Zillow Market Pulse: May 7, 2020

May 7, 2020

Another 3 million-plus jobless claims filed in the past week suggests the labor market is still suffering immensely. Housing sentiment fell to eight-year lows, and a differing outlook between buyers and sellers is emerging. And MBA data provided proof that the mortgage market is tightening.

• 3.2 million more jobless claims were filed last week

  • It was the seventh-straight week in which jobless claims topped 3 million, and the total filed since mid-March now exceeds 30 million.
  • Jobless claims are trending downward, but remain far greater than pre-coronavirus levels and previous records.

• Housing market sentiment falls to lowest level since 2011

  • The Fannie Mae Home Purchase Sentiment Index fell 17.8 points in April from March.
  • 48% of respondents said it's a good time to buy, but only 29% said it's a good time to sell.

• The mortgage market has tightened significantly in the last month

  • The Mortgage Bankers Association Mortgage Credit Availability Index fell 12.2% in April from March.
  • Conventional loans and jumbo loans experienced the biggest monthly declines.

So what?

One day ahead of the government's official April jobs report, another week in which millions of unemployment claims were filed reinforced the dire state of the labor market. The 3.2 million seasonally adjusted claims filed in the week ending May 2 was a slight pullback from the previous week, but is still more than four times the highest level ever recorded before the coronavirus outbreak, and about fifteen times the typical levels seen in the immediate runup to the outbreak. In the last 7 weeks, more than 30 million claims have been filed, a number that represents about 20% of all people counted as employed in the March jobs report. Despite the enduring trauma in the markets, many are shifting their focus to the next phase of this crisis – specifically, attempting to gauge when the jobless claims figures will start to show signs of stabilization and, broadly, what the labor force is going to look like once the crisis begins to fade. The latter will depend greatly on the fate of businesses in the coming months, and a new working paper released today found that 18% of lost paid employment from February through mid-April was because of business closures (either permanent or temporary). A rise in bankruptcies is widely expected in coming months, so these closures will continue to play a role in job losses and restrict the labor market's recovery. If existing businesses permanently close, additional growth from those that survive and/or supplemental growth from newly created businesses will be necessary to bring job levels back.

Fannie Mae's monthly read on household sentiment as it pertains to the housing market declined by more in April than it has in any month before. The overall measure of sentiment now sits at its lowest level since November 2011, when the nation was still recovering from the housing-centric global financial crisis. The decline in the headline index was largely expected, but the release offered an interesting take on the differing housing market outlook between home buyers and sellers. A roughly equal share of people said they think buying conditions are good as those that said buying conditions are bad. But more than twice as many respondents said they viewed selling conditions as bad than those who viewed them as good. The divergence might suggest that low inventory (which limits competition among sellers but has the opposite effect for buyers) and low mortgage rates (which, in theory, increase a home buyer's purchasing power) may not be enough to persuade sellers to list their home in such an uncertain time. This sentiment is echoed in the steep pullback we've observed in the number of homes newly listed for sale on Zillow compared to this time last year. Meanwhile, buyers – seeing those same conditions and expecting less competition on the market – remain more confident in the market's conditions. Surprisingly, the report also found that 76% of respondents remain unconcerned about their job prospects over the next year – a figure that might be buoying buyers' relative optimism.

While average mortgage rates have fallen back to near all-time lows in recent weeks, many are finding that the mortgage market remains very tight, particularly for those with less-than-excellent credit and those seeking an atypical home loan. The Mortgage Bankers Association's Mortgage Credit Availability Index fell 12.2% in April, with conventional loans and jumbo loans falling by double digits. The overall figure is currently at its lowest level since December 2014. The restricted mortgage market – largely a result of lenders inability to accurately price the risk, given uncertainty in the broader markets – will limit loan availability for many, but should also limit the damage incurred upon the mortgage industry and broader financial markets.

 

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

The post Zillow Market Pulse: May 7, 2020 appeared first on Zillow Research.

via Zillow Market Pulse: May 7, 2020