Homes Are Being Snatched Off the Market at Their Fastest Pace in 2 Years

• Homes sold in the U.S. during the second week of June typically stayed on the market for 22 days, the fastest pace since June 2018.
• Columbus, Cincinnati and Kansas City are the hottest large markets, with homes being snapped up in less than a week. The slowest-moving for-sale markets are in New York, Miami and Atlanta.

After some choppy weeks in April and May, the housing market appears to once-again have the wind at its back as we approach the end of June, with active home listings on Zillow going pending after only three weeks — the fastest pace in two years.

Homes that transitioned from active to pending status — indicating an accepted offer, but not-yet-closed sale — in the week ending June 13th did so after being listed on Zillow for just 22 days, matching the 2020 low set during the week-ended March 28. A lot has happened in the ensuing three months — at the end of March, the true scale of the pandemic was just being realized, and widespread business closures and social distancing protocols were not yet fully adopted nationwide. 

Pre-pandemic, the real estate market was riding a wave of early-2020 momentum and looking ahead at what was shaping up to be a banner spring home shopping season. In the final full week of March, homes were selling about 5 days more quickly than in the same week of 2019, when the median home took 27 days to sell. But as the coronavirus pandemic and subsequent mitigation measures took hold more fully, the market slowed dramatically over the next several weeks, reaching its nadir in the week ending May 16, when the median home took 31 days to go pending — 6 days slower than the comparable week of 2019. 

Activity has picked up steadily and strongly since then, as buyers and sellers alike adjusted to new norms and found ways to make transactions happen safely and efficiently. Listings are now once again going pending faster than they did at this time in 2019.

Newly pending sales fell more than 40% from the week ending March 1 to its low point in mid-April. But the time homes stayed on the market was not impacted to nearly the same degree. Sellers took a wait-and-see approach, limiting inventory but seemingly juicing demand for those few homes that were available. That same dynamic — sellers pulling back from the market more than buyers — has kept home prices relatively steady during the pandemic, though signs point to a modest decline in the coming months.  

This pickup in selling speed suggests that fundamentals are once again taking the wheel in the housing market: millions of Millennials are aging into their mid-30s and clamoring to move into homeownership, armed with record-low mortgage rates, but there is no wave of supply to match that demand. This May, buyers found themselves competing over the smallest pool of inventory on record for that month in years, and it seems that after a couple months of delayed shopping, buyers were eager to make up for lost time with speedy offers.

Still, real estate is local, and the nationwide trend obscures some drastic differences in home sales speeds across major metro areas. The New York City metro area, already one of the nation's slowest-moving markets in 2019 even before getting hit especially hard by the pandemic in its early days, has slowed even more dramatically since: The median days to pending rose from 47 to 70 days in mid-June compared to the same week in 2019. Miami, another slow-moving market, also experienced a notable year-over-year increase in days-to-pending, from 49 to 55. 

But most major metro areas followed the national trend: 29 of the 35 largest metro areas in the country saw an annual drop in days-to-pending for the week ending June 13. Home sales accelerated most quickly in mid-June in Pittsburgh, where days to pending plummeted from 27 to 10 year-over-year. In absolute terms, though, the fastest-selling homes this June are in Columbus, Ohio, where the median sold home lasts less than a week on the market — just 5 days — before going pending. Nearby Cincinnati is not far behind, at a blistering pace of 6 days to pending, tied with Kansas City as the second-fastest market as of mid-June.

Sellers appear to have heard the good news about brisk sales this June, and are bringing more homes onto the market: new listings are up 14% month-over-month. It remains to be seen whether more homes to choose from will provide buyers with some breathing room, or if it will be matched by continued bounce-back demand from those willing and able to move forward with their delayed home shopping plans. 

At the moment, given how low overall inventory is and how low mortgage rates have remained, there is a chance the U.S. will match or beat the record-low of 21 days to pending set in May 2018.

