Week of July 20th, 2020 in Review
The economic calendar was relatively quiet, with unemployment numbers and housing reports dominating the headlines. The news regarding jobless claims continues to reflect the pandemic's ongoing impact on the labor sector, as another 1.416 million people filed for unemployment benefits for the first time during the week ending July 18. This was about 100,000 claims higher than last week’s number of 1.3 million first-time filers. Continuing claims, which measure people continuing to receive benefits, did improve significantly – at least, the headline figure did. There's more to the story, as noted below. A plethora of housing reports were also released, with June's Existing Home Sales surging 20.7% from May, marking the largest one-month increase ever. Inventory of existing homes continues to remain a challenge for buyers, however, down 18.2% compared to June of last year. New Home Sales also rose much higher than expected in June, up 13.8% from May. Lastly, the Federal Housing Finance Agency (FHFA) released their House Price Index, which measures home price appreciation on single-family homes with conforming loan amounts. While home prices fell 0.3% from April to May, they are still up 4.9% compared to May of last year.
Initial Jobless Claims Rise in Latest Week
Another 1.416 million people filed for unemployment benefits for the first time during the week ending July 18, an increase of about 100,000 people from the previous week's number of 1.3 million. California (+292K), Florida (+105K) and Georgia (+120K) saw the largest gains. Continuing claims improved significantly from 17.304 million to 16.197 million, but there is much more to this headline number because the Pandemic Unemployment Assistance (PUA) Claims are not captured. PUA Claims reflect people like gig workers and contractors who usually would not be approved for unemployment benefits. These claims, again which are separate and in addition to the headline claims, totaled 975,000 in the latest week. Continuing PUA Claims did improve slightly from 14.2 million to 13.18 million but they are still significant. All told, the total number of people receiving some type of benefits improved slightly from 32 million to 31.8 million. Based on the total number of people receiving benefits, divided into the labor force of 160 million, there is likely a 20% unemployment rate.
Home Sales Surge in June
The National Association of REALTORS (NAR) reported that sales of existing homes jumped 20.7% in June, which was the largest one-month jump ever, albeit still slightly beneath expectations. The report measures closings in the month of June and likely represents buyers shopping for homes in April and May. Sales were down 11.3% year over year, but this is a big improvement from the -27% annual reading we saw in May's report. First-time home buyers made up 35% of home sales, up from 34%. Inventory remains tight, as there were only 1.57 million units for sale, down 18.2% when compared to June of last year. The median home price was reported at $295,300, up 3.5% year over year. "The sales recovery is strong, as buyers were eager to purchase homes and properties that they had been eyeing during the shutdown,” said Lawrence Yun, NAR’s chief economist. "This revitalization looks to be sustainable for many months ahead as long as mortgage rates remain low and job gains continue.”
Meanwhile, New Home Sales, which measure signed contracts on new homes, also came in strong, up 13.8% from May to June. This was much stronger than the 4% gain anticipated. Sales are now up 7% when compared to June of last year, which is quite an impressive amount especially given the pandemic. The median new home price increased 5.8% year over year to $329,300, while the majority of homes that sold were between $200,000 and $300,000.
An Update on Home Appreciation
There was news on home appreciation from the Federal Housing Finance Agency House Price Index, which measures home price appreciation on single-family homes with conforming loan amounts.
Home prices fell 0.3% from April to May, but they are still up 4.9% compared to May of last year. However, May's 4.9% year-over-year reading is a bit lower than the reported 5.5% annual gain in April and 5.9% in March.
Family Hack of the Week
Looking for some new ways to keep your kids entertained throughout the remaining hazy days of summer? Here are two outdoor craft ideas that are sure to be a hit.
Everyone loves tie-dye, and now you can up the ante beyond t-shirts and sweatshirts by tie-dyeing old beach towels or a blanket. Once they've dried, extend the fun by planning a picnic outing where you can put them to good use.
Pool noodles are for more than swimming pools – they can double as paint brushes. First, lay easel paper flat, placing rocks along the edges and corners so the paper doesn't blow away or move. Next, add washable paint to large bowls. Your kids can then dip the ends of the pool noodles into the paint and start creating their masterpieces.
Enjoy the warm weather with these fun and creative outdoor crafts!
What to Look for This Week
The last week of July brings a full slate of economic data, beginning Monday with Durable Goods Orders for June. We'll get a sense of how consumers are feeling with July's Consumer Confidence reading on Tuesday, plus there's housing news with May's Case-Shiller Home Price Index. June's Pending Home Sales figures follow on Wednesday.
Wednesday also brings the statement from the latest Federal Open Market Committee meeting, which always has the potential to move the markets.
On Thursday, all eyes will be watching for the latest Initial Jobless Claims numbers, along with the first look at Gross Domestic Product for the second quarter. The market is expecting -35% GDP in the second quarter, following -5% in the first quarter.
Finally, on Friday we'll get an update on the Fed's favorite inflation reading with June's Personal Consumption Expenditures. Also look for June's Personal Income and Personal Spending figures along with July's Consumer Sentiment Index and Chicago PMI (which measures manufacturing in that region).
We'll also keep an eye on rising tensions between the U.S. and China, as well as details regarding a new stimulus package throughout the week.
Technical Picture
The Fed's ongoing purchases of Mortgage Backed Securities remain a stabilizing force in the markets, though they did cut back their purchases last week from $4.4 billion to $3.4 billion per day. Mortgage Bonds have been trading sideways over the past two weeks, testing overhead resistance a few times but failing to break through. Every time the 103.219 ceiling was tested, or close to being tested, Bonds have been pushed lower. Mortgage Bonds remain in the middle of a wide range between the aforementioned ceiling and support at the 25-day Moving Average, meaning they are susceptible to price swings.
