Zillow Market Pulse: April 29, 2020

April 29, 2020

The U.S. economy shrank in the first quarter, and it will almost certainly get worse. A weak read on pending home sales is a bad omen for April sales data. But promising signs in the mortgage market suggest that an upturn in the housing market is underway.

• The U.S. economy shrank in Q1, the first such contraction since 2014

  • The seasonally adjusted annual rate of real GDP fell 4.8% in the first quarter of 2020.
  • A much larger decline in the second quarter is widely expected, and today's reading is likely to be revised downward.

• Pending sales in March were weak, unsurprisingly

  • The National Association of Realtors Pending Sales Index fell 20.8% in March from February.
  •  The reading sets the stage for a poor April existing sales report.

• Mortgage data continues to show signs of improvement

  • In the week ending April 24, for-purchase mortgage applications rose 12% from the week prior.
  • Washington, California and New York State all experienced double-digit percent increases over the same period.

So what?

The initial read on Q1 GDP confirms what many already knew: Large parts of the economy came to a crashing halt in March, the economic expansion has ended and a recession is almost certainly underway. The negative quarter – the first since a 1.1% decline in the first quarter of 2014, and largest since the Great Recession – was driven by a severe pullback in consumer spending and trade-related metrics. Consumer spending, which comprises about 2/3 of the overall economy, fell 7.6% in the three-month span ending in March, with spending on services falling 10.2%. But as bad as these numbers appear, the second quarter's figures are poised to be far, far worse. Today's release predominantly covers a period that preceded the coronavirus outbreak and includes data from just the few weeks of the economic shutdown that largely began in March. Businesses in some states weren't forced to shut their doors until late March or even early April, and subsequent slowdowns – including a sharp reduction in spending and an unprecedented surge in layoffs — barely register in today's report, if at all. It's also common for initial GDP readings to be revised downward, sometimes sharply, in times of economic volatility. The initial reading of annualized GDP growth in Q4 2008 – the middle of the financial crisis – was -3.8%, a level that was later restated to -8.9%. Taken together, it's likely that today's numbers will be revised downward when they're restated next month, and that economic growth in the current quarter will plunge to levels not seen since the Great Depression. Even so, the housing market was a surprisingly positive note in today's GDP release. The seasonally-adjusted annual rate of residential fixed investment, which includes spending on home construction, grew 21% from last quarter. 

The monthly decline in March pending home sales — to their lowest level since 2011 — was disappointing in some ways, but not unexpected. Overall, today's reading was in line with other housing indicators that have emerged in the last few weeks. Pending sales typically lead the official reading of existing home sales by 4-6 weeks, and most experts already expect April's existing sales figures to decline sharply. Pending sales figures are often viewed as a forward-looking indicator of the housing market, but in today's fast-moving, unprecedented times, today's release in some ways already feels like old news.

But other, faster indicators tell a somewhat more optimistic housing story. One of these is the weekly read of for-purchase mortgage application activity, which showed purchase applications rebounding over the week ending April 24 after falling in early April to their lowest level in almost five years. And these gains may be starting to accelerate. For-purchase applications still sit 19.8% below their levels from a year ago, but they were down 35% year-over-year just two weeks ago – a strong improvement in a short period of time. According to the Mortgage Bankers Association, the nation's ten largest states saw an increase in purchase activity this week from last, with Washington, California and New York among those that saw a double-digit percent increase over that span. Low rates and changing lending criteria appear to be playing a role. Rates last week hit the lowest point ever recorded by the Mortgage Bankers Association, while strict lending criteria and preferences are making for more attractive rates for those looking to purchase a home rather than refinance. All told, it is an encouraging sign for the housing market, and may suggest that a possible upturn in the market is indeed underway.

 

Click here to read past editions of Zillow’s Market Pulse updates.

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‘Timeless’ $40M Estate on Star Island Is the Week’s Most Expensive New Listing

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A contemporary waterfront estate on Florida’s ultra-exclusive Star Island has floated onto the market for $40 million. The top-tier price tag makes the Miami Beach property this week’s most expensive new listing on realtor.com®.

The 14,762-square-foot luxury mansion on the guard-gated island last sold in 2011 for $25.5 million. At the time, it was one of the most expensive Miami Beach residential sales ever.

Post-purchase, the new owners remodeled and expanded the residence. According to the listing agent, Jill Eber with Coldwell Banker Realty, they added a professional chef’s kitchen, another bedroom, a home office, and a laundry facility.

The property is held by an opaque Delaware corporate entity (E&A Estates), and the elusive owners are now ready to sail away from the waterfront retreat, which comes with 100 feet of water frontage and a wood dock. Eber told us that the sellers live overseas and don’t spend as much time in Miami as they used to.

With the stand-out price comes a stand-out property.

“It’s the most sought-after view that you have in Miami. It’s direct bay, out to the downtown skyline,” Eber says.

She adds, “Everybody’s looking for the best of the best location. That is what this is. And then, the house itself is beautiful. It’s a trophy property.”

Biscayne Bay and Miami skyline views

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Waterfront and dock

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Covered seating area

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Living room

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Family room

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Den with bar

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Bedroom with sitting area

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Pool

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Along with those Biscayne Bay and Miami skyline views, the spacious spread contains 10 beds, 10.5 baths, a living room and formal dining room, a chef’s kitchen, library/den, wine room, and a great room that opens to the pool area. 

Upstairs, the master suite features a sitting room, office, and two large terraces, plus a bathroom with an onyx and glass steam shower, a walk-in closet, and custom spa tub. 

Other luxe interior details include stone floors, Venetian plaster walls, and an elevator.

On the almost 1-acre lot, the manicured grounds include a pool with a hot tub, cabana bath, covered bar, and multiple seating and sunning areas. 

“It’s really a timeless design,” Eber says. “The whole layout is open. It’s very much indoor-outdoor living.”

The current listing is at the top of the price point for the island, but it joins several other properties on the exclusive Miami Beach enclave that are up for grabs.

A renovated 1920s villa that came on the market in 2016 for $65 million dropped to $40 million last year. Each time it was listed, the estate was named our most expensive listing of the week. The property is still available.

In one more note, the singer Gloria Estefan has had a home on the market for years, first listed in 2015 for $40 million, now available for $32 million. She and her husband, Emilio Estefan, live nearby, and initially bought the place for Emilio’s mother. After her death, the couple rented out the property before deciding to sell it.

