Zillow Market Pulse: September 9, 2020

September 9, 2020

Job openings increased strongly in July, but hiring has yet to catch up. Rental payment rates showed signs of slippage in the first week of September. And consumer housing confidence improved in August after a setback in July.

Labor market offers signs of hope, and enduring hardship

• Job openings rose by 617,000 in July and the quits rate improved to 2.1%.
• But the hiring rate declined, and there are still about 2.5 unemployed workers for every job opening.

Rental payment rate shows signs of slipping

• Through last Sunday, just 76.4% of tenants in professionally managed apartments had paid at least part of their September rent — down from 79.3% in the last week of August.
• Labor Day falling later on the calendar this year may have played a role.

After July setback, housing sentiment improved in August

• The Fannie Mae Home Purchase Sentiment Index rose 3.3 points in August from July.
• For the first time since March, more people said they believe it's a good time to sell a home than a bad time.

So what? 

Similar to the official August jobs report, the headline July JOLTS figures offered some reasons for optimism, but did little to alter underlying labor market trends. Job openings and the quits rate — in a vacuum, signs of business and worker confidence, respectively – both increased in July. And some sectors – construction, retail trade and other services — boasted more job openings in July than in February, before the pandemic. But while job openings increased in July, the rate of hiring fell significantly: 5.8 million hires were made in July, more than 1.1 million less than in June. About half the reduction in hiring was in the accommodation and food services industry, a sector highly susceptible to virus-related constraints. An accelerated slowdown in hiring at a time when so many people remain unemployed is obviously a bad sign for the labor market and broader economy, and a signal that the painful and slow jobs recovery is likely to persist.

The expiration of enhanced unemployment benefits and other fiscal relief programs may finally be having a meaningful impact on rental payment rates. According to the National Multifamily Housing Council (NMHC), just over 76% of tenants in professionally managed apartment properties made at least a partial September rent payment as of Sunday. That rate is 4.8 percentage points less than the payment rate this time last year and 2.9 points less than the rate through the first 6 days in August. The slowdown could be due in part to the Labor Day weekend taking place much later this year than last, thereby impacting people's ability/willingness to pay their rent over the holiday weekend. But if subsequent reports reinforce this trend, it likely means payment rates in the broader rental market are much worse. Last month, a report from Avail – a technology and marketing platform for small landlords – showed that 31% of renters in units owned by individual landlords were unable to pay their August rent. The NMHC reported that 90% of households renting professionally managed apartments paid their rent in that same time frame.

Following a setback in July, the 3.3 point monthly increase in Fannie Mae's Home Purchase Sentiment Index was fueled by monthly improvements in feelings toward buying a home and selling a home. The survey also found  that, despite the fact that mortgage interest rates are already near historic lows, more people said they believe they will fall in the next year than did last month. Additionally, more people said they believe it's a good time to sell a home than a bad time to sell a home, the first time that's been the case since March. Overall home seller sentiment remains quite low, but this is a positive step for a market that continues to wrestle with a severe inventory shortage.

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