Zillow Market Pulse: May 7, 2021

March job losses topped 700k
·4 min read

May 7, 2021

A disappointing April jobs report raised some questions about the pace and timing of the nation's recovery, and helped push mortgage rates down sharply to end the week. And new data suggest some home buyers may be getting discouraged while sellers are growing more confident.

April jobs numbers fell well short of expectations

  • 266,000 jobs were added in April, well below many forecasts that expected closer to 1 million.

  • The national unemployment rate increased 0.1 percentage point from March, to 6.1%.

Falling mortgage rates and a court-ordered end to the national eviction moratorium capped an eventful week

  • Mortgage rates decreased sharply at the end of the week, hitting their lowest levels since mid-February.

  • A national moratorium on evictions, put in place at the outset of the pandemic and since extended several times, was struck down by a federal judge.

Mixed signals on housing sentiment

  • 47% of respondents to Fannie Mae's April National Housing Survey said it was a good time to buy a home, the lowest in the survey's history.

  • Seller sentiment, meanwhile, surged. 67% of respondents said they believed April was a good time to sell a home.

So what?

In normal times, the addition of 266,000 jobs to the economy in a single month would be viewed as a solid, if not stellar report. But at a time when the market is still crawling out of the depths of the pandemic and appeared primed for accelerated growth, the April jobs report was a resounding dud. The national unemployment rate surprisingly ticked up on the month and alternative measures of core unemployment – which factor out temporary unemployment – held firm near their highest level since the pandemic began. The number of working women and the number of women in the labor force both fell on the month. The question now is whether today's weak report was a temporary aberration, or if the economy will have to settle for more muted job growth in the months ahead. With the economy still 8.2 million jobs short of where it was before the pandemic, the latter scenario would pose significant challenges to the economy's recovery. Sharp increases in wages suggest that employers may indeed be having a difficult time finding the talent they are seeking for some positions. Some of the challenges could be attributed to many would-be workers hesitant to go back to work because of enduring fears about the virus, having to care for their child(ren) and/or a number of other reasons.

The weak jobs report sent mortgage rates down sharply, capping an eventful week in the mortgage market. After spiking early in the year, mortgage rates have moved consistently downward for the past several weeks – falling a quarter of a percentage point in the month of April alone – and Friday's sharp downturn left rates at their lowest point since the middle of February. Forbearance metrics continue to improve: According to Black Knight, 2.2 million loans (4.2% of total) were in forbearance in the week ending May 4, 105,000 fewer than the previous week. The number was partially inflated due to the fact that many plans expired at the end of April, but the sharp decrease was the latest indication that many homeowners are in a largely sound financial state. On the rentals side, a national moratorium on evictions — set to legally expire June 30 — was struck down by a federal judge earlier this week. While an appeal was immediately filed, the surprising development reinforced the fragility of a policy that contributed to a 65% decline in evictions in 2020 compared to the usual annual rate, according to Eviction Lab.

Consumer sentiment has been rising strongly in recent weeks, but an indicator measuring housing-specific confidence offered a mixed reading this week. According to Fannie Mae's National Housing Survey, 47% of respondents surveyed in April said they believed it's a good time to buy a home, down 6 points from March and 1 point below the 48% of respondents who viewed it as a bad time to buy. It was the first time in the survey's history, which dates back to 2010, that the difference between the two shares was negative – suggesting that some buyers may be growing dismayed by the shortage of available homes for sale and the heightened market competition that is pressing prices higher. The report highlighted the fact that respondents with household incomes between $50,000 and $100,000 showed a particularly steep reduction in confidence, illustrating the outsized difficulty faced by many shoppers seeking a more-affordable home. Seller sentiment, meanwhile, continues to swell. About two-thirds of respondents (67%) stated that April was a good time to sell a home, up 6 points from March and 12 points from February – the highest two-month improvement since July 2020. The improved seller confidence is the latest indication that inventory pressures may be finally starting to relent and that supply may finally be starting to catch up to demand.

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