Considered one of the most sought-after locations in Miami, Star Island has attracted many A-listers to its shores, including Cher, Jennifer Lopez, and Ricky Martin.

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Mortgage Rates Hit New All-Time Lows—and They May Fall More

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There is at least one bright spot for home buyers, sellers, and owners amid the economic mayhem brought on by the novel coronavirus. Mortgage interest rates have fallen to a new record low, a boon to homeowners who may want to refinance and save money, and buyers (if anyone feels like buying a home right now).

Rates have been on a wild ride since this crisis began, and the average for a 30-year fixed-rate mortgage hit 3.23% for the week ending April 30, according to Freddie Mac. That’s the lowest it’s been since Freddie Mac began tracking rates in 1971. The average rate was 4.14% a year ago.

The drop may not seem all that substantial, as it’s not even a full percentage point. But the lower rate will save borrowers $132 a month for a $320,000 home (the national median home price) if they made a 20% down payment. That’s $1,584 a year—which adds up over the life of that 30-year loan.

Mortgage rates could continue falling as the pandemic continues wreaking havoc on the economy.

“Rates are not in a hurry to move back up from here,” says Matthew Graham, chief operating officer of Mortgage News Daily. “Unless there is a sudden and significant change in the global economy in response to a sudden and significant development in the fight against coronavirus, we likely haven’t seen the lowest rates yet.”

Those ultralow rates aren’t likely to save the slumping housing market, though.

“In a normal market, that would be great news for buyers,” says realtor.com® Senior Economist George Ratiu. “In today’s market, rates are likely to have little impact.”

More than 30 million people are out of work as businesses across the nation have been forced to temporarily close to stem the spread of COVID-19. Even those that remain functioning have seen their revenue plunge, raising the prospect of more layoffs.

That should give both buyers and sellers pause. Add a severe shortage of properties for sale, with double-digit drops over the past few months, and it’s clear that this year’s spring home-buying season, already well underway, will end up far slower than usual.

Can borrowers snag these low rates?

Though rates have reached record lows, not everyone will be able to snag them. Mortgage rates can fluctuate throughout the day as well as vary quite a bit among lenders—by as much as 0.5%.

Riskier borrowers with lower credit scores, higher debt loads, or lost income due to the crisis may get stuck with higher rates, if they’re granted a loan at all.

“These rates are really available, but the catch is the restrictions are tighter at many lenders for things like lower credit scores … and other risk factors,” says Graham. “These either make for higher rates or flat-out unavailability, depending on the scenario.

Why rates are falling again

As the economy shifted into a downturn in early March, rates reached then-record lows of 3.29% in the week ending March 5. But just two weeks later, they had risen back to 3.65% despite the Federal Reserve slashing mortgage rates to between 0% and 0.25%. They’ve since fluctuated, sometimes multiple times a day.

They’re settling down again, thanks to changes the U.S. government has made to the secondary mortgage market. Lenders typically don’t want to keep a mortgage on their books once it’s made, as that ties up money that could be used to make new loans. So they sell the mortgages, which are bundled together into mortgage-backed securities, to investors in the secondary market.

With so many people out of work and unable to make their mortgage payments, many investors have shied away from these securities, also called mortgage bonds. But Fannie Mae and Freddie Mac are now permitted to buy these riskier loans in forbearance. That’s boosting investor confidence in these securities and driving up prices due to demand.

When mortgage bonds prices are up, mortgage rates go down. Hence, the lower rates.

“These low rates are driving higher refinance activity and have modestly helped improve purchase demand from their extremely low levels in mid-April,” Sam Khater, Freddie Mac’s chief economist, said in a statement. “While many people are benefitting from low mortgage rates, it’s important to remember that not all people are able to take advantage of them given the current pandemic.”

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In States Loosening Lockdowns, Will Real Estate Markets Rebound?

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In the past few days, several states have begun the highly controversial process of loosening stay-at-home orders and restrictions put in place to combat the spread of the deadly novel coronavirus. In the coming days and weeks, many more states, counties, and cities will follow examples set by states such as Georgia, Texas and Colorado as lockdowns expire at the end of the month or in early May.

The impact of these changes won’t be felt just by the small-business owners who choose to reopen and the customers who begin resuming their lives in this new normal. The easing of these restrictions will also be felt by the housing markets in these places. But how quickly—and strongly—will they rebound from their period of deep freeze?

Real estate professionals are already reporting that the easing of these orders is resulting in a small boost in the number of listings coming online, and in a slight uptick the numbers of prospective buyers shopping around. This gives these markets a stronger start to what will certainly be a much slower than anticipated spring market.

“There’s a clear link between the extent of the stay-at-home orders and the amount of buyers and sellers in the real estate market,” says Javier Vivas, realtor.com®’s director of economic research. “The markets that reopen will see more listings come back onto the market. And then very shortly after that, we’ll see more buyers at open houses.”

The benefits to easing up on restrictions may give both buyers and sellers something of a psychological boost, too.

Sellers may feel more secure in allowing buyers to walk through their properties. And with local economies beginning to rev back up, buyers may feel more confident in their finances to pull the trigger on investing in a new home and moving. Both groups may believe that the worst of the deadly health threat is behind them, regardless of whether that proves to be true.

Part of that bump will come from the spring and summer being traditionally busier months for home sales, says Norm Miller, a real estate finance professor at the University of San Diego. Parents often want to move before the kids go back to school.

However, health experts have warned that allowing people to freely circulate again could lead to a rash of new cases, which would take a couple of weeks to emerge. And no one should expect the real estate market will get fully back to normal—even when the U.S. is open for business again. In the absence of a vaccine, there’s still a deadly pandemic terrorizing the world, which will discourage many folks from listing or buying homes. At least 26 million people have lost their jobs or income, or have been furloughed, since the crisis began—and that number is expected to rise. As a result, it’s now going to be harder for many folks to score a mortgage. Even those who are still employed may worry about the security of their jobs. And they may hold off on making what could be the biggest purchase of their lives until the economy improves.

That means there will be fewer listings, buyers, and sales even as the nation heads into what’s normally the busiest seasons for real estate: spring and summer.

“When you get a sense that things are back to normal, [there could be] an initial boost of energy” in the housing market, says Vivas. “But pretty quickly there will be a reality check. You look at your finances and what’s available on the market, and you do the math, and it pretty quickly turns into a difficult decision.”