Methodology

Zillow's Median Days to Pending metric captures the time homes are typically on the market, measuring the number of days from when a home is first listed for sale on Zillow to when an offer is accepted and the listing's status is changed to "Pending." The term is shorthand for the notion that a sale has been agreed upon, pending the completion of traditional closing steps such as a final inspection. The majority of pending sales do in fact close as settled transactions, but some of them fall through and those home listings are reactivated or taken down. The figure reported for each week takes the median days to pending for all homes that went pending during that week, which is then smoothed using a four-week trailing average.

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Zillow Market Pulse: June 23, 2020

June 23, 2020

New home sales rose for the second straight month, and the rent is still getting paid. But households remain extremely vulnerable despite these improvements, in part because of rising household debt levels.

• New home sales continue their solid recovery

  • May new home sales rose 16.6% from April and 12.7% from May 2019.
  • April's figures were revised downward, helping to inflate the monthly improvement in May.

• People are continuing to pay their rent

  • Through June 20, 92% of households in professionally managed apartment units paid their monthly rent, according to the National Multifamily Housing Council.
  • The share is higher than the payment rate at the same time in May 2020, and about equal to that of June 2019.

• Rising debt leaves many households vulnerable

  • Household debt is at a record high level, and the delinquency rate of personal, non-mortgage loans is rising.
  • Government assistance is helping for now, but many worry about what happens if/when these policies expire.

 So what?

Even with a healthy downward restatement to April's data, recent strength in new home sales is setting the stage for a swift improvement in the housing market that so far shows few signs of slowing. New home sales data is more timely than existing sales data, and today's report suggests would-be buyers remain eager to take advantage of favorable mortgage rates and enter the market while they can. The rapid improvement in sales of new homes may also reflect a change in consumer preferences, with buyers showing a newfound penchant for cleaner, never-lived-in homes - although the long-term durability of that trend remains to be seen. Either way, builders are taking notice: Builder confidence shot way up June – a sign of good things to come for a housing market that continues to struggle with exceptionally low inventory. Low inventory levels and tight lending conditions will continue to drag on the housing market, as will ongoing broad-based economic and public health risks associated with the pandemic. But at least for now, home buyers are largely disregarding those headwinds and the housing market appears poised to continue its improvement into the early weeks of summer.

In more good news for the housing market, even three-plus months into this pandemic people are continuing to pay their rent. According to the National Multifamily Housing Council (NMHC), the rate at which rental households made their monthly payments – at least in part – through June 20 was about the same as the same period last year and higher than the rate at this time last month. This is obviously excellent news given the huge job losses over the past few months, particularly among workers in lower-income occupations that are more likely to rent. But there are several reasons this news should be taken with a grain of salt. First, the NMHC figures only reflect households renting in 11.4 million professionally managed apartment units nationwide, about a quarter of the overall number of U.S. rental units and a cohort that likely skews towards a higher income bracket. More broadly, it also appears that much of this success can be directly attributed to federal financial support, including direct cash payments and expanded unemployment benefits, which have helped renters stay afloat and pay their bills. But some of this support has already or will soon expire without an extension, which may lead to large numbers of tenants falling behind on their rent. And the situation could rapidly become worse as some states, including New York and Colorado, weigh an end to eviction moratoriums put in place at the beginning of the crisis.

Even with federal assistance, the budgets for a huge number of households remain delicate and very vulnerable to any change in income. On average, U.S. households entered the crisis in a strong financial position, spending less than 10% of their income on debt service – the lowest percentage on record. But most of this improvement is thanks to strengthening of mortgage loans: Americans have built significant equity in their homes since the last crisis. But for credit cards and auto loans, the story is the opposite. U.S. residents owe just slightly less on their credit cards and cars than they did at the onset of the financial crisis, and delinquency rates on these loan types were already rising in the months leading up to the current crisis. Ominously, most of the pandemic-related job losses thus far have been in industries including tourism and manufacturing, where there is a higher concentration of hourly workers — many of whom are less likely to own a home, but almost certainly have some form of personal debt. Millions of households are making use of loan forbearance programs and payment holidays to stay afloat, but the fate of these borrowers once assistance expires remains very unclear. And if these lost jobs don't return as anticipated as businesses tentatively reopen, a wave of loan defaults and bankruptcies will almost certainly follow.

