National residential new home metrics; December, 2021

Release Number: CB22‐11
January 19, 2022 ‐ The U.S. Census Bureau and the U.S. Department of Housing and Urban Development jointly announced the following new residential construction statistics for December 2021;

Building Permits
Privately‐owned housing units authorized by building permits in December were at a seasonally adjusted annual rate of 1,873,000.
This is 9.1 percent (±1.1 percent) above the revised November rate of 1,717,000 and is 6.5 percent (±1.7 percent) above the December 2020 rate of 1,758,000. Single‐family authorizations in December were at a rate of 1,128,000; this is 2.0 percent (±1.3 percent) above the revised November figure of 1,106,000. Authorizations of units in buildings with five units or more were at a rate of 675,000 in December.
An estimated 1,724,700 housing units were authorized by building permits in 2021. This is 17.2 percent (±0.6 percent) above the 2020 figure of 1,471,100.

Housing Starts
Privately‐owned housing starts in December were at a seasonally adjusted annual rate of 1,702,000. This is 1.4 percent (±10.1percent)* above the revised November estimate of 1,678,000 and is 2.5 percent (±13.8 percent)* above the December 2020 rate of 1,661,000. Single‐family housing starts in December were at a rate of 1,172,000; this is 2.3 percent (±9.8 percent)* below the revised November figure of 1,199,000. The December rate for units in buildings with five units or more was 524,000.

An estimated 1,595,100 housing units were started in 2021. This is 15.6 percent (±4.0 percent) above the 2020 figure of 1,379,600.

Housing Completions
Privately‐owned housing completions in December were at a seasonally adjusted annual rate of 1,295,000. This is 8.7 percent (±14.5percent)* below the revised November estimate of 1,418,000 and is 6.6 percent (±10.4 percent)* below the December 2020 rate of 1,386,000. Single‐family housing completions in December were at a rate of 990,000; this is 3.9 percent (±13.3 percent)* above the revised November rate of 953,000. The December rate for units in buildings with five units or more was 299,000. An estimated 1,337,800 housing units were completed in 2021. This is 4.0 percent (±3.2 percent)* above the 2020 figure of 1,286,900.

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New York Fed home price change interactive map for United States

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Conference Board Employment Trends Index; December 2021

NEW YORK, January 10, 2022…The Conference Board Employment Trends Index™ (ETI) increased in December. The index now stands at 116.63, up from 115.64 in November (an upward revision).

“The Employment Trends Index increased again in December. And based on the latest readings of the index’s components, job growth is likely to be strong in 2022,” said Gad Levanon, Head of The Conference Board Labor Markets Institute. “Nevertheless, in the very short term, job growth may be tepid as the fallout from Omicron continues.” 

Levanon added that “hiring in in-person services industries will be most impacted by Omicron through lower consumer spending, leading to less hiring. Such industries include restaurants, hotels, personal care, entertainment, and passenger transportation. In addition, an increasing number of sick or quarantined employees will force businesses to operate at lower capacity and dampen overall economic activity. Office environments will need to remain virtual or at least hybrid for the foreseeable future. Labor shortages continue to be severe and will likely remain so going forward. High wage pressures will continue to feed into price inflation. Service employers will need to automate quickly to make up for the labor shortfall.”

December’s increase in the Employment Trends Index was driven by positive contributions from six of eight components. From the largest positive contributor to the smallest, these were: Initial Claims for Unemployment Insurance; Ratio of Involuntarily Part-time to All Part-time Workers; Job Openings; Industrial Production; Real Manufacturing and Trade Sales; and the Percentage of Firms With Positions Not Able to Fill Right Now. The two components that made negative contributions in December were the Number of Employees Hired by the Temporary-Help Industry and the Percentage of Respondents Who Say They Find “Jobs Hard to Get”.

The Employment Trends Index is a leading composite index for employment. When the index increases, employment is likely to increase as well, and vice versa. Turning points in the index indicate that a turning point in the number of jobs is about to occur in the coming months. The Employment Trends Index aggregates eight leading indicators of employment, each of which has proven accurate in its own area. Aggregating individual indicators into a composite index filters out “noise” to show underlying trends more clearly.

