December 3, 2024 – A Better Picture
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Economic Commentary
We have had so many months of jobs gains that the monthly employment report has held little intrigue lately. As a matter of fact, the ancillary numbers such as wage inflation have garnered more attention than the number of jobs gained in some circles. For at least one month, this is no longer the case. In October, the number of jobs added was a paltry 12,000, the lowest number by far since the pandemic-induced recession. The average monthly gain for the previous 12 months was 194,000 according to the Bureau of Labor Statistics.
Even though the pace of job growth was expected to slow from the torrid pace we have seen in the past three-plus years, few were expecting this paltry increase – even with temporary factors considered. These temporary factors included two major storms and two major labor strikes as well. Though the numbers again may be affected by some of these factors, the November report released this week should give us a clearer picture as to how much the labor market is slowing. And the pace of wage inflation will still be an important component of the equation.
Meanwhile, December is always an important month for the economy as the holiday shopping season will be going full throttle. This will occur without the uncertainty of who will occupy the Oval Office, but with plenty of uncertainty with regard to the upcoming transition. Throughout the past few years, the low unemployment rate and consumer spending has fueled economic growth – as well as inflation. If consumers continue to open their wallets, the economy should end 2024 on a positive note. Especially if the Fed acts to lower rates again in December.
Weekly Interest Rate Overview
The Markets. According to Freddie Mac, mortgage rates decreased last week as the market’s volatility eased. Rates continued to move lower as the holiday approached. 30-year fixed rates decreased to 6.81% from 6.84% from the week before. In addition, 15-year loans increased to 6.10%. A year ago, 30-year fixed rates averaged 7.22%, just under 0.50% higher than today. Attributed to Sam Khater, Chief Economist, Freddie Mac, “The 30-year fixed-rate mortgage moved down this week, but not by much. Rates have been relatively flat over the last few weeks as the market waits for more clarity on specific economic policies. Potential homebuyers are also waiting on the sidelines, causing demand to be lackluster. Despite the low sales activity, inventory has only modestly improved and remains dramatically under-supplied.” 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 Federal Housing Finance Agency (FHFA) announced the maximum conforming loan limits for conventional conforming loans to be acquired by Fannie Mae and Freddie Mac in 2025. In most of the nation, the 2025 maximum conforming loan limit for one-unit properties will be $806,500, an increase from $766,550 in 2024. According to FHFA’s seasonally adjusted, expanded-data HPI, house prices increased 5.21%, on average, between the third quarters of 2023 and 2024. Therefore, the baseline maximum conforming loan limit in 2025 will increase by the same percentage as required by the Housing and Economic Recovery Act (HERA). For areas in which 115 percent of the local median home value exceeds the baseline conforming loan limit, the maximum loan limit will be higher than the baseline loan limit. The new ceiling loan limit for one-unit properties in most high-cost areas will be $1,209,750 — or 150 percent of $806,500. As a result of generally rising home values, the increase in the baseline loan limit and the increase in the ceiling loan limit, the maximum conforming loan limit will be higher in 2025 in all but six counties or county equivalents in the U.S. Source: FHFA
According to the National Association of Realtors‘ (NAR) most recent quarterly report, home prices increased in about 90% of metro markets (196 out of 226, or 87%) during Q3 of 2024. Compared to 13% in Q2, just 7% of the 226 metro regions under study saw double-digit price increases within the same time frame. “Home prices remain on solid ground as reflected by the vast number of markets experiencing gains,” said Lawrence Yun, Chief Economist of NAR. “A typical homeowner accumulated $147,000 in housing wealth in the last five years. Even with the rapid price appreciation over the last few years, the likelihood of a market crash is minimal. Distressed property sales and the number of people defaulting on mortgage payments are both at historic lows.” The typical single-family existing-home price nationwide increased 3.1% to $418,700 from a year ago. The national median price rose 4.9% year-over-year in the previous quarter. With a 0.8% year-over-year price increase, the South had the highest percentage of single-family existing-home sales (45.1%) among the major U.S. regions in Q3. Additionally, prices rose 1.8% in the West, 4.3% in the Midwest, and 7.8% in the Northeast. Gains of at least 10.6% were recorded in the top 10 metro areas with the biggest year-over-year median price increases, which can be impacted by the kinds of properties sold during the quarter. Source: NAR
Female homebuyers who purchase homes on their own have emerged as a formidable housing force, with their growth trajectory as a share of the market rising faster than that of their male counterparts, according to software firm Maxwell. Even with the difficult real estate landscape of the past couple of years, female homebuyers who apply for mortgages on their own have grown to comprise 18% of market share, per Maxwell’s numbers. “The data on single women homebuyers is empowering,” says Melissa Langdale, president and chief operating officer of The Mortgage Collaborative. “It clearly shows that women value homeownership and aren’t waiting on a life event like marriage or the perfect economic conditions to purchase a home. They’re being practical and are willing to make compromises to seek out affordable solutions for their single-income budget.” Maxwell’s recently released Single Women Home Buyer Report, based on a survey of 1,000 respondents, dug into the demographics of the emergent cohort, revealing that 51% buy single-family homes and 40% buy because of high rent prices. Twenty percent buy properties to be deployed as long-term rentals. Thirty-five percent are between 25-34 years of age, with another 24% between 35-44. Over half (55%) of female borrowers who apply singly are 34 or younger, compared to just 40% of male borrowers. Notably, women who buy homes on their own aren’t necessarily single; one-third have a partner or are married but buy alone, either because they’re the breadwinner or have strong credit and savings. Women who buy alone tend to leverage low downpayment options more than men: 20% put 3.5% of less down (compared to 14% of men) and 60% put less than 10% down. And 64% move to a more affordable area to buy, compared to just 41% of men. “Today, we’re seeing women adopt a ‘whatever it takes’ attitude towards homeownership,” said Amy Jo Plummer, Maxwell’s vice president of customer success. “Because many recognize their earnings don’t stack up to their male counterparts, women buying on their own are finding alternative paths to secure financing, whether that’s lower money down options, first-time homebuyer programs or other creative methods.” Source: Scotsman Guide