“We’ll see buyers be more cautious,” he says.

More homes are going on the market where lockdowns are eased

One of the biggest issues facing the national housing market is the lack of homes for sale.

Inventory is down annually just about everywhere, hitting a new low in supply for April, according to realtor.com data. But in most states that have allowed more businesses to reopen, inventory is beginning to trickle back onto the market again, even if just by a little.

“Places that have fewer physical restrictions and fewer [COVID-19] cases tend to see more sellers act as if this was just a regular spring home-buying season,” says Vivas.

Take South Carolina. A stay-at-home order was issued on April 7, later than most other states, and has been extended through May 15. But the Palmetto State began loosening restrictions on April 20, allowing beaches and retail stores to begin reopening. Stores must operate at a reduced capacity.

In South Carolina, showings reached their lowest point around Easter weekend, says Charleston-based real estate broker Owen Tyler, of the Cassina Group. He’s also president of the South Carolina Realtors®, the state’s Realtor association. Since the restrictions have been loosened, he’s seen a slight pickup statewide in the market—but nowhere near the normal numbers of buyers, sellers, and sales.

“They’re ticking up slowly but surely,” Tyler says. “We can see a light at the end of the tunnel. … It does not feel like a forever situation.”

Since Colorado started easing up on its own restrictions, Aurora-based real estate broker Cindy Dassinger has also seen listings nudge up in areas where in-person showings can resume. Real estate agents in Douglas County, near Denver, were allowed to give home tours since Monday. However, they’re still not permitted in Denver County.

Many more listings, currently classified as coming soon, are likely to hit the market once showings resume in their respective counties, she says.

“The faster we can get small businesses open, the faster we can recuperate,” says Dassinger, of Metro Home Finders in Aurora. “There are [fewer] buyers out there, but the buyers that are there are serious.”

The restrictions on in-person home tours haven’t discouraged buyers who need to move, say, for a job transfer. Folks have bought homes they’ve never set foot in, Dassinger says. They’ll add clauses to their contracts stating they have the right to view the properties in person before the closings take place. This allows them to back out of any bad deals without losing money.

“We’ve had houses go on the market in the middle of this thing and go under contract within 72 hours, and some with multiple offers,” says Dassinger.

Atlanta-area real estate broker Tim Hur is also seeing a few more listings go live and expects to see more as Georgia eases up on restrictions. However, he doesn’t expect the normally brisk, spring buying seasons of years past.

“We’ll see a little more activity,” says Hur, who’s with Point Honors & Associates, Realtors. “But it doesn’t change the fact that people are still unemployed, they’re furloughed, or there are fears of COVID-19. … There’s a lot of more people sitting on the sidelines wanting to see how it all pans out.”

More buyers may also return to reopening markets

Blue Ridge, GA–based real estate broker Faron W. King is also seeing a bit more interest from prospective buyers ever since Georgia let up on some of its restrictions. King, of Coldwell Baker High Country Realty, sells homes in the vacation area, which is popular with folks from Atlanta and Florida for its mountains and lakes.

“A lot of this is people with cabin fever” dreaming of leaving the city behind and moving to or buying a second home in the mountains, says King. He is also the president of the state’s Realtor group, Georgia Realtors®.

But it could lead to even a slight uptick in sales, particularly as the country heads into the warmer-weather months when vacation homes are particularly appealing.

The demand is still there from buyers, many of whom have been stymied by the lack of homes for sale even before the crisis and sky-high prices. But those who’ve lost jobs and income may no longer be able to afford to get into the market. And many more may choose to wait out the crisis until they’re more sure of their financial footing.

Being allowed to go back to work again may give at least a few potential buyers the psychological and even financial boost they need to pull the trigger.

Buyer “interest has been piling up,” says realtor.com’s Vivas. “By reopening, you’re opening the door to that backlog.”

However, the areas suffering from the highest numbers of COVID-19 cases will take longer to reopen. And while sales are expected to be down nationwide this spring and summer, these more affected real estate markets will be off to a slower start and take longer to rebound.

“There’s going to be some uncertainty in areas that have had a worse experience with the virus,” says Edward Goetz, an urban planning professor at University of Minnesota in Minneapolis. “Real estate markets [don’t] like uncertainty.”

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Zillow Market Pulse: April 28, 2020

April 28, 2020

Home sales in China were up this week compared to the same week a year ago, the first such increase since the coronavirus outbreak began. The Federal Reserve moved to make loans available to small local and county governments. And a reading of consumer confidence took a big step back in April, but suggests people believe the worst might be over.

• Home sales in China are up year-over-year for the first time since the crisis began

  • On April 23, home sales in China were up 2.4% from the year before.
  • At the height of the outbreak, home sales in China were down as much as 98% year-over-year.

• The Fed expands its ability to lend directly to local governments

  • The central bank announced yesterday that smaller cities and counties would be eligible to participate in their new municipal lending program.
  • Estimates suggest that as many as 261 local governments are now eligible for the program, up from 75 in the previous iteration.

• Another key read on consumer confidence sees a historic decline

  • The Conference Board's Consumer Confidence Index fell 31.9 points in April from March, by far the largest one-month drop in the index's history.
  • A gauge of how respondents feel about the economy right now fell 90.3 points, but the outlook for six months from now actually rose 7 points.

So what?

A few weeks ago, the Federal Reserve announced it would be opening up a new lending facility enabling it to lend directly to state and municipal governments. The unprecedented move – one of many the Fed has taken in the last 6 weeks – would allow smaller governments to offload short-term debt from their balance sheets, freeing up some money for unemployment benefits and other short-term obligations that have emerged in in the wake of the coronavirus outbreak. The program has been largely well-received, despite some concerns from both political parties about eligibility standards they deemed too strict. Yesterday, the Fed announced an amendment to the program aimed at addressing those concerns. Going forward, smaller cities and counties previously deemed too small to participate in the program are now eligible to apply for loans. Counties with populations of at least 500,000 people (down from 2 million), and cities of at least 250,000 (down from 1 million), are now able to take advantage of this lending opportunity. Estimates suggest that the updated program will allow for as many as 261 state, city and county governments nationwide to partake in the program, up from just 75 eligible participants under the previous format.

