Zillow Market Pulse: November 2, 2020
The ongoing inventory shortage may finally be starting to impact sales. Home builders are doing what hey can to address the shortage.

The ongoing inventory shortage may finally be starting to impact sales. Home builders are doing what hey can to address the shortage.
NAR’s Pending Home Sales Index – a seasonally adjusted measure of the number of homes that went under contract in a month, and a leading indicator for existing home sales – declined 2.2% in September from August, the first monthly decline since April. Even so, home purchase activity and general measures of buyer demand both remain elevated and very strong by most measures. Pending sales activity in September was 20.5% above last September’s reading, according to the report. Separate readings of for-purchase mortgage activity remain near their highest levels in more than a decade, and homes nationwide are typically going under contract in less than two weeks – a historically fast pace. But the monthly decline in homes going under contract was likely an indication that record-low levels of for-sale inventory are finally eating into people’s ability to purchase a home. According to Zillow’s data, there are 37.2% fewer homes for sale across the country than there were this time last year. And NAR’s measure of months of supply (the amount of time it would take to sell through all currently-listed for-sale inventory) was just 2.7 months, the lowest ever recorded in its monthly series.
One method of addressing this persistent shortage of for-sale inventory is to build more. A report from the Census Bureau released today showed that spending on residential construction continues to improve, even as spending on other forms of construction has slowed. September’s seasonally adjusted annualized rate of spending on private residential construction projects overall rose by 9.9% from a year ago and 2.8% from August. Spending on new single-family homes rising a whopping 5.7% from August to September – the strongest monthly improvement since 2009. Spending on private, non-residential construction – things like lodging, office space and other commercial buildings — fell on the month and on the year. Despite constraints posed by the pandemic and shortages in land and labor, home builders are as confident as ever and poised to do their part to address the overall shortage of inventory on a market filled with eager buyers. Expect continued strong residential construction figures in the coming months.
In March, oil prices plummeted more than 50% — and briefly fell below $0/barrell — at the onset of the pandemic as mandatory closures, supply chain disruptions and fewer people traveling via car, airplane or boat led to a severe glut of oil. Conditions stabilized over the summer, but the situation in October — while not nearly as bad as the early spring — still represented a disturbing recent low. Newly-announced shutdowns and market uncertainty as a result of recently rising coronavirus case volumes worldwide have injected new concerns into the oil market. It is feared that stricter lockdown measures will weaken already shaky demand for airline travel, something particularly worrisome at a time when some major oil producing nations, like Norway, had ramped up their pumping rate to near pre-pandemic levels. Tuesday’s federal election in the U.S. is also a source of uncertainty for oil markets. This diminished outlook will place further pressure on the U.S. labor market: Exxon Mobil announced last week that it plans to lay off 1,900 U.S. employees.
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