Zillow Market Pulse: July 15, 2020

July 15, 2020

Rental payment rates continue to fall short ahead of the looming expiration of enhanced unemployment benefits. Census data suggest households remain very concerned about losing employment income, particularly in some recent COVID hot spots. And for-purchase mortgage applications pulled back this week, but remain up from the same week last year.

July rental payment rates remain low

• 87.6% of apartment households had made a full or partial July rent payment through July 13, according to the National Multifamily Housing Council.
• That's 1.4 percentage points below the payment rate through this point in June, and 2.5 points below last July's rate.

Census: Housing insecurity and fears of lost income are rising

• More than a quarter of U.S. households either missed last month's housing payment or are worried about missing the next.
• Expectations for lost employment income are also elevated.

Purchase mortgage applications pull back from last week, but remain up year-over-year

• According to the Mortgage Bankers Association, for-purchase mortgage activity slipped 6% on the week
• Activity remains up 15% from the same week last year, but that pace is half of last year's rate

 So what?

 Last week, we reported that the rental payment rate through the first week of July was down 3.4 percentage points from the same period in June. Today's report from the National Multifamily Housing Council suggests renters have not caught up through the middle of the month as some had hoped. It's difficult to point to any single reason for the decline, but one likely explanation is the impending expiration of some enhanced government support come July 25. Even with this relief in place, those households with little-to-no safety net are having to make extremely difficult choices of where to spend their money. Some are seemingly choosing to forego rent payments, perhaps thinking they are protected by eviction moratoriums still in place in some states. Absent extended support and/or new programs being put in place, we should expect the rent payment rate to slide in coming months.

 These trends are echoed in the latest weekly Household Pulse Survey from the Census Bureau. According to the report, slightly more than a quarter of households either missed last month's housing payment or are skeptical of being able to make the next one, up from a low of 22.1% in early June. But the national rate pales in comparison to the rate in some metro areas that have been hard-hit by a recent surge in coronavirus cases. Almost 40% of households in Houston said they face some form of housing insecurity, up from 28.6% in mid-May. The rate was similar in Miami, and has remained elevated for weeks, suggesting hardship there is not solely attributable to the recent uptick in cases. The report also suggests that people are growing increasingly concerned about their employment prospects in the coming weeks: 34.9% of households expect to lose some of their employment incomes in the next month, up from a rate of 31.7% a month before but down from a high-water mark of 38.8% in May. In Miami, more than half of all households expect to lose some income in the next month, the same rate as in early May and up from a low of 36.5% in the first week of June. Houston has seen a similar increase in the last month.

 On the surface, purchase mortgage applications are continuing to show strength into July, up 16% last week from the same week a year ago amid mortgage rates that continue to plumb new record-lows. But enduring – and in many areas, worsening — shortages of for-sale inventory as well as the rising uncertainty posed by the latest surge in coronavirus cases is starting to play a role and impact would-be buyer activity. The seasonally-adjusted measure of home purchase application activity slipped 6% week-over-week, and this week's annual increase was just half of the annual improvement cited in last week's report. The annual change figure itself can also be challenging to interpret: Some of today's market activity is likely behavior that would have taken place in the spring, had it not been for the shutdown. This makes for an annual change figure that isn't entirely apples-to-apples — in a way, it is a comparison between April/May activity of this year and June activity last year. The coming weeks will be crucial: If levels can remain steady or continue to improve in the wake of rising uncertainty, it will be the latest vote of confidence in the housing market.

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