In a milestone three months in the making, home sales in China have returned to a level above where they were last year, a major accomplishment in the country's recovery efforts. Some estimates suggest that residential transactions in China fell at least 99.7% from the day the first coronavirus case was discovered – to just 22 sales across the entire country – but now sit 2% above where they were this time last year. The improvement in sales is of course due in part to growing optimism amongst China's population, but other factors – aimed at stoking the market – might be at play as well. Some reports suggest that some housing projects have had their prices capped, resulting in a mad dash by buyers and property developers to buy homes and land with the expectation that prices will rise once the economy truly goes back to a "normal" state. The improvements in the real estate market have outpaced improvements in the broader consumer spending segment, which has risen in recent weeks but is still down 20% from a year ago. This could be what the next phase of the recovery looks like in the U.S., with consumers less inclined to engage in activities with lots of other people around (taking a flight, going to a theater, visiting a mall etc.) but OK with more-private activities like shopping for a home.

Much like the April reading of the University of Michigan Index of Consumer Sentiment, the Conference Board's Consumer Confidence Index offered a sobering take on how moods have shifted during the coronavirus outbreak, as well as views of the future. The 31.9-point fall in April from an upwardly-revised March total was easily the largest monthly decline ever recorded in the index, and offers clear evidence that massive job losses and daily disruptions have seriously sapped consumer morale. The combination of a 23.3 point decline in the share of people that said jobs were "plentiful" and an almost equal increase in the share of people who said that jobs would be "hard to get", clearly defined the currently pessimistic view of the job market. But the report also offered some evidence of hope for the near future. While the measure of people's confidence in present conditions fell a staggering 90.3 points from March to April, expectations for the next six months actually improved in April's reading, rising 7 points to 93.8. All told, the release indicates that while consumers are reeling from recent developments, the notion that the worst might be over appears to be setting in.

 

Click here to read past editions of Zillow’s Market Pulse updates.

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Tiny-House Revolution Redux—Will the Pandemic Drive Demand for Affordable Homes Without Shared Spaces?

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Shannon McMillan Thompson has moved a dozen times over the past several years. Now she’s prepping for what she hopes will be her last move for a long while—into a tiny house.

When the pandemic hit, Thompson lost her job taking care of a homebound elderly couple, whose relatives decided to take over their care. And since Thompson was living in an apartment off the couple’s home, the loss of her job also meant she needed to find a new place to live.

Trying to make the best out of a lousy situation, she decided to take a leap she’s considered for several years. She’s buying a tiny home, which she plans to park on a piece of land owned by a friend.

“I like the low overhead, mobility, and using everything I have,” Thompson says. “I want to move forward. I want to travel.”

The pandemic that has swept around the world has motivated many Americans, like Thompson, to get out of dense and crowded cities and head for the hinterlands, where little effort is needed to stay more than 6 feet away from other people.

As unemployment ripples through the economy and even the employed fear for their financial stability, it looks like tiny-house living is ready to shift from an HGTV novelty to a lifestyle that more buyers might truly consider.

With demand on the rise, a key question is whether the tiny-house industry can ramp up to satisfy consumers in search of a small retreat.

Thompson is pulling together the money to fund the construction of her tiny house, so she called an expert for advice on her project.

If you want to know about tiny homes, John Kernohan is the guy to call. The founder and chair of the United Tiny House Association, he also owns and operates the Beloved Cabin Homestead Community of tiny homes in Georgia.

He also organizes tiny show events, workshops, and festivals to connect the industry with people who are considering living on a much smaller footprint.

Escape to tiny homes

Kernohan told us he’s seen an uptick in inquiries like Thompson’s since the coronavirus outbreak began to spread across the United States this spring.

He added that Beloved Cabin Homestead is booked up for the foreseeable future, and that there’s a backlog of people looking for a spot to park their own tiny home.

He says there’s a common theme behind these inquiries: “Individuals [want to] get away from larger, populated areas.”

Since widespread stay-at-home orders meant to limit the spread of the coronavirus, people have fled densely populated areas like New York City and Los Angeles for more remote locations.

Some popular retreats have put restrictions in place to keep out anyone who isn’t a full-time resident, including tony beach towns in the Hamptons, outside New York City.

Tiny homes can be DIY affairs, or a buyer can choose professional-grade construction. The United Tiny House Instagram feed is filled with images of innovative, cozy, and beautiful spaces on four wheels, up in a tree, or in any other number of adventurous places.

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Demand on the rise

Texas-based tiny home builder Andrew Pleban says it’s tough to keep up with nationwide demand—after all, there was a housing shortage even before the health crisis.

His company, American Tiny House, is currently constructing more than 1,000 tiny homes for planned tiny-home communities around Texas, the largest of which is a 6-acre tiny-house oasis outside Dallas.

“That’s just in Texas, they’re popping up everywhere,” he says. “I work from 7 a.m. to midnight.”

Boomers drive the tiny house boom

Pleban says there’s a common misconception out there that tiny homes are mostly sought after by adventure-seeking millennials. He told us it’s actually older folks and retirees who make up the bulk of his customers.

“I get calls all the time from producers from tiny house [television] shows looking for people to feature,” he says.

“But they want eye candy, young people. Most of my customers are baby boomers who want to downsize.”

Once their nests are empty, boomers yearn for the simplicity of going small—and want to avoid an onerous monthly mortgage payment.

One of Pleban’s most popular models is the Phoenix, a tiny home with a modern design and 256 square feet of living space. It could easily work as a vacation spot ideal for keeping proper distance or as a year-round residence, thanks to its insulation.

Phoenix model

American Tiny House

 

Tiny-house financing

However, according to Pleban, there’s one major hurdle holding back further expansion of the tiny-house concept. While they’re less pricey than traditional homes, it’s difficult—if not impossible—to get a mortgage for a tiny home through a bank or credit union.

To alleviate that headache and propel the industry forward, Pleban is working with investors to launch a national financing infrastructure that will make loans more readily available to potential tiny-home owners. He hopes to have it off the ground in the next few weeks, which could make this option even more appealing to buyers.

After all, like Thompson, we’re all just looking for a way to move forward. And for a growing number of Americans, living with less might just be the best way to do it.

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Zillow Market Pulse: April 27, 2020

April 27, 2020

Fannie Mae and Freddie Mac clarified repayment policies for mortgage loans in forbearance. Signs suggest that sales of new homes have strengthened in the last two weeks. And oil prices continue to plummet, posing real economic threats in Texas.

