February 7, 2023 – The period from the end of January through the beginning of February was jammed packed with data and events which will help shape 2023 from an economic standpoint.


Economic Commentary

So How Did We Make Out? The period from the end of January through the beginning of February was jammed packed with data and events which will help shape 2023 from an economic standpoint. Now the data is in the books at we can look back. First we had the first measure of economic growth for the last quarter of 2022. As we indicated previously, the growth rate of 2.9% was stronger than expected.

We then had the first meeting of the Federal Reserve for the year. It was expected that the Fed would raise rates, but continue at a moderate pace. The increase of .25% was in line with expectations and indications are that we are approaching the end of this period of tightening. Recent inflation reports showing inflation moderating have enabled the Fed to ease off the pedal a bit. The announcement after the meeting acknowledged this progress, but fell well short of declaring the war is over.  

Finally, the January jobs report was released on Friday of last week. This represents the first data of the new year. The surprise increase of over a half-million jobs and the lowest unemployment rate in over 50 years were strong indications that the job machine continues to roll on. While this is good news for the economy, it does give the excuse for the Fed to keep rates elevated for a longer period of time. Another inflation indicator, wage growth, came in at 4.4% annually, also higher than expected.  All in all, the markets seemed to be confused as to what they have seen as we kicked off 2023, as the warnings of a recession seemed to be off the table for now.

Weekly Interest Rate Overview

The Markets. Rates decreased again last week, with rates easing even more after the survey was released. But they turned very volatile after the jobs report was issued. For the week ending February 2, 30-year rates fell to 6.09% from 6.13% the week before. In addition, 15-year loans decreased to 5.14%. A year ago, 30-year fixed rates averaged 3.55%, more than 2.5% lower than today. Attributed to Sam Khater, Chief Economist, Freddie Mac, “Mortgage rates inched down again, with the 30-year fixed-rate down nearly a full point from November, when it peaked at just over seven percent. According to Freddie Mac research, this one percentage point reduction in rates can allow as many as three million more mortgage-ready consumers to qualify and afford a $400,000 loan, which is the median home price.” 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. Also showing the 30-day average of SOFR beginning January of 2023. 

Real Estate News

More than 2 million homes nationwide no longer require a jumbo loan, giving homebuyers additional inventory that is covered by a more accessible financing option, according to a new analysis by Zillow. The change is due to the Federal Housing Finance Agency’s (FHFA) recent increase of conforming loan limits to $1,089,300 in some high-cost markets. Zillow said the change may be welcome for buyers looking to purchase a home in the coming shopping season, as jumbo loans often come with additional fees and more stringent qualification standards, making them less affordable for many buyers. Compared to conforming loans, jumbo loans typically require a higher credit score versus a score that many require for a conforming loan. Jumbo loans often require 20% down, although some call for even higher down payments. Some jumbo loans also will require proof of larger cash reserves than conventional loans, up to 12 months. For the majority of the country, the conforming loan requirement increased by $79,000 — going from $647,200 in 2022 to a baseline of $726,200 in 2023. In the most expensive parts of the country, equivalent to 103 counties, the conforming loan limit was raised to $1,089,300, topping the $1 million mark for the first time. While home price appreciation has begun to plateau, home prices are still significantly higher than a year ago. Source: National Mortgage Professional

Would you design and buy a home entirely online — picking everything from the lot to the cabinets without ever seeing or touching them in person? Many people say they would, according to a company that’s leading builders in that direction. And when it came time to sell, what if you could spruce up your place to today’s standards without spending a dime of your own money until the house sold? These are two of the hottest trends in housing today. But in the case of purchasing a new house, buyers are light-years ahead of builders. “We are playing catch-up,” says Jay McKenzie of BDX, a digital marketing company for homebuilders. In a recent survey