Danielle Hale

Apache is functioning normally

Apache is functioning normally

Prostock-Studio / iStock.com

There is still no sign of relief for homebuyers. Mortgage rates are continuing to soar and home prices have reached record prices. This, coupled with low inventory might still leave many buyers on the sidelines.

See: 5 Reasons the Housing Market is Reversing
Find: 15 Cheapest, Safest Places To Live in the US

As of Sept. 28, the 30-year fixed-rate mortgage (FRM) averaged 7.31% — the highest level in 23 years, according to Freddie Mac.

“The 30-year fixed-rate mortgage has hit the highest level since the year 2000,” Sam Khater, Freddie Mac’s chief economist, stated in a press release. “However, unlike the turn of the millennium, house prices today are rising alongside mortgage rates, primarily due to low inventory. These headwinds are causing both buyers and sellers to hold out for better circumstances.”

To put this latest figure in context, a year ago at this time, the 30-year FRM averaged 6.7%. And for the same time of the year in 2021, it averaged 3.01% (and 2.88% in 2020), according to Freddie Mac data.

At the same time, despite soaring mortgage rates, home prices not only continued to rise, but hit record highs in July — increasing 1% from a year ago — as demand outpaced supply, according to the S&P CoreLogic Case-Shiller National Home Price Index, released Sept. 26.

What Can Homebuyers Expect in 2023 and 2024?

According to Selma Hepp, chief economist with CoreLogic, homebuyers in the market for a home can expect competition to wane through the remainder of the year given lower demand during winter months and continued increases in mortgage rates.

“But, with rates expected to stay higher than 6% for the remainder of 2023, and through most of 2024, and the Federal Reserve not expected to change this any time soon, that means it may be easier to buy now than to wait until next year when home prices are likely to be higher,” she said, adding that buying in winter months generally means less competition and better deals for homebuyers.

Said sentiment was echoed by other experts, who said that mortgage rates continue to be a big wildcard for shoppers. Today’s rates make it challenging to predict the monthly cost of buying a home even, if home prices remain steady.

Danielle Hale, chief economist at Realtor.com, said her expectation is that continued progress on inflation may allow the Fed to begin to normalize policy (resulting in mortgage rates eventually declining). Yet, she added that the decline won’t be quick — and we could still see further increases if progress in fighting inflation isn’t as quick as expected.

Where Will Rates Go and How Long Will it Take To Get There?

According to Hale, for mortgage rates to get back below 7%, there will need to be consistently positive inflation data in the months ahead. Confidence from the Fed that policy has been effective will also need to be evident.

In terms of how long this outcome will take to arrive, she said she expects mortgage rates to settle in the 5.5-6% range in the longer run, “but we may not see that range in the market until 2025.”

Also: More Americans Can Afford To Buy a Home in These 20 Cities

What Can Homebuyers Do?

In the very near term, there are additional issues which could affect the market. A potential government shutdown could create some volatility in rates.

In turn, Hale’s advice is to focus on the things you can control more directly.

“When you set your budget, use a mortgage rate calculator like the one at Realtor.com to see how rate increases or decreases affect your monthly costs and how that fits in your budget,” she said.

In addition, she recommended building in some wiggle room in your price target. She also recommended having a contingency plan for mortgage rates increasing further, so that you can adjust quickly without derailing your search.

“For buyers ready to move now, mortgage rates are high, but there are other, predictable seasonal factors that make now a good time to be shopping for a home,” she said.

Indeed, according to Realtor.com, the best week for buyers in 2023 is Oct. 1-7 because shoppers can expect a combination of seasonal price relief, relatively plentiful homes for sale compared to other times of the year and fewer buyers to compete with.

More From GOBankingRates

This article originally appeared on GOBankingRates.com: Real Estate 2023: Will Mortgage Rates and Home Prices Ever Become Affordable Again?

Source: finance.yahoo.com

Apache is functioning normally

Apache is functioning normally

Washington, DC
CNN
 — 

US mortgage rates ticked down for the second week in a row but remain above 7%.

It’s the fourth consecutive week rates have been above 7% as inflation pressure lingers.

The 30-year fixed-rate mortgage averaged 7.12% in the week ending September 7, down from 7.18% the week before, according to data from Freddie Mac released Thursday. A year ago, the 30-year fixed-rate was 5.89%, the last time the weekly average has been under 6%.

