February 27, 2024 – This Year We Leap. Baby Boomers are making their presence felt.

Economic Commentary

This year is a leap year. The one year in four that we have an extra day added to the calendar. Well, not exactly one in four, because when it comes to the earth orbiting the sun, it is not exactly an even number. It takes the earth 365 days 5 hours, 48 minutes and 56 seconds to complete one orbit and adding one day every four years approximately does the trick. Though, skipping the leap year in 2100 will make the numbers work more closely in the long run. That is something the vast majority of us won’t get to experience in our lifetimes, but more likely our kids or grandkids hopefully will.

Still, even with one extra day, February is a short month. It means that economic reports will be crammed into fewer days. This week, the reports on personal spending and the Personal Consumption Expenditures Inflation Index (PCE) will be highlighted. With regard to the employment report, it will actually come out later in March because the first Friday in March is the first following a short month. With the Federal Reserve meeting the 19-20 of March, the March 8 jobs report and the March 12 Consumer Price Index release will be the freshest data the Fed has on hand to determine whether to hold on rates changes once again, or lower rates for the first time in four years.

As we have said previously, it is not likely the Fed will lower rates in March — especially considering the hot inflation reports that were recently released. It would likely take some pretty dramatic reports to change that trajectory. On the other hand, this is a leap year and the last time the Fed did lower rates was the last time there was an extra day in February. Could there be some karma at work here? We think it would take quite a leap of faith to come to that conclusion, but you never know! 

Weekly Interest Rate Overview

The Markets. Mortgage rates rose for the third-straight week as the markets contemplated how long the Fed will hold off on lowering rates in light of stronger inflation data and economic growth. For the week ending February 22, 30-year fixed rates rose to 6.90% from 6.77% the week before. In addition, 15-year loans increased to 6.29%. A year ago, 30-year fixed rates averaged 6.50%, less than 0.50% lower than today. Attributed to Sam Khater, Chief Economist, Freddie Mac, “Strong incoming economic and inflation data has caused the market to re-evaluate the path of monetary policy, leading to higher mortgage rates. Historically, the combination of a vibrant economy and modestly higher rates did not meaningfully impact the housing market. The current cycle is different than historical norms, as housing affordability is so low that good economic news equates to bad news for homebuyers, who are sensitive to even minor shifts in affordability.” 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

Although U.S. women still trail men when it comes to pay, they are pulling ahead financially in one important way of building wealth: homeownership. A recent study from LendingTree shows that single women own 2.7 million more homes than their male counterparts, with roughly 13% of those women holding the titles to their homes, compared to 10% of men. “A home for most people is going to represent the biggest portion of their overall net worth,” Jacob Channel, senior economist at LendingTree and author of the report, told CBS MoneyWatch. “Owning a home helps you access considerably more wealth.” Women have historically faced social and economic barriers to wealth creation, and they continue to earn an average of just 82 cents for every dollar men earn for the same work, according to the Pew Research Center. The study is based on an analysis of data from the U.S. Census Bureau’s 2022 American Community Survey and accounts for demographic factors including homeowners’ age, income, education and racial background. According to the study, single female homeowners outnumber their male peers in 47 states. Home equity accounts for nearly 28% of household wealth on average, according to a 2020 U.S. Census Bureau report. Channel notes that most homes are owned by couples and families. And overall, American women’s net worth still falls well below that of men. According to the Federal Reserve Bank of St. Louis, the median wealth of women-headed households is 45% lower than those headed by men. Source: CBS News

A significant shift is underway as sellers, particularly Baby Boomers, are making their presence felt. Representing a substantial 52% of all sellers, this generation, born between 1946 and 1964, is poised to fuel the housing supply with their cash-flush status as they approach retirement or seek to downsize. The implications of this demographic trend highlight the benefits it brings to the market. Baby Boomers, a generation known for their sheer size and significant economic influence, are now reaching a stage in life where many are considering selling their homes. According to the National Association of Realtors (NAR), Baby Boomers account for over half of all home sellers, signaling a major demographic shift in the real estate market.

• Increased Housing Supply. One of the most notable benefits of Baby Boomers entering the selling market is the surge in housing supply. With a large portion of this generation owning homes that have appreciated in value over the years, their decision to sell contributes to a more robust inventory of available properties. This increased supply helps alleviate the ongoing housing shortage in many regions, providing more options for prospective buyers.
• Cash-Flush Sellers. As Baby Boomers have matured in their careers and potentially paid off mortgages, many find themselves in a financially advantageous position. This cohort often has significant equity in their homes, which translates to sizable profits upon sale. These cash-flush sellers inject liquidity into the market, stimulating economic activity and driving further growth.
• Diverse Housing Options. The diversity of housing options is another notable benefit of the Baby Boomer selling wave. As this generation transitions into retirement or seeks to downsize, they often gravitate towards different types of properties. This shift opens opportunities for a wider range of buyers, from young professionals looking for starter homes to empty nesters seeking condominiums or retirement communities. Source: ActiveRain