Another 2.44 Million People Filed for Initial Jobless Claims… The eight-week total now stands at 39 million people.
What it means— When does 2.44 million people filing for initial unemployment look good? When it follows weeks of three million people filing such claims. All 50 states, at least in part, have lifted restrictions on movement and businesses, which means companies are desperate to get clients back in the door and spending money.
Businesses need workers to open, but they are running headlong into a financial barrier. A new study from the University of Chicago finds that 68% of those who qualify for unemployment make more by staying at home… a lot more, 34% more. Imagine getting a 34% raise for not going to work. This will motivate even the most dedicated workers to avoid the phone calls to let them know their jobs are available again.
At these levels, unemployment for May should be above 20%, a sobering number, no matter how many caveats and mitigating factors exist.
Housing Starts Fell From 1.276 Million Annually to 891,000… Building permits fell less, from 1.356 million to 1.074 million.
What it means— Builders definitely did it better this time around than in the 2008–2009 financial crisis. We’re not seeing tracts of empty homes desperate for buyers. Instead, we’re seeing few homes available at all. With conventional 30-year fixed-rate mortgages offered at 3.15%, now is a great time to finance a home, if you have a paycheck and plan to stay a while.
Twenty percent unemployment and its effects on the overall economy should give us pause in many sectors including housing. We’re likely to see a pop in home buying and shopping in general as stay home restrictions ease. Just don’t expect the economy to go right back to pre-crisis levels.
Unemployment benefits will run their course this summer. Many small businesses won’t reopen. By early fall, we’ll know more about the economic damage of the shutdown including how it will affect prices on real assets. It seems unlikely we will see an increase.
April Existing Home Sales Down 17.8% … Multifamily home sales, or condos, dropped 26.4%.
What it means— It’s no surprise that existing home sales fell dramatically in April. Buyers were reduced to virtual tours. That’s a tough way to decide to make the biggest financial commitment of your life. The number of sales dropped to a level not seen since 2011, the biggest drop since the 2010 expiration of the homebuyer credit put in place during the financial crisis. However, the prices paid were surprising, up 7.4% compared with April 2019, to $286,800. It all comes down to supply.
In April 2020, the number of existing homes for sale dropped 19.7%, to a record low of just 4.1 months’ supply. Not only did potential sellers not put their homes on the market during what is typically the busy season, but sellers pulled their listings.
For Cities That Want to Save Money, Here’s a Suggestion: Stop Recycling… Recycling gained traction in the 1970s and 1980s as Americans became more environmentally conscious as we found ways to reuse materials. The process took off when China started buying our recyclable waste in massive quantities. It was profitable for cities to pick up and separate waste, then sell it.
All that changed last year when China dramatically reduced what recyclables it would buy. Much of what we sent over they simply threw away. Now cities must pay people to take recycling materials making the entire process costly and ineffective. According to Howard Husock of the Manhattan Institute, New York City could save $200 million per year by cutting out recycling. It’s likely that many other cities could do the same. The best way to reduce waste has always been not to use the disposable products in the first place, but that would mean giving up all of those bottles of water.
Data supplied by HS Dent Research
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What do you do, sir?” ~ John Maynard Keynes
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