The average mortgage rate is based on mortgage applications that Freddie Mac receives from thousands of lenders across the country. The survey includes only borrowers who put 20% down and have excellent credit. The data was collected during a holiday-shortened week.

Mortgage rates have spiked during the Federal Reserve’s historic inflation-curbing campaign, sending home affordability to its lowest level in nearly four decades. Buying a home is more expensive because of the added cost of financing the mortgage and rising home prices.

“The economy remains buoyant, which is encouraging for consumers,” said Sam Khater, Freddie Mac’s chief economist.

But it isn’t good news for inflation, which needs to drop further for mortgage rates to come down.

Even though inflation has started to ease, strong economic data has continued to keep mortgage rates elevated this week, Khater said. That is straining potential homebuyers, who have seen their purchasing power dwindle.

The combination of low inventory and high costs has squeezed would-be homebuyers and sent home sales lower than last year.

Inflation is still too high

Rates are not expected to move much in the near term, said Danielle Hale, chief economist for Realtor.com. They didn’t move much during the shortened Labor Day week, and the strong economy, which has been keeping rates over 7%, has been cooling but at a moderate pace.

“In addition to fewer job openings and slower hiring this summer, recent readings on inflation have shown progress,” Hale said a statement.

Still, inflation remains well above the Federal Reserve’s 2% target. The Personal Consumption Expenditures index for July, released last week, showed that prices increased 3.3% annually.

The Fed has been raising interest rates in an effort to cool the economy and bring inflation closer to its target. But as the economy shows signs of resilience, the bond market is concerned that more hikes may be required to tame inflation. The central bank has three remaining policy meetings this year, including later this month.

While the Fed does not set the interest rates that borrowers pay on mortgages directly, its actions influence them. Mortgage rates tend to track the yield on 10-year US Treasuries, which move based on a combination of anticipation about the Fed’s actions, what the Fed actually does and investors’ reactions. When Treasury yields go up, so do mortgage rates; when they go down, mortgage rates tend to follow.

Although home prices have crept up recently due to historically low inventory, rent prices have trended lower, which Hale says should help move inflation back toward its target in the months ahead.

The economy is nearing an inflection point, she says. But until it shows signs of cooling without protracted job losses or a recession – what’s known as a soft landing – mortgage rate volatility may continue.

Housing market ‘appears to be stuck’

With high mortgage rates, stubbornly high home prices and low inventory, fewer people are buying a home.

Applications for a mortgage to buy a home dropped to a 27-year low this week, according to the Mortgage Bankers Association.

“The housing market appears to be stuck heading into autumn, with sales activity likely to stay stagnant until housing inventory increases and mortgage rates decline to more affordable levels,” said Bob Broeksmit, MBA president and CEO in a statement.

However, August saw an uptick in newly-listed homes, according to data from Realtor.com, “suggesting the possibility that we’ve reached a point where some current homeowners are ready for a change despite the market’s challenges,” Hale said.

Still, the number of homes on the market is historically low, and August’s new listings lag behind prior years for the same period.

“This has kept housing markets surprisingly competitive,” Hale said.

Source: cnn.com

Apache is functioning normally

Apache is functioning normally

The Federal Reserve ended its long streak of interest rate hikes last week, but the pause may offer little reprieve to Americans squeezed by higher borrowing costs.

The decision left interest rates unchanged at a range of 5% to 5.25%, the highest level since 2001. However, policymakers also opened the door to additional rate increases this year, meaning there could be more pain for would-be homebuyers in the form of steeper mortgage rates.

“Higher rates are a positive for savers, but it also means mortgage rates may not fall all the way back to where they were in 2020 and 2021,” said Sonu Varghese, global macro strategist at Carson Group.

Mortgage rates spiked over the past year as the Fed waged an aggressive campaign to crush high inflation. In the span of just 16 months, the central bank approved 11 rate increases – the fastest pace of tightening since the 1980s.

A pedestrian passes the Federal Reserve building in Washington, D.C., on June 3, 2023.

MORTGAGE CALCULATOR: SEE HOW MUCH HIGHER RATES COULD COST YOU

While the federal funds rate is not what consumers pay directly, it affects borrowing costs for home equity lines of credit, auto loans and credit cards.

