February 11, 2025 – A Big Ho-Hum?

Economic Commentary

By all rights, we should have seen extreme market volatility during the past several weeks.  After all, we have a new President implementing many new initiatives – from back to the office for federal employees to a constant threat of tariffs toward various countries.  Yet, the stock and bond markets have been relatively quiet during this implementation period.  Why is that?  Perhaps it is because none of this activity comes as a surprise and the markets had plenty of warnings and time to acclimate to these actions. Or perhaps they don’t see major movements within the economic world caused by these activities. Certainly, we won’t know the answer to these questions for some time — especially with recently announced delay of tariff implementation.

Last week we saw the release of the January jobs report. The increase of 143,000 jobs was slightly less than expected following a very strong month of December. The previous two months of data were revised upward by 100,000 jobs, making 2024 even stronger than originally reported. The unemployment rate moved down to 4.0% from 4.1% the previous month. In addition, wage growth increased by 0.5% monthly and 4.1% annually. Overall, this was seen as a mixed report to start the year with disappointing inflationary numbers.

We move from the focus on wage growth to the release of the January inflation data this week.  The consumer and producer price indices are released tomorrow and Thursday.  Because there is no meeting of the Federal Reserve’s Open Market Committee this month, the Fed will have two months of data to consider when they meet in March.  That includes two employment reports and two sets of inflation data—along with several other economic indicators.  This extra time and data to consider should make the Fed decision making process interesting – especially regarding that the aforementioned Presidential initiatives would have had more time to percolate within the economy by then.

Weekly Interest Rate Overview

The Markets. The Freddie Mac rate survey indicated that mortgage rates were moderately lower in the past week. According to the survey, 30-year fixed rates decreased to 6.89% from 6.95% the week before. In addition, 15-year loans fell to 6.05%. A year ago, 30-year fixed rates averaged 6.64%, 0.25% lower than today. Attributed to Sam Khater, Chief Economist, Freddie Mac, “The 30-year fixed-rate mortgage decreased this week, now averaging 6.89%. Mortgage rates have been stable over the last month and incoming data suggest the economy remains on firm footing. Even though rates are higher compared to last year, the last two weeks of purchase applications are modestly above what was seen a year ago, indicating some latent demand in the market.” 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

As home inventory begins to grow and buyers regain some advantage in the market, sellers may consider offering more in negotiations to make the deal more attractive and get to the closing table. “With where interest rates are, buyers can be deterred if they don’t feel like they’re getting some kind of deal,” says Cooper Thayer, ABR, broker-associate at Keller Williams Action Realty in Denver. “We’re definitely advising sellers that they can expect to offer a concession to help a buyer get into their home specifically—if it’s not a super-hot product.”  A concession is when the seller covers certain costs associated with the purchase of the home. Concessions can make homeownership more accessible for buyers by reducing upfront costs. Seller concessions are often used in markets where buyers have more negotiating power or when the seller needs to stand out in a competitive environment. NAR data found that “given buyer demand and lack of housing inventory,” only 24% of sellers nationwide offered a concession in 2024, down from 33% the previous year. While the 2025 housing market remains to be seen, several signs point to a healthier outlook: both pending home sales and existing-home sales jumped in November and there are more homes on the market compared to a year ago. “Sellers do have to differentiate themselves in the market now with the levels of inventory that we’re at,” Thayer says.  Concessions can cover a wide range of costs and closing costs were the most common concession in 2024, NAR data shows. That makes sense in markets with a high volume of first-time buyers.  “First-time home buyers are huge in our area,” Scott Robins, an associate broker at Summit Sotheby’s International Realty in Salt Lake City, says. Source: Realtor Magazine

Just about every time a benefactor provides gift funds for a home purchase, two questions come up. Do I have to report the gift to the Internal Revenue Service? & Do I have to pay tax on the gift?  The short answer for Question 1 is yes, in most cases you are supposed to report the gift. For Question 2, contributors likely don’t have to pay tax unless they are very, very wealthy and the recipient typically does not have to pay tax as well. A mortgage borrower may use funds received as a personal gift for some or all the down payment, closing costs and cash reserves for a primary residence or second home in most cases.  A paper trail evidencing the gift from the benefactor is also required. For example, wire transfer evidence from the donor’s account to the borrowers’ account or the wire being sent directly to the escrow company.  Typical patrons include spouse, parent, godparent, relative, unmarried partner, former relative, relative of a domestic partner and legal guardianship.  The annual gift tax exclusion is $19,000 for 2025. For example, a parent gifts $19,000 to a child. This means no tax and no gift tax return, according to Rod Stern, partner, Murtaugh, Treglia, Stern & Deily LLP.  Both parents can give $19,000 to the child for a total of $38,000 without having to report the gift or pay taxes. If the child is married, each parent can give $19,000 to each “child,” meaning the spouse and the child can receive as much as $76,000, Stern said. “Any married couple (can do this) for any married couple. Source: Jeff Lazerson for Pasadena Star-News

Moving is still a major component of the American Dream, according to a recent analysis by moveBuddha. This is because people are looking for better lifestyles, more affordable housing, and financial security. But as migration rates continue to decline, fewer Americans than ever before are able to fulfill their aspirations of relocating. Despite historically low rates of movement, a large percentage of Americans say they would like to move. Americans are asked in the study if they intend to relocate in 2025, where they would like to relocate, and why.  The “American Dream” vs. reality: While more than one-third of respondents wish to move in 2025, less than 10% actually will. Up to 35% of the 1,250 poll participants said they were planned to migrate in 2025. In line with the decades-long trend of declining migration, the actual rate of movements will most likely be closer to 8 or 9% after the year is out.  Out-of-state moves make up around one in four planned moves. Respondents who are making plans to relocate are searching farther for more “novel experiences.”   Approximately 29% of respondents said they would give priority to suburban locations in a hypothetical transfer, regardless of whether they intend to migrate in 2025. Rural places (21%) and large metro areas (14%) would follow. In this case, survey participants’ migration goals and reality coincide.  Meanwhile, when Americans are thinking about moving, they are more and more driven by a variety of lifestyle aspects. These include the social (being close to friends and family, 67%) and cultural (64%), as well as the environmental (having more access to nature, 76%) and living space (70%), as well as a warmer climate (67%).  In addition, Americans in 2025 are more interested in relocating where their money will buy them a higher quality of life than they are in relocating to earn more money.  Source: MortgagePoint