Record 29% of for-sale homes not under construction yet: RPT

Record 29% of for-sale homes not under construction yet: RPT

is the delta variant hurting the economy it depends on who you ask there are a handful of businesses over the past several weeks that have said customers are closing their purses we had consumer confidence fall through the floor retail sales sank last month but on the other end we’ve got an electric job market right now and new home sales bouncing back in july uh here to break it down for us is greg dacko he is oxford economics chief u.s economist and greg always good to see you so look the economy is putting out a lot of mixed signals here right now what do you make of it well i think we’re in an environment where there is some degree of uncertainty uh we are probably near peak growth and peak inflation as you mentioned in the outset because we’re likely to see an environment in which economic momentum cools over the last part of the year and into 2022 but still remains fairly strong from an objective perspective likewise inflation is likely to come off of its top above five percent for the cpi reading but still remain fairly warm uh over the latter part of this year and into into next year there are different currents happening at the same time i think the health situation has deteriorated that is weighing on people’s optimism as you mentioned in terms of consumer sentiment but there may be a lot of emotion in there and a little bit less reason because the health situation is clearly not terrible it’s worsened but there is some hope that perhaps we’ve actually reached the peak of this new wave yet again and that the end of the year may be more optimistic greg what do you see as sort of the pillars of the economic recovery for a long time housing was one of those pillars and we’ve seen cracks there over the past few months we saw a modest bounce back in new home sales last month but what’s your take on the overall housing industry right now i think first and foremost the main pillar is and will remain the health situation we have to have a stable and solid health situation to ensure a solid recovery so that’s number one in terms of the housing sector we had a very hot labor uh housing market because of housing conditions that were quite favorable and people wanting to either buy new homes in new places that were perhaps less densely populated or look for secondary homes after the surge in demand what we had was an environment in which inventories fell to record lows and prices surged what we’re seeing in the most recent data is as there’s actually some signs that there is a buildup in new homes a buildup of inventory but a lot of that that inventory that is rebounding is actually not essentially built if you look at the latest data for new home sales 29 of the homes that are for sale have not been built 34 of the homes that were sold in july have not been built so there is a strong pipeline for construction um but we still have to keep in mind that there are still supply constraints both on the input front from a capital perspective and on the input from from a labor perspective that are restraining housing activity and which can also put a strain on overall prices which means higher inflation you mentioned uh earlier that you believe we’re past peak inflation right now so where do you see prices going as we head toward 2022 are we going to see a drop in prices are they going to plateau what are you thinking well i think we’re going to see somewhat of a plateau in the the next couple of months and then a gradual decline in inflation rates and a rotation in the mix of inflation that’s very important to understand from an economic perspective what we’re seeing is really a rotation in the nature of growth whereas the good side was really driving growth earlier in the recovery the service sector is driving more growth as of right now and we’re going to continue to see that rotation where housing and housing inflation is going to play a greater role in both supporting economic activity but also supporting inflation rates so as we look at the fed’s main gauge for inflation the core pce indicator we’re likely to see core pc inflation hover above or around three percent for the foreseeable future and then gradually fall towards two percent but remain above the fed’s target which is something that i think the fed is willing to tolerate given its new flexible average inflation targeting framework speaking of the fed we’ve got the jackson hole symposium kicking off tomorrow what are you expecting to come from from that symposium and and what’s your timeline for bond tapering and interest rate hikes i think it’ll be very interesting to see how powell reacts to the latest developments both in terms of how inflation has developed how the health conditions have developed and how the labor market has developed because we have to keep in mind that although the minutes from the previous fomc meeting noted that if economic conditions remain the same they would consider tapering asset purchases by the end of this year things have not necessarily evolved in the way they would have expected them to so powell may have somewhat of a more dovish lien in terms of his remarks because of the environment and because of the how health conditions have somewhat deteriorated and how that’s weighing on actual economic data remember the fed is focused on actual outcomes not forecasted outcomes and so it may be that powell has a bit more of a dovish lien given those developments in terms of health and economic data all right greg dacko of oxford economics thanks so much for being with us we’re going to bring you uh highlights from that jackson hole symposium live here on yahoo finance live later in the week
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Record 29% of for-sale homes not under construction yet: RPT

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