 

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

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Despite the Crisis, Homeowners Remodel to Ride Out Pandemic in Comfort

Robert Beatty

Shelley Beatty had been planning a major remodel of her home for more than a year, and she wasn’t going to let the deadly coronavirus pandemic get in the way. She was determined to create a roomier home in the Kansas City suburbs to accommodate her three children, their spouses, and her eight grandkids when they visit for extended holidays and vacations.

But when Beatty, 67, a part-time accountant, and her husband, an emergency room doctor, learned of the COVID-19 outbreaks earlier this year, she made some changes to her plans for a $300,000 renovation of their seven-bedroom, 4,000-square-foot home in Fairway, KS. Now, not only did she want the new kitchen and dining room to accommodate big, boisterous family gatherings, it also had to stand up to constant cleaning to combat the coronavirus.

So she opted for quartz instead of a granite countertop. Instead of stone or textured floor tile, she went with smooth ceramic.

Despite dire predictions from home improvement experts amid high unemployment, a struggling economy, and health concerns, people are still investing in upgrading their homes—and it’s keeping the remodeling  industry surprisingly strong.

Homeowners are undertaking new projects or adding to ongoing ones—albeit with some alterations. These days, people want home offices for remote work, learning space for online classes, spacious kitchens for home dining, and more space in general in this new, socially distanced reality.

More than half of homeowners who were in the middle of renovations when a global pandemic was declared on March 11 went ahead with their projects, according to a survey from the website Houzz, polling nearly 1,000 U.S. homeowners. Only 1% of those in the middle of a project canceled work. Contractors say that wealthier clients are going ahead with their plans, while those with lower incomes are postponing or canceling their remodeling projects.

“Things are not as terrible as we were thinking,” says Paul Emrath, an economist at the National Association of Home Builders. But the outlook for the rest of the year, he adds, depends in large part on whether the pandemic is contained.

In April, 96% of contractors surveyed by NAHB reported fewer inquiries for new projects and 93% said homeowners were pausing their remodeling plans. That’s likely due to health and financial concerns, as well as laws in certain cities and states prohibiting remodelers from working if they weren’t designated essential businesses. However, business began picking up again in April and has continued to do so as more states reopen. The organization predicts remodeling sales will rebound to 2019 levels by the beginning of next year.

Of course, there are challenges and health precautions are necessary. Beatty, who has a pacemaker and suffers from asthma, worked in a spare bedroom on the second floor of her home that was transformed into an office. That gave her some space from the contractors on the first floor who were tearing out walls separating rooms downstairs and installing new hardwood flooring.

When she spoke with the workers, she wore a mask and they stood at least 6 feet apart. After they left for the day, she would clean the surfaces with disinfectant wipes.

“I knew exactly what I wanted, and I went for it,” Beatty says. The work is nearly done so she’s planning for her children and grandchildren to spend a part of the summer in her newly expanded home and backyard with a pool.

“I can stay here with everyone I want to be with right here,” she says. “My family can come and be together.”

Confined at home, owners dream of making changes

The Beattys aren’t alone. Almost 80% of respondents in the Houzz survey said they were “dreaming” about pursuing home projects that would let them enjoy their homes more. Their top priorities were outdoor amenities, new bathrooms, and remodeled kitchens. Nine in 10 of those who dream about improving their homes said they plan to do so after the pandemic subsides.

“People have had this time at home and think ‘I love this place, I love this house, but I hate this room,'”says William Brackmann, president of Brackmann Construction in Belton, MO. His company is remodeling the Beattys’ home. “So, they’ll call someone to remedy the situation.”

Before COVID-19, many homeowners were content to use their dining tables, coffee tables in front of TVs, or spare bedrooms as temporary workspaces. But with more white-collar Americans working full time at home, they’re increasingly coveting home offices. They’re seeking more privacy and soundproofing for business calls and video meetings, and more sophisticated technology to support all their equipment.

