April 8, 2025 – Uncertainty

Economic Commentary

When it comes to economic performance, the term uncertainty is a dirty word.  The financial markets do not like uncertainty.  The consumer does not like uncertainty.  Yet, we are hearing that word over and over again.  The Federal Reserve is uncertain of how tariffs will affect inflation.  The markets are uncertain about which tariffs will be implemented; hence we are experiencing somewhat of a rollercoaster performance by stocks. Consumer confidence has fallen significantly – again because of uncertainty.

To some extent, any time there are changes this will create uncertainty.  Not all uncertainty is justified. For example, if you work for the Federal Government, it is very likely that you are experiencing great uncertainty regarding the future of your position.  On the other side of the coin, certain businesses stand to gain as a result of these new policies. What we can all hope for is a settling down of the markets and commerce after a transition period. We are not saying that it will be business as usual.  But life will go on – it always does.

Speaking of positions, last week we had the jobs report. Though still early, it is the first report which covers the reductions in Federal employment.  How did we do?  In March, the economy added 228,000 jobs, which was more than expected. The unemployment rate moved up slightly to 4.2%. The previous two months of data were revised downward by 48,000 jobs, lowering the positive impact of the higher rate of hires for March.  Wage growth increased by 0.3% monthly and 3.8% annually, signaling decent news on the inflation front.  All in all, this was seen as a solid report

Weekly Interest Rate Overview

The Markets. The Freddie Mac rate survey continued to be stable in the past week, though the numbers did not include the reaction to the tariff announcement. According to the survey, 30-year fixed rates decreased slightly to 6.64% from 6.65% the week before. In addition, 15-year loans fell to 5.82%. A year ago, 30-year fixed rates averaged 6.82%, slightly higher than today. Attributed to Freddie Mac: “Over the last month, the 30-year fixed-rate has settled in, making only slight moves in either direction. This stability is reassuring, and borrowers have responded with purchase application demand rising to the highest growth rate since late last year.” 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

Homebuyers and sellers have been slow to re-enter the market, but lower mortgage rates could change that in the coming months. Mortgage rates dipped by about a quarter of a percentage point in February and have continued their downward trend into March, hitting levels not seen since December, according to Zillow’s latest housing market report. The shift is expected to provide relief to prospective buyers and encourage more homeowners to list their properties. The report also pointed to slowing home value growth. Typical home values increased by 2.1% year over year – the slowest pace in 18 months and the weakest for any February since 2012. Pending listings declined nearly 8% annually, but they remain about 10% above pre-pandemic levels. Zillow research suggests that sellers could still command higher prices through July, even with tempered demand. “Affordability is still a massive challenge for those who have been waiting to buy a home, but the lower rates we’ve seen recently are taking the edge off,” Zillow chief economist Skylar Olsen said in the report. “Rate dips tend to energize buyers and sellers both; if they continue or hold, we should see more activity. “Economic uncertainty is a counterbalance, one that will be felt in some areas of the country more than others. People tend to shelter in place when the future of their job or industry is uncertain.”   Source: Mortgage Professional America

The median age of U.S. homes is now 45 years — think of a house built in 1980 — which is four years newer than the median home age a decade ago. But that’s just the big picture; dial in more closely, and you’ll find plenty of different stories across various regions of the housing market.  A new study from PropertyShark, an online real estate database and property research tool, provides a glimpse into where homebuyers are snapping up newer houses, and where more newer houses are being built (and where they’re not).  In the most drastic changes, the median home age dropped 25 years in Williston, N.D., and Farmers Branch, Texas, while it increased by seven years in Passaic City, N.J.  “Of course, construction of new housing was the main driver of decreasing median homes’ ages, spurred by existing shortages, growing populations, and migration trends,” the study authors wrote. “In other locations, median home ages were brought down by the redevelopment and replacement of aging housing stock, sometimes through gentrification or government programs.” The study examined homes in all 1,839 U.S. cities and towns with at least 25,000 residents.  What’s behind this “Benjamin Button”-like decreasing age of homes across the country? PropertyShark points to various causes:  new construction, which is more pronounced in certain areas of the country; redevelopment of outdated housing, where builders either buy and demolish older homes to build new ones or by repurposing existing structures; urban sprawl, where newer construction of various types spreads out from major metro areas; gentrification, which is when wealthier residents and businesses move into historically low-income or working-class neighborhoods; migration patterns, which have been favoring larger cities and Sunbelt states; and population growth, where the U.S. population stood at 320.7 million in 2015 and is projected to grow by nearly 30 million to about 350 million by the end of this year.  Source: National Mortgage Professional

ATTOM released its year-end 2024 U.S. Home Flipping Report, which shows that 297,885 single-family homes and condos in the United States were flipped in 2024. That was down 7.7 percent from 322,782 in 2023 and 32.4 percent from a recent peak of nearly 441,000 reached in 2022. The report further reveals that as the number of homes flipped by investors declined, so did flips as a portion of all home sales, from 8.1 percent in 2023 to 7.6 percent last year. In one potential bright spot for the home-flipping industry, profits and profit margins rose slightly in 2024 on typical buy-renovate-and-resell projects. But margins again remained at one of their low points over the past 10 years. Gross profits on typical home flips in 2024 increased to $72,000 nationwide (the difference between the median sales price and the median amount originally paid by investors). That was up from $67,846 in 2023 and translated into a 29.6 percent return on investment compared to the original acquisition price. The latest nationwide return on investment (before accounting for mortgage interest, property taxes, renovation expenses and other holding costs) was up from 28.6 percent in 2023 and from 29.4 percent in 2022. But it remained barely more than half of the 54.2 percent peak over the past decade in 2016. Investors saw their profit margins tick upward as the median price of the homes they flipped increased slightly faster than the median price they had paid to purchase properties – 3 percent versus 2 percent.  Source: ATTOM