Daily Business Briefing
June 22, 2021, 4:23 p.m. ET
June 22, 2021, 4:23 p.m. ET
Sales of homes in the United States fell for the fourth consecutive month in May as a sharp rise in prices and a shortage of houses for sale led to a slowdown in the market.
Existing home sales fell 0.9 percent in May from April, the National Association of Realtors said Tuesday, with the median sales price climbing nearly 24 percent from a year earlier to a record $350,300.
Home sales in May were nearly 45 percent higher than they were a year ago as buyers continue to leave cities in search of more space and better work-from-home scenarios. That spike in demand has exacerbated a shortage in housing supply that was already problem before the pandemic.
Economists don’t expect the dynamics to shift anytime soon.
“There’s so many factors with limited supply that it’s hard to imagine a huge increase in supply any time soon,” said Nancy Vanden Houten, lead economist at Oxford Economics. “The housing market has been suffering for many years from a shortage of homes for sales and that’s only gotten worse as the pandemic created a demand for housing.”
About 1.23 million previously owned homes were on the market in May, a 20.6 percent decline from a year ago, the report said.
“Lack of inventory continues to be the overwhelming factor holding back home sales, but falling affordability is simply squeezing some first-time buyers out of the market,” Lawrence Yun, the Realtor association’s chief economist, said in a statement.
Realtors also cited under-construction and a lack of investment for new homes as some of the chief factors for rising home prices.
Soaring demand for vacation homes is also fueling a spike in prices, especially in Florida, Maryland, Massachusetts, Michigan and North Carolina, the report showed.
From January to April, vacation home sales jumped 57.2 percent year-over-year, according to the 2021 Vacation Home Counties Report.
Jerome H. Powell, the Federal Reserve chair, said on Tuesday that the central bank was focused on returning the economy to full strength, and he emphasized that the Fed would be more ambitious and expansive in its understanding of what that meant.
Speaking before House lawmakers on Tuesday afternoon, Mr. Powell emphasized that the Fed was looking at maximum employment as a “broad and inclusive goal” — a standard it set out when it revamped its policy framework last year. That, he said, means the Fed will look at employment outcomes for different gender and ethnic groups.
“There’s a growing realization, really across the political spectrum, that we need to achieve more inclusive prosperity,” Mr. Powell said in response to a question, citing lagging economic mobility in the United States. “These things hold us back as an economy and as a country.”
The Fed cannot solve issues of economic inequality itself, he said. Congress would need to play a role in establishing “a much broader set of policies.”
But Mr. Powell’s explanation of full employment came as many lawmakers wanted to talk about the second of the central bank’s two goals: stable inflation. The Fed chair was quizzed repeatedly about the recent pickup in price gains, with Republicans warning that the trend could become dangerously entrenched — even quoting statistics about recent jumps in bacon and used-car prices — as Democrats warned that the central bank should not be quick to react to the price pressures.
“There’s sort of a perfect storm of very strong demand and weak supply due to the reopening of the economy,” Mr. Powell said, adding that much or all of the recent overshoot in inflation came from short-term bottlenecks. “They don’t speak to a broadly tight economy.”
Mr. Powell added that price jumps have been bigger than expected and that the Fed was monitoring them closely, but he said they were still expected to wane over time. He also acknowledged that economic data was uncertain now, given quirks in supply and demand as businesses reopen.
“We have to be very humble about our ability to really try to draw a signal out of it,” Mr. Powell said.
He said he had “a level of confidence” that strong price gains would be temporary but was not certain when bottlenecks would clear up. Nevertheless, the goods and services categories where costs are picking up quickly, like restaurants and travel, are clearly tied to the pandemic.
“It should not leave much of a mark on the ongoing inflation process,” he said.
Bitcoin fell below $30,000 on Tuesday for the first time since January after a torrid week of trading in which the cryptocurrency has lost nearly 30 percent of its value. The latest drop leaves the cryptocurrency little changed from where it began the year, erasing a large run-up in recent months.