“If you’re having a videoconference, it’s cute when the 5-year-old comes in and wants to go to potty,” says Brackmann. “But if that’s your normal business routine, it’s not so cute anymore.”

In May, Brackmann received six requests for estimates for finished basements with home offices—more than he usually gets in a year. A home office can be as simple as a space with bookshelves with a built-in desk, or a more elaborate, executive suite–size room with desks, cabinets, bookshelves, computer tables, and showy shadowboxes for memorabilia.

The pandemic has changed how people use their homes in other ways. Kitchens are becoming even more of a focal point, says Tim Shigley, a remodeler based in Wichita, KS.

Not only are people cooking more, but many who have young children find themselves setting up makeshift classrooms there as well as entertainment space for hobbies, games, and TV watching.

For one couple, who now find themselves home-schooling their young children, Shigley suggested they scrap their idea of having one large island in the kitchen and install two smaller ones. One can be used for food prep and dining. The other can be reserved for schoolwork, games, and other activities.

But the outlook for the rest of the year is uncertain

While it looks like the renovation industry will be spared much of the pain it was expecting, that doesn’t mean it’s all roses.

The remodeling market was slowing down even before COVID-19, says Abbe Will, a research associate at the Harvard Joint Center for Housing Studies. The industry grew 4.7% annually in 2019, a little lower than the historic average. That was due to a shortage of homes on the market combined with escalating prices, which has made it harder for many folks to become homeowners. And the widespread economic pain of today could lead to less activity going forward.

However, that could be offset by the pent-up demand from homeowners desperate to adapt their spaces or replace old roofs, windows, and heating and air-conditioning systems.

“You can only put off those projects for so long,” says Will. She expects the industry to dip just slightly, remaining basically flat over the next few quarters.

Economics professor Jerry Schiff and his wife, who life in Chevy Chase, MD, started a $40,000 basement remodel in late January, when news of the coronavirus outbreak in China made headlines.

As the project continued in February, Schiff, 62, says he was getting concerned about the health implications. The couple decided they didn’t want to stop halfway through the project: They took precautions, including masks and disinfectants, and finished remodeling the two basement bathrooms in May.

“The project came out well,” Schiff says. And despite the couple’s moments of doubt along the way, “We’re happy it’s done.”

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Zillow Market Pulse: June 22, 2020

June 22, 2020

Home sales continued to slide in May, but the data likely don't reflect more-recent increases in homebuyer activity. Participation in mortgage forbearance programs fell slightly, but remains elevated. And economic activity rose at a record rate as the country reopened.

• Home sales fell in May, but better days should be coming soon

  • Existing home sales fell 9.7% in May from April, according to the National Association of Realtors.
  • The median sale price of an existing home in May was 2.3% higher than a year before, the slowest annual increase since 2012.

• Mortgage forbearance program participation fell, but overall delinquency is up

  • The share of loans in forbearance as of June 14 fell from the previous week, according to the Mortgage Bankers Association.
  •  The national mortgage delinquency rate jumped by more than 20% in May from April, according to Black Knight.

• A key economic index increased at a record rate

  • The Federal Reserve Bank of Chicago's National Activity Index increased to 2.61 in May, a record high, up from a  record low of -17.89 in April.
  • The broad-based index suggests that economic growth rose significantly in the last month, largely thanks to businesses reopening.

 So what?

After falling precipitously at the beginning of the pandemic, the housing market has shown marked signs of improvement in recent weeks - though those gains have yet to show up in home sales. Sales of existing homes are captured when the deal closes not when the contract is signed, capturing buyer behavior from one or even two months prior to the month noted in the official release. That means today's reading is measuring activity from a time when most businesses were still shuttered and people were just coming to terms with how their lives would be altered by pandemic. But despite the sharp decline from an already sobering April release, the outlook for the housing market appears relatively rosy heading into the summer months. Pending sales are primed to pick up as low mortgage rates, a gradually opening economy and innovative techniques being employed by real estate professionals keep buyers engaged and eager to enter the market. The small monthly decline in prices is notable and worth watching going forward - prices have never fallen in May from April in the history of the series. Low inventory had been keeping upward pressure on prices, but it now seems buyers may be finding more room to negotiate and/or that more-expensive homes are lingering longer on the market. But nevertheless, look for home sales to begin their recovery beginning in next month's release.