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Rates on the popular 30-year fixed mortgage are currently hovering around 7.19%, according to Freddie Mac, well above the 6.29% rate recorded one year ago and the pre-pandemic average of 3.9%. It is near the highest level in two decades.

MORTGAGE DEMAND DROPS AGAIN AS INTEREST RATES EASE SLIGHTLY

Below, you can calculate how volatile increases and decreases in rates could affect the typical cost of a monthly mortgage.

Even just a minor change in rates can affect how much would-be homebuyers pay each month.

A recent study from LendingTree compared the average monthly payments on 30-year fixed-rate mortgages in April 2022 – when the rate hovered around 3.79% – and one year later, when rates jumped to 5.25%.

It found that higher rates cost borrowers hundreds more each month and potentially add as much as $75,000 over the lifetime of the 30-year loan.

The monthly mortgage payment for a median-priced home, calculated using the current 30-year mortgage rates and a 6% down payment, is about $2,590. That is dramatically higher than just three years ago, when that same mortgage payment would cost about $1,779.

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The spike in mortgage rates comes as the Federal Reserve wages an aggressive campaign to crush high inflation, raising interest rates at the fastest pace in decades in a bid to cool the economy and tame runaway prices.

While the federal funds rate is not what consumers pay directly, it affects borrowing costs, including everything such as home equity lines of credit, auto loans and credit cards.

Even just a minor change in mortgage rates can affect how much potential homebuyers pay each month.

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“Higher mortgage rates have radically altered homebuyer purchasing power and have been a key factor in existing home sales dropping from a more than 6.5 million unit pace in early 2022 to the roughly 4 million unit pace in recent months,” said Danielle Hale, chief economist at Realtor.com. “Perhaps more importantly, higher mortgage rates continue to keep existing homeowners sidelined because they don’t want to borrow at today’s much higher rates.”

Original article source: See how much higher mortgage rates are actually costing you

Source: finance.yahoo.com

Apache is functioning normally

Apache is functioning normally

Apache is functioning normally

Apache is functioning normally

The FOMC also said it would continue to reduce its holdings of Treasury securities and agency debt and agency mortgage-backed securities.

During a press conference with reporters on Wednesday, Fed Chair Jerome Powell said that the committee decided to leave their policy interest rate unchanged. However, looking ahead, he did not exclude the possibility of another hike.

In spite of a higher-than-expected CPI reading in August, core inflation readings have been falling every month in 2023. Meanwhile, the pace at which new jobs were added to the economy slowed. Other labor market indicators, such as job openings and the unemployment rate, also point to a cooling economy, Danielle Hale, chief economist at Realtor.com noted.

Today’s decision not to raise rates will likely influence credit markets.

“In the mortgage market, for instance, consumers who have been holding off may begin to be motivated by the announcement to consider making the home purchase they have been waiting on,” Michele Raneri, vice president and head of U.S. research and consulting at TransUnion, said. 

In fact, mortgage applications picked up in the week leading up to the Fed meeting, signaling a wave of optimism. 

The CME FedWatch Tool showed a 99% chance the Fed would halt its hikes to the 5.25 to 5.5% range on Wednesday morning, according to interest rate traders. However, only 70.9% of these investors bet officials will freeze the rate hike at the November 1st meeting. 

On Monday, mortgage rates for 30-year fixed-rate mortgages were at 7.21%, according to HousingWire‘s Mortgage Rates Center. However, at Mortgage News Daily, mortgage rates were higher on Tuesday, at 7.30%.

The effects of tighter policy have already reverberated across the economy. While mortgage rates have steadied just below recent highs, they remain more than 3 percentage points above their pandemic-era lows. In the housing sector, the combined impact of higher rates and higher home prices drove the cost of financing a home up more than $400, or 22.5%, from a year ago.

Overall, the market has been rather optimistic about the rate picture this year. However, a number of experts are concerned that lifting rates too high could send the economy into recession.

Inflation picked up to 3.7% in August, down significantly from where it was a year ago but still higher than the 2% threshold. Core inflation—which excludes food and energy costs—rose 4.3% in August. Raising interest rates is designed to tackle those still-high prices outside of the volatile food and energy sectors.

