Some Hope for Housing

• With much of the economy in free fall, housing has held up relatively well, and many signs point to the sector as a potential bright spot of the eventual recovery. Of course, the housing market has not weathered the ongoing pandemic unscathed.

• Stay-at-home orders and social distancing have made it difficult to show homes, and made existing homeowners less likely to list. These factors have hit existing home sales particularly hard. Resales fell 17.8% in April, bringing the rate of existing sales to its lowest level since 2011.

• The easing of lockdowns should make it easier to view existing homes and sign documents in person. Traffic of prospective buyers measured in the NAHB/Wells Fargo Housing Market Index increased in May, albeit after a historic decline in April. Meanwhile, new home sales, which appear to have been less impacted by lockdown measures, increased slightly in April. More broadly, demand for housing seems to be back on track.

• After bottoming in early April, mortgage applications for purchase have quickly recovered their COVID-induced decline and are up 10% year-to-date (top chart). Other high frequency indicators, such as Google searches for ‘new homes’ and Redfin’s homebuyer demand index, also indicate the housing demand has reached or eclipsed its pre-COVID-19 level. While there are some concerns about credit availability (see Credit Market Insights for more detail), mortgage rates remain historically low and should continue to buoy demand.

Wells Fargo