The decline comes as China intensifies its crackdown on Bitcoin. The Chinese government has long viewed cryptocurrencies as a threat to its control over capital flows in the country. Recent statements from top policymakers and articles in the official news media have signaled an increased focus on controlling financial risks, likely to ensure smooth sailing for the economy ahead of a major Communist Party political meeting next year.
China banned domestic cryptocurrency exchanges years ago, but trading has continued on other platforms. And China has remained a major hub for cryptocurrency mining operations, in which vast computer farms compete to solve complex equations in return for Bitcoin. Now, though, all of that is coming under greater official scrutiny.
In May, Chinese financial regulators issued a stark statement barring banks and payment companies from handling crypto-related business and reminding consumers about the dangers of virtual currencies. Since then, local authorities in several parts of China have shut down crypto mining operations.
In recent days, processing activity on the Bitcoin network, known as the hashrate, a measure of the computing power devoted to processing the cryptocurrency, has dropped markedly. And China’s central bank said on Monday that it had summoned banks and fintech firms to remind them that crypto trading in the country was banned.
Bitcoin’s plunging price has set off a technical pattern called the death cross, in which the 50-day moving average drops below the 200-day average. Some chart watchers think this portends trouble — hence the ominous name. But the last time this happened, in early 2020, it was around the start of a steady increase in price.
Bitcoin price
Crypto supporters are trying to look on the bright side. Sam Bankman-Fried, the chief executive of FTX, one of the largest cryptocurrency exchanges, put a positive spin on the “legitimate bad news” from China, saying now is a great time for North American crypto mining to take off. This, some crypto proponents say, would help make the digital currencies more mainstream.
A major criticism of Bitcoin and some other cryptocurrencies is that it takes a lot of energy to mine them, producing carbon emission footprints akin to entire countries. Some states, like Wyoming, are encouraging crypto miners to siphon energy from gas flares to power their computers, using fossil fuels that would otherwise go to waste. Others, like New York, are trying to restrict mining operations because of environmental concerns.
The more important long-term trend, however, is the gradual adoption of cryptocurrencies by investors and financial institutions, said Matthew Sigel, the head of digital assets research at the investment manager VanEck. Goldman Sachs, for example, recently started trading Bitcoin futures.
The regulatory review of VanEck’s application for a Bitcoin exchange-traded fund in the United States was delayed for a second time last week. (Mr. Sigel declined to comment on the application.) Some regulators and industry insiders believe it is only a matter of time before these investment vehicles, which already trade in Canada and parts of Europe, are allowed in the United States. That would greatly expand the scope of potential investors with exposure to the volatile world of cryptocurrencies.
Lumber prices soared over the past year, frustrating would-be pandemic do-it-yourselfers, jacking up the costs of new homes and serving as a compelling talking point in the debate over whether government stimulus efforts risked the return of 1970s-style inflation.
The housing-and-renovation boom drove insatiable demand for lumber, even as the pandemic idled mills that had already been slowed by an anemic construction sector since the 2008 financial crisis. Lumber futures surged to new heights, peaking at more than $1,600 per thousand board feet in early May, The New York Times’s Matt Phillips reports.
But since then, the prices of those same plywood sheets and pressure-treated planks have tumbled, as mills restarted or ramped up production and some customers put off their purchases until prices came down. Lumber prices in the futures market, for example, are down more than 45 percent from their peak, slipping below $1,000 for the first time in months. That’s still high — from 2009 to 2019, prices averaged less than $400 per thousand board feet — but the sell-off has been gaining momentum over the last few weeks.
It’s a dance of supply and demand that has reassured many experts and the Federal Reserve in their belief that painful price jumps for a range of products like airline tickets and used cars will abate as the economy gets back to normal.
Why have prices fallen so fast? It’s partly because they set off a surge of production at the country’s roughly 3,000 sawmills.