If shelter was excluded from the CPI calculation, inflation would be about 1% in August, said Bright MLS Chief Economist Lisa Sturtevant last week. In August, the rent index was up 7.2%, rising for the 40th consecutive month. Meanwhile, rent growth slowed considerably and median rents nationally fell year-over-year in August, according to Sturtevant. Additionally, apartment construction is strong, which puts an additional pressure on landlords to avoid vacancy. In the second quarter of 2023, the national vacancy rate was 6.3%, up from 5.6% a year earlier. However, it takes months for those aggregate rent trends to show up in the CPI measures.

What’s next?

Although the Fed decided to hold steady this time, it remains fixated on taming inflation and bringing it back to the 2% target. In light of this goal, Realtor.com’s Hale expects the Fed to keep the option for an additional future rate hike on the table. 

During the press conference, Powell remained  extremely cautious, insisting on the Fed’s data dependent approach. He reiterated that the decisions that will be made at the two remaining meetings in 2023 will depend on the totality of all the data gathered, including the inflation data, the labor market data, the growth data, the balance of risks, etc. As is custom now, he sidestepped questions from reporters about what would prompt the FOMC to raise rates again before the end of 2023 or hold them steady.

Powell also shared the committee’s economic projections, showing a longer period of elevated rates.

“FOMC participants expect the rebalancing in the labor market to continue, easing upward pressure on inflation,” Powell said. “The median unemployment rate projection in the summary economic projections rises from 3.8% at the end of this year to 4.1% over the next two years.”

Meanwhile, the median projection for total PCE inflation is 3.3% this year, 2.5% next year and to reach 2% in 2026, he added.

Even though inflation remains well above the Fed’s longrunning goal of 2%, he acknowledged that inflation has moderated since the middle of last year.

On the housing market, he noted that activity “picked up somewhat” although it remains well below the levels of a year ago, largely reflecting higher mortgage rates. 

Indeed, Sturtevant highlighted the resilience of the housing market in the face of rising interest rates. “Over the past year, buyer interest has remained high, home prices continued to rise in most markets, and homebuilding activity has surged,” she said.

However, she underlined that, even with today’s pause, the aggressive rate hikes have had major and somewhat deferred impacts on the housing market. 

As demand might decline in the fall, Sturtevant expects home prices to fall in some markets. However, price declines will remain modest as supply will remain low, she added. 

“The biggest downfall of the market cooling is that many individuals and families–particularly first-time homebuyers–have been priced out of the market as a result of the Fed’s aggressive rate increase,” she said.

This afternoon’s projections give valuable insight into the amount of improvement in inflation that the Fed would want to see before pausing or ending the current tightening. 

“The Federal Reserve is rightly on pause and is looking for more data before determining its next course on interest rates,” NAR Chief Economist Lawrence Yun said. “With fewer job openings, slowing job gains, and softening core consumer price inflation, the Fed must consider the potential economic damage arising from any future rate hikes.”

Source: housingwire.com

Apache is functioning normally

Apache is functioning normally

The housing market will remain subdued until the Federal Reserve starts cutting rates next year, according to economists and housing pros following the central bank’s Wednesday announcement to leave the benchmark rate unchanged in the target range of 5.25%-5.5%.

Until interest rates come down, affordability challenges will continue to put first-time buyers on the sidelines, housing industry observers said. Real estate experts reiterated caution against further rate increases. 

While Fed Chair Jerome Powell emphasized incoming data will determine whether the central bank will raise its federal funds rate at its next FOMC meeting in November, the “dot-plot” of rate projections showed policymakers foresee one more hike by the year-end. The bulk of central bank officials expect to have interest rates finishing the year at around 5.6%.

In an elevated rate environment, the lack of inventory continues to be the biggest challenge for many potential buyers, the Mortgage Bankers Association said. 

“While homebuilder sentiment is clearly impacted by the recent surge in mortgage rates, permits for single-family homes provide a positive outlook for the pace of construction in the year ahead. If mortgage rates trend down in 2024 as we anticipate, the combination of more homes for sale and somewhat lower rates should support stronger purchase volume,” Mike Fratantoni, SVP and chief economist at the MBA.

The MBA expects mortgage rates should begin to reflect that the Fed’s moves in 2024 will be cuts – not further increases. MBA’s mortgage finance forecast projected the 30-year fixed mortgage rate to decline to 5.4% in 2024 and 5.1% in 2025.

