Key Takeaways
- Existing home sales dipped in December, mainly due to limited supply.
- Still, low interest rates and solid household balance sheets helped push existing home sales to a 15-year high in 2021.
- While the supply gap supports homebuilding activity, lingering supply bottlenecks remain a constraint.
U.S. homebuying activity took a breather in December amid the holiday buying season. After existing home sales climbed higher over the prior three months, in December they declined by 4.6% from the previous month to a seasonally adjusted annualized rate of 6.18 million--below consensus expectations of 6.43 million. Actual existing home sales rose to 6.12 million in 2021 from 5.64 million in 2020, reaching their highest annual level since 2006, helped by low interest rates, a strong jobs market, and high stock prices that supported healthy household balance sheets.
Slim picking was a major culprit behind the December decline. Existing home inventories fell to a historical low of 910,000, with the month's supply falling to just 1.8 months in December. Given the limited supply, existing home prices remained near their record high ($363,800 in June) at $354,300. Despite rising home prices, however, monthly mortgage purchase applications in November and December rose 6.6% and 0.5% month over month, respectively.
Prices for new home sales are also hot, with the median price reaching an all-time high of $416,900 in November, from a prior record of $408,700 (was $407,700) the month before. We expect new home sales to climb by 0.8% to 750,000 for December. Robust demand for homes and strong new home construction activity over the past two months should support supply in 2022, though supply roadblocks could limit just how fast homes can come to market.
The large housing supply gap has kept homebuilders busy. Housing starts went higher in December, climbing by 1.4% over November to 1.70 million (seasonally adjusted annual rate). Housing permits, a leading indicator of residential construction activity in the months ahead, shot up by 9.1% from their November level to 1.87 million (seasonally adjusted annual rate). Both indicators stayed above their values from December 2020.
But while demand to build is there, lingering supply bottlenecks continue to delay construction. Limited materials, labor, and building lots, as well as higher prices for what's available, will likely continue to temper the pace of new home construction. Housing completions went 8.7% below their November reading in December, to 1.30 million, and 6.6% below their level a year ago.
Table 1
Review Of U.S. Economic Indicators | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Release date | Measurement | Nov-21 | Dec-21 | Jan-22 | Level year ago | Year over year | ||||||||||
Labor market | ||||||||||||||||
Four-week moving average of initial claims | 1/13/2022 | in 000 | 240 | 200 | 231 | 866 | ||||||||||
Unemployment rate | 1/7/2022 | % | 4.2 | 3.9 | 6.7 | |||||||||||
All employees, total nonfarm | 1/7/2022 | change in 000 | 249 | 199 | (306) | |||||||||||
All employees, total private | 1/7/2022 | change in 000 | 270 | 211 | (274) | |||||||||||
Average hourly earnings of all employees, total private | 1/7/2022 | m/m,% | 0.4 | 0.6 | 4.7 | |||||||||||
Average weekly hours of all employees, total private | 1/7/2022 | hours of work | 34.70 | 34.70 | 35 | |||||||||||
Total nonfarm private payroll employment | 1/5/2022 | change in 000 | 505 | 807 | (76) | |||||||||||
Labor force participation rate | 1/7/2022 | % | 61.9 | 61.9 | 61.5 | |||||||||||
Job openings: total nonfarm | 1/4/2022 | millions | 10.6 | 6.8 | ||||||||||||
Consumer spending and confidence | ||||||||||||||||
Personal income | 12/23/2021 | m/m,% | 0.4 | 7.4 | ||||||||||||
Real disposable personal income | 12/23/2021 | m/m,% | (0.2) | 0.0 | ||||||||||||
Personal consumption expenditures | 12/23/2021 | m/m,% | 0.6 | 13.5 | ||||||||||||
Personal saving rate | 12/23/2021 | % | 6.9 | 13.0 | ||||||||||||
Total vehicle sales | 12/23/2021 | millions | 13.3 | 16.3 | ||||||||||||
University of Michigan: consumer sentiment | 1/12/2022 | index | 67.4 | 70.6 | 68.8 | 79.0 | ||||||||||
Advance retail sales: retail trade and food services | 1/14/2022 | m/m,% | 0.2 | (1.9) | 16.9 | |||||||||||
Advance retail sales: retail trade | 1/14/2022 | m/m,% | 0.1 | (2.1) | 14.4 | |||||||||||
Industrial activity | ||||||||||||||||
Industrial production: total index | 1/14/2022 | m/m,% | 0.7 | (0.1) | 3.7 | |||||||||||
Industrial production: manufacturing (ICS) | 1/14/2022 | m/m,% | 0.7 | (0.3) | 3.7 | |||||||||||
Total business inventories | 1/14/2022 | m/m,% | 1.3 | 8.7 | ||||||||||||
Capacity utilization: total index | 1/14/2022 | index | 76.6 | 76.5 | 74.1 | |||||||||||
Current general business conditions; diffusion index for New York | 1/18/2022 | index | 30.9 | 31.9 | (0.7) | 3.5 | ||||||||||
