic seasonal strength to interest rates, which remain near record lows, interest in vacation homes fueled by the work-from-home option available to many workers, and a desire for more space resulting from the enforced togetherness the pandemic has produced.
The NAR”s pending sales index declined slightly in September compared with August, but still increased by more than 20 percent year-over-year with double-digit gains in every region, indicating that “we are still likely to end the year with more holds sold overall than in 2019,” Yun observed.,
Anemic Inventories
Inventory levels remain anemic, however, with a 2.7 month’s supply in September, down from a four month’s supply a year ago, falling far short of meeting growing demand, especially at the lower end of the price range. “The primary constraint to even more sales is the plummeting inventory of homes on the market, which is leading to bidding wars and spikes in home prices across the country,” Mike Frantoni, chief economist for the Mortgage Bankers Association, told Housing Wire.
Scarce listings are also forcing prices higher. The S&P CoreLogic Case-Shiller price index increased at an annual rate of 5.7 percent in August, the largest year-over-year increase in more than two years. Rising prices are undercutting affordability for first-time buyers trying to get a foothold in the market, and for existing owners uncertain about their ability to find and afford a new home if they sell the one they own.
The National Association of Home Builders (NAHB) reports that 58.3 percent of the new and existing hones sold between the beginning of July and the end of September were affordable to families earning the median income ($73,900), the lowest affordability reading since the fourth quarter of 2018.
Housing Starts
Homebuilders are responding to strong buyer demand by building more homes. Single-family home starts in September hit an annual rate of 1.1 million units, more than 10 percent above the year-ago pace. The smaller (8.5 percent) month-over-month gain reflects the sharp decline in multi-family construction, which fell by more than 16 percent compared with August, NAHB analysts say.
Permits for single-family homes increased by almost 8 percent in September compared with August, indicating that builders remain upbeat about the market outlook. Reflecting that upbeat mood, the NAHB-Wells Fargo Housing Market Index rose two points in October to 85, the highest reading since the index was created 35 years ago.
Construction levels are more subdued than the confidence reading might suggest, reflecting the constraints imposed by the rising cost of building supplies, whicih, the Bureau of Labor Statistics estimates has added $16,000 to the price of a typical single-family home this year.
Although the housing market has defied the pandemic’s drag thus far, uncertainty about its duration and its impact are taking a toll. More than one-third of the would-be home sellers responding to a Zillow survey said pandemic concerns have led them to delay putting their homes on the market.
For the moment, however, the housing market remains red-hot in most areas, including Boston.
“I’ve seen bidding wars randomly, here or there in the past, but I’ve never seen the consistent bidding wars I’ve seen this fall,” one local Realtor told Housing Wire. “It’s been a circus, really,” he added.