Powell also noted in a press conference that because people locked in “very low rate mortgages, even if they want to move now, that would be hard because the new mortgage would be so expensive.”

Rates are most likely to stay elevated until 2024, said Danielle Hale, chief economist at Realtor.com, thus putting a damper on the number of home sales transactions.

“Higher mortgage rates have radically altered homebuyer purchasing power and have been a key factor in existing home sales dropping from a more than 6.5 million unit pace in early 2022  to the roughly 4 million unit pace in recent months,” Hale said. 

More importantly, higher mortgage rates continue to keep existing homeowners sidelined, with as many as one in seven buyers out of the market because they don’t want to borrow at today’s much higher rates, Hale noted. 

Short-term mortgage rate movement

In the short-term, mortgage rates are likely to bounce around a bit as the markets digest upcoming economic data, Melissa Cohn, regional vice president of William Raveis Mortgage, said. 

Incoming data of job and CPI reports next month will provide more clarity on how strong the economy is. Reports on jobs and inflation will be released on October 6 and October 12, respectively. 

“If the data reveals that inflation remains elevated and employment is still growing, then mortgage rates are likely to move up and we can look for what we hope to be the last rate hike of this cycle,” Cohn said.

The rapid ascent is mostly behind us but it will be a while before the economy sees any sign of a gradual descent, Marty Green, principal at mortgage law firm Polunsky Beitel Green, added.

“In my view, this means the mortgage interest rate environment will continue to bounce sideways through the next several months,” Green said.

Mortgage rates have been on an upward trend this year with rates in August surging to 7.23%—the highest since 2001.

Fed officials expect interest rates to be at 5.1% in 2024, up from the 4.6% projected in June. Officials expect fewer cuts in 2025 with the median estimate for the benchmark rate to be at 3.9%, up from 3.4%. 

The committee raised its projections for growth, and is looking for a better-than-expected labor market as well, with the jobless rate peaking at 4.1%, rather than 4.5%.

Pushback against further rate increases

With two more scheduled FOMC meetings in November and December, housing experts cautioned against further rate increases.

The Fed must consider the potential economic damage arising from any future rate hikes, Lawrence Yun, chief economist at National Association of Realtors, reiterated his position. 

“Commercial real estate has come under stress from higher interest rates, which will further negatively impact community banks due to their large exposure to the sector. Therefore, the Fed needs to wait and not raise rates. Possible interest rate cuts then need to be considered once inflation is fully under control,” Yun said.

Overall data point to an accelerating slowdown but continues to be mixed because of some lagging indicators, Green noted.

Unemployment rates and the CPI component lags measures of market rents by around a year.

“With rates elevated into restrictive territory, I expect the Fed to be patient and hold off on any additional increases until it becomes clearer that an additional rate hike is warranted,” Green said. 

Source: housingwire.com

Apache is functioning normally

A slight cooling in mortgage rates wasn’t enough to keep mortgage applications from sinking to a 28-year low.

Freddie Mac‘s Primary Mortgage Market Survey, which focuses on conventional and conforming loans with a 20% down payment, shows the 30-year fixed rate averaged 7.12% as of Sept. 7, down from last week’s 7.18%. By contrast, the 30-year fixed-rate mortgage was at 5.89% a year ago at this time.

“The economy remains buoyant, which is encouraging for consumers,” said Sam Khater, Freddie Mac’s chief economist. “Though while inflation has decelerated, firmer economic data have put upward pressure on mortgage rates which, in the face of affordability challenges, are straining potential homebuyers.”

Other indices showed higher mortgage rates this week.

HousingWire’s Mortgage Rates Center showed Optimal Blue’s 30-year fixed rate for conventional loans at 7.20% on Wednesday, compared to 7.07% the previous week. At Mortgage News Daily on Wednesday, the 30-year fixed rate for conventional loans was 7.33%, up from 7.06% the previous week.

Rates should continue to come down from their peaks, as the inflation and the jobs market are cooling, said Bright MLS Chief Economist Lisa Sturtevant.

However, high home prices and growing affordability challenges are the two factors weighing on prospective home buyers, said Sturtevant. She expects a market contraction this fall in the housing sector. 

MBA President and CEO Bob Broeksmit is of the same opinion:

“The housing market appears to be stuck heading into autumn, with sales activity likely to stay stagnant until housing inventory increases and mortgage rates decline to more affordable levels,” he said in a statement. 

