There’s no doubt that it’s been a weird couple of months in the real estate market. The real question is where that leaves us going forward. That leads us to our big story.
The Big Story
Did you really expect it to be anything other than COVID-19 (coronavirus)? It’s like late-night Coney dogs. It just keeps coming back to haunt you the next day.
The good news is that real estate showings are starting to happen again. We’re here in Michigan, and that happened last week. Your buyers and sellers may feel the need to be a little bit more careful, and that’s OK, because there are options to do virtual tours. Where open houses are taking place, everyone is taking extra precautions.
Another challenge confronting real estate right now is the job market. In the most recent data from the Bureau of Labor Statistics, unemployment was at 14.4%. If you’re a real estate agent, it’s important to make sure you do your homework on your clients right now. And if they’re not ready given this situation, be patient. The stress is real, but you can help by sharing your knowledge, and showing compassion and understanding.
Let’s get into the headlines.
News You Can Use
With that, let’s look at what else happened relevant to real estate in the last few weeks. This information was gathered with the assistance of Econoday.1
Gross Domestic Product (GDP)
GDP, the most widely used measure of economic growth or lack thereof, showed that the U.S. economy shrank in the first quarter by 4.8% according to initial estimates. Consumer spending was also down 7.6%. There are a couple of things to pay special attention to if you’re a real estate agent in this data.
First, we’re almost certainly headed for a recession, which is traditionally defined as consecutive quarters of a shrinking economy. There’s a decent chance it’s going to be harder out there for a while. Compassion and communication will be doubly important. Close the homes you can. Even if you can’t help someone right now, you’re still helping by being supportive. Clients who have worked with you in the past will also appreciate your knowledge. You can let them know that rates are near record lows and it could be time to refinance.
The other good news is that residential investment was up 21% in the first quarter. This means that builders and consumers have faith in the future of the housing market. There should also be some fresh inventory available. When this is over, some people will be looking to list their houses and builders had already constructed some new ones.
New Home Sales
New home sales fell by 18% in March to come in at a seasonally adjusted annual rate of 627,000. The median price of a new home did fall by more than $24,000 to $321,400, although they had been quite high before, and this particular number tends to be quite volatile. There is also definitely more inventory on the market as the supply of homes given the current sales pace is at 6.4 months compared to 5 months in February.
Pending Home Sales Index
Pending home sales were down 20.8% in March to come in at 88.2. This metric from the National Association of REALTORS® measures the number of existing homes under contract to be sold. This isn’t great news for April existing home sales numbers, but we’ll have those in our next real estate update.
S&P Corelogic Case-Shiller HPI
Heading into this thing, data was strong. The S&P index runs 2 months behind the data it covers. Released at the end of April, data for February shows prices were up 0.4% on a seasonally adjusted basis and 0.5% overall. Year-to-year, prices were up 3.5% in comparison to last February.
Consumer confidence dropped by 32.1 points in April to an overall level of 86.9. The good news is that the expectations for the future were actually higher, meaning the entirety of the drop has to do with current conditions.
I’m going to end on the positive notes, so bad news first. More than a third of those surveyed feel that jobs are hard to get, which is up 20% from March. The number of people saying jobs are abundant was down was down almost 25% at 20% overall. Meanwhile, 45.2% of people believe business conditions aren’t good, a number that’s up from 11.7% the prior month.
For the good news, 40% of people surveyed see business conditions getting better 6 months from now. That’s double what it was in March. Meanwhile, 41% of those asked said that more jobs would be opening up. Expectations for income were a little more bleak, so that’s a cautionary note. However, what should be particularly exciting for this group is that 5.4% of the sample still expected to buy a house in the next 6 months.
Consumer Price Index (CPI)
Prices were down 0.8% overall in April and fell 0.4% when food and energy were taken out. On the year, prices are only up 0.3% and 1.4% when excluding food and energy.
There were drops across a broad swath in sectors with the price of gasoline falling 20.6% in April. However, one thing that should be encouraging is that at least in this initial look, housing costs are up 2% both in terms of rent and the equivalent costs for homeowners. This means the housing markets is one area of stability right now.
Although they’ve gone up a little bit from being the lowest they’ve ever been, mortgage rates are still extremely low, according to Freddie Mac. This should give your clients increased buying power in the market if they’re in a position to make a move right now.
With 0.7 points paid in fees, the average rate for a 30-year fixed mortgage was up 3 basis points to 3.26%. However, this has fallen from 4.1% at the same time a year ago.
For those looking at shorter terms, the average rate for a 15-year fixed mortgage with 0.7 points paid was down 4 basis points last week to 2.73% and has dropped from 3.57% last year.
Finally, the average interest rate for a 5-year treasury-indexed, hybrid adjustable rate mortgage (ARM) was up a few basis points to 3.17% with 0.3 points paid. The rate has decreased from 3.63% last year.
Now that you have this information, go use it to educate your clients. For even more insights, visit our Agent Relations page!
1 Important Legal Notice: Econoday has attempted to verify the information contained in this calendar. However, any aspect of such information may change without notice. Econoday does not provide investment advice, and does not represent or warrant that any of the information is accurate or complete at any time. Copyright 2020 Econoday, Inc. All rights reserved.
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