The housing market has been a nightmare for would-be buyers since the pandemic began, and no real relief is yet in sight. Liz Ann Sonders, chief investment strategist at Charles Schwab, joined TheStreet to share her thoughts on the housing market and how it has become a “funky cycle.”
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Full video transcript below:
Sara Silverstein: What do you see in the latest housing data? What does it tell you about the health of the real estate market?
Liz Ann Sonders: You know, the real estate cycle in this, let's say, strange pandemic era has been really unique because during the first part of the recession, the crisis was felt most acutely on the sales side, particularly in existing homes, because how many homeowners were essentially locked in their homes because they had, you know, fixed-rate mortgages at a much lower level than the listed mortgage rate. And it continues to be seen that, although sales have recovered, the fluctuations in terms of sales prices have been harsher. And I think that's the imbalance between supply and demand, especially with used homes, which are over 80% of the real estate market and because of the number of homeowners that are locked in and that's a tight supply on the existing side. And we can't increase supply fast enough on the new home side, which has kept prices higher. So these changes happen a little more on the sales side, but not as much on the pricing side. So I think those are, again, the unique characteristics of this very funky cycle, to use a technical term.
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Sara Silverstein: And is there any market data that you think investors are oversimplifying or completely misinterpreting?
Liz Ann Sonders: You know, I think labor market data is very important today. And when it comes to monthly employment reports, there is always a focus on the initial headlines being reported. So the number of payrolls created or lost in the previous month and then the unemployment rate, I think we need to take a deeper look at all the data points that appear in that employment report. Then you have the establishment survey that generates payroll. There is 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 Traditional Unemployment Hours Worked to give you an idea of what is happening from a demand perspective, we know there is a lot of labor hoarding, but when you start to see work hours decrease , which we've seen, that suggests a weaker demand backdrop, even if it doesn't pick up in something like payrolls. The response rate is also down quite a bit, especially on things like the job openings survey, the establishment survey, again, which generates payrolls. That means reviews are becoming more important. So don't just look at the previous month's headlines. Look at the reviews from the last few months. So 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 has come into play in its relationship to Federal Reserve policy along with inflation. So I think both components of the Fed's dual mandate are more focused compared to last year's almost exclusive focus on the inflation side.
