April 9, 2024 – Another Month Strong of Jobs Gains.


Economic Commentary

If the Federal Reserve is waiting for the economy to slow down before it eases interest rates, there is no doubt that they are watching the monthly jobs report for a significant clue. Thus far this year, there has been no sign that the economy is producing less jobs each month. The pace of the creation of jobs is fueling consumer spending which in turn is fueling a healthy economy. Thus, Friday’s jobs report was watched intensely by members of the Fed, as well as every market analyst in the country.

So how did we fare? Last month we added 303,000 jobs and the headline unemployment rate fell to 3.8%. In addition, the previous two months of job gains were revised upward by 22,000 jobs. Another important indicator the Fed is watching is wage inflation. Last month wages grew 0.3 % from the previous month and 4.1% year-over-year. Subject to further revisions, the economy now has added over 800,000 jobs in the first quarter of the year. How strong is this jobs market?

The economy has added jobs for 39 consecutive months, marking the fifth-longest period of job expansion on record. The unemployment rate has been below 4.0% for 26 months in a row, the longest streak since the late 1960s. The markets have been expecting the Fed to lower interest rates at their June meeting. However, this benchmark has been in question based upon recent inflation numbers and Friday’s jobs report makes a decrease even less likely. Next on the agenda? You guessed it – the consumer and producer price indices. The CPI will be released tomorrow.

Weekly Interest Rate Overview

The Markets. Mortgage rates rose slightly in the past week, as the markets were absorbing the previous week’s end of the month strong data and the jobs report approached. Certainly, Friday’s jobs report will not help the quest for lower rates. 30-year fixed rates rose to 6.82% from 6.79% the week before. In addition, 15-year loans decreased to 6.06%. A year ago, 30-year fixed rates averaged 6.28%, 0.54% lower than today. Attributed to Sam Khater, Chief Economist, Freddie Mac, “Mortgage rates showed little movement again this week, hovering around 6.8 percent. Since the start of 2024, the 30-year fixed-rate mortgage has not reached seven percent but has not dropped below 6.6 percent either. While incoming economic signals indicate lower rates of inflation, we do not expect rates will decrease meaningfully in the near-term. On the plus side, inventory is improving somewhat, which should help temper home price growth.” 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

The traditional American dream of homeownership continues despite some challenging years in the housing market. Most Americans believe that owning a home is still attainable, but for many would-be homebuyers, it depends on an interest rate reduction to less than 6%, according to a recent Realtor.com survey. While most generations share this opinion, Millennials and Gen Z respondents indicate they would be slightly more flexible, with nearly half (47%) and 37%, respectively, saying they would still buy a home if rates rose over 8%. “The current market is very different from where it was before the pandemic, but many Americans still have a positive outlook towards achieving the dream of buying a home,” said Danielle Hale, Chief Economist at Realtor.com. “This optimistic lens may shape the way younger shoppers in particular view mortgage rates. Although mortgage rates are up from a year ago, they have declined from their peak. While some home shoppers and sellers are likely holding out for even lower rates, the improvement in affordability as rates fall has already ushered in an uptick in listings and contract signings.” Although many Americans still want to buy a home, they are waiting for mortgage rates to decrease in order to make that happen. If interest rates fall below 6%, four out of ten Americans who plan to purchase a home in the next year would think it is feasible. Most notably, some 18% of aspiring homeowners believe that purchasing is doable if the mortgage rate falls below 7%—a barrier that was exceeded in late 2023; another 22% of consumers believe they can purchase if the rate falls below 6%; 32% would enter the market if rates dropped below 5%; an additional 18% are searching for mortgage rates below 4%; and the remaining 9% of respondents are unsure of what rate would enable them to purchase. Source: DSNews

Despite elevated interest rates and tight inventory, the national Hispanic homeownership rate reached 49.5% in 2023, with a net gain of 377,000 Hispanic owner households from the previous year. In total, more than 9.5 million Hispanic households own their home, the National Association of Hispanic Real Estate Professionals (NAHREP) said in its 2023 State of Hispanic Homeownership Report. In 2023 alone, Latinos saw a net gain of 450,000 new households and were responsible for 25.5% of overall U.S. household formation growth. And the 49.5% homeownership rate was close to a record high in census data going back to 2000. Going forward, NAHREP projects the total number of Latino households to increase as young Latinos move out of their parents’ homes and form new households. About 29.5% of Latinos are under the age of 18, with 2.2 million turning 18 within the next two years. Interest rates and rising prices were barriers to Hispanic homeownership in 2023. “While rising interest rates affected all homebuyers, this impact was more pronounced among Hispanic households, many of whom are first-time buyers with lower median incomes and who live in higher priced markets,” according to NAHREP. In the face of affordability challenges, Latino migration to lower-cost areas and the use of co-borrowers were more common in 2023. Co-occupant, co-borrowers were more common in places where homes can be adapted to comprise multiple living spaces. In other cases, family members or friends agreed to serve as a co-signer for a buyer with the intention of coming off the loan at some point in the future. “In the past, we never talked about co-borrowers — obviously, husband and wife, you know, that’s your co-borrower,” said Edgar Garcia, a real estate agent at Revolve Realty in El Paso, Texas. “But last year I had co-borrowers where the dad was jumping in, the mom jumping in. I’ve even seen grandparents jump in. So, I did see that spike this year.” Source: HousingWire

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 percent in 2022, recovering from a post-Great Recession low point of 50 percent in 2016. Single women’s homeownership rate outpaced that of single men by approximately two percentage points. There is good reason to celebrate this rebound, as housing wealth is a primary driver of wealth creation in the United States. Analysis of the 2019 Survey of Consumer Finances data (latest available), 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. Between 2016 and 2019, housing wealth was the single biggest contributor to the increase in net worth across all income groups, a period during which annual house price appreciation averaged 5.5 percent. 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 percent 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 percent of total assets for the average single, female-headed household, up from 44 percent three years prior. Housing has likely generated further wealth gains for single women since 2019, given that house prices increased over 40 percent between 2020 and 2022. Source: First American Corporation



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