Last Friday, the U.S. Bureau of Labor Statistics released their May Employment Situation Summary. Leading up to the release, most experts predicted the unemployment rate would jump up to approximately 20% from the 14.7% rate announced last month.

The experts were shocked.

The Wall Street Journal put it this way:

“The May U.S. jobless rate fell to 13.3% and employers added 2.5 million jobs, blowing Wall Street expectations out of the water: Economists had forecast a loss of 8.3 million jobs and a 19.5% unemployment rate.”

In addition, CNBC revealed:

“The May gain was by far the biggest one-month jobs surge in U.S. history since at least 1939.”

Here are some of the job gains by sector:

• Food Service and Bartenders – 1,400,000
• Construction – 464,000
• Education and Health Services – 424,000
• Retail – 368,000
• Other Services – 272,000
• Manufacturing – 225,000
• Professional Services – 127,000

There’s still a long way to go before the economy fully recovers, as 21 million Americans remain unemployed. That number is down, however, from 23 million just last month. And, of the 21 million in the current report, 73% feel their layoff is temporary. This aligns with a recent Federal Reserve Bank report that showed employers felt 75% of the job losses are temporary layoffs and furloughs.

The Employment Situation Summary was definitely a pleasant surprise, and evidence that the country’s economic turnaround is underway. The data also offers a labor-market snapshot from mid-May, when the government conducted its monthly survey of households and businesses. Many states did not open for business until the second half of May. This bodes well for next month’s jobs report.

Bottom Line

We cannot rejoice over a report that reveals millions of American families are still without work. We can, however, feel relieved that we are headed in the right direction, and much more quickly than most anticipated.

Note: In its original report, the BLS explained that a misclassification error could have occurred over the last 3 months, starting in March of 2020. Readjusting for this error, the unemployment rate would actually show a drop from 19.7% in April to 16.3% in May. Nobody would say the original report of 13.3% unemployment was a good number, nor is the revised 16.3%. What is a positive move for our country and the economy is the significant drop in the rate from April to May, meaning more people are getting jobs than losing them. That’s the key takeaway.

As we enter the summer months and work through the challenges associated with the current health crisis, many are wondering what impact the economic slowdown will have on home prices. Looking at the big picture, supply and demand will give us the clearest idea of what’s to come.

Making our way through the month of June and entering the second half of the year, we face an undersupply of homes on the market. Keep in mind, this undersupply is going to vary by location and by price point. According to the National Association of Realtors (NAR), across the country, we currently have a 4.1 months supply of homes on the market. Historically, 6 months of supply is considered a balanced market. Anything over 6 months is a buyer’s market, meaning prices will depreciate. Anything below 6 months is a seller’s market, where prices appreciate. The graph below shows inventory across the country since 2010 in months supply of homes for sale.Robert Dietz, Chief Economist for the National Home Builders Association (NAHB) says:

“As the economy begins a recovery later in 2020, we expect housing to play a leading role. Housing enters this recession underbuilt, not overbuilt. Estimates vary, but based on demographics and current vacancy rates, the U.S. may have a housing deficit of up to one million units.”

Given the undersupply of homes on the market today, there is upward pressure on prices. Looking at simple economics, when there is less of an item for sale and the demand is high, consumers are willing to pay more for that item. The undersupply is also prompting bidding wars, which can drive price points higher in the home sale process. According to a recent MarketWatch article:

 “As buyers return to the market as the country rebounds from the pandemic, a limited inventory of homes for sale could fuel bidding wars and push prices higher.”

In addition, experts forecasting home prices have updated their projections given the impact of the pandemic. The major institutions expect home prices to appreciate through 2022. The chart below, updated as of earlier this week, notes these forecasts. As the year progresses, we may see these projections revised in a continued upward trend, given the lack of homes on the market. This could drive home prices even higher.

Bottom Line

Many may think home prices will depreciate due to the economic slowdown from the coronavirus, but experts disagree. As we approach the second half of this year, we may actually see home prices rise even higher given the lack of homes for sale.

More than ever, our homes have become an integral part of our lives. Today they are much more than the houses we live in. They’re evolving into our workplaces, schools for our children, and safe havens that provide shelter, stability, and protection for our families through the evolving health crisis. Today, 65.3% of Americans are able to call their homes their own, a rate that has risen to its highest point in 8 years.

June is National Homeownership Month, and it’s a great time to reflect on the benefits of owning your own home. Below are some highlights and quotes recently shared by the National Association of Realtors (NAR). From non-financial to financial, and even including how owning a home benefits your local economy, these items may give you reason to think homeownership stretches well beyond a sound dollars and cents investment alone.

