Redfin Economists’ Weekly Take: All Eyes on Fed Speeches as Markets Continue to Fly Data-Blind

Last Week In A Nutshell

Rates eased due to a surprisingly negative ADP jobs report, which stayed in the spotlight as the government shutdown sidelined the official jobs report.

Upcoming Attractions

• Jobless claims (Thursday): Expected to stay in the 220,000 range, similar to the last few years.
• University of Michigan consumer sentiment (Friday): Expected to fall slightly from the recent low levels while consumer inflation expectations are expected to rise slightly.
• Fed:
  • FOMC minutes: Minutes from the September Fed meeting will be analyzed to see how officials discussed the path of rates for the rest of this year
  • Fed speak: There are 18 scheduled speeches for Fed officials this week, with Chair Powell scheduled to speak on Thursday morning.

Last Week’s Highlights

• ADP jobs report: The ADP report showed the economy lost 32,000 jobs in September vs expectations of a 50,000 gain. While the quality of the ADP report has improved over time, it often deviates significantly from the official jobs report.
• JOLTS report: As expected, job openings stayed flat at 7.2 million.
• ISM: ISM services PMI fell to 50 in September from 52 the previous month and below expectations of 51.7—indicating less activity than expected in the services sector.
• Housing data:
  • Pending sales: NAR reported that pending home sales increased 4% month over month and 3.8% year over year. The headlines blew the increase out of context. Much of the outsized increase month over month is because this index unexpectedly fell last time. The year over year increase is mostly because last August was very soft. Home sales continue to bounce along the bottom and we have yet to see a meaningful pick up.
  • Case-Shiller Home Price index: As expected, annual growth for home prices fell to 1.8%.

Diving a Little Deeper

• Government shutdown:
  • How long will this last?
    • It seems likely the government will re-open by mid-October. The last shutdown starting in December 2018 lasted 34 days and was the longest ever. However, the Department of Defense had already been funded. This time, if the government doesn’t re-open by October 15, uniformed military would go unpaid unless the Defense Department is able to find an alternate way to pay them.
  • What data are available?
    • Available: Private sector data (e.g., NAR, MBA, ISM, Conference Board. etc), Federal Reserve data, Treasury’s Daily Treasury Statement, and jobless claims from individual states that can be aggregated without the Department of Labor.
    • Not available: Anything from the Census Bureau, Bureau of Labor Statistics (e.g., jobs report, CPI, etc.), and Bureau of Economic Analysis (e.g., GDP, PCE inflation, etc.)
  • When will economic data be available again?
    • Once the government re-opens, data that was scheduled to be released will be released with a small delay. The statistical agencies will announce new release dates. Data that was to be collected during the shutdown and scheduled for release in the future will also be delayed as the agencies catch up.
  • Will the quality of data released after the shutdown be affected?
    • Yes, and we will provide a careful read out after each release of where we think the biases could be.
  • What are the consequences to the economy of “flying blind”?
    • We still have lots of alternative data sources for economists to parse, but these often come with many more drawbacks than the official statistics. For our purposes, the main question is what the Fed decides to do if it doesn’t have the October data before their October 29 meeting. They will likely proceed with a 25 bps cut.

• Housing market reports from Redfin:
  • Home Sellers Are Cutting Prices at a Record Rate to Lure Skittish Buyers
    • The typical home that sold in August went for nearly 4% under its asking price–the steepest discount for that month since 2019.
  • Typical U.S. Luxury Home Price Rises 4% to $1.25M as Sales Fall to Lowest August Level in Over a Decade
    • The typical U.S. luxury home sold for $1,250,000 in August, up 3.9% from a year earlier.
    • Luxury home sales fell 0.7% to the lowest August level in Redfin’s records, which go back to 2013. Non-luxury home sales also fell (-0.6%) to the lowest August level on record.
    • The typical luxury home sold in 46 days in August, three days slower than a year ago. In comparison, non-luxury home sales typically took 40 days to go under contract, up from 33 days last year.
    • Luxury home prices grew the most in West Palm Beach, FL (+15%), and fell the most in Tampa, FL (-5.5%).
  • Starter-Home Sales Up 4% as Demand for Higher-Priced Options Stumbles
    • The median sale price of starter homes hit a record $260,508 in August, up 2.2% from a year earlier.
    • Starter-home sales grew 3.8% year over year, rising for the 12th consecutive month to the highest August level in three years. In comparison, sales of mid- and high-price homes fell 0.6% and 1.2% respectively.
    • Providence, RI recorded a 25% spike in starter-home sales, leading all major metros. San Antonio recorded the biggest drop (-10%).