Current Climate – May 2020
A bleak employment picture dominates the headlines.
Total nonfarm payroll employment fell 701,00 in March and the unemployment rate rose to 4.4%.
That was then, this is now . . .
As of this writing, more than 30 million people had filed for unemployment in April.
The projected unemployment rate for the month is in the 16% to 20% range.
Next bleak topic: Pandemic-fueled mortgage forbearance increased from 3.74% to 5.95% for the week ending April 12th. As of April 19th, the Mortgage Bankers Association had polled more than 50 mortgage servicers and found that nearly 7% of the 38.3 million loans serviced were in forbearance.
The highest rate was exhibited by FHA and VA loans where the forbearance rate has reached 10%.
Early indicators show a lack of confidence is creeping into the housing market.
The Fannie Mae Home Purchase Sentiment Index fell 11.7 points to 80.8 in March, its lowest reading since December 2016.
On April 16, the National Association of Realtors released a poll that found 90% of member respondents reporting decreased homebuyer interest with 44% reporting buyer interest fell by more than 50% in their market.
Location, location, location.
A colleague of ours with Keller Williams in Palm Beach County, FL tells us that total sales for the month of March reached 2,836 for a 4% year-over-year increase.
The median single-family home sales price jumped 5.7%
The median townhouse/condominium sales price jumped a significant 13.7%.
Sales prices represented 94% to 95% of list price.
On a national basis, total existing home sales fell to a seasonally adjusted annual rate of 5.27 million in March following significant nationwide gains in February, eking out a 0.8% year-over-year increase.
The median existing home price for all housing types was $259,700 in March, up 8.0% year-over-year. March’s price increase marked 97 consecutive months of year-over-year gains.
Total housing inventory at the end of March stood at 1.50 million units, down 10.2% from a year prior reflecting a 3.4-month supply at the current sales pace.
According to Realtor.com, in the weeks ending March 21st and March 28th, the numbers of newly listed properties fell by 13.1% and 34.0% respectively when compared to the same periods one year prior.
Based on Redfin data, there was a 148% y/y increase in delisting during the week ending March 29th for a total of 28,140 homes (4% of listed homes) taken off the market. The rate is about two times average.
Concurrently, there were 58,366 new home listings for the week ending March 29th marking a 33% year-over-year decline.
On a national basis, the homes that remain on the market are being listed at lower prices. According to Redfin, the median asking price for a newly listed home for the week ending 3/29 was $309,000, $21,000, or 6.8% lower than two weeks prior.
According to Realtor.com, the pace of home price growth slowed notably in the latter half of March, up just 3.3% year-over-year for the week ending March 21st declining further the following week to +2.5%. This represented the slowest pace of listing price growth since Realtor.com began tracking this data in 2013.
As listings and sales dropped in mid-March, so did Zillow page views. The portal reports year-over-year drops as high as 19%, dependent upon the market. That said, by mid-April, visits to the website had rebounded to levels higher than a year prior. On a national basis, total views were up 13% year-over-year for the week ending April 13th.
On average, properties remained on the market for 29 days in March, down from 36 days in February and 36 days in March 2019; 52% of homes sold in January 2020 were on the market less than a month, up from 42% in January.
First-time homebuyers were responsible for 34% of total sales in March, up from 33% the year prior.
Individual investors and second home buyers were responsible for 13% of sales transactions, down from 18% in March 2019.
The National Association of Realtors’ (NAR) Pending Home Sales Index (PHSI) fell 42% year-over-year during the week ending March 29. This precipitous drop is on the heels of a 5.2% rebound in January, followed by a 9.4% y/y increase in February to a reading of 111.5.
February was the 15th consecutive month of growth in pending home sales.
Meyers Research New Home Pending Sales Index (PSI) came in at 122.7 in February reflecting a 16.4% year-over-year increase. By March it had dropped 40.6 points to 82.1 reflecting a 33.1% decrease from February and a 23.9% decline year-over-year.
The U.S. Census Bureau reports that sales of new single-family houses in March 2020 were at a seasonally adjusted annual rate of 627,000, reflecting a 17.9% drop from January’s rate of 764,000 and a 15.4% drop from February’s rate of 741,000.
Year-over-year, new single-family home sales were down 9.5% in March.
Inventory of new homes for sale stood at 333,000 representing a 6.4-month supply at the current sales pace.
The median new home sales price ($321,400) reflected 2.6% month-over-month and 3.5% year-over-year decreases.
Mortgage rates continued to hover near all-time lows (3.31%) for the third straight week as of 4/16 as refinance activity remained high while home purchase demand weakened.
While new monthly economic data appear to be driving markets lower, they are a lagging indicator.
According to FreddieMac, real-time daily economic activity suggests that the economy will likely not decline much further.
Going forward, the key question is not the depth of the economic contraction, but the duration.