One of the biggest questions on everyone’s minds these days is: What’s going to happen to the housing market in the second half of the year? Based on recent data on the economy, unemployment, real estate, and more, many economists are revising their forecasts for the remainder of 2020 – and the outlook is extremely encouraging. Here’s a look at what some experts have to say about key areas that will power the industry and the economy forward this year.

Mortgage Purchase Originations: Joel Kan, Associate Vice President of Economic and Industry Forecasting, Mortgage Bankers Association

“The recovery in housing is happening faster than expected. We anticipated a drop off in Q3. But, we don’t think that’s the case anymore. We revised our Q3 numbers higher. Before, we predicted a 2 percent decline in purchase originations in 2020, now we think there will be 2 percent growth this year.”

Home Sales: Lawrence Yun, Chief Economist, National Association of Realtors

“Sales completed in May reflect contract signings in March and April – during the strictest times of the pandemic lock down and hence the cyclical low point...Home sales will surely rise in the upcoming months with the economy reopening, and could even surpass one-year-ago figures in the second half of the year.”

Inventory: George Ratiu, Senior Economist, realtor.com

“We can project that the next few months will see a slow-yet-steady improvement in new inventory...we projected a stepped improvement for the May through August months, followed by a return to historical trend for the September through December time frame."

Mortgage Rates: Freddie Mac

“Going forward, we forecast the 30-year fixed-rate mortgage to remain low, falling to a yearly average of 3.4% in 2020 and 3.2% in 2021.”

New Construction: Doug Duncan, Chief Economist, Fannie Mae

“The weaker-than-expected single-family starts number may be a matter of timing, as single-family permits jumped by a stronger 11.9 percent. In addition, the number of authorized single-family units not yet started rose 5.4 percent to the second-highest level since 2008. This suggests that a significant acceleration in new construction will likely occur.”

Bottom Line

The experts are optimistic about the second half of the year. If you paused your 2020 real estate plans this spring, let’s connect today to determine how you can re-engage in the process.

According to the latest FreddieMac Quarterly Forecast, mortgage interest rates have fallen to historically low levels this spring and they’re projected to remain low. This means there’s a huge incentive for buyers who are ready to purchase. And homeowners looking for eager buyers can take advantage of this opportune time to sell as well.

There’s a very positive outlook on interest rates going forward, as the projections from the FreddieMac report indicate continued lows into 2021:

“Going forward, we forecast the 30-year fixed-rate mortgage to remain low, falling to a yearly average of 3.4% in 2020 and 3.2% in 2021.”

 With mortgage rates hovering at such compelling places, ongoing buyer interest is bound to keep driving the housing market forward. Rates also reached another record low last week, so homebuyers are in what FreddieMac is identifying as the buying mood:

“While the rebound in the economy is uneven, one segment that is exhibiting strength is the housing market. Purchase demand activity is up over twenty percent from a year ago, the highest since January 2009. Mortgage rates have hit another record low due to declining inflationary pressures, putting many homebuyers in the buying mood. However, it will be difficult to sustain the momentum in demand as unsold inventory was at near record lows coming into the pandemic and it has only dropped since then.”

There’s no doubt that even though buyers are ready to purchase, it’s hard for many of them to find a home to buy today. Mortgage rates aren’t the only thing hovering near all-time lows; homes available for sale are too. With housing inventory as scarce as it is today – a nearly 20% year-over-year decline in available homes to purchase – keeping buyers in the purchasing mood may be tough if they can’t find a home to buy (See graph below):

What does this mean for buyers?

Competition is hot with so few homes available for purchase and low mortgage rates are helping to drive affordability as well. Getting pre-approved now will help you gain a competitive advantage and accelerate the homebuying process, so you’re ready to go when you find that perfect home you’d like to buy. Working quickly and efficiently with a trusted real estate professional will help put you in a position to act fast when you’re ready to make your move.

What does this mean for sellers?

If you’re thinking of selling your house, know that the motivation for buyers to purchase right now is as high as ever with rates where they are today. Selling now before other sellers come to market in your neighborhood this summer might put your house high on the list for many buyers. Homebuyers are clearly in the mood to buy, and with today’s safety guidelines and precautions in place to show your house, confidence is also on your side.

Bottom Line

Whether you’re looking to buy or sell, there’s great motivation to be in the housing market, especially with mortgage rates hovering at this historic all-time low. Let’s connect today to make sure you’re ready to make your move.

The New York Times recently ran an article regarding unemployment titled: Don’t Cheer Too Soon. Keep an Eye on the Core Jobless Rate. The piece suggests we should look at unemployment numbers somewhat differently. The author of the article, Jed Kolko, is a well-respected economist who is currently the Chief Economist at Indeed, the world’s largest online jobs site. Previously, he was Chief Economist and VP of Analytics at Trulia, the online real estate site.