• Fannie Mae and Freddie Mac clarify details around mortgage forbearance programs

  • Mortgage borrowers in forbearance programs will not be required to make lump sum repayments when their relief expires.
  • Borrowers will be offered a set of options ranging from modifying their loan to making their normal monthly payment amounts after the fact, to paying the loan off all at once.

• Evidence suggests that sales of newly built homes have risen in the last two weeks

  • According to John Burns, sales of new homes have risen slightly in the past two weeks after bottoming in early April, but remain 65% below last year's levels.
  • The research suggests renters looking to upsize have led the resurgence in demand.

• Falling oil prices are starting to wreak havoc in Texas

  • The Dallas Fed's Manufacturing Outlook Survey fell to -55.3 in April, the lowest in the survey's history.
  • By some estimates, up to 300,000 jobs will be lost in the Houston area alone as a result of the crash in oil prices.

So what?

Almost 7% of all outstanding mortgages were in some form of forbearance as of April 19, according to the Mortgage Bankers Association, allowing borrowers to temporarily delay their monthly mortgage payments for as long as a year. These programs are undoubtedly helpful to many struggling borrowers, but have also raised questions. The programs stipulate that participation in the program will not negatively impact a borrower's credit score, but the possibilities of other negative impacts were not as explicitly stated. Specifically at issue was exactly how lenders/servicers were going to demand the eventual repayment of the foregone monthly payments – would borrowers be required to pay back the foregone balance all at once, or would there be other options available? Today's announcement by Fannie and Freddie adds plenty of clarity to some of these concerns and should help ease some of the uncertainty and potential stigma around participating in these types of programs.

After sharp declines in the initial month of the lockdown, a recent report suggests sales of newly built homes are beginning to show noticeable signs of improvement. After falling as much as 85% from a year ago earlier in the month, sales of new homes have risen relative to last year's activity in each of the past two weeks, and now cumulatively sit 65% below last year's levels. The numbers are more subtle evidence of positive momentum in the housing market, which has begun to see other signs of improvement higher up the funnel in the last couple weeks. Sales of new homes are typically a timelier indicator of sales activity, due to the fact that the transaction is recorded much earlier in the home buying process than on existing homes. The report pointed to evidence that demand from renters of small apartments has picked up markedly, perhaps as people come to terms with the fact that they will be working from home for a while and may desire more space than they had previously needed. And consumer preferences might also be shifting, the report found, with people potentially more willing to focus their housing search strictly on new homes in order to minimize exposure to spaces that are currently lived-in.

The stock market rose today to a six-week high, but benchmark oil prices fell again, largely in response to the nation's largest oil-focused exchange traded fund selling its holdings of short-term oil futures contracts. Oil prices have come under extreme stress in the last month, and have fallen from a recent high of more than $60/barrel in early January to around $12 today (not to mention a trip to negative territory last week). Such a steep fall in oil prices was certain to wreak havoc on oil-dependent parts of the country, including Texas. The slide in the Dallas Fed's production index, a gauge of manufacturing conditions in the Lone Star state, suggests that deterioration in the oil market has also spilled over into complimentary businesses. Of the 115 manufacturing businesses surveyed, 24% said they had net layoffs in the period of April 14-22. Additionally, a third of business respondents to different, broader survey (including companies in the service sector) said that they were temporarily shut down. The downturn is being felt particularly hard in the Houston area, where an estimated 40% of the economy is tied to the price of oil. Some estimates suggest that between 200,000 and 300,000 jobs will be lost in Houston alone, due to the combined force of falling oil prices and the coronavirus pandemic. Look for similar stories to emerge in coming weeks – other oil-dependent states including Alaska, Louisiana, Oklahoma and Wyoming all face similar threats to their oil-dependent state and local economies.

 

Click here to read past editions of Zillow’s Market Pulse updates.

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February Case-Shiller Results & March Forecast: Last Look at The World that Was

• The S&P CoreLogic Case-Shiller U.S. National Home Price Index® rose 4.2% year-over-year in February (non-seasonally adjusted), up from 3.9% in January. Annual growth was also up from January in the smaller 10-city index (to 2.9%, from 2.6%) and 20-city index (to 3.5%, from 3.1%).
• Phoenix (+7.5%), Seattle (+6%), Tampa (+5.2%) and Charlotte (+5.2%) reported the highest year-over-year gains among markets in the 20-city index.

Today's reading of the Case-Shiller home price index for February – the last before the data begin to show effects of the coronavirus outbreak – offers a final look at a housing market that was primed for a stellar spring selling season.

The national Case-Shiller Home Price Index rose 4.2% year-over-year in February. The smaller 10- and 20-city composite indices grew more slowly, at 2.9% and 3.5% year-over-year, respectively. The annual rate of growth was higher in February than in January in all three indices. On a monthly (seasonally adjusted) basis, the 10- and 20-city indices were each up 0.4% from January; the national index was up 0.5% month-over-month.

Index	Zillow Forecast, Released 3/31/20	Actual Case-Shiller Indices, Released 4/28/20	Historical Median Absolute Error*
10-City Composite, Month-Over-Month (SA)	0.2%	0.4%	0.2%
10-City Composite, Year-Over-Year (NSA)	2.7%	2.9%	0.2%
20-City Composite, Month-Over-Month (SA)	0.3%	0.4%	0.2%
20-City Composite, Year-Over-Year (NSA)	3.2%	3.5%	0.1%
U.S. National Month-Over-Month (SA)	0.4%	0.5%	0.1%
U.S. National Year-Over-Year (NSA)	4%	4.2%	0.1%
*Calculation of Median Absolute Errors are based on Zillow’s forecasts dating to 2011.  The national Case-Shiller forecasts began in 2014.

Things were looking up for the housing market in mid-winter, with low interest rates and still-secure job prospects combining to boost demand for housing just as a growing share of millennials were looking to finally take the leap into home ownership. Teamed with record-low levels of for-sale inventory, these demand factors had begun to push home prices upward after the growth rate spent most of 2019 decelerating. The economic carnage that's occurred since, particularly in the labor markets, has been well documented and the true impact on home prices remains to be seen. But for now, today's release offers one last glimpse of what was the makings of a promising spring for housing, before the world changed.

Annual growth in February as reported by Case-Shiller is expected to accelerate in all three major indices. S&P Dow Jones Indices is expected to release data for the March S&P CoreLogic Case-Shiller Indices on Tuesday, May 26.

