The economy continues to bounce back but is recovering at a moderate pace. While many economic indicators are clearly showing signs of improvement, it will take time to get back to the pre-pandemic level as many uncertainties remain unanswered. The housing market, on the other hand, remains a rare bright spot even as it transitions into the traditional slow time of the year. While the market is showing signs of leveling off in recent weeks, it is still stronger than normal as low rates and renewed interest in home buying continue to fuel housing demand.
California Job Market Is Slowly Recovering: Employment conditions continued to improve in California, with the unemployment rate falling to 11.0 percent in September, as nonfarm payrolls added a net total of 96,000 jobs. California has added back more than 994,000 jobs since May, but the state employment level is still below the February peak by 1.6 million. With job growth moderating in the last three months and not expected to see significant surge in the last quarter of 2020, the recovery will take some time.
Retail Sales Top Estimates as Consumer Sentiment Continues to Rise: Despite slow growth in the job market, consumers continued to spend at the fastest pace in three months. Retail sales shot up 1.9 percent in September, more than double the consensus expectation. The unexpected big gain in spending reflects that consumers could be tapping into their elevated savings, as the personal saving rate remains high at 14.1 percent in August after peaking at 33.6 percent in April. Meanwhile, consumer sentiment continued to improve as the index released by the University of Michigan climbed again and continued to move in the right direction.
Housing Starts Fall Short of Expectation, but Builder Confidence Remains Upbeat: Housing starts rose 1.9 percent in in September, with multifamily starts declining 16.3 percent, while single-family starts jumped 8.5 percent. As apartment constructions continued to slow, single-family homebuilding gained momentum as housing demand remained robust since the pandemic lockdown was lifted. Homebuilder confidence remains elevated as the National Association of Home Builders housing market index climbed to the highest level on record. Low rates and ongoing shift in housing preferences to adjust to new COVID norms are primary factors for the rise in developers’ confidence.
Buying Season Continues to Slow but Fall Will Likely Be Stronger than Normal: The statewide average daily sales declined again and dipped to the lowest level in five weeks, suggesting a continued slowdown of the extended home buying season. The momentum of housing demand has not completely fizzled out, however, as pending sales inched up slightly from the prior week. This could suggest a stronger- than-normal fall market if rates continue to stay near record lows. Tight supply remains an issue though, as average daily new listings were down 6.5 percent and reached the lowest level since early July.
REALTORS® Spirits Were Lifted, at least temporarily, as listing activities increased in the latest week. Despite a decline in close of escrow sales, more REALTORS® had a property listed (+20.4%) or a listing appointment (+12.6%) in the most recent week. While this market trend may not be completely in line with what was suggested by the latest market data, an increasing number of REALTORS® believed that the market will see an increase in new listings in the week ahead. More than a third of REALTORS® also believed that prices will continue to rise in the upcoming week.
The market will likely moderate in the upcoming weeks/months as we move into the holiday season. Despite the anticipated seasonal slowdown, market participants remain positive, at least for now, about the outlook of the housing sector.