Kolko suggests “the coronavirus pandemic has broken most economic charts and models, and all the numbers we regularly watch need a closer look.” He goes on to explain that the decline in the unemployment number reported by the Bureau of Labor Statistics (BLS) earlier this month was driven by a drop in temporary layoffs. If we strip those out, we’re left with what Kolko calls the core unemployment rate. Many economists have struggled with how to deal with the vast number of temporary layoffs, as a complete shutdown of the economy has never happened before. As the article states, in the last unemployment report:

“73 percent of all unemployed people said they were temporarily unemployed, which means they had a return-to-work date or they expected to return to work in six months. Before the pandemic, temporary unemployment was never more than one-quarter of total unemployment.”

The core unemployment rate handles this issue and also deals with another concern economists have discussed for years: the exclusion of the marginally attached. These are people who are available and want to work, but count as out of the labor force rather than unemployed because they haven’t searched for work in the past four weeks.

Kolko’s core rate does three things:

1. Takes out temporary unemployment
2. Retains the rest of the standard unemployment definition: permanent job losers, job leavers, and people returning to or entering the labor force
3. Adds in the marginally attached

Removing the temporarily unemployed makes sense according to the article:

“Initial pandemic relief efforts focused on money for people to manage a temporary loss of income and funds to keep businesses afloat until they could bring their workers back. The hope and the goal is for the temporarily unemployed to return to their old jobs, rather than have them lose their jobs and have to search for new ones when jobs have become scarcer.”

The Bad News and the Good News

Clearly, the adjustments Kolko makes dramatically impact the way we look at unemployment. The bad news is, using his core rate, there was an increase in unemployment from April to May. The conventional rate reported by the BLS showed a decrease in unemployment.

The good news is that the core rate compares more favorably to the last recession in 2008. Here’s the breakdown:

Bottom Line

The unemployment rate is a key indicator of how the economy is doing. Heading into a highly contested election this November, the BLS report releasing next week will be scrutinized like no other by members on both sides of the aisle. Mr. Kolko’s take is just one additional way to evaluate how unemployment is impacting American families.

Every year, Gallup conducts a survey of Americans to determine their choice for the best long-term investment. Respondents are asked to select real estate, stocks/mutual funds, gold, savings accounts/CDs, or bonds.

For the seventh year in a row, real estate has come out on top as the best long-term investment. Gallup explained:

“Real estate remains the most favored investment to Americans, as has been the case since 2013, when the housing market was on the rebound. More than a third of Americans have named real estate as the top investment since 2016.”

This year’s results indicated 35% of Americans chose real estate, followed by stocks at 21%. The full results covering the last decade are shown in the chart below:

Bottom Line

The belief of the American people in the stability of housing as a long-term investment remains strong, even through the many challenges our economy faces today.

Some Highlights

• The health crisis slowed the market this spring, so buyers are jumping back into the market to make their moves this summer.
• Check these 10 items off your to-do list so your house is ready to sell while buying is hot!
• Let’s connect today to prepare your house for the sizzling summer market.

The Wall Street Journal just released their latest monthly Survey of Economists. In an article on the findings, they reported:

“The U.S. economy will be in recovery by the third quarter of this year, economists said in a survey that also concluded the labor market will fare better than previously expected following the effects of the coronavirus pandemic.”

Clearly, the latest jobs report from the U.S. Bureau of Labor Statistics confirmed the labor market is outperforming expectations, as it revealed that 2.5 million jobs were added. Directly before the release, experts forecasted that we would lose over 8 million jobs.

A second revelation indicating the economy is already about to turn around was also somewhat unexpected. More than 9 out of 10 economists surveyed believe the recovery has already begun this quarter or will begin in the third quarter. Here are the results of the survey question asking when the recovery will begin:The survey also asked what type of recovery the economists expect.

More than 8 out of 10 believe it will be a form of a ‘V’ recovery:

• A true ‘V’ with a sharp drop and a sharp rebound
• A ‘Nike Swoosh’ with a sharp drop and a more gradual recovery, coined after the company’s logo

Some experts, possibly concerned about a second wave of COVID-19, call for a ‘W’ recovery – a double dip recession.

Others call for a ‘U’ with a prolonged bottom.

A very small percentage project the dreaded ‘L’ recovery, which is no recovery at all for the foreseeable future (think of the Great Recession).

Here’s the breakdown:

Bottom Line

Though we still have a long and difficult journey ahead, it appears the worst for both the economy and the unemployment situation may be in our rearview mirror.