Chicago Fed National Activity Index | 12/22/2021 | index | 0.4 | 0.3 | ||||||||||||
Current general activity; diffusion index for Federal Reserve District 3: Philadelphia | 12/16/2021 | index | 39.0 | 15.4 | 11.1 | |||||||||||
Housing | ||||||||||||||||
New privately owned housing units started: total units | 1/19/2022 | millions | 1.68 | 1.7 | 1.66 | |||||||||||
New privately owned housing units authorized in permit-issuing places: total units | 1/19/2022 | millions | 1.72 | 1.87 | 1.76 | |||||||||||
New privately owned housing units completed: total units | 1/19/2022 | millions | 1.42 | 1.29 | 1.39 | |||||||||||
Monthly supply of houses in the U.S. | 12/23/2021 | months | 6 | 4 | ||||||||||||
Total construction spending: total construction in the U.S. | 1/3/2022 | m/m,% | 0.4 | 9.3 | ||||||||||||
External trade | ||||||||||||||||
Trade balance: goods and services, balance of payments basis | 1/6/2022 | billions | (80.2) | (67.3) | ||||||||||||
Exports of goods and services, balance of payments basis | 1/6/2022 | billions | 224.2 | 185.2 | ||||||||||||
Imports of goods and services, balance of payments basis | 1/6/2022 | billions | 304.4 | 252.5 | ||||||||||||
Import Price Index (End Use): All Commodities | 1/14/2022 | m/m,% | 0.7 | (0.2) | 10.4 | |||||||||||
Export Price Index (End Use): All Commodities | 1/14/2022 | m/m,% | 0.8 | (1.8) | 14.7 | |||||||||||
Prices | ||||||||||||||||
Producer Price Index by commodity: final demand | 1/13/2022 | m/m,% | 1.0 | 0.2 | 9.8 | |||||||||||
Producer Price Index by commodity: final demand: finished goods less foods and energy | 1/13/2022 | m/m,% | 0.6 | 0.6 | 6.5 | |||||||||||
Consumer Price Index for all urban consumers: all items in U.S. city average | 1/12/2022 | m/m,% | 0.8 | 0.5 | 7.1 | |||||||||||
Consumer Price Index for all urban consumers: all items less food and energy in U.S. city average | 1/12/2022 | m/m,% | 0.5 | 0.6 | 5.5 | |||||||||||
Personal Consumption Expenditures: chain-type price index | 12/23/2021 | m/m,% | 0.6 | 5.7 | ||||||||||||
Personal Consumption Expenditures excluding food and energy (chain-type price index) | 12/23/2021 | m/m,% | 0.5 | 4.7 | ||||||||||||
Note: Data retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/. m/m--Month over month. Last three months selected. Yearly data is either year-on-year change (%) or level value year ago. Total nonfarm private payroll employment is from ADP. University of Michigan: consumer sentiment is extracted from http://www.sca.isr.umich.edu/. Data retrieved on Jan. 20, 2021 |
Table 2
Economic Release Calendar | |||||
---|---|---|---|---|---|
Date | Release | For | Forecast | Consensus | Previous |
25-Jan | Consumer confidence | Jan | 109.0 | 111.5 | 115.8 |
26-Jan | Advance trade in goods (bil. $) | Dec | (95.00) | (96.10) | (98.00) |
New home sales (mil.) | Dec | 0.750 | 0.763 | 0.744 | |
27-Jan | GDP advance report (%) | Q4 | 5.3 | 5.5 | 2.3 |
Chain price index advance report (%) | Q4 | 5.8 | 6.0 | 6.0 | |
Durable goods orders (%) | Dec | (0.4) | (0.5) | 2.6 | |
Initial jobless claims | 1/22 | 265.0 | 255.0 | 286.0 | |
28-Jan | Employment Cost Index (%) | Q4 | 1.1 | 1.2 | 1.3 |
Personal income (%) | Dec | 0.5 | 0.5 | 0.4 | |
Personal consumption expenditure (%) | Dec | (0.1) | (0.5) | 0.6 | |
University of Michigan Consumer Sentiment (final) | Jan | 68.0 | 68.8 | 68.8 | |
31-Jan | Chicago PMI | Jan | 64.0 | 62.5 | 64.3 |
1-Feb | ISM (Manufacturing) | Jan | 59.0 | 58.8 | 58.7 |
Construction spending (%) | Dec | 0.7 | 0.7 | 0.4 | |
2-Feb | ADP employment survey (000) | Jan | 210 | 210 | 807 |
3-Feb | Nonfarm productivity (prelim, %) | Q4 | 3.0 | 2.6 | (5.2) |
Unit labor costs (prelim, %) | Q4 | 1.0 | 1.2 | 9.6 | |
Factory orders (%) | Dec | 0.2 | 0.3 | 1.6 | |
ISM-NMI | Jan | 61.0 | 61.4 | 62.0 | |
4-Feb | Nonfarm payrolls (000) | Jan | 220 | 235 | 199 |
Private nonfarm payrolls (000) | Jan | 200 | 226 | 211 | |
Manufacturing payrolls (000) | Jan | 25 | 25 | 26 | |
Unemployment rate (%) | Jan | 3.9 | 3.9 | 3.9 | |
Average hourly earnings (%) | Jan | 0.5 | 0.5 | 0.6 | |
Hours worked | Jan | 34.8 | 34.8 | 34.7 |
The views expressed here are the independent opinions of S&P Global's economics group, which is separate from, but provides forecasts and other input to, S&P Global Ratings' analysts. The economic views herein may be incorporated into S&P Global Ratings' credit ratings; however, credit ratings are determined and assigned by ratings committees, exercising analytical judgment in accordance with S&P Global Ratings' publicly available methodologies.
This report does not constitute a rating action.
U.S. Chief Economist: | Beth Ann Bovino, New York + 1 (212) 438 1652; bethann.bovino@spglobal.com |
Contributor: | Shuyang Wu, Beijing |
Research Contributor: | Shruti Galwankar, CRISIL Global Analytical Center, an S&P affiliate, Mumbai |
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