While the participation rate in mortgage forbearance programs is improving, the market remains vulnerable over the long-term. For the first time since the onset of the crisis, the Mortgage Bankers Association's estimate of the share of mortgages in forbearance actually dropped in the week ending June 14 – falling by about 100,000 loans from the week before. Even so, more than 4 million loans remain in forbearance, a figure that helped push the national mortgage delinquency rate as measured by Black Knight up more than 20% in May from April to its highest level in more than 8 years. The numbers in the Black Knight report are a little misleading (not all of the loans in forbearance are truly delinquent, despite the fact that's how they're labeled). But the sheer volume of loans receiving assistance suggests that a huge number of homeowners remain in need of some form of assistance and are likely in a vulnerable financial position. The upcoming expiration of enhanced jobless benefits, as well as recent increases in COVID case volume, help make consumers' financial outlook — and its impact on the broader mortgage market — even more uncertain.

Despite the uncertainty, the economy is slowly but surely coming back to life: The Chicago Fed's national activity index rose to a record high in May, increasing substantially from a record low in April. The broad-based index offers a good gauge for the overall economy's health and performance in a month, and offers an indication of which sectors are thriving and which aren't — and of the 85 indicators tracked, 72 improved in May from April. Still, it's difficult to get too excited about the May uptick this time around. The fact that economic growth has resumed is definitely good news, but the record reading is more a reflection of the fact that the economy has merely resumed activity, rather than operating at anything close to full capacity. What's more, the release doesn't really contain any additional information about what economic activity is going to look like in the coming months, after the initial reopening phase ends. The release also confirmed that the economy was indeed in a recession beginning in March. Still, despite the limited outlook, the report's main takeaway is that large parts of the economy have resumed activity, and that can only be viewed as good news.

 

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

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May New Home Sales: Poised for Continued Improvement

• May new home sales were up 16.6% from April and 12.7% from May 2019, to 676,000 (SAAR), according to the U.S. Census Bureau.
• The median sales price of new houses sold in May 2020 was $317,900, up 1.7% from a year ago.
• Inventory of new homes available for sale fell 2.2% from April and 5.4% year-over-year.

Even with a healthy downward restatement to April’s data, recent strength in new home sales is setting the stage for a swift improvement in the housing market that so far shows few signs of slowing. New home sales data is more timely than existing sales data, and today's report suggests would-be buyers remain eager to take advantage of favorable mortgage rates and enter the market while they can. The rapid improvement in sales of new homes may also reflect a change in consumer preferences, with buyers showing a newfound penchant for cleaner, never-lived-in homes — although the long-term durability of that trend remains to be seen. Either way, builders are taking notice: Builder confidence shot way up June – a sign of good things to come for a housing market that continues to struggle with exceptionally low inventory. Low inventory levels and tight lending conditions will continue to drag on the housing market, as will ongoing broad-based economic and public health risks associated with the pandemic. But at least for now, home buyers are largely disregarding those headwinds and the housing market appears poised to continue its improvement into the early weeks of summer.

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In Need of a Drink? 8 Homes for Sale With Private Speak-Easy Lounges

realtor.com

During Prohibition, thirsty folks had to find watering holes, secret bars, and nightclubs willing to sell spirits—often in private homes. When imbibers arrived, it was necessary to whisper, or “speak easy,” about your interest in an adult beverage to keep activity on the down low.

Today, wetting your whistle poses a new set of challenges. Instead of a prohibition on alcohol, it’s the crowds themselves that are inadvisable. This means the old-fashioned speak-easy has a brand-new starring role in the pursuit of leisure spent sipping suds with friends and family.