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CoreLogic report on national difference between contract price and appraised value

The second half of 2020 saw a small uptick in loans with appraisal gaps, but it wasn’t until the start of 2021 that the acceleration quickly picked up.  In a matter of months, the percentage of appraisals falling short of buyer’s offer price climbed from 11.9% in January 2021 to 20.1% in May 2021.  The acceleration is also accompanied by a widening difference between the appraised value and offer price. In May 2021, the median difference between a home’s appraised value and buyer’s offer price was 4.5%, up from 3.5% seen in the first half of 2020. 

 The risks of overpaying amid an inventory shortage and bidding wars are just some of the reasons why the frequency and severity of an appraisal gap has increased.  For appraisers, fast-rising home prices also present challenges. Fast-rising home prices can render recent comparable home sales—the primary basis for appraisers to develop an independent estimate of a house’s fair value — relatively obsolete  quickly, giving rise to appraisal data lags if recent comparable home sales are insufficiently adjusted to current market conditions. A recent CoreLogic Intelligence blog observed just that and attributed the surge in appraisal gap to the impact of fast-moving housing market.

Figure 3 below plots appraisal gap frequencies along with 12-month and 1-month home price movements.  It shows a precipitous decline in appraisal gap frequencies amid the fastest-rising annual home prices on record – at a time when one may expect the impact of lags in recent comparable home sales to have persisted.  After peaking in May, appraisals with a gap to buyer’s offer price have fallen just as rapidly as they have risen in the months earlier to just about a half of the peak rate.

Figure 3: Appraisal Gap and Home Price Growth

Source: CoreLogic National HPI; CoreLogic National Collateral Database.© 2021 CoreLogic,Inc., All rights reserved.

What explains the decline in appraisal gap frequencies in the fastest rising market?  If the risks of overpaying and overbidding may have contributed in part to the rising appraisal gap frequencies , then it is rather unconvincing to suggest that the same risks may have subsided at a time when bidding wars and buyers paying higher premiums to secure those winning bids have likely continued and possibly intensified.  According to the CoreLogic MLS data, the share of homes selling at or above list price reached new highs in August.

While not ruling out the impact of heated homebuying and bidding wars on the appraisal gap, a more likely scenario is that appraisals may have caught up with the fast-moving market after they were initially impacted by lagging comparable sales data. Additionally, iIt is plausible that after months of rapid home price appreciation, appraisers have become more confident and adept at incorporating market condition adjustments into recent comparable sales, thus negating the appraisal data lag between recent comparable sales and current purchase transactions.

As shown in Figure 3, month-to-month price growth has slowed since April. Subsiding month-to-month price momentum means that the need or the size of required market condition adjustments to calibrate recent comparable sales have likely become fewer or smaller, making it less likely for the appraised transaction to be impacted by the lag in the comparable sales data..

While the rise and fall in appraisal data lag may offer an understanding of the rise and fall of the frequency of an appraisal gap, its significance remains an empirical question and is worthy of further analysis.  Home prices are expected to grow at a slower and more sustainable pace in 2022. That means we can also expect frequency of an appraisal gap being present in a purchase transaction to return to the 7-9% levels that prevailed before the pandemic.

© 2021 CoreLogic, Inc. , All rights reserved.

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Conference Board commentary on U.S. labor market

New York, January 7, 2022…Employment growth remained modest in today’s jobs report, reflecting the ongoing toll of the pandemic on in-person services. As of December, there are no signs that severe labor shortages in the US are easing.

Nonfarm payroll employment increased by 199,000 in December, after gains of 249,000 (upwardly revised) in November and 648,000 in October. Job growth in in-person services—including restaurants, hotels, and retail—remains depressed by the rapid spread of the pandemic. The number of jobs in the US economy is still 3.6 million below its pre-pandemic level.

Nevertheless, December saw the unemployment rate decline further—from 4.2 to 3.9 percent. In June 2021, six months ago, the unemployment rate was two full percentage points higher, at 5.9 percent. In the preceding six months (December 2020–June 2021), the unemployment rate declined by just 0.8 ppts, despite similar job growth during these two six-month periods. The large drop in the unemployment rate in the past six months reflects a higher proportion of unemployed people landing a job, which may be related to the expiration of the enhanced unemployment benefits.

