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June 7, 2021

While the outlook for the economy and the market remains bright, both are encountering supply constraints as the reopening continues. Despite a surge in consumer spending and an improving job market, labor and material shortages have become hurdles that the recovery needs to overcome. As such, inflation and slower job growth remain topics of concern when discussing how fast the U.S. can get back to its pre-pandemic levels. Meanwhile, the housing market has had solid performance since the second half of 2020 but is showing signs of moderations in recent weeks. As tight supply continues to apply upward pressure on prices, the market momentum could slow as affordability issues kick in in the second half of the year.  

REALTORS® See Some Market Moderations in the Week Ahead: While almost half (48.6%) of those who responded to the weekly survey expected home sales to rise in the coming week, the share has been below 50% for the fourth time in the past five weeks. Meanwhile, more REALTORS® believed that home prices might have already peaked as those who expected prices to go up declined to 58.2%, the lowest level since late January. The consistent moderations since late April suggest that the market momentum could be easing slightly going into the summer season. 

Job Growth Improves but Lower than Expected: U.S. employers added 599,000 jobs last month, an increase from a revised 278,000 in April, but the gains were lower than expected. Businesses continue to struggle to fill job openings as potential workers remain on the sidelines. Factors that constrain the labor supply includes workers’ fear to go back to their jobs because of concerns about catching COVID, the disincentive effect of additional unemployment benefits, and childcare constraints as schools have not fully returned to in-person learning. With payrolls still 7.6M below the pre-pandemic level, a full recovery may not be reached until early 2023. The unemployment rate fell to 5.8% in May from 6.1% the prior month.   

Rates Inch Up but Remain below 3%: The average 30-year fixed-rate mortgage (FRM) increased slightly in the first week of June but remained below the 3% threshold. Despite market concerns about rising inflation in recent weeks as the economy continues to recover, the average 30-year FRM compiled by Freddie Mac has been at or below 3% for the past seven weeks. The lower-than expected job growth figure released last Friday may have eased some of the market concerns, as the 10-year Treasury has been primarily moving side-ways since then. 

Consumers Feel More Pessimistic about Homebuying: As housing affordability deteriorated further and supply shortage remained an issue, homebuyers sentiment declined to the lowest point in 32 months, according to the C.A.R. Housing Sentiment Survey. Only 19% of consumers believe it is a good time to buy a home in May 2021, a sharp drop from 25% in the prior month, and a steep decline from 31% in May 2020. With California setting another record median price in April 2021 and the corresponding mortgage payment increasing more than 30% from a year ago, potential homebuyers are feeling more pessimistic about the homebuying conditions.  Meanwhile, 72% of all respondents believe it is a good time to sell, an all-time high since the survey launched in September 2018. 

Home Building at Fastest Pace in Areas with Shortest Commute Times: Home building expanded the fastest in places with the shortest commute times, according to an index released by the National Association of Home Builders (NAHB). The Q121 Home Building Geography Index (HBGI) shows that single-family home building was the highest in the longest commute (top two quintiles), with a combined market share of 63.6%. The year-over-year growth rate, however, was the strongest at 22.2% in the shortest commutes (bottom quintile). So, while the longer-commute areas have a much greater market share in single-family home building, the construction growth rates were highest in the areas with shortest commute times. 

 
 
 
 
 
 

Weekly Data for WE 2021-05-29

Updated infographic coming soon!


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