The Week in Review: June 28, 2021
High Home Prices Dent Housing Sales
The pandemic has generated economic distortions throughout the economy, and housing is no exception. After sales briefly fell during last year’s lockdown, sales surged and peaked in January, as illustrated in Figure 1.
Sales of existing homes have followed a similar pattern, according to data from the National Association of Realtors (NAR).
But the jump in sales has eaten away at scarce inventories, and bidding wars have erupted in various locations. Furthermore, high lumber prices have held back homebuilding, contributing to rising prices for the limited number of houses available.
We see it in the price of new homes, which hit a record high in May and are up 18% versus one year ago—see Figure 2.
While sellers celebrate the jump in prices, it has been a tough market for buyers, especially first-time buyers. Not surprisingly, high prices are starting to affect sales.
Sales are off the peak but remain elevated. NAR data suggest inventories remain very low, which is supportive of prices.
If you have any questions or concerns, please don’t hesitate to let me know.
Two for the Road
The lowest wage that workers without a college degree would be willing to accept for a new job now stands at an all-time high of $61,483, a rise of $10,000 in just one year. —Axios, June 13, 2021
According to the Fed's data, bank deposits have continued to surge this year. Between late March and May 26, they rose by $411 billion to $17.09 trillion. That is slower than the pace last spring, but still nearly four times the average of the past 20 years. —National Review, June 9, 2021
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