Trend watch and what’s new this week
New U.S. COVID-19 cases and the death rate modestly edged higher this past week (slide 6). The percentage of hospitalized COVID-19 patients has held steady for roughly three weeks, though the rate of hospitalizations ticked higher this past week.
The activity-based data (slides 5 and 7) have continued to strengthen. Restaurant bookings and staffing both jumped after dipping for two weeks following the Memorial Day holiday.
While most of the upswing is the result of the summer travel season, it is remarkable how the 2022 data are tracking to pre-pandemic summer travel trends. For instance, air passenger counts are now running above the 2019 full-year average, though remain about 12% below the same week in June 2019.
Similarly, we revisited hotel occupancy (slide 8), which popped to 71.8% nationally this past week, hits highest level since 2019.
On slide 9, we show a key metric within the freight gauges, unit volumes of shipping containers, which have reaccelerated in ’22 and are less than 1% from the all-time high.
On slide 10, we also revisited temporary staffing. Staffing levels have rebounded above pre-pandemic all-time high, and underscore continued strong demand and employment trends.
More mixed signals in housing
New and existing home sales figures for May moved in opposite directions as did their respective sales prices. Note that new sales are counted when a sales agreement are signed, whereas existing home sales are recorded at closing, which takes considerably longer. For instance, closings with a conventional mortgage (about 65% of sales) generally takes 30 to 45 days, while a cash sale (35% of sales) can close as quickly as two weeks.
On slide 11, new home sales jumped 10.7% in May, halting a four-month slide, but prices dipped 1.3%.
On slide 12, existing home sales fell 3.6%, down for the fourth straight month. Yet, prices jumped to $414,200, a new all-time high.
Additionally, on slide 13, we address the inventory of homes for sale (both new and existing).
The cross currents within the economic data that we have noted here often were front-and-center in the May housing data, which seems unlikely since they are in same industry.
Aside from the aforementioned timing differences above, the directional contradiction seems stark. We are skeptical that there could be a sustained uptrend in new home sales into June given a nearly half-percent (0.50%) increase in mortgage rates from May to June (slide 3). We anticipate that new and existing home sales will continue to decline, reacting to both dramatically higher mortgage rates and home prices.
On the other hand, we expect new and existing home prices to remain elevated generally given the tight supply of both. While higher mortgage rates will cool housing sales further, more than a decade of underbuilding will likely continue to support prices, especially in the south, which accounts for more than 50% of all new home sales.
Even in the aftermath of the bursting housing bubble (2006 to 2008) when home sales plunged, new and existing home prices didn’t decline nearly to the same magnitude, and actually held fairly firm in most areas. The obvious exceptions during that period were the prices of foreclosed homes. We don’t expect foreclosures will jump as dramatically should a recession occur now as happened during the housing bubble years given that consumers are carrying higher cash buffers (thanks to higher wages) and lenders have generally adhered to stricter underwriting standards in the past decade compared to the housing bubble years.
Elevated home prices holding up home values would also mean maintaining a "wealth effect," whereby households can maintain their spending and lifestyles generally, which supports the broader economy. Unfortunately, firm home prices also likely means inflation trends remain somewhat hotter as well.
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