- Home sales at highest levels since before the Great Recession.
- Pace of jobs recovery is slowing.
- Plans to purchase a vehicle in the next 6 months mixed.
The peak in daily new COVID-19 cases was six weeks ago, and now hospitalizations and deaths are in decline as well. The decline has helped consumer sentiment improve modestly. Home sales are strong with low mortgage rates and favorable demographics.
The jobs recovery continues, but the pace of recovery is slow and slowing as each week we lose jobs as well as see recovered jobs. The country still has 14.5 million on traditional unemployment benefits, and support is waning.
Consumer sentiment improving: Consumer sentiment has been slowly improving for the last four weeks. Consumer Confidence, according to the Conference Board, declined 7.5% in August and left confidence down 37% from a year ago. Plans to purchase a vehicle in the next six months declined in August to a new 10-year low. Plans to purchase a home also fell but just to a 4-month low. The data for consumer confidence was collected through August 14.
The final reading on Consumer Sentiment in August from the University of Michigan increased to 74.1 from the preliminary estimate of 72.8 mid-month. Sentiment recovered some of its July losses. The consumer view of buying conditions for vehicles improved slightly in August as the views of prices and interest rates both improved.
The index of consumer sentiment from Morning Consult saw a fourth week of improvement last week. The daily index as of last Friday was at its highest point since March 22. The view of sentiment from Morning Consult is much timelier and is tracking the declining trend in daily COVID-19 cases.
Consumer spending up: Consumer spending in total increased in July with spending hikes on durable goods, non-durable goods, and services. Spending on durable goods and motor vehicles and parts again outpaced nondurable goods and services in aggregate, but categories like jewelry, telephone equipment, dental services, public transportation, casino gambling, food services, and hotel accommodations saw even stronger rebounds.
Personal income increased, but the sources of income saw mixed trends. Wages and salaries increased, but government payments declined the same amount. Unemployment benefit payments declined 7.2% while “Other” government payments increased 0.7%.
With spending growth exceeding income growth, the personal savings rate declined to 18%, but that was still the fourth highest savings rate in the history of the data with only April, May and June higher. Overall price inflation increased to 1% year over year in July.
Jobless claims still high: Initial jobless claims were 1.01 million for the week ending August 22, which was a decline of 98,000 from the prior week’s 1.10 million. Continuing claims, which represent people who previously filed and were approved and remain on unemployment compensation, declined to 14.5 million from 14.8 million. That represents 9.5% of February’s job total.
Continuous claims have declined by 2.4 million over the last four weeks. The trend is moving in the right direction again, but progress is very slow. The number of unemployed remains very high and initial claims continue to be very high by historical standards.
Rising home sales: New contracts to buy new and existing homes are now higher than last year and at the highest levels we’ve seen since before the Great Recession.
The new home sales SAAR increased 13.9% in July, which again far outperformed consensus expectations even with June’s sales revised up. The pace of new home sales is now 901,000, which is up 36.3% from a year ago and is the highest level of new home sales since 2006. Demand for new homes may also be boosted by growing interest in suburban, rural, and second homes.
The increases in the existing home market are similar to new but are more constrained by supply. Pending home sales are now up 15.5% from a year ago, and the index reflects the highest rate of pending sales since October 2005 during the housing bubble. With mortgage rates near all-time lows and the demographics of homeowners less likely to be negatively impacted by job losses, housing is outperforming most other sectors this year.
NAR’s Chief Economist Lawrence Yun said, “Home sellers are seeing their homes go under contract in record time, with nine new contracts for every 10 new listings. … If 20% more homes were on the market, we would have 20% more sales, because demand is that high.”
Check back on Smoke on Cars tomorrow for a video that will include updated data.