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Zillow Market Pulse: November 13, 2020

mattspeakman
·4 min read

November 13, 2020

Confidence in the housing market continued to improve in October, with more people growing comfortable selling their home. But consumers' broader economic outlook isn't as rosy. Applications for jobless benefits fell, but remain elevated with key programs set to expire soon.

Housing market optimism improved further in October

  • Fannie Mae's Home Purchase Sentiment Index improved 0.7 points in October from September, to 81.7.

  • 59% of respondents said they believe now is a good time to sell their home, the largest share since February.

Overall consumer sentiment slipped in early November

  • The University of Michigan's Index of Consumer Sentiment fell 4.8 points from October to November, the first decline in four months.

  • Downbeat expectations for the next six months drove the headline index down.

Applications for jobless benefits remain elevated

  • About a million initial jobless claims were filed last week, down from the previous week, but still historically high.

  • 60% of people currently receiving relief are doing so through programs set to expire at the end of the year.

So what?

Housing market optimism continued to steadily grow in October, improving for the fourth straight month and fifth out of the past six, according to Fannie Mae's National Housing Survey. October's improvement was driven by a consistently rosy outlook for mortgage rates and a marked uptick in respondents' confidence in buying and selling homes. Three-in-five respondents said they believed it was a good time to buy a home in October – almost equal to the strongest reading since early 2018. Nearly the same share said they believe it is a good time to sell a home – up significantly from earlier in the year: In April, just 29% of people said they believed it was a good time to sell. Strong demand from home buyers is driving remarkable growth in home sales and prices, despite an ongoing and historic inventory shortage. Improved seller sentiment is an encouraging sign that more sellers may soon emerge to help relieve the inventory crunch.

But while consumers' housing confidence is strong the University of Michigan's broader headline consumer sentiment index took a step backward in early November, slipping 4.8 points in November from October's final reading, the first monthly decline since July. The setback was driven by growing pessimism about the future, rather than unease about the present. The report's read on current economic conditions was flat from the month prior, while the Index of Consumer Expectations – a forward-looking read of perceptions up to six months in the future – fell 8.9 points, or 10%, from October to November. The report also highlighted the differences in sentiment across political party lines. Survey respondents who identify as Republican expressed far less optimism for the next six months than they did in October, while the outlook for those who identify as a Democrat did not change.

A million people applied for unemployment insurance last week, down about 110,000 from the week before but still a remarkably high number. Last week was the 34th consecutive release in which there were far more initial claims for jobless benefits than there were at any week during the Great Recession. About 60% of the more than 21 million people currently receiving some form of unemployment aid are doing so via programs implemented in the immediate wake of the pandemic but set to expire at the end of the year. The majority of these people are gig workers or self-employed – groups that typically don't qualify for regular state jobless benefits – though this group also includes about 4 million people out of work for more than half the year and still unable to find work. Without enhanced aid enacted earlier in the year, none of them would be receiving benefits, and while there is still a chance these programs could be extended, the federal government has so far not been able to come to an agreement on doing so. The looming expiration of these programs is particularly troubling given the fact that many service-based businesses will have a harder time remaining open in the colder months to come.

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

The post Zillow Market Pulse: November 13, 2020 appeared first on Zillow Research.