The market sentiment is drastically different today compared to a year ago at the onset of the pandemic. With the U.S. economy positioned to grow at the fastest pace since the early 1980’s and mortgage rates trending down again in the past week, REALTORS® are feeling more optimistic about the upcoming home buying season. Many expect sales to remain solid as prices continue to grow, while more supply will be added to the market in the coming weeks. Consumers are also more positive about the housing market than they were 12 months ago, as more of them believe housing is a good investment now relative to before the COVID-19 outbreak.       

Optimism Remains High as Buying Season Begins: While the tight supply condition will likely continue at least in the next few months, California REALTORS® remain positive about their market outlook. Despite fewer members having a listing appointment in the past week, the share who expected listings to have a weekly increase reached 55.7%, the highest level since late July. REALTORS® also felt positive about the demand side of the market. More than half (54.8%) believed sales would go up in the following week, while nearly three quarters (72.1%) thought prices would rise. Both levels were the highest since July 20, 2020.    

Mortgage Rates Dipped for the First Time since January: After increasing for seven consecutive weeks, mortgage rates finally dropped last week. The average 30-year FRM reported by Freddie Mac dipped to 3.13% in the week ending April 8, a 5-basis point decrease from the prior week and was lower than the same time last year by 20 basis points. Rates continued to decline daily since the end of March, according to Mortgage News Daily, and might have found a ceiling as the 10-year bond has remained below the mid 1.7% range since March 18.    

A Hiccup in the Labor Market: The job market had a setback last week as initial jobless claims unexpectedly climbed to 744,000. Continuing claims, on the other hand, provided some good news with the total dropping 16,000 to 3.73 million, the lowest level since March 21, 2020. Economists do not expect initial claims to continue to rise from here. Real-time data on job openings, in fact, indicates a surge in labor demand. Postings on Indeed -a job search site- for example, are now 16% higher than where they were in February 2020.  

Housing Affordability Dips as Price Growth Surges: Housing affordability declined in the U.S. in February compared to a year ago, according to NAR’s Housing Affordability Index. The index was at 173.1 for the nation, slightly below 175.6 recorded in February 2020. Housing affordability dropped from a year ago in two of the four regions, with the West region falling 1.3% as its price growth surged 21.2% year-over-year. The West also had the biggest month-to-month decline of 9.8% of all four regions. 

Jumbo Loans Returning as Economy Recovers: As demand for homebuying remains strong and price growth continues to accelerate in many markets, the availability of jumbo loans is increasing as the economy regains its footing. The supply of jumbo mortgages increased for six straight months and helped pushed up Mortgage Bankers Association’s (MBA) Mortgage Credit Availability Index (MCAI) in March. The overall index rose 0.6% to 125.4 last month, while the Jumbo MCAI was up 1.5%. An increase of the index suggests loosening lending standards, which will play an important role in supporting housing demand as the economy further improves.  

Housing Is Viewed as a Good Investment: People view housing – both rental properties and primary residences – as a good investment as compared to the aggregate stock market, according to a survey of the Federal Reserve Bank of New York. When asked to choose between investing in a primary residence versus the stock market, 90% of the survey respondents chose the former. Between buying a rental property or investing in the stock market, more than 50% of the households recommended housing. Relative to pre-COVID, more households now cite higher returns and lower volatility as reasons to purchase a primary residence.