In many markets, renting has become more affordable than owning

The balance between renting and owning in many markets has shifted toward renting as more new apartment construction comes online, noted Sturtevant. Moreover, declining rent prices will likely help move inflation back toward its target in the months ahead, added Realtor.com Chief Economist Danielle Hale.

“Looking ahead, the economy is nearing an inflection point, and mortgage rate volatility may continue until it is clear that the economic landing has actually occurred and we are not seeing a touch-and-go on growth that could reignite inflation,” said Hale.

Source: housingwire.com

Apache is functioning normally

Mirroring the trend for new home sales(+4.4%), pending home sales rose 0.9% in July, according to data released Wednesday by the National Association of Realtors (NAR). 

Year over year, pending home sales were down 14%, a smaller decrease than the 15.6% annual drop recorded in June. However, unlike the market for new homes, which has recovered convincingly above last year’s lows (+31.5%), pending home sales continue to lag behind year-ago levels (-14.0%). The NAR’s Pending Home Sales Index climbed to a reading of 77.6 in July. An index of 100 is equal to the level of contract activity in 2001.

“The small gain in contract signings shows the potential for further increases in light of the fact that many people have lost out on multiple home buying offers,” said NAR Chief Economist Lawrence Yun. “Jobs are being added and, thereby, enlarging the pool of prospective home buyers. However, rising mortgage rates and limited inventory have temporarily hindered the possibility of buying for many.”

Month over month, contract signings increased in the South and West but decreased in the Northeast and Midwest

Regionally, on a month-over-month basis, the South (95.3) and the West (61.3)  pending home sales climbed and showed the smallest declines from one year ago, according to Realtor.com Chief Economist Danielle Hale. Meanwhile the Northeast (63.2) and the Midwest (77.5) interestingly fell, even though these two regions recently boasted more robust real estate activity and stronger pricing. Compared to a year ago, pending sales activity was down by more than 20% in the Northeast region, the biggest decline in that region over the past year, noted Lisa Sturtevant, Bright MLS chief economist.

“Greater availability of homes for sale in the South and price breaks in the West were likely contributors,” said Hale.

Overall, pending home sales fell in all four U.S. regions compared to one year ago. 

Two consecutive months of increases doesn’t necessarily mean that the housing market is moving

The median existing home price crawled north of $400,000 in July while interest rates inched above 7%.

“These significant affordability challenges, as well as a continued dearth of inventory, lower the likelihood that pending sales will continue to grow,” said Kate Wood, home and mortgage expert at NerdWallet.

While it is common for pending sales to decline between June and July, this year’s situation is tougher, said Sturtevant.

 “Buyers are being forced to lengthen their home search since there are so few properties available for sale,” she said.

In fact, two out of three Mid-Atlantic buyers who purchased in July had to make an offer on more than one home before they were successful, found a  Bright MLS’s recent survey.

Sales activity is expected to remain  slow for the rest of the year, as inventory remains low and mortgage rates remain high, noted Sturtevant. 

Source: housingwire.com

Apache is functioning normally

The housing market continues to cool amid high mortgage rates, low inventory and rising property insurance rates.

The National Association of Realtors (NAR) suggested a 2.2% month-over-month drop from June, a seasonally adjusted annual rate of 4.07 million, according to its latest report.

Despite a sharp drop in home sales compared to the year-earlier period, the median existing-home sales price rose 1.9% from one year ago to $406,700. It was the fourth time the monthly median sales price exceeded $400,000, according to the NAR.

While all regions saw sales activity decline, the Northeast region saw the biggest drop in home sales, with existing-homes sales down 5.9% month over month and 23.8% compared to July 2022. The median price for a home was $467,500, up 5.5% a year ago. By contrast, the West saw existing-home sales increase 2.7% since June, to an annual rate of 770,000 in July, down 12.5% from the prior year. Median home prices there were roughly unchanged from the same period in 2022.

Elevated mortgage rates and low inventory 

As of August 17, mortgage rates surpassed 7% as U.S. bond yields hit their highest level since 2008. Average mortgage rates rose by about a half percentage point in May and June, pricing some buyers out and limiting closed sales in July. 

