April 25, 2023 – Triple Whammy Time. Every week seems to be a big week when it comes to economic data and events.

Economic Commentary

Triple Whammy Time. Every week seems to be a big week when it comes to economic data and events. However, it is not often we see the triple whammy of events which will occur this week and next. This period typically occurs once or twice per year. What are these events? First, this week we will have the preliminary reading of economic growth for the first quarter of the year (GDP). This is the most important aggregate measure of the health of our economy.

We have previously mentioned that some prognosticators had predicted a recession to start in the first quarter of the year; however, these same analysts are now predicting positive growth in the first quarter. Why? One only needed to look at one data point to reverse those predictions – the growth of jobs. You can be sure that the members of the Federal Reserve’s Open Market Committee will be looking at the GDP report closely when they meet next week. Economic growth, inflation and the banking sector will all be analyzed carefully by the Fed.

To round out this eventful time, a week from Friday we will see the April jobs report. This will be the first economic data of the second quarter. While few are expecting the economy to start losing jobs this quarter, most are expecting the pace of jobs growth to slow down. If we do undergo a mild recession later this year, the pace of adding jobs would theoretically slow even more, which would further ease pressure on inflation. Get ready for a busy two weeks!

Weekly Interest Rate Overview

The Markets. Rates edged upward in the past week. For the week ending April 20, 30-year rates rose to 6.39% from 6.27% the week before. In addition, 15-year loans increased to 5.76%. A year ago, 30-year fixed rates averaged 5.11%, more than 1.0% lower than today. Attributed to Sam Khater, Chief Economist, Freddie Mac, “For the first time in over a month, mortgage rates moved up due to shifting market expectations. Home prices have stabilized somewhat, but with supply tight and rates stuck above six percent, affordable housing continues to be a serious issue for potential homebuyers. Unless rates drop into the mid five percent range, demand will only modestly recover.”  Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

Real Estate News

Millennials no longer rank as the biggest homebuying generation, falling from the top spot for the first time in nearly a decade. The National Association of Realtors (NAR) says Gen X’ers and baby boomers now make up a bigger share of homebuyers than millennials. NAR Chief Economist and Vice President of Research Jessica Lautz said millennials can no longer afford to be the largest group of homebuyers, for a variety of reasons. “Obviously inventory, housing affordability, student loan debt, childcare costs — I think the laundry list goes on and on,” Lautz said. This shift is also changing how buyers purchase homes, with many older buyers avoiding a mortgage altogether. According to NAR’s 2023 Home Buyers and Sellers Generational Trends:

• Gen X’ers — those between the ages of 43 and 57 — make up the largest share of homebuyers, at 24%.
• Younger boomers — those between 58 and 67 — account for 23%.
• Older boomers — ages 68 to 76 — hold 16% of the market.
• That equals older millennials — those 33 to 42 — while younger millennials and Gen Z now make up 12% of homebuyers.

Older buyers are also moving farther. Buyers overall moved a median of 50 miles from their current home, up from just 15 miles last year. Even as buyers get priced out of the market, Lautz said, they’re not giving up on their dream. Across all age groups, 88% of people still think buying a home is a good investment. “Even among those who are shut out of home buying and really want to enter the market, they know that this is a good financial investment,” Lautz said. “This is their American dream.” Source: NAR

Single women are achieving one of the main tenets of the American Dream – homeownership. Since 2019, the number of single, female-headed households (including widowed, separated, or divorced) has increased by 1.4 million, one million of whom are homeowners. The overall homeownership rate declined in the aftermath of the Great Recession, but has since rebounded, in part due to the growth in single female homeownership. According to an analysis of anonymized household-level survey data, the homeownership rate among single, female-headed households surpassed 52% in 2022, recovering from a post-Great Recession low point of 50% in 2016. Single women’s homeownership rate outpaced that of single men by approximately two percentage points. Analysis of the 2019 Survey of Consumer Finances data, a triennial survey that collects detailed accounts of U.S. household finances, reveals that homeowners had 40 times the household wealth of a renter—the majority of which came from their home. For single women, housing has always made up a large share of total assets. Over the last 30 years, the average single woman’s wealth has increased 88% on an inflation-adjusted basis, from just over $142,000 in 1989 to $267,000 in 2019, and housing has remained the single largest component of their wealth. In the latest available 2019 data, housing made up 49% of total assets for the average single, female-headed household, up from 44% three years prior. Housing has likely generated further wealth gains for single women since 2019, given that house prices increased over 40% between 2020 and 2022. Typically, the lower the income of a home-owning household, the greater the share of its wealth that stems from homeownership. This pattern is no different for single, female-headed households. Housing wealth made up 68% of total assets in 2019 among single women in the lowest income quintile, while it made up only 22% among single women in the top income quintile. The difference in the composition of wealth means that fluctuations in home prices will have a much bigger impact on the wealth of lower-income, single, female-headed households. Source: DSNews

According to the March 2023 Monthly Housing Market Trends Report, the inventory of homes for sale continued to grow higher than last year but this pace of growth declined slightly and inventory remained constrained compared to pre-pandemic levels. Home sellers were listing in lower numbers than previous years but those who listed their homes gradually adjusted to softer market conditions, as growth in the median list price continued to slow. Despite slowing listing price growth and increased price reductions, high interest rates continued to create an affordability challenge for buyers as fewer homes went under contract compared to the previous year. There were 59.9% more homes for sale in March compared to the same time in 2022. This means that there were 211,000 more homes available to buy this past month compared to one year ago. The growth rate in inventory began to slow slightly, as fewer potential sellers opted to list their home for sale. This means that there were still fewer homes available to buy on a typical day in March than there were a few years ago. The total number of homes for sale, including homes that were under contract but not yet sold, increased by 9.3% compared to last year. Growth decelerated from last month’s 13.3% growth rate as fewer potential sellers listed homes. The growth rate in the total number of homes for sale also remains lower than active inventory because there were still fewer homes under contract (pending listings) than there were last year. Source: Realtor.com