Home Values Jump, Trade Deficit Plummets

Tuesday, October 6, 2020

A new report from analytics firm CoreLogic on Home Values this morning showed the highest rise in two years for the month of August: +5.9% year over year, +1.0% in just the past month. Two big drivers appear to be the +8.6% year-over-year spike in entry-level home ownership (meaning Millennials are at last making the jump in meaningful numbers to real estate purchases), and the “mass exodus” from crowded cities like New York in favor of more space, following the initial impact of the coronavirus pandemic: suburban homes with big back yards.

Inventories were down in August 17% year over year, as home builders from entry-level specialists D.R. Horton DHI to luxury developers Toll Brothers TOL scramble to make land purchases and break new ground. This industry was affected by this past spring’s shutdown, as land-buying firms were not considered part of the “essential workers” allowed into the field. Predictably, New York City dropped home values by 0.1%, but virtually all other markets saw gains, led by Phoenix at +9.8%, San Diego +6.2% and Washington DC +5.5%.

Some unexpected states saw the biggest jumps in home value increases, with Idaho leading the pack at +10.8% year over year. Arizona came next at +9.7% (carried largely by the strength in Phoenix and its surrounding areas) and Maine, +9.6%. It would appear the spreading out of the American population, largely as a reaction to the pandemic — and its subsequent work-from-home/anywhere policies — has already begun.

The U.S. Trade Deficit continues to move in the wrong direction, with a new report this morning showing -$67.1 billion for the month of August. This is steeper than the -$66.7 billion and well below the slightly upward revision of -$63.4 billion in July, as well as the lowest read we’ve seen since directly prior to the financial collapse in 2008. In fact, we appear headed for an all-time low at some month in the near future, which is -$68.28 billion in August 2006. This latest -$67.1 billion read is the second-lowest all time.

The trailing 12-month average has also been taken down a peg with this latest read on the trade deficit: -$49.95 billion is better than the past few months, but down notably from the -$48.62 billion in the previous trailing 12-month average. Imports jumped 3.2% on the month, with a slower build of +2.2% in Exports.

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