Zillow Market Pulse: April 23, 2020

April 23, 2020

New home sales fell sharply in March, particularly in parts of the country hit earliest by the coronavirus outbreak. Roughly one-in-six people that were employed in March are now without a job. And global business activity has declined dramatically.

• New homes sales fell short of already-low expectations

  • New home sales fell 15.4% in March from February, and 9.5% from March 2019.
  • The West and Northeast regions experienced monthly declines of more than 38%, while declines were more modest in the South.

• Another 4.4 million Americans filed for unemployment

  • Since mid-March, more than 24 million Americans have filed for unemployment protections.
  • Nearly 16 million people are currently receiving benefits, almost 2.5x more than at the height of the Great Recession.

• Business activity worldwide has fallen off a cliff, and the coronavirus' spread may be much wider than assumed

  • The IHS Markit Purchasing Managers Indices – a measure of private sector business activity – fell to all-time lows in the U.S., U.K., Japan and the eurozone.
  • A study from New York state suggests that ten times as many people may have contracted the coronavirus than previously thought.

So what?

Compared to existing home sales data released earlier this week, today's timelier March new home sales report offers a more-accurate glimpse into how the housing market has shifted as a result of the coronavirus outbreak. Sales of new homes are recorded at the time a deal is signed (but not necessarily recorded and closed), as opposed to transactions involving existing homes which are counted at the time the deal is closed. The news today was worse than expected, even with some elements of the report offering faint optimism. Sales of new homes through the first quarter of 2020 are up about 7% compared to the same period from 2019, but that improvement is more about the strength of the market in January and February, prior to the U.S. coronavirus outbreak, and the relatively sluggish start to 2019. The March report was also notable for its regional differences. Sales in the West and Northeast – the two census regions hit earliest by the coronavirus outbreak – saw dramatic monthly declines in new home sales activity, while sales in the South barely budged. With widespread shutdowns spreading to the South and other regions toward the end of March, that likely sets the market up for an even worse April.

The 4.4 million initial jobless claims filed in the week ending April 18th mean that since mid-March – the last time the official unemployment rate was calculated – more than 24 million people have filed for jobless benefits. Put another way, approximately one out of six people who were counted as employed in the March jobs report have since filed for unemployment. Another week like this, and we would be close to having twice as many unemployment claims filed in the last six weeks than there were people unemployed at the height of the Great Recession. The downturn in the labor market has not been felt equally across the country. Eight states – including Michigan, Pennsylvania and Georgia – have received unemployment claims from more than 1/5 of their workforce since mid-March. Florida – home to the nation's third-largest workforce, and where 11% of workers filed for unemployment in the last five weeks – is processing claims at among the slowest rates in the nation. Last week, just 4% of the ~850,000 pending claims in the Sunshine State had been processed. Don't be surprised if the nation's official unemployment rate is near 20% when the April jobs report is released on May 7.

Data released today from around the globe are the latest to point to sharp contractions in the global economy. Purchasing Managers' Indices (PMI) for a number of countries point to record declines in private-sector business activity in the month of April. The U.S. index declined to 13.5 points in March from February to 27.4 – the lowest reading in the data's history, which dates to October 2009. Any reading below 50 suggests that activity in the private sector has fallen, and the lower the number the larger the decline in activity. For context, the lowest level reached during the Great Recession was 36.2. Globally, PMIs in the U.K., Japan and the eurozone all hit all-time lows. But while industry is eager to resume activity ASAP, concerns remain about the ability to detect, test for, contain and treat the virus, particularly if social activity returns to a somewhat "normal" state. A report out of New York today suggests that our ability to detect the virus is still sorely lacking. Findings from a statewide survey suggest that approximately 2.7 million people in just the state of New York may have had COVID-19 at some point, a number at least ten times larger than the previous estimate.

 

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