Zillow Market Pulse: August 21, 2020

August 21, 2020

Home sales skyrocketed in July, as did sale prices, as the inventory shortage persists. The number of initial unemployment claims reversed course last week, rising to 1.4 million. And reports indicate that coming federal housing protection policies will cover far fewer households than the last time around.

Existing home sales skyrocket in July

• NAR: Sales of existing homes jumped 24.7% from June to 5.86 million (SAAR), the highest monthly total since 2006
• The median sale price of an existing home rose 8.5% from July

The number of unemployment claims filed grew from last week

• 1.4 million initial claims for jobless benefits were filed last week
• There are 11.2 million more unemployed people than there are job openings, according to the Economic Policy Institute

Report suggests that new federal housing protections will apply to far fewer households than previous policy

• According to Politico, the Department of Housing and Urban Development will extend a ban on evictions and foreclosures, but only to single-family mortgages insured by the Federal Housing Administration
• The ban will apply to about 8 million homes, far fewer than the number of homes protected under a portion of the CARES Act that expired at the end of July

So what? 

July home sales numbers continued the stellar pace set in June, skyrocketing to their highest monthly total since 2006 and once again registering their strongest monthly growth ever recorded. Despite the pandemic, which caused sales volume to plummet in March and April, sales volume of existing homes is amazingly just 4.7% below last year's total to this point. And if recent pending sales figures are any indication, the good times are likely to keep on rolling in the near future. However, the longer-term outlook for sales is a little cloudier. A severe shortage of homes available – especially at lower price points - is likely to force these strong improvements to decelerate in the coming months, particularly if heightened levels of economic uncertainty start to weigh on homebuyers' enthusiasm. Rapid home price appreciation might also limit the number of buyers who can benefit from these otherwise rosy buying conditions. But for now, the housing market is red hot and homes are flying off the shelves.

Following last week's fairly encouraging, albeit still historically poor, initial unemployment claims figures, yesterday's news was a disappointing turn and a sobering indictment on the state of the labor market. The 1.4 million initial applications for jobless benefits were a notable increase from last week and an indication that the removal of the $600 weekly boost to unemployment benefits has not resulted in a wave of people returning to work, at least not yet. According to the Economic Policy Institute, there remain 11.2 million more unemployed workers than there are job openings in the U.S. Evidence of a slowdown in hiring activity has also emerged in recent days. And a new report states the extra $300 in weekly unemployment payments included in President Trump's executive order announced last week may only be offered for three weeks, a development that adds to the uncertainty already faced by millions of U.S. workers that are out of work and unsure of their income prospects in the near future.

The continued strife of the job market and the millions unemployed is poised to have a substantial impact on the rental market. The federal eviction moratorium that was included as part of the CARES act expired at the end of July, and while some states have extended the prohibition on evictions, their respective protections vary, and many states have let the program lapse without any renewal. As a response, the Department of Housing and Urban Development (HUD) will reportedly announce a ban on evictions. But the policy will be limited to renters in single-family homes with mortgages issued by the Federal Housing Administration (FHA), according to a report from Politico. The policy's caveat significantly reduces the share of renters that are granted federal protection and sharply increases the risk of a wave of evictions. More than 20% of renters were already behind on rent in July, before enhanced unemployment benefits expired.

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