Liz Ann Sonders took a look at the health of the housing market and how it relates to economic data more broadly.
Full Video Transcript Below:
Sara Silverstein: What do you see from the latest housing data. What does it tell you about the health of the housing market?
Liz Ann Sonders: You know, the housing cycle in this, let’s say, odd pandemic era has been really unique because during the early part of the downturn, the downturn was felt most acutely on the sales side, particularly in existing homes, because of how many homeowners were essentially locked into their homes because they had, you know, fixed rate mortgages at a much lower level than where the stated mortgage rate was. And you continue to see, even though sales have recovered, fluctuations in terms of sales prices, though, have been stickier. And I think that that’s the supply demand imbalance, especially with existing homes, which represent more than 80% of the home market and because of how many homeowners are locked in and that’s restrained supply on the existing side. And we can’t build supply fast enough on the new homes side, that has kept prices more elevated. So you get these swings a little bit more on the sales side, but not as much on the pricing side. So I think that’s, again, the unique characteristics of this very funky cycle, to use a technical term.
Sara Silverstein: And is there a market data point that you think investors oversimplify or completely misunderstand?
Liz Ann Sonders: You know, I think the labor market data is so important these days. And when it comes to the jobs reports on a monthly basis, there’s always a focus on the initial headlines that are reported. So the number of payrolls created or lost in the prior month and then the unemployment rate, I think there needs to be more look at all of the component data points that come out within that jobs report. So you’ve got the establishment survey which generates payrolls. There’s also the household survey, which generates the unemployment rate. And there have been big divergences between those two that are important to digest. Temporary help versus permanent work. Same thing in terms of layoffs, temporary layoffs versus permanent layoffs. Long term unemployment relative to the traditional unemployment hours worked to give you a sense of what’s happening from a demand perspective, we know there’s a lot of labor hoarding, but when you start to see hours work come down, which we have seen, that suggests a weaker demand backdrop, even if it’s not picked up in something like payrolls. Response rate is also down quite a bit, especially for things like the job openings survey, the establishment survey, again, that generates payrolls. That means that revisions are increasingly important. So don’t just look at the headline release for the prior month. Look at the revisions for the past couple of months. So I, I think it requires a broader look. I would say this about any economic metric, but I think the labor market is really important right now because it’s come into the mix as it relates to Fed policy alongside inflation. So both components of the Fed’s dual mandate I think are more in focus relative to last year’s almost sole focus on the inflation side.
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