With supply remaining low — with less than three months of supply nationally — some buyers may continue to rent, especially in markets where rents are falling, said Lisa Sturtevant, chief economist at Bright MLS.

Despite market pressures, however, Zillow Senior Economist Jeff Tucker suggested that price trends are “swinging the pendulum of negotiating power back in favor of those buyers who remain in the hunt.”

Others say it will take time for home prices to drop. 

Realtor.com Chief Economist Danielle Hale said consumer incomes will need to catch up for the market to recover next year.

“Fortunately, inflation is ebbing, and a further decline in July asking rents will likely help keep that trend on track,” he added. 

Homes are sitting on the market somewhat longer. Properties typically remained on the market for 20 days in July, up from 18 days in June and 14 days in July 2022, according to the NAR.

Source: housingwire.com

Apache is functioning normally

Data from the July jobs report released Friday fell roughly in line with expectations. Job gains came in lower than both the 278,000 monthly average for the first half of 2023 and the 399,000 average of 2022. Total nonfarm payroll employment increased by 187,000 jobs, compared to 209,000 in June, according to data released by the Bureau of Labor Statistics. 

The unemployment rate changed little at 3.5%, compared to 3.6% in May, with the total number of unemployed persons falling to 5.8 million. The unemployment rate has remained between 3.4% and 3.7% since March 2022.

In June, job openings eased back to 9.6 million, bringing the openings rate to 5.8%. Meanwhile job quits slipped to 3.8 million or 2.4%.

“The incoming economic data continue to convey conflicting signals about the strength of the economy. Indicators of manufacturing and service sector health remain lackluster, measures of inflation have moved lower, while GDP growth in the second quarter was stronger than expected and consumer spending remains resilient,” said Mortgage Bankers Association VP and Deputy Chief Economist Joel Kan.

While job growth is weakening, and wage growth is holding steady, both metrics are still above the pace that would be consistent with the Federal Reserve’s inflation target, noted Kan. 

“However, we expect that the FOMC will hold the federal funds target at its current level given the declining trend in inflation,” he added.

The lion’s share of the job growth in June came from gains in health care (+63,000), social assistance (+24,000), financial activities (+19,000), and wholesale trade (+18,000), according to the report.

Employment in the construction industry continued to trend up in July, adding 19,000 jobs, especially in the residential construction space. The ongoing shortage of housing inventory helped spur an increase in home building and home improvement activity, Kan said. 

On average, the industry added 16,000 jobs per month in the second quarter of the year, after employment was essentially flat in the first quarter. Over the month, a job gain in real estate and rental and leasing (+12,000) partially compensated for a loss in commercial banking (-3,000).

Furthermore, residential building construction employment was flat year-over-year in July, while non-residential was up by 5.9%, according to First American Economist Ksenia Potapov. Compared with pre-pandemic levels, residential building employment is up 10%, while non-residential building is up 3%.

“Like June, the fastest monthly growth came from residential specialty trade contractors. This sub-sector comprises establishments whose primary activity is performing specific activities, such as pouring concrete, site preparation, plumbing, painting and electrical work,” said Potapov.

Employment in the professional and business services sector and in the leisure and hospitality sector changed little in July.

What’s next ?

At the July Fed meeting, the FOMC hiked the benchmark rate by a quarter percentage point, as widely expected. During the press conference that followed the meeting, Fed Chair Jerome Powell said that another rate hike in September is “certainly possible,” but so is a pause.

According to Realtor.com‘s chief economist Danielle Hale, today’s report is unlikely to sway the Fed.

“Today’s jobs report is unlikely to change those odds significantly as it is one of several pieces of additional data that the Fed will have to consider before the next decision. The Fed will see not only an additional jobs report, but also two more readings each on consumer prices and producer prices along with several other indicators before its September 19-20 meeting and decision,” said Hale.

On the housing market, she said that conditions are still favorable for households, supporting housing demand. However, climbing mortgage rates remain a substantial obstacle for homebuyers. Hale expects more “coping strategies” on the buyer’s end, such as moving further away to find affordability. Another outcome will be that affordable markets, such as those in the Midwest, will continue to see an outsized level of housing activity for both homeowners and renters, she said.

As existing homeowners remain rate-locked into their homes with no financial incentive to move, homeowners are likely to increasingly turn to renovating their homes to suit their evolving needs, added Potapov. 

Source: housingwire.com