Zillow Market Pulse: July 13, 2020

July 13, 2020

There were signs of both optimism and pessimism in consumer confidence reports from last month. New reports suggest that new home sales likely recorded a blockbuster June. And California's plans to scale back reopening gave financial markets flashbacks to March.

• June survey on consumer expectations offers mixed signals

  • In June, consumers gave themselves a 47.6% chance of finding a job in the next three months, on average, down from May.
  • But respondents said they believe there is just a 9.8% chance of their missing an impending minimum debt payment – the lowest in the series' history.

• A measure of new home sales shows massive annual gain

  • John Burns suggests sales of newly constructed homes rose 55% in June from a year before.
  • Homebuilder Taylor Morrison showed an even stronger increase.

• California and Oregon roll back plans to reopen

  • The Golden State fully closed bars and limited activity at restaurants, museums and elsewhere to outdoors-only.
  • California has averaged 8,000 new cases a day lately.

 So what?

The June Survey of Consumer Expectations, a monthly survey conducted by the Federal Reserve Bank of New York, found that consumers were getting more confident in the economy by the end of the Spring — before the recent surge in case counts across the country — but largely remained cautious about their short-term prospects. On average, consumers gave themselves a 47.6% chance of finding a job in the next three months if they were to lose one today – down from May's reading, despite a marked gain in the labor market in June. Similarly, income expectations continue to fall. The typical consumer expects their income to grow by only 1.6% in the next year – the lowest reading in the survey's history. But there were optimistic notes, too: The typical expectation for home price appreciation over the next year rose strongly in June, to 2% from 0.6% in May. And perhaps most surprisingly, respondents placed an average probability of just 9.8% on their missing an impending minimum debt payment – a sharp decline from May and the lowest average reading in the history of the report. The improvement is likely due in large part to successful loan forbearance and forgiveness programs, direct federal fiscal support and the fact that savings rates have generally been higher than usual over the past few months.

A report from John Burns set expectations for a sweeping gain for the new home industry to end the spring, ahead of next week's official new home sales data for June. According to the report, sales of newly constructed homes rose a whopping 55% in June from the same month in the previous year. This finding was mirrored (in fact, eclipsed) by data from homebuilder Taylor Morrison, which said sales of their homes nearly doubled in June from the year before. Sales of new homes bounced back strongly and quickly this Spring, in part because of the timely way in which they're tallied but also likely because of a partial consumer shift towards a preference for new, never-lived-in homes. Should next week's report from the Census echo these preliminary findings, it will only further add to the narrative of broad housing resilience in the face of the pandemic. But, it's important to take these headlines with a grain of salt. Many measures of housing market activity suggest that the pandemic has delayed the spring selling season by a month or two, essentially pushing it back into the summer. While the recent improvements in housing are due in large part to strong buyer demand fueled by low mortgage rates, this delayed homebuying season is likely also inflating annual growth figures, as numbers from this year's peak shopping season are being compared to figures from last year when the market is typically cooling off.   

In the latest and likely loudest sign that the recent surge in coronavirus cases has begun to pose real threats to the economy, the state of California announced plans to halt reopening plans and drastically limit the indoor operations of a number of businesses. Restaurants, wineries, museums and many Golden State businesses must limit their interactions with customers to the outdoors, while bars have been instructed to pause operations altogether. The state of Oregon followed suit with the imposition of similar, though less-strict, restrictions. Perhaps getting déjà vu from the early days of the pandemic, the market immediately reversed course after briefly touching its highest level since the pandemic. Where things go from here is uncertain, but the partial closure of a state that would be the world's 5th largest economy were it its own nation is a dire sign for those hoping for/betting on a swift economic recovery.

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

The post Zillow Market Pulse: July 13, 2020 appeared first on Zillow Research.

via Zillow Market Pulse: July 13, 2020