With that boozy backdrop, we’ve rounded up eight properties for sale right now with their own speak-easies. You don’t need a code word to enter these comfortable places to hang out and have a few drinks without the worry of social distancing.

Highlights include a delightful art deco basement lounge in Kansas City, a house in the Hollywood Hills rumored to have been a local hangout for silent-film stars of yesteryear, and a Dutch Colonial in Oregon with a basement speak-easy surprise.

These secret hideaways were already nice spots for entertaining a few months ago, but now they’re the ultimate luxury amenity as a private space for socializing. So raise a glass and scroll on down.

1400 W. 50th St, Kansas City, MO

Price: $765,000
Fortified castle: Built in 1921, this 3,700-square-foot home was built as a “fortified castle.” Filled with gorgeous art deco details, the five-bedroom home also features specialty light fixtures throughout. But the true highlight is the art deco speak-easy and projection room housed in the wood-paneled basement. It includes a bar, lounge area, and ornate fireplace.

Kansas City, MO

realtor.com

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560 S Peralta Hills Dr, Anaheim Hills, CA

Price: $3,999,900
Peralta Hills: This six-bedroom mansion comes with nearly every amenity imaginable: a massive saltwater fish tank, crafts room, sauna and tanning bed, gym, and home theater. For true entertainment, there’s a speak-easy above the property’s detached garage. It’s a formal, elegant space with a high ceiling and features a pool table, bar, and fish tank. The space is ideal for entertaining a crowd without ever having to leave the home’s 1.2-acre grounds.

Anaheim Hills, CA

realtor.com

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50 Mount Tom Rd, Pelham, NY

Price: $1,589,000
English manor: The working bar in this Tudor-style estate from 1925 is rumored to have been an underground speak-easy. Today, it’s just one of the many touches that give this six-bedroom home its signature old-world charm. Standout features include a circular driveway, mezzanine library, wine room, and gorgeous views.

Pelham, NY

realtor.com

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1200 N Oak Park Ave, Oak Park, IL

Price: $679,000
Colonial craftsmanship: Padded faux-leather doors lead to this home’s speak-easy, which boasts vintage built-in seating and a bar with mahogany accents and mirrored shelves. Other show-stopping details in this custom-built residence from 193 include a large, domed ceiling light and brass staircase in the foyer and hand-carved plasterwork in the dining room.

Oak Park, IL

realtor.com

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3440 Troy Dr, Hollywood Hills East, CA

Price: $1,450,000
Country English: With its signature diamond-pane windows out front, this 1926-built English country estate is rumored to have been a popular hangout for silent-film actors such as Tom Mix. Tipplers likely congregated in the speak-easy downstairs. Upstairs, the three-bedroom home boasts canyon views, high ceilings, and a guest suite with private entry.

Hollywood Hills, CA

realtor.com

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210 Laurel St E, Stillwater, MN

Price: $1,350,000
Historic masterpiece: Originally built in 1878, this 7,900-square-foot home was rebuilt in 1992. Today, the six-bedroom residence has a state-of-the-art kitchen, heated walks, and a driveway. But we’re most intrigued by the lower-level speak-easy with stone walls, huge bar, pool table, and comfy seating.

Stillwater, MN

realtor.com

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3023 E Sunset Hill Dr, West Covina, CA

Price: $999,888
Modern ranch: Built in 1954, this four-bedroom, 2,800-square-foot ranch was recently given an ultramodern makeover. In the temperature-controlled basement, behind a bookcase, you’ll find a space currently outfitted as a speak-easy with a fully equipped bar. According to the listing, the seller is motivated to make a deal on this open-concept home.

West Covina, CA

realtor.com

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6937 SW 31st Ave, Portland, OR

Price: $995,000
Multnomah Village: This four-bedroom Dutch Colonial was originally built in 1928 and has since received a glorious, contemporary renovation. Highlights include a home theater, game room, and, best of all, a basement bar with a speak-easy vibe and temperature-controlled wine cellar.

