LIVE MARKETS-Bust and boom: Existing home sales, jobless claims

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BUST AND BOOM: EXISTING HOME SALES, JOBLESS CLAIMS

Two economic indicators were released on Thursday, one of which gives evidence of a solid economy. The other one hails from an economic soft spot.

Starting with the latter, sales of pre-owned US homes USEHS=ECI dropped 5.5% in October to a 16-year low: 3.75 million units at a seasonally adjusted annual rate (SAAR), according to the National Association of Realtors (NAR).

The number fell 2.6% short of consensus.

In detail, single-family home sales—which represented about 91% of the total—tumbled 5.8%, while the volatile condo/co-op segment dropped 2.9%.

NAR shows a 0.4% monthly dip in the median home price. At last month's decelerated sales pace, it would take 5.1 months to sell every home on the market, up from 4.7 months in September.

The weakness occurs against a backdrop of elevated borrowing costs. The average 30-year fixed contract rate has been bouncing above 6% for over four years now, and above 7% since late September, according to data from the Mortgage Bankers Association.

"Home buying is difficult when mortgage rates have climbed to their highest levels since 2000, aside from a single month in 2023," writes Lawrence Yun, NAR's chief economist. "As a result, home sales fell to their lowest level since August 2010.”

However, Yun sees a turnaround happening in 2027.

"Based on the current underwhelming home sales pace at a time of consistent job growth, there could be sizable pent-up demand if mortgage rates decline," he says.

Moving to the labor market, an even 200,000 US workers joined the line outside the unemployment office USJOB=ECI last week, 4.7% more than the week prior and 5,000 north of consensus.

Ironing out weekly volatility, the four-week moving average of initial jobless claims continues to drift sideways around the 195,000 area.

Even considering Friday's stronger-than-expected employment report and the most recent JOLTS numbers, there are few signs the labor market has broken free from low-hire/low-fire mode.

"Initial jobless claims are down year on year in the vast majority of states, consistent with other evidence that labor market conditions are improving across most of the country," writes Michael Pearce, chief US economist at Oxford Economics. "Most of that strength comes from a dearth of firing, with hiring rates still subdued."

Ongoing jobless claims USJOBN=ECI, reported on a one-week lag, dipped by 1.2% to 1.697 million, 13,000 fewer than economists predicted and the lowest level since April 2023.

The metric has finally, in recent weeks, reclaimed a level associated with its pre-pandemic "normal." That could explain the recent uptick in jobs confidence, which had been on a steady downhill slide for nearly two years.

"We expect layoffs to remain low through Q4, but then come under some pressure next year in response to the recent tightening of financial conditions and the growing use of AI by firms," says Olivia Cross, senior US economist at Pantheon Macroeconomics. "By next summer, we think the FOMC will see evenly balanced risks to its dual mandate objectives."

(Stephen Culp)

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