April 5, 2021
Written by the California Association of REALTORS®
As we enter the traditional home-buying season, REALTORS® remains upbeat about the current housing market conditions. There are reasons to feel good about the market, despite rates rising high in recent weeks. With strong growth in employment in March and a surge in consumer confidence to the highest level in the year, the economy is slowly recovering and life is hopefully getting back to somewhat “normal” in the second half of the year. Tight supply, however, remains a concern as it continues to hold back demand and continues to put pressure on affordability.
REALTORS® Feel Upbeat about the Market: California REALTORS® felt positive about the market as we entered the month of April. More than half (54.7%) of them expected sales to improve in the upcoming week, while nearly seven out of ten believed prices to increase from the prior week. Both measures reached the highest level since C.A.R. started tracking members’ weekly market sentiment in July 2020. Those who had a listing appointment also hit the highest level (40.4%) since late August, and 49 percent think active listings will rise in the upcoming week.
Pending Home Sales Holdback by Tight Supply: U.S. pending home sales dipped slightly by 0.5 percent from a year ago after eight consecutive months of year-over-year gains, according to the National Association of Realtors® (NAR). Tight housing inventory was the primary reason for the slowdown, as there were just 1.03 million homes for sale at the end of February, a 29.5 percent decline compared to a year ago. On a month-to-month basis, pending home sales were down 10.6 percent in February with all regions showing a decline.
Consumer Confidence Hits One-Year High: Consumer confidence in the U.S. surged in March and reached the highest level since the pandemic started a year ago. The index increased to 109.7 in March from 90.4 in February and was the third consecutive month with a gain from the prior month. The higher-than-expected number surpassed even the top-end of most forecasts by a sizable margin. Government fiscal stimulus, lower number of COVID cases, continued success in vaccine roll-outs, and the reopening of businesses were all contributing factors to the optimism. While the index remains below a pre-pandemic level posted in February of last year, the increase in optimism is an encouraging sign that we are moving in the right direction.
Job Market Continues to Make Progress: With success in vaccine rollouts improving public health and easing COVID restrictions, economic activities started picking up and firms began to ramp up hiring to meet increased consumer demand. Employers added 916k in March as the recovery gained momentum, easily beating consensus expectations. Hiring last month was broad-based with almost all major industry reporting gains. The unemployment rate declined 0.2 percentage point to 6.0 percent in March 2021, the lowest since twelve months ago. While the unemployment rate is still above the pre-pandemic level and there is still a lot of ground to recover, the labor market is showing signs of a faster recovery than previously anticipated.
Mortgage Applications Moderate in Recent Weeks but Remain Elevated: With higher rates of cooling refinancing activity, mortgage applications decreased 2.2 percent from one week earlier. The Purchase Index decreased 1 percent compared to the prior week but was 39 percent higher than the same week one year ago, as purchase activity dropped sharply due to the pandemic. The refinance share of mortgage activity dipped 3 percent on a week-to-week basis and was 32 percent down from the same week of last year. Refinance activity continued to pull back, as the pool of borrowers who can benefit from a refinance further shrinks with recent rate hikes.
Construction Spending Declines in February but Still Up over the Year: Severe weather has damped construction activity during February, as total construction spending fell 0.8 percent. On a year-over-year basis though, total spending is up 2.3 percent. Residential spending registered a decline of -0.2% from the prior month but was up a robust 21.1 percent from a year ago. Single-family expenditures inch up 0.1 percent during the month, while multifamily dipped 1.4 percent.