Index	Actual February Case-Shiller Change	Zillow’s Forecast for the Case-Shiller March Indices
10-City Composite, Month-Over-Month (SA)	0.4%	0.3%
10-City Composite, Year-Over-Year (NSA)	2.9%	3.3%
20-City Composite, Month-Over-Month (SA)	0.4%	0.4%
20-City Composite, Year-Over-Year (NSA)	3.5%	3.8%
U.S. National Month-Over-Month (SA)	0.5%	0.4%
U.S. National Year-Over-Year (NSA)	4.2%	4.4%

 

 

Note: Case-Shiller and Case-Shiller Index are registered trademarks of CoreLogic Solutions, LLC. The statements herein are not endorsed by or provided in association or connection with CoreLogic, LLC.

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Zillow Market Pulse: April 24, 2020

April 24, 2020

Mortgage delinquencies rose in March — the first rise ever recorded in the month — but remain near record low levels. Roughly 6 percent of outstanding mortgages are in a forbearance agreement. Spending on capital goods rose, but will very likely reverse in coming weeks.

• Mortgage delinquency rate rises in March for the first time

  • According to Black Knight, 3.39% of loans were delinquent in March, up from 3.28% in February.
  • Delinquencies have never before risen in March — the month is normally the strongest of the year in the mortgage industry, according to the report.

• 3.4 million mortgages are in forbearance

  • The figure represents 6.4% of all outstanding mortgages.
  • Combined, these loans are associated with an estimated $4.1 billion in monthly principal and interest payments.

• Spending on core capital and durable goods exceeded expectations

  • Orders for core (non-defense or transportation) goods increased 0.1% in March from February, according to the Census Bureau's advance report.
  • The final report, due May 4, will provide more detail and likely show declines.

So what?

The monthly increase in the share of delinquent loans is notable because it was the first time in the report's history that this figure increased in the month of March. According to Black Knight, March is normally the strongest month of the year for mortgages. Despite the one month increase in delinquency, overall tardiness is down 26 basis points from a year ago and delinquency rates are still very low by historic standards. Furthermore, measures of serious delinquency and the rate of foreclosures all set new record lows in March. So, despite the notable uptick in overall delinquency, if anything the March report on payment delinquencies offered more evidence of the housing market's overall stability in the period immediately prior to the coronavirus outbreak.

But while delinquencies remain low, the number of loans in forbearance is only getting bigger. According to Black Knight, as of April 23, 3.4 million mortgages were in a forbearance agreement, up half a million from a week ago and representing 6.4% of all outstanding mortgages. Combined, these loans are associated with an estimated $4.1 billion in monthly principal and interest payments that mortgage servicers are still responsible for advancing to investors. Servicers have been vocal about requesting aid in order to help them meet these financial obligations that they had neither foreseen nor planned for. Earlier in the week, the Federal Housing Finance Agency (FHFA) announced a policy that removes the servicers' obligations on a loan after it has been in forbearance for four months, but some argue that the policy does not go far enough to assist servicers in the short term. Treasury Secretary Steven Mnuchin said earlier this week that he has no plans to create a new lending facility specifically for mortgage servicers. As the dispute carries on, the labor market continues to reel and more increases in forbearances in coming weeks look very likely.

The March reports on core (non-defense, non-transportation-related) capital and durable goods spending were a pleasant surprise to most experts, who on average expected each reading to fall by close to 7% from February. But the same experts who were surprised by the relatively good news were also quick to caution that these numbers likely don't reflect reality in the manufacturing and other industrial sectors, and that subsequent reports are likely to be far worse. Today's report was the advanced version for March, which generally captures the industry at a high level, with a particular focus on the beginning of the month. It's likely that the final report, due May 4th, will include more fine-grained information on specific subsectors and offer much more clarity into how the coronavirus outbreak has impacted those lines of business. Measures of consumer sentiment fell sharply this month, suggesting that the willingness to purchase larger items such as cars or large household appliances has waned, a view reinforced by the final version of the University of Michigan Index of Consumer Sentiment, which was released today. The index's read on people's perception of Current Economic conditions fell 29.4 points from March, while the forward-looking Index of Consumer Expectations fell just 9.6 indicating at least some signs of stabilization. In the weeks ahead, we will begin to get a sense of consumers' reactions to eased shelter-in-place restrictions, which will be crucial and informative for how the path to recovery will be charted.

 

Click here to read past editions of Zillow’s Market Pulse updates.

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Do It Together: 5 Home Projects for You and Your Household Helpers

While the kids are out of school, the adults are doing everything they can to keep their little ones safe and healthy at home - and find creative ways to alleviate the boredom and frustration they may be feeling after weeks away from their school friends or grandparents.

With just a few materials you can order online (or pick up curbside at the home improvement store) and some tools you likely have lying around the house, you can keep those little hands busy while giving your house some TLC.

Here are five DIY projects to improve your home and give your kids a productive outlet for their energy.

Build raised garden beds

It seems like everyone is jumping on the gardening bandwagon and creating "victory" COVID-19 gardens. A garden not only gives you the benefit of fresh herbs, vegetables or flowers, it's also a natural outdoor classroom for your kids - helping them learn measurements, basic botany facts and giving them a boost to their mental and physical well-being. 

Raised garden beds help plants thrive because they're easier to maintain, and they are a fairly easy project for children to assist with. To make a 4×4 raised garden bed, all you need are the following:

• Eight untreated 2x4s that are 4 feet long
• Four untreated 12-inch 4×4 corner posts
• A box of 4-inch wood screws
• A drill 

To construct the rectangular box, attach two 2x4s to each corner post (stacking them vertically). Have your older child hold the boards securely in place as you drill. When you're finished building your structure, kids of all ages can assist you with picking out a sunny spot in the backyard for your raised garden bed and help you pour in the soil and plant your veggies or flowers.

Give your mailbox a makeover

Brighten up your humdrum mailbox and give your heroic postal worker something to smile about when they deliver your mail. This project is best suited for those kids who can comfortably wear a face mask and use a spray paint can responsibly. To give your mailbox a facelift, you'll need the following supplies:

• Medium-grit sandpaper
• Protective masks* 
• Painters tape
• Aluminum primer
• Metal paint spray paint in a vibrant color

Tag team sanding off rust and old paint on your mailbox while wearing protective masks. Then, have your child assist you with placing painters tape over any address numbers or the mail flag to protect them from being painted. Spray primer and allow it to dry before applying the metal spray paint. To customize your mailbox and make it stand out, use stencils to create flowers, letters, or let your mini Van Gogh freehand different designs. 