Mostly concentrated in the rich belt of Southern yellow pine that stretches from the woods of East Texas to the Carolinas, mills buzzed back to life in a rush to sell wood for prices few would have imagined possible a couple of years ago.
“Nobody’s not running capacity right now,” said Joe Hankins, sales manager at Hankins Lumber, a sawmill and timber company in the north-central Mississippi town of Grenada.
The professional homebuilding industry, the largest source of demand for lumber, is also decelerating from a breakneck pace, with some builders citing high prices for wood as a reason to hold off on construction.
Those decisions by consumers and companies are a major reason some analysts think the recent rise in inflation is the result of temporary mismatches in supply and demand, rather than a harbinger of runaway price increases stoked by all the money pouring into the economy.
The lumber market’s behavior is a sign of consumer sanity, said Kristina Hooper, chief global market strategist at the investment management firm Invesco.
“We don’t have that kind of buying frenzy that creates sustained inflation,” she said.
U.S. stocks rose on Tuesday, extending a rally that began on Monday, as the Federal Reserve chair repeated his assurances that recent price gains were a result of the economy’s reopening and would eventually fade.
“There’s sort of a perfect storm of very strong demand and weak supply due to the reopening of the economy,” Jerome H. Powell, the Fed chair, said, adding that much or all of the recent overshoot in inflation came from short-term bottlenecks. “They don’t speak to a broadly tight economy.”
He said he had “a level of confidence” that strong price gains would be temporary but that he was not certain when bottlenecks would clear up.
Mr. Powell’s remarks come after John C. Williams, president of the Federal Reserve Bank of New York, offered an optimistic view of the nation’s economic outlook as widespread vaccines and business reopenings drive growth.
Investors are highly attuned to comments from the Fed, as they worry the central bank may begin to pull back on its efforts to support the economy if price gains continue for too long. For now, the Fed says it has no plans to back away from its emergency monetary policy.
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The S&P 500 rose 0.5 percent, edging closer to a new high.
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The yield on 10-year U.S. Treasury notes dropped to 1.47 percent.
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Most European stock indexes were higher. The Stoxx 600 Europe rose 0.3 percent.
Millions of workers have voluntarily left their jobs recently, one of the most striking elements of the newly blazing-hot job market.
According to the Labor Department, nearly four million people quit their jobs in April, the most on record, pushing the rate to 2.7 percent of those employed.
The rate was particularly high in the leisure and hospitality industry, where competition for workers has been especially fierce. But the number of those quitting registered across the board, The New York Times’s Sydney Ember reports.
Economists believe that one reason more workers are quitting is simply a backlog: By some estimates, more than five million fewer people quit last year than would otherwise be expected, as some workers, riding out the labor market’s convulsions, stuck with jobs they may have wanted to leave anyway. (And the millions of involuntary job losses during the pandemic surely accounted for some of the reduction in quitting.) Now that the economy is regaining its footing, workers may suddenly be feeling more emboldened to heed their impulses.
But another factor may be the speed with which the economy has reawakened. As the pandemic has receded and the great reopening has swept across the country, businesses that had gone into hibernation or curtailed their work force during the pandemic have raced to hire employees to meet the surging demand.
At the same time, many people remain reluctant to return to work because of lingering fears of the virus, child care or elder care challenges, still-generous unemployment benefits, low wages or other reasons.
The result has been an explosion of job openings, despite a relatively high unemployment rate, as businesses struggle to recruit and retain employees — a dynamic that has placed power more firmly in workers’ hands. With employers offering higher wages to attract candidates, many workers — especially in low-wage positions in restaurants and hotels — are leaving their jobs and jumping to ones that pay even slightly more.
Today in the On Tech newsletter, Shira Ovide writes that we sometimes believe that behavioral changes from new technologies are far more commonplace than they really are. “This doesn’t mean that Peloton doesn’t matter, that remote work isn’t worth paying attention to, or that Netflix isn’t a big deal,” she writes. “Today’s novelties can become tomorrow’s commonplace.”
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