Non-Financial Benefits

Owning a home brings families a sense of happiness, satisfaction, and pride.

• Pride of Ownership: It feels good to have a place that’s truly your own, especially since you can customize it to your liking. “The personal satisfaction and sense of accomplishment achieved through homeownership can enhance psychological health, happiness and well-being for homeowners and those around them.”
• Property Maintenance and Improvement: Your home is your stake in the community, and a way to give back by driving value into your neighborhood.
• Civic Participation: Homeownership creates stability, a sense of community, and increases civic engagement. It’s a way to add to the strength of your local area.

Financial Benefits

Buying a home is also an investment in your family’s financial future.

• Net Worth: Homeownership builds your family’s net worth. “The median family net worth for all homeowners ($231,400) increased by nearly 15% since 2013, while net worth ($5,000) actually declined by approximately 9% since 2013 for renter families.”
• Financial Security: Equity, appreciation, and predictable monthly housing expenses are huge financial benefits of homeownership. Homeownership is truly the best way to improve your long-term net worth.

Economic Benefits

Homeownership is even a local economic driver.

• Housing-Related Spending: An economic force throughout our nation, housing-related expenses accounted for more than one-sixth of the country’s economic activity over the past three decades.
• GDP Growth: Homeownership also helps drive GDP growth as the country aims to make an economic rebound. “Every 10% increase in total housing market wealth would translate to approximately $147 billion in additional consumer spending, or 0.8% of GDP, as well as billions of dollars in new federal tax revenue.”
• Entrepreneurship: Homeownership is even a form of forced savings that provides entrepreneurial opportunities as well. “Owning a home enables new entrepreneurs to obtain access to credit to start or expand a business and generate new jobs by using their home as collateral for small business loans.”

Bottom Line

The benefits of homeownership are vast and go well beyond the surface level. Homeownership is truly a way to build financial freedom, find greater satisfaction and happiness, and make a substantial impact on your local economy. If owning a home is part of your dream, let’s connect today so you can begin the homebuying process.

With the U.S. economy on everyone’s minds right now, questions about the country’s financial outlook continue to come up daily. The one that seems to keep rising to the top is: when will the economy begin to recover? While no one knows exactly how a rebound will play out, expert economists around the country are becoming more aligned on when the recovery will begin.

According to the latest Wall Street Journal Economic Forecasting Survey, which polls more than 60 economists on a monthly basis, 85.3% believe a recovery will begin in the second half of 2020 (see graph below):There seems to be a growing consensus among these experts that the second half of this year will be the start of a turnaround in this country.

Chris Hyzy, Chief Investment Officer for Merrill notes:

“We fully expect the economy could begin to pick up in late June and July with a strong recovery in the fourth quarter.” 

In addition, five of the major financial institutions are also forecasting positive GDP in the second half of the year. Today, four of the five expect a recovery to begin in the third quarter of 2020, and all five agree a recovery should start by the fourth quarter (see graph below):

Bottom Line

The vast majority of economists, analysts, and financial institutions are in unison, indicating an economic recovery should begin in the second half of 2020. Agreement among these leading experts is stronger than ever.

With stay-at-home orders starting to gradually lift throughout parts of the country, data indicates homebuyers are jumping back into the market. After many families put their plans on hold due to the COVID-19 pandemic, what we once called the busy spring real estate season is shifting into the summer. In 2020, summer is the new spring for real estate.

Joel Kan, Economist at The Mortgage Bankers Association (MBA) notes:

“Applications for home purchases continue to recover from April’s sizable drop and have now increased for five consecutive weeks…Government purchase applications, which include FHA, VA, and USDA loans, are now 5 percent higher than a year ago, which is an encouraging turnaround after the weakness seen over the past two months.”

Additionally, according to Google Trends, which scores search terms online, searches for real estate increased from 68 points the week of March 15th to 92 points last week. As we can see, more potential homebuyers are looking for homes virtually.

What’s the Opportunity for Buyers?

Another reason buyers are coming back to the market, even with forced unemployment and stay-at-home orders, is historically low mortgage rates. Sam Khater, Chief Economist at Freddie Mac indicates:

“For the fourth consecutive week, the 30-year fixed-rate mortgage has been below 3.30 percent, giving potential buyers a good reason to continue shopping even amid the pandemic…As states reopen, we’re seeing purchase demand improve remarkably fast, now essentially flat relative to a year ago.”

With mortgage rates at such low levels and states gradually beginning to reopen, there’s more incentive than ever to buy a home this summer.

