Zillow Market Pulse: July 16, 2020

The Pulse team will be off tomorrow, July 17. We look forward to resuming our usual publication schedule on Monday, July 20.

July 16, 2020

Homebuilder confidence soared on the back of strong new home sales and the prospect of continued strength. Retail sales also improved, as stores reopened across the country. But the looming expiration of jobless benefits places these recoveries at risk — and almost 2.5 million more people filed for jobless benefits just last week.

Homebuilder confidence rebounds to March levels

• The National Association of Homebuilders Housing Market Index rose 14 points from June to July.
• The survey has rebounded 42 points since April. Any value above 50 indicates more builders are confident in the market than pessimistic.

Another strong improvement propels retail sales up for the year

• Retail sales rose 7.5% in June from May.
• Core sales were up 2.7% from June 2019.

Unemployment claims continue to rise ahead of key policy expirations

•  2.4 million more claims for jobless benefits were filed last week.
• Estimates suggest there are 14 million more people seeking jobs than there are job openings.

 So what?

Sales of newly built homes have bounced back strongly this spring, and many expect June's sales figures – set for release next week – to show another significant improvement. This building momentum propelled a key measure of builder confidence higher for the second straight month, to levels last seen just before the coronavirus outbreak fully engulfed the nation. The index's 14-point monthly improvement from June to July is the second strongest one-month gain in the series' history — exceeded only by last month's remarkable 19 point surge — and a sign that builders believe demand for new housing will remain solid through the summer months. Needless to say, the data are great news for the industry and inventory-starved housing market overall, particularly recent rises in the cost of lumber and other construction materials – factors that might normally dent homebuilders' eagerness to start projects.

Retail sales figures staged their own remarkable improvement in June, and were actually higher last month than they were in June 2019. So-called core retail sales, which removes more-volatile gasoline sales, are now up 2.7% year-over-year — a remarkable turnaround after being down more than 18% as recently as April. Of course, this improvement is even more remarkable given that unemployment nationwide remains historically high. Many suggest that the main reason for this improvement, given otherwise poor economic conditions, is because of enhanced unemployment benefits that have allowed unemployed workers to both pay their monthly and still spend at a somewhat-normal rate. With these benefits set to expire in the next two weeks, it's possible this recovery in sales may begin to wane.

Speaking of unemployment, another 2.4 million people filed claims for jobless benefits last week – the 17th consecutive week (roughly 4 straight months) in which claims have been twice as high as the worst week of the Great Recession. Meanwhile, recent estimates suggest there are 14 million more people out of work (but still in the labor force) than there are open job postings. Other evidence is also emerging that the recent job losses are less-temporary than the initial wave of layoffs/furloughs from the early days of the pandemic. So, while some headlines suggest the labor market is improving, it remains deeply damaged and just weeks away from crucial support going away.

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