Portland, OR

realtor.com

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Zillow Market Pulse: June 18, 2020

Note: The Market Pulse team will be off Friday, June 19, in observance of Juneteenth. We look forward to resuming our regular publication schedule on Monday, June 22.

June 18, 2020

Another week, another couple million unemployment claims. More than 100 million loans are enrolled in some kind of relief program. And Goldman Sachs' economic outlook improved, but with caveats.

• Another 2+ million jobless claims were filed last week

  • Combining headline figures and claims made through the Pandemic Unemployment Assistance program, 2.2 million claims for unemployment benefits were filed last week.
  • For the 13th week in a row, the number of claims doubled the worst week of the Great Recession.

• 100 million+ consumer loans are getting some kind of assistance

  • 79 million student loans had their monthly payments deferred or were receiving other forms of relief as of May 31, according to the Wall Street Journal, up from 18 million at the end of April.
  • The number of auto loans and personal loans receiving relief doubled from April to May.

• Goldman Sachs: Outlook improves, but severe risks remain

  • Goldman Sachs now expects Real GDP to fall by 4.2% on an annual average basis in 2020, down from 5.2% previously.
  • But a lack of additional fiscal support and a significant uptick in COVID cases would derail the recovery.

 So what?

With the pandemic entering its fourth month, job losses continue to mount at a historic pace. For the thirteenth straight week, more than 2 million claims for unemployment benefits were filed last week, when you combine the headline numbers and claims filed through Pandemic Unemployment Assistance (PUA). But while the job losses continue to accrue, parts of the labor market are hiring: Job openings appear to be trending upward and 2.5 million jobs were added to the market in May. As governments continue to ease restrictions, businesses are continuing to reopen which means that workers are slowly returning to the workplace. But today's report, and the sustained level of unemployment claims, suggest that the optimism brewing from the May jobs report has not yet been fully realized throughout the broader labor market. While jobs are returning, there continue to be a huge number of layoffs happening simultaneously. Unfortunately, the businesses that are laying people off now are likely doing so because of a longer-term business decision, rather than just a temporary relief of their labor costs.

This enduring wave of layoffs has left many in a position where they cannot keep up with regular debt payments. Wall Street Journal reporting found that more than 100 million consumer loans had been enrolled in some sort of relief program, such as forbearance or deferment, as of May 31. Student loans were far and away the loan type with the most accounts receiving relief (79 million as of May 31st, up from 18 million at the end of April), but the number of auto loans and personal loans with deferred monthly payments both also doubled in the month of May. While much of these increases are attributable to government policies set up to provide penalty-free support for those in need, this development is not without some risks. Repayment plans associated with some forms of this relief are still not clearly defined, which means borrowers could be left in a vulnerable position once the relief runs out. What's more, borrowing conditions will continue to remain tight going forward, as lenders continue to struggle to weigh risks when initiating new loans. Most of all, this sharp increase in relief participation in May suggests that millions of debt-laden borrowers are currently unable to meet some/all of their monthly obligations, a fact that will likely worsen if expanded unemployment benefits expire at the end of next month.

The lack of an extension in unemployment benefits also factors into how large banks are considering the path forward for the economy. In a revision to their GDP forecast released late yesterday, Goldman Sachs upgraded their outlook for the economy in 2020 and 2021, but were quick to point out the substantial remaining risks to their outlook. Chief among these risks was a potential flare up in COVID-19 case volume – which the bank expects would greatly hinder the economy's recovery, and even possibly set up a second, more modest downturn that reaches a low point in early 2021. The pending expiration of extra federal jobless benefits also weighed heavily, and was deemed the most imminent risk to recovery. Should additional fiscal policy not be approved, the banks stated, disposable income will fall sharply and the economic recovery would stall and even retreat. The forecast revision was the latest example of the fact that while the recovery has gathered steam in the last couple months, the road ahead remains long and significant risks remain.

 

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

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