* If you don’t already have masks on hand, consider waiting on this project until masks and other personal protective equipment are more readily available. Or, if you’re purchasing a new mailbox, you can do this project entirely freehand, no mask required.

Construct a birdhouse

Though birds aren't required to shelter in place, it's nice for them to have a safe spot to land in your backyard - and exciting for the whole family to watch as they come and go. You can either construct a birdhouse using a pre-cut birdhouse kit (available to order online at most home improvement stores) or you can make the cuts yourself on a 2×6 or even a spare fence post. Have older kids help you nail or wood glue it together and have little ones personalize it with paint to give the birds in your backyard a truly unique home to call their own. 

Or, if you want to give your neighborhood squirrels a place to kick back, you can repurpose almost any kind of wood to make an adorable miniature picnic table.

Stencil paint your tile floor

Want to give your tile floor a new look but don't want to invest the money, time or intensive labor it takes to rip up and lay down a new one? While this project requires patience and attention to detail, your children can pitch in and help out to make it go a little faster. Here's what you'll need for this tile stenciling project:

• Fine-grit sandpaper
• Painters tape
• Primer
• Semi- or high-gloss latex paint in both a base color and a design color
• A chosen stencil (create your own or look up one that you like online)
• Foam roller

Begin your project with a deep cleaning of your bathroom floors (and cue the complaints from your kids). Once your floors are squeaky clean, tag team a floor sanding with your kids to help the tiles take paint. Then, tape the perimeter of the room, underneath your vanity cabinet and around your toilet. 

Apply primer to the floors and let them dry. Then, paint your base color. Once these coats have dried, you're now ready for your stenciling. Have your kid help you tape the stencil in place and then paint your design color onto the floor. If your older kids have a steady hand, using two stencils will speed the process along and reveal a beautifully designed floor even quicker. This example can help you visualize a finished product.

Restyle your bathroom drawer pulls

You'd be surprised at how much of a design impact changing the drawer pulls on a bathroom vanity can have. This inexpensive DIY project is quick to complete and perfect for little hands who can help you hold the hardware while you handle the screwdriver. 

All you need for this project are new drawer pulls or knobs (have your child assist you with the measurements to see what size you need) and a screwdriver. Remove the old drawer pulls and have your kid at the ready to put all of the old pieces in a single pile and hand you the screws and the new drawer pulls as you need them. 

Feeling more ambitious? Change out the hardware on your kitchen cabinets for an easy upgrade. Or do this project on a small scale and swap out the handles or knobs on an old dresser to give it a new style.

Related:

• 9 Easy-to-Ambitious DIY Projects to Improve Your Home
• How to Grow a Spectacular Container Garden
• Personalize Your Space With a DIY Gallery Wall

via Do It Together: 5 Home Projects for You and Your Household Helpers

A Sneak Peek at Chip and Joanna Gaines’ New Magnolia Network

Andrew Lipovsky/NBC/NBCU Photo Bank via Getty Images

It’s been two long years since Chip and Joanna Gaines wrapped up the final season of their hit HGTV show, “Fixer Upper,” and fans have been missing them ever since.

Now, at long last, they’re back on TV, offering a preview of what will soon air on their own Magnolia Network!

Owned by Discovery, the Magnolia Network will feature a variety of shows created by Chip and Jo about renovation, design, gardening, cooking, and running a successful business.

“When Jo and I had the opportunity to take on the challenge of running a network,” Chip explains, “we really wanted to make sure that we encompassed all the things that we’re passionate about in our family.”

While the network was originally slated to launch in October, COVID-19 has pushed these plans forward to an unknown date. Nonetheless, Chip and Jo were far enough along in their production process to air a one-time special on Discovery’s DIY Network. (The network will be rebranded as Magnolia once it’s launched.)

Titled “Magnolia Presents: A Look Back and a Look Ahead,” this special gives fans a sneak peek at which shows to expect. Here’s a look at what your favorite renovation duo have been up to!

‘Home on the Road’

Abner and Amanda Ramirez aren’t the average family. They’re living the folk star lifestyle, touring the country with their band Johnnyswim and bringing along their two young kids (and one on the way) for the ride.

Chip and Jo fans will probably recognize Johnnyswim’s hit song “Home” from the opening credits of “Fixer Upper.” But “Home on the Road” will feature so much more than music. Viewers will get a peek into the challenges that go along with balancing kids and career, traveling, and making the road feel like home.

‘Bespoke Kitchens’

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Tonight's the night… 5pm ET on the DIY Network join the delightful @JoannaGaines and @ChipGaines for a very exciting sneak peek at our new Magnolia Network series, deVOL Kitchens. The 4 hour special kicks off with a look back at where it all began with their iconic show Fixer Upper and goes on to look ahead to all the amazing series coming very soon, we can't wait!! #deVOLKitchens #MagnoliaNetwork

A post shared by deVOL Kitchens (@devolkitchens) on Apr 26, 2020 at 11:02am PDT

Chip and Jo have been known to create some incredible kitchens, but they’re not the only experts when it comes to this home gathering space.

Paul O’Leary and Helen Parker, stars of the new show “Bespoke Kitchens,” are sure to give even the Gaineses a run for their money. Parker is an interior designer, while O’Leary is a furniture designer. Together, they create beautiful, colorful kitchens that feel timeless.

This show is sure to inspire lots of new trends for kitchen renovation.

‘Family Dinner’

Jo and Chip got into the food business with their restaurant, Magnolia Table, so it makes sense that they’d include a show that’s centered around food.

Andrew Zimmern stars in “Family Dinner,” where he learns all about families’ food traditions, discovering the secrets behind every dish from venison to mashed potatoes, cranberry sauce to desserts.

“Whether it’s over Sunday supper, a holiday brunch, or a summer barbecue, families come together over food,” Zimmern says.

‘Restoration Road’

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Get a sneak peek of my new Magnolia Network series, Restoration Road with Clint Harp as @Magnolia Presents: A Look Back & Look Ahead this Sunday, 4/26 beginning at 5p et on DIY Network. This has been a long time coming. I’ve covered many miles across this beautiful country with my production team telling stories about priceless old structures that are being saved one by one and the folks that have the courage to do it. We’ve got more work to do as soon as we can get back out there…but until then this sneak peek will have to do! Can’t wait for yall to see! #lovebuildrun (p.s. i’m pretty sure it’s showing up on your tv guides now!)