What’s the Opportunity for Sellers?

Finding a home to buy, however, is still a challenge, as this spring sellers removed many listings from the market. Though more people are now putting their houses up for sale this month as compared to last month, current inventory is still well below last year’s level.

According to last week’s Weekly Economic and Housing Market Update from realtor.com:

“Weekly Housing Inventory showed continued tightening. New Listings declined 28% compared with a year ago, as sellers grappled with uncertainty and hesitated bringing homes to market. Total Listings dropped 20% YoY, a faster rate than in prior weeks, leaving very few homes available for sale. As Time on Market was 15 days slower YoY, asking prices moved up 1.5% YoY.”

If you’re thinking of selling your house this summer, now may be your best opportunity. With so few homes on the market for buyers to purchase, this season may be the time for your house to stand out from the crowd. Trusted real estate professionals can help you list safely and effectively, keeping your family’s needs top of mind. Buyers are looking, and your house may be at the top of their list.

Bottom Line

If you’re thinking of selling, many buyers may be eager to find a home just like yours. Let’s connect today to make sure you can get your house in on the action this summer.

Today, many people are asking themselves if they should buy or sell a home in 2020. Some have shifted their plans or put them on hold over the past couple of months, and understandably so. Everyone seems to be wondering if the market is going to change and when the economy will turn around. If you’re trying to figure out what’s going to happen and how to play your cards this year, you’re not alone.

This spring in the 2020 NAR Flash Survey: Economic Pulse, the National Association of Realtors (NAR) has been tracking the behavior changes of homebuyers and sellers. In a reaction to their most recent survey, Lawrence Yun, Chief Economist at NAR, noted the beginnings of a turn in the market:

“After a pause, home sellers are gearing up to list their properties with the reopening of the economy…Plenty of buyers also appear ready to take advantage of record-low mortgage rates and the stability that comes with these locked-in monthly payments into future years.”

What does the survey indicate about sellers?

Sellers are positioning themselves to make moves this year. More than 3 in 4 potential sellers are preparing to sell their homes once stay-at-home orders are lifted and they feel more confident, which means more homes will start to be available for interested buyers.Just this week, Zillow also reported an uptick in listings, which is great news for the health of the market:

“The number of new for-sale listings overall has shown improvement, up 5.9% last week from the previous week. New listings of the most-expensive homes…are now seeing the biggest resurgence, up 8%. The uptick is likely a sign sellers are feeling more confident because of improving buyer demand, as newly pending sales have also jumped up during the same period.”

What does the survey note about buyers?

The recent pandemic has clearly impacted buyer preferences, showing:

• 5% of the respondents said buyers are shifting their focus from urban to suburban areas.
• 1 in 8 Realtors report changes in desired home features, with home offices, bigger yards, and more space for their families becoming increasingly important.
• Only 17% said buyers stopped looking due to concerns about their employment or loss of a job.

As we’ve mentioned before, buyer demand is strong right now, and many are simply waiting for more inventory to become available so they can make a move, especially as the country begins to reopen.

Bottom Line

If you’re thinking about putting your house on the market, let’s connect today. There’s a good chance an eager buyer is looking for a home just like yours.

With the housing market staggered to some degree by the health crisis the country is currently facing, some potential purchasers are questioning whether home values will be impacted. The price of any item is determined by supply as well as the market’s demand for that item.

Each month the National Association of Realtors (NAR) surveys “over 50,000 real estate practitioners about their expectations for home sales, prices and market conditions” for the REALTORS Confidence Index.

Their latest edition sheds some light on the relationship between seller traffic (supply) and buyer traffic (demand) during this pandemic.

Buyer Demand

The map below was created after asking the question: “How would you rate buyer traffic in your area?”The darker the blue, the stronger the demand for homes is in that area. The survey shows that in 34 of the 50 U.S. states, buyer demand is now ‘strong’ and 16 of the 50 states have a ‘stable’ demand.

Seller Supply

The index also asks: “How would you rate seller traffic in your area?”As the map above indicates, 46 states and Washington, D.C. reported ‘weak’ seller traffic, 3 states reported ‘stable’ seller traffic, and 1 state reported ‘strong’ seller traffic. This means there are far fewer homes on the market than what is needed to satisfy the needs of buyers looking for homes right now.

With demand still stronger than supply, home values should not depreciate.

What are the experts saying?

Here are the thoughts of three industry experts on the subject:

Ivy Zelman:

“We note that inventory as a percent of households sits at the lowest level ever, something we believe will limit the overall degree of home price pressure through the year.”

