Jobs up, Forbearance Down, and Rates Still Low: Housing Market News You Need to Know
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Jobs up, Forbearance Down, and Rates Still Low: Housing Market News You Need to Know

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Dave Meyer Read More

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With the housing market in its current frenetic state, it has become difficult to stay on top of all the data, news, and analyses being released. But don’t worry, we’ve got your back! Here’s some of the major news of the last several weeks to ensure you have all the information you need to manage your portfolio and plan for the future.

May jobs report

On June 4, the Bureau of Labor Statistics announced that the U.S. added 559,000 new jobs in May 2021. This number was up from a very poor showing in April but remains far below March numbers and where we need to be.

All told, there are still more than 7 million people looking for jobs in the U.S. But the really curious thing is that there are currently more than 8 million open jobs in the U.S. This bodes well for long-term employment recovery but highlights that there is still some friction in the job market. Most experts believe it will take several more months for the labor market to work itself out.

In the real estate market, the labor numbers didn’t look very good. Residential construction only added 1,900 jobs in May. Given the lack of housing supply in the U.S., we’ll need to see construction employment growing a lot faster, and for a long time, to start addressing the housing shortage.

Forbearance and delinquencies decline

According to the Mortgage Bankers Association, the number of loans in forbearance has declined again and now sits at 4.16%, leaving about 2.1 million homeowners still in forbearance.

The number has dropped steadily over the last several months and has come down from 5.53% at the beginning of the year. This is good news, but according to an analysis done by CNBC, 70% of those who remain in forbearance are not making any payments at all. It makes sense that the people who have not yet exited forbearance are the most vulnerable. About 2.9% of all mortgages could enter delinquency.

In the depths of the Great Recession, delinquencies hit 6.3%, so even the worst-case scenario wouldn’t even approach those rates. But still, having more delinquencies and subsequent foreclosures would be terrible for those homeowners and could send ripple effects through the housing market.

Personally, even if the worst-case scenario happens, I don’t think it would cause any crash in the housing market— but it would likely bring growth down from its current astronomical levels.


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Mortgage rates remain low

Despite the increasing economic activity, mortgage rates are remaining low at below 3%. If you haven’t already heard, that is extremely low.

With the jobs report coming in weaker than anticipated, it’s unlikely that the Fed will raise rates soon. They’ve repeatedly stated that to raise rates, they need to see strong job growth and/or several months of uncomfortably high inflation.

Low mortgage rates have helped fuel the enormous rise in home prices over the past year and played a major role in maintaining buyer demand even in this wild economic climate. Yet despite rates remaining low, there was a small dip in buyer demand in early June.

While this 4% dip is modest and only covers a single week of data, buyer demand is something to keep an eye on. Low supply and high demand are helping maintain the historic run-up in housing prices, and if demand starts to slip, we could see the housing market cool. Of course, it’s far too early to know if this dip is just an anomaly, but it’s something to keep an eye on in the coming weeks.