Unemployment Hits Record Low as Home Prices Rise to Record High
As we transition from Q1 to Q2 This Week in Real Estate we do so on the heels of the median value of homes for sale reaching a record high, declining interest rates spurring a refinance surge and unemployment claims at the lowest level since December 1969. Below are a few highlights from the first week of April that influence our business:
Home Prices Hit a Record High. If you’re shopping for a cheap home this spring, good luck. The median value of homes listed for sale in March hit a record $300,000, according to realtor.com.”Despite a slowing growth rate, home prices will likely continue to set new records later this year,” said Danielle Hale, realtor.com’s chief economist. “Heading into spring, U.S. prices are expected to continue to rise and inventory is expected to continue to increase, but at a slower pace than we’ve seen the last few months as fewer sellers want to contend with this year’s more challenging conditions.” The number of homes for sale listed above $750,000 increased 11% year over year in March, while the number of entry-level homes priced $200,000 or below fell 9%.
Refinancing Activity Soars Due to Rate Declines. Amid growing concerns about housing affordability, the latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey show a surge in home refinancing, a week-to-week increase of 39% on a seasonally adjusted basis. The increase is contemporaneous with the fourth consecutive week of mortgage rates’ declining. Despite the widespread decrease in mortgage rates, changes in purchasing activity (i.e., purchases on new or existing homes) were not as sensitive to the drop as were applications to refinance. The data also show that purchase applications are almost 10% higher than they were a year ago, that refinance applications are 58% higher on a year-over-year basis, and that, combined, both purchase and refi applications are almost 30% higher than they were a year ago. Despite the tight lending environment of 2019, as anticipated by banks’ senior loan officers in the Federal Reserve’s Senior Loan Officer Opinion Survey, the data show a rise in applications on a year-to-date and year-over-year basis, which may partially offset tighter lending standards. The mortgage applications for purchase index is usually a leading indicator for forthcoming home sales, but the latter may be conflated by other factors, such as all-cash sales. The prior few months’ data lean less to such a conclusion, as the upward trend of the purchase index in January 2019 was subsequently followed up by increases in new and existing home sales in February.
Weekly Jobless Claims Drop to the Lowest Level Since 1969. The number of Americans filing applications for unemployment benefits dropped to a more than 49-year low last week, pointing to sustained labor market strength despite slowing economic growth. Initial claims for state unemployment benefits declined 10,000 to a seasonally adjusted 202,000 for the week ended March 30, the lowest level since early December 1969, the Labor Department said on Thursday. Job growth has slowed from last year’s roughly 225,000 monthly average pace. The pace of increase, however, remains more than sufficient to keep up with growth in the working age population, holding down the unemployment rate. The unemployment rate forecast is unchanged at 3.8 percent.