Mark Fleming, Chief Economist, First American:

“Housing supply remains at historically low levels, so house price growth is likely to slow, but it’s not likely to go negative.”

Freddie Mac:

“Two forces prevent a collapse in house prices. First, as we indicated in our earlier research report, U.S. housing markets face a large supply deficit. Second, population growth and pent up household formations provide a tailwind to housing demand.”

Bottom Line

Looking at these maps and listening to the experts, it seems that prices will remain stable throughout 2020. If you’re thinking about listing your home, let’s connect to discuss how you can capitalize on the somewhat surprising demand in the market now.

We also feel the migration from the NorthEast will continue to be very strong in 2020.  With the SALT tax issues and now COVID-19, this will serve to keep the Treasure Coast a very appealing area for people looking to downsize and move.

Given how we have seen more unemployment claims than ever before over the past several weeks, fear is spreading widely. Some good news, however, shows that more than 4 million initial unemployment filers have likely already found a new job, especially as industries such as health care, food and grocery stores, retail, delivery, and more increase their employment opportunities. Breaking down what unemployment means for homeownership, and understanding the significant equity Americans hold today, are important parts of seeing the picture clearly when sorting through this uncertainty.

One of the biggest questions right now is whether this historic unemployment rate will initiate a new surge of foreclosures in the market. It’s a very real fear. Despite the staggering number of claims, there are actually many reasons why we won’t see a significant number of foreclosures like we did during the housing crash twelve years ago. The amount of equity homeowners have today is a leading differentiator in the current market.

Today, according to John Burns Consulting, 58.7% of homes in the U.S. have at least 60% equity. That number is drastically different than it was in 2008 when the housing bubble burst. The last recession was painful, and when prices dipped, many found themselves owing more on their mortgage than what their homes were worth. Homeowners simply walked away at that point. Now, 42.1% of all homes in this country are mortgage-free, meaning they’re owned free and clear. Those homes are not at risk for foreclosure (see graph below):In addition, CoreLogic notes the average equity mortgaged homes have today is $177,000. That’s a significant amount that homeowners won’t be stepping away from, even in today’s economy (see chart below):In essence, the amount of equity homeowners have today positions them to be in a much better place than they were in 2008.

Bottom Line 

The fear and uncertainty we feel right now are very real, and this is not going to be easy. We can, however, see strength in our current market through homeowner equity that has not been there in the past. That may be a bright spark to help us make it through.

For nearly two months, most of us have been following strict stay-at-home orders from our state and local governments. It is a whole new way of life that has put our daily lives on pause. On the other hand, many of us have also found a sense of comfort by slowing down and spending time at home, highlighting the feeling of security that comes with having a much-needed safe place for our families to live.

The latest results of the Housing Vacancy Survey (HVS) provided by the U.S. Census Bureau shows how Americans place immense value in homeownership, and it is continuing to grow in the United States. The results indicate that the homeownership rate increased to 65.3% for the first quarter of 2020, a number that has been rising since 2016 and is the highest we’ve seen in eight years (see graph below):Why is the rate increasing? The National Association of Home Builders (NAHB) explained:

“Strong owner household formation with around 2.7 million homeowners added in the first quarter has driven up the homeownership rate, especially under the decreasing mortgage interest rates and strong new home sales and existing home sales in the first two months before the COVID-19 pandemic hit the economy.”

The NAHB also emphasizes the year-over-year increase in each generational group:

“The homeownership rates among all age groups increased in the first quarter 2020. Households under 35, mostly first-time homebuyers, registered the largest gains, with the homeownership rate up 1.9 percentage points from a year ago. Households ages 35-44 experienced a 1.2 percentage points gain, followed by the 55-64 age group (a 0.9 percentage point increase), the 45-54 age group (a 0.8 percentage point gain), and the 65+ group age (up by 0.2 percentage point).” (See chart below):

Homeownership is an important part of the American dream, especially in moments like this when many are feeling incredibly grateful for the home they have to shelter in place with their families. COVID-19 may be slowing our lives down, but it is showing us the emotional value of homeownership too.

Bottom Line

If you’re considering buying a home this year, let’s connect to set a plan that will help you get one step closer to achieving your dream.

Some Highlights

• Staying at home doesn’t mean your search for a new place needs to come to a standstill.
• Check out these tips on how to explore other neighborhoods virtually in the homebuying process. You may find a spot that better suits your needs without ever leaving your living room!
• Let’s connect today so you have help with all of the additional steps along the way, and you’re ready to make your next move.