• Pending home sales continue to rise, despite incredibly low inventory
  • NAR’s pending home sales index rose 5.9% in July from June.
  • The latest Zillow data shows for-sale inventory is down 28.9% year-over-year.
  • Almost a third of mortgages don’t qualify for extended foreclosure/forbearance protection
  • Previously “temporary” job cuts are becoming permanent
  • Mortgage rate environment has been unstable

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Following strong home sales figures in July, the housing market appears to have more to give. Pending home sales – normally a 1-2 month leading indicator of final sales – rose strongly in July, an improvement that comes even as the number of homes available for sale remains very low. According to the National Association of Realtors, for-sale inventory was down 21.1% year-over-year at the end of July, and Zillow’s latest weekly market report found there were 28.9% fewer homes for sale as of August 22 compared to the same time last year. Theoretically, a shortage of for-sale homes will constrain the market going forward, but thus far, the housing market is showing few signs of slowing down as we enter the late summer months. Homes are moving to a pending status in just under two weeks, and price cuts have become far less common.

Millions of homeowners are ineligible for extended protections offered by Fannie Mae and Freddie Mac. A consistently dwindling number of homes available for sale is not stopping buyers from snatching up those that are. And job losses once hoped to be temporary are becoming permanent. Almost a third of mortgages don’t qualify for extended foreclosure/forbearance protection. Fannie Mae and Freddie Mac recently reaffirmed their plans to offer 12 months of forbearance to homeowners in need. But loans held privately/in lenders’ portfolios — roughly a third of all mortgages — do not qualify for this protection.

Last week, Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac extended key assistance policies for distressed homeowners, including the extension of a foreclosure moratorium through the end of the year and a reminder that servicers of GSE-backed loans are allowed to provide a year of mortgage forbearance for those in need. The update provided some much-needed assurances for the ~5% of homeowners with GSE-serviced loans currently in forbearance and, more broadly, the ~25 million borrowers nationwide with loans guaranteed by the two GSEs. But about 30% of the country’s outstanding mortgages are portfolio or private-label securities (PLS) loans, owned by financial institutions and ineligible for servicing by the GSEs. These loans have also received some assistance in response to the coronavirus outbreak, but the fate of their protection going forward remains unknown.

According to payroll firm Gusto, 33% of workers placed on temporary furlough in March were permanently laid off by July.

Last week, MGM Resorts laid off 18,000 employees, a development that followed American Airlines’ decision earlier in the week to cut 19,000 workers by October 1 unless additional aid is received. Earlier this summer, oil field services provider Schlumberger said it will cut 21,000 jobs. Announcements like these are the latest in a steady stream of large companies being forced to cut jobs due to weak consumer demand for their products and services. As the pandemic lingers on, more evidence is emerging that a significant share of layoffs that were initially deemed temporary are transforming into persistent (or permanent) job losses.

The current mortgage rate environment has been unstable because of the coronavirus pandemic, but generally rates have been low. Mortgage rates are rising and falling from week to week, as lenders are inundated with forbearance and refinance requests. In general, however, rates are consistently below 4 percent and even dipping into the mid to low 3s. This is an especially good time for people with good to excellent credit to lock in a low rate for a purchase loan. However, lenders are also raising credit standards for borrowers and demanding higher down payments as they try to dampen their risks.

Current average mortgage interest rates (Updated on August 31, 2020.)

Loan type                               Interest rate               A week ago                Change

30-year fixed rate                   3.13%                          3.02%                          +0.11

15-year fixed rate                   2.59%                          2.62%                          -0.03

30-year fixed jumbo rate        3.20%                          3.04%                          +0.16

30-year fixed refinance rate  3.19%                          3.22%                          -0.03