As states and their economies open up, emerging information shows that the real estate market may be in the early stages of recovery as consumer confidence, which declined sharply in April, has begun to stabilize and buyers cautiously return to the market.
According to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending May 22, mortgage applications increased 2.7% from a week earlier.
Even more significant, the seasonally adjusted Purchase Index increased 9% from one week earlier.
“The housing market is continuing its path to recovery as various states reopen, leading to more buyers resuming their home search,” said MBA Associate VP Joel Kan in a press release. “Purchase applications increased 9% last week – the sixth consecutive weekly increase and a jump of 54% since early April. Additionally, the purchase loan amount has increased steadily in recent weeks and is now at its highest level since mid-March.”
Meanwhile, the latest Conference Board Consumer Confidence Index shows that after a steep drop in April, the overall index now stands at 86.6, up from a low of 85.7 in April, while the Expectations Index — based on consumers’ short-term outlook for income, business and labor market conditions – improved from 94.3 in April to 96.9 this month.
Consumers expecting business conditions will improve over the next six months increased from 39.8% in April to 43.3%, while those expecting business conditions will worsen decreased, from 25.1% to 21.4%.
“Following two months of rapid decline, the free-fall in confidence stopped in May,” said Conference Board Senior Director Lynn Franco in a press release. ‘Short-term expectations moderately increased as the gradual re-opening of the economy helped improve consumers’ spirits.”
According to Franco, the impact of COVID-19 on consumer confidence has been mostly reflected in the Present Situation Index, which has plummeted nearly 100 points since the onset of the pandemic and continued its decline in May, from 73.0 in April to 71.1.
In the report, the percentage of consumers claiming business conditions are good decreased from 19.9% to 16.3%, while those claiming business conditions are bad increased from 45.3% t to 52.1%.
Consumers’ outlook for the labor market was mixed. The percentage of consumers saying jobs are “plentiful” decreased from 18.8% to 17.4%, however those claiming jobs are “hard to get” decreased from 34.5% to 27.8%.
According to Franco, consumers remain concerned about their financial prospects as well as the possibility of inflation, which could lead to a sense of diminished purchasing power and curtail spending. “While the decline in confidence appears to have stopped for the moment, the uneven path to recovery and potential second wave are likely to keep a cloud of uncertainty hanging over consumers’ heads,” she said.