A post shared by Clint Harp (@clintharpofficial) on Apr 24, 2020 at 1:15pm PDT

Clint Harp is best known for his furniture creations on “Fixer Upper,” but now, he’s getting his own show. On “Restoration Road,” Harp will be hitting the road in search of the most exciting restorations and renovation projects in the country.

He’ll find old barns and structures, and get hands-on with builders who are bringing old places back to life.

One of those projects is a 270-year-old inn where George Washington once stayed. This historical building will be deconstructed in Pennsylvania and reconstructed in Texas, where it will operate once again as an inn.

‘Growing Floret’

What’s a home without a garden? (Or at least a vase of fresh-cut flowers?)

“Growing Floret” centers on Erin and Chris Benzakein, a married couple who run a flower farm in Washington state. And business is blooming. Their farm is growing from 2 acres to 20, and Erin and Chris are hoping they can keep up.

The show is sure to feature small business successes, floral tips, and lots of fun.

‘The Fieldhouse’

Right now, @chipgaines and @joannagaines are hosting a 4-hour network preview event called @magnolia Presents: A Look Back & A Look Ahead which highlights where Fixer Upper first began, including some never before seen footage. pic.twitter.com/2q9hN1RJx7

— The Fieldhouse Abilene (@TheFieldhouse__) April 26, 2020

Many of the shows on the Magnolia Network will have some relation to home building and design, but one show, “The Fieldhouse,” is focused on physical health and wellness.

The star of the show, Justin Bane, explains that after suffering a football injury, he became interested in physical training. He decided to open a gym in Waco, TX, which lead to opening a bigger gym in Abilene, TX.

Now, Bane is focused on making people feel better and helping them reach their goals. The show is certain to be packed with heart-warming stories of hard work and overcoming challenges.

‘Super Dad’

pic.twitter.com/eJ5xW6LBpL

— Taylor Calmus (@DudeDadVlog) June 20, 2019

 

With Magnolia’s big focus on family togetherness, it’s no wonder the Gaineses created a show just for kids’ projects. “Super Dad” is centered on Taylor Calmus, who loves creating custom toys and playhouses for his kids.

Now, he’s helping other dads to make something special for their families. Talk about sweet!

‘Home Work’

Candace and Andy Meredith have a big family. With her three boys, his three boys, and one little girl they have together, they are a modern “Brady Bunch,” according to Chip and Jo. But this family of nine needs to find a bigger place to live.

Since Candace and Andy have already been restoring old homes together for six years, they think they’re ready to take on an old schoolhouse, turning it into a dream home for their family.

On their show, “Home Work,” they’ll create a custom home that’s perfect for their custom family.

‘The Lost Kitchen’

Food is sure to play a big role on the Magnolia Network, especially with the new show “The Lost Kitchen.”

This series will center around a small Maine restaurant, which shares a name with the show. This restaurant is small and is open for only six months out of the year, so reservations are limited. In fact, the series star and restaurant owner, Erin French, has an unconventional reservation system where she accept postcards from all over, then grants reservations based on these notes.

It’s an unconventional restaurant and likely to be an unconventional show.

‘Inn the Works’

The Gaineses are used to renovating homes, but what about renovating a home away from home?

In “Inn the Works,” Lindsey Kurowski is taking a big risk by buying and renovating a mountain lodge in Big Bear, CA. She’s hired her siblings to help her turn this run-down hotel into a rustic lodge with new life.

But, they’ll have to do it quickly, because they haven’t shut down the hotel for renovations. With guests needing help and design choices to be made, Kurowski is being pulled in all directions. Airbnb superhosts have nothing on this gal!

… and lots more!

Of course, Chip and Jo couldn’t create a network lineup without including some of their own family hijinks, too.

They finish their special by showing off clips of some new projects of their own and new family adventures. It looks like we’ll have to wait to find out what the Gaines’ new show (or perhaps shows) will be called, but it’s sure to have the couple’s signature charm.

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What Americans Love—and Hate—About Their Homes During Coronavirus

Eva Blanco/Getty Images

There’s nothing like a pandemic forcing you to stay indoors to help you realize what’s really important in your living space.

As millions of Americans shelter in place, they’re realizing what they love—and what they desperately want to change—about their homes and neighborhoods.

The quality people valued most in their current living situation was being in a quiet neighborhood with outdoor space that’s near grocery stores and pharmacies, according to a realtor.com® survey of 1,300 homeowners and renters.

The survey was conducted during the week of April 5. About 13% of respondents ranked each of these characteristics highly.

“After more than a month of stay-at-home orders, it’s safe to say Americans are really getting to know what home features work and don’t work for their families,” realtor.com’s chief marketing officer, Nate Johnson, said in a statement.

That outdoor area in a quiet community can provide fresh air and a much-needed mental health break from those who have been cooped up at home for too long.

Ten percent of folks also appreciated having an updated kitchen, all the better for preparing meals at home when dining out is not an option. About 9% of participants liked their natural light, and 6% appreciated flexible spaces that can be used for crafting, gaming, or exercise.

What folks yearned for the most—but didn’t have—in their homes was more space. Hey, it’s hard to be quarantined with everyone on top of everyone else! About 19% of survey participants dreamed of additional square footage, while 13% wanted an updated kitchen and 11% wanted a home gym.

Updating the style of the home, wanting more natural light, and adding a yard or patio all ranked highly, with about 9% of participants each. An additional 6% hoped for an extra bathroom.

And since they’re stuck at home, many folks are making the best of it by finally getting around to their do-it-yourself lists. About 32% of those surveyed said they had started a home improvement project, and another 15% plan to embark on one.

“As we move forward, we expect the shelter-in-place experience to have a significant influence on home-buying trends and how buyers prioritize home features, neighborhoods, and home improvement projects,” Johnson said in a statement.

The most common DIY project was finally getting around to cleaning out the closets or the garage, at 21% of participants. That was followed by gardening and planting, at 17%; painting, at 13%; redecorating a room, at 10%; and rearranging the furniture, at 9%.

In addition, folks were keen on adding artwork or decor to their homes, at 7%; adding a home gym or workout space, at 5%; and installing an office or workspace, at 4%.

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