Zillow Market Pulse: April 22, 2020

April 22, 2020

After weeks of bad news, some small signs of hope emerged for the housing market. Continued turmoil in oil markets has real potential to leak into the broader economy. And workers' pessimism about their continued job prospects hit its highest-ever level.

• Weekly mortgage applications rise slightly

  • In the week ending 4/17, for-purchase mortgage applications increased 2% from the week earlier.
  • Purchase applications in both California and Washington increased for the second straight week.

• Oil prices continue to languish

  •  Despite rising today, the price of a contract for June delivery of West Texas Intermediate (WTI) crude oil fell at least 43% yesterday.
  • A supply glut coupled with a severe shortage of storage space is greatly weakening demand from investors.

• Remarkable downturn in labor market a cause for growing worker pessimism

  • About a quarter of Americans said they think it's at least fairly likely they'll lose their job in the next year.
  • The April job report is likely to reflect more losses in white collar occupations, which largely avoided the first waves of layoffs.

So what?

A small uptick in purchase mortgage applications last week was faintly encouraging for the housing market after a slew of demoralizing data releases over the last few weeks. California and Washington State – two states which bore much of the initial brunt of the U.S. coronavirus outbreak – each saw purchase applications rise for the second straight week. Purchase mortgage applications remain roughly a third below (31%) where they were this time last year, and two data points don't make a trend. But the release coincided with other faint signs of progress in the housing market that have emerged in recent days, including an uptick in home showings from recent lows and a bounceback in page views of for-sale listings.

Despite a modest improvement today, oil prices remain very low as the industry continues its struggle to chart a path forward amid waning demand and an extreme shortage of storage space. Monday's historic plunge to negative prices was associated with contracts for May delivery of WTI crude, which was set to expire – necessitating the physical delivery of oil – the next day. But yesterday's 43% decline in prices was associated with June contracts, which aren't due to expire until this time next month, adding more evidence that the industry remains deeply unsure about its near-term prospects. The decline in oil prices has the potential to wreak real havoc on specific regions across the country, as well as the broader economy. Five states in the U.S. owe at least 10% of their economic output to oil and gas production, while 7.8% of the economic output from Texas (the nation's second largest state-level economy) depends on activity in the sector. Estimates now suggest that oil production could fall 20% in the near term likely resulting in thousands of workers losing their jobs. Currently, the price of a June WTI contract is hovering around $12/barrel, with estimates suggesting that at $15/barrel, most wells will lose money and likely be forced to shut down. Industry consultant Rystad Energy predicts that more than 500 U.S. companies in the oil industry will file for bankruptcy if the price of crude doesn't recover to $20+/barrel. The plunge in prices also has enormous implications outside the oil industry, with job losses within the industry likely to spill over into other sectors.

Finally, a new Gallup poll suggests that an onslaught of recent negative news, particularly when it comes to the labor market, is heavily weighing on people nationwide. According to the poll, 25% of currently-employed U.S. adults assume that they are likely to lose their job in the next year. Not only is that a record high for the poll, which dates back to at least 1975, it's a remarkable increase from last year's figure of 8% — a record low for the series. That highly negative outlook has the potential to greatly impact consumer spending – which fuels the U.S. economy – and limit people's willingness to make larger investments. Unfortunately, the pessimism is unlikely to improve in the coming weeks, with estimates calling for another 4 million unemployment claims coming this week. And new forecasts call for massive job losses and wage cuts in April across a wide array of sectors, including some white-collar sectors which largely avoided the initial waves of layoffs in the pandemic's early stages.

 

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

The post Zillow Market Pulse: April 22, 2020 appeared first on Zillow Research.

via Zillow Market Pulse: April 22, 2020