I hope you had a great weekend. We are 2 weeks away from adding a new family member so I spent the weekend getting the nursery ready with my wife and playing baseball with my 8 year old son who just went on summer break.

Congratulations to all 2020 graduates! It is a shame that they did not receive a proper sendoff but perhaps their educational institutions will find a way to honor their graduating classes.

SELLERS NEEDED
We have a lot of buyers looking to upsize and several looking to buy for the first time. Many are considering a move to get more space as working remotely becomes a long-term reality since they have been forced to repurpose another room in their home into office space, like a living room, dining room or bedroom, which invites distractions and other frustrations.

Buyers are suddenly putting a premium on a quiet, separated workspace as opposed to the open concept floor plans that soared in popularity in the past few years–it is still desirable just less so than it was before the pandemic and stay-at-home orders.

If you or someone you know is considering a move, please put them in touch with me as I can save them a lot of time, headache, and money as they go through the process.

QUICK UPDATE
The economy and the housing market continue to see signs of improvement—particularly in terms of buyer demand. The labor market impacts continue to shrink while mortgage applications and showing appointments continue to improve. More REALTORS® are closing deals and helping their clients to purchase homes. And all of this is happening against a backdrop of the lowest mortgage interest rates ever and a critical housing shortage.

However, we are also still in the midst of a global pandemic while at the same time grappling with the tragedy of loss and the ensuing social unrest. Thus, even as things move in the right direction, the process will be slow and we all have a lot of work to do individually and collectively before we can fully recover.

While the number of closed transactions in May is expected to fall (due to an insufficient number of homes for sale), housing demand is back stronger than ever and pending sales increased more than 100% since the bottom fell out in early April.

Looking forward, data indicates that the housing market will grow even stronger in the months ahead.

UNEMPLOYMENT
*Employers added 2.5 million jobs in May*
The Department of Labor Statistics reported that the economy added 2.5 million net jobs in May. That marked an all time record for jobs added in one month. The unemployment rate in May was 13.3%. While that marked an improvement from April’s 14.7% unemployment rate, it’s still much higher than at the peak of the Great Recession. Economists had expected the unemployment rate to be 20%, so this beat any expectation by any expert and stocks surged. It should be noted that the unemployment rate was 3.5% three month ago! Most of the job gains came from re-hire of employees that have been laid off since the country forced a shut down of business beginning in March. Over 20 million jobs were lost in April alone. While some experts questioned the methods of how the numbers were calculated, they all agreed that employers are hiring back workers faster than expected.

MORTGAGE FORBEARANCE
*falls for the first time*
According to a report by Black Night, the number of mortgages in forbearance fell 3 million from 4.76 million to 4.73 million. While that is a drop in the bucket, it is significant because momentum has swung the other way. As a percentage of all mortgages, forbearances dropped to 8.9% from 9.0% in the prior week.

HOME SHOWINGS
*Rapid recovery after steep decline*
According to ShowingTime.com, showings declined nearly 75% from where we started the year as the result of the pandemic. Since then showings rapidly increased to just 0.3% below the number of showings at this time last year. That puts the number of showings up by more than 50% on a weekly basis from where we started 2020 and 13.2% higher than the pre-crisis levels of late February.

NEW PURCHASE MORTGAGE ACTIVITY
*Jumped and Now Exceeds 2019 Levels*
New purchase mortgage applications in California were up 8.7% from last year and exceeded 2019 levels for the
first time last week, after weeks of decline since the pandemic lock-down. The record low mortgage interest rates are luring even more buyers back into the market, leading to a surge in home purchase demand.

SUPPLY OF HOMES FOR SALE
*Still critically limited by Pandemic*
Tight housing supply could remain an issue though. One reason closed sales may see a slow upward
trajectory is that new supply is not rebounding as quickly as buyer demand in California. Pending sales were
only down slightly at the end of May, but the pace of new listings coming onto the market has been flat or
down for the past five weeks. Thus, even as the economy starts to open and buyer demand starts to return,
new supply is desperately needed in order to maintain an uptrend in pending sales so that closed
transactions can actually rise.

HOME PRICES
*Strong growth especially in Los Angeles*
We experienced strong price growth in Los Angeles during May given the market conditions covered above. Nationally home prices were strong too. According to realtor.com’s May Monthly Housing Trends report, data shows that the national median listing price hit a new all-time high in May, rising 1.6% year over year.

While the spring home-buying season was delayed due to state shut-downs, a short but strong period this summer is expected to see 2020’s peak home-buying season. This will add upward pressure on prices, making this a great time to consider selling if you have a home to sell before home prices peak.

While experts predicted these improvements, they vastly underestimated the pace. As our economy improves, confidence will improve. When confidence improves, investors sell bonds and buy stocks so the price of bonds fall. If the price of bonds fall, then mortgage rates increase. Now that simplifies things, but an improving economy is bad for mortgage rates, which will most likely gradually rise from their all times lows given the initial strength seen in this recovery especially as more states move to reopen and more people go back to work. That could slow down price appreciation although not measurably unless we see a lot of new listings of homes for sale.

STOCK MARKETS
*Stocks surged on better than expected job gains*
Stock markets closed higher every day this week despite protests which forced businesses to close just after they were finally permitted to reopen. On Friday the jobs report revealed that employers had hired back workers at a faster clip than anyone expected in May, and stocks surged.

By The Numbers:
The Dow Jones Industrial Average closed the week at 27,110.98, up 6.8% from 25,383.11 last week. It’s down 5.0% year to date.
The S&P 500 closed the week at 3,193.93, up 4.9% from 3,044.31 last week. It’s down 1.1% year to date.
The NASDAQ closed the week at 9,814.09, up 3.4% from 9,489.87 last week. It’s up 9.4% year to date.

TREASURY YIELDS
The 10-year treasury bond closed the week yielding 0.91%, up from 0.65% last week.
The 30-year treasury bond yield ended the week at 1.68%, up from 1.41% last week.

MORTGAGE RATES
*Still at historic lows*
The Freddie Mac Primary Mortgage Survey released on June 4, 2020, reported mortgage rates for the most popular loan products as follows:
The 30-year fixed mortgage rate average was 3.18%, almost unchanged from 3.15% last week.
The 15-year fixed was 2.62%, unchanged from 2.62% last week.
The 5-year ARM was 3.10% almost unchanged from 3.13% last week.

Enjoy your week!

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