Rapid wage inflation in December suggests that the US labor market is still experiencing severe labor shortages. In the past nine months, average hourly earnings for production and nonsupervisory employees increased by over 7 percent (annual rate). For comparison, in no other nine-month period in the 35 years prior to the pandemic did this measure exceed 5 percent. Such strong wage growth is putting upward pressure on inflation.

At 61.9 percent, labor force participation remains low compared with the pre-pandemic rate of 63.4 percent. But it is gradually improving, especially among women. Some people are delaying a return to the labor market because they still fear the virus. In addition, older Americans’ labor participation rate declined significantly during the pandemic—and there are no signs of it recovering.

In the near term, the exponential spread of the Omicron variant is likely to temporarily lower the supply of labor, as many workers will be sick or quarantined. Employers may resort to temporary help agencies to fill the gaps.

By March or April, we expect strong job growth to resume. Employment in many of the in-person services industries are still well below pre-pandemic levels and are likely to grow rapidly in 2022. The US unemployment rate may well reach 3 percent this year, marking a 70-year low. Severe labor shortages will continue.

While today’s payroll gains missed market expectations, the continued improvement in jobs data more generally suggests that the US economy has either achieved or is close to full employment. Against this backdrop, the Fed is likely to continue its plans to accelerate quantitative-easing taper and implement at least three 25–basis point interest rate hikes this year.

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New Home Sales
Sales of new single‐family houses in November 2021 were at a seasonally adjusted annual rate of 744,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development.

This is 12.4 percent (±17.2 percent)* above the revised October rate of 662,000, but is 14.0 percent (±20.5 percent)* below the November 2020 estimate of 865,000.

Sales Price
The median sales price of new houses sold in November 2021 was $416,900. The average sales price was $481,700.

For Sale Inventory and Months’ Supply
The seasonally‐adjusted estimate of new houses for sale at the end of November was 402,000. This represents a supply of 6.5 months at the current sales rate.

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Conference Board Consumer Confidence Index; December, 2021

New York, December 22, 2021…The Conference Board Consumer Confidence Index® increased again in December, after an upward revision in November. The Index now stands at 115.8 (1985=100), up from 111.9 (an upward revision) in November. The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—was relatively flat at 144.1, down from 144.4 last month. The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—rose to 96.9 from 90.2.

“Consumer confidence improved further in December, following a very modest gain in November,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “The Present Situation Index dipped slightly but remains very high, suggesting the economy has maintained its momentum in the final month of 2021. Expectations about short-term growth prospects improved, setting the stage for continued growth in early 2022. The proportion of consumers planning to purchase homes, automobiles, major appliances, and vacations over the next six months all increased.

“Meanwhile, concerns about inflation declined after hitting a 13-year high last month as did concerns about COVID-19, despite reports of continued price increases and the emergence of the Omicron variant. Looking ahead to 2022, both confidence and consumer spending will continue to face headwinds from rising prices and an expected winter surge of the pandemic.”

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Conference Board Leading Economic Index; November, 2021

NEW YORK, December 20, 2021The Conference Board Leading Economic Index® (LEI)for theU.S. increased by 1.1 percent in November to 119.9 (2016 = 100), following a 0.9 percent increase in October and a 0.3 percent increase in September.

“The U.S. LEI rose sharply again in November, suggesting the current economic expansion will continue into the first half of 2022,” said Ataman Ozyildirim, Senior Director of Economic Research at The Conference Board. “Inflation and continuing supply chain disruptions, as well as a resurgence of COVID-19, pose risks to GDP growth in 2022. Still, the economic impact of these risks may be contained. The Conference Board forecasts real GDP growth to strengthen in Q4 2021 to about 6.5 percent (annualized rate), before moderating to a still healthy rate of 2.2 percent in Q1 2022.”

The Conference Board Coincident Economic Index® (CEI) for the U.S. increased by 0.3 percent in November to 106.7 (2016 = 100), following a 0.5 percent increase in October and no change in September.

The Conference Board Lagging Economic Index® (LAG) for the U.S. decreased by 0.1 percent in November to 107.2 (2016 = 100), following a 0.5 percent increase in October and a 0.9 percent increase in September.

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Interactive heat map of United States house price change; October 2021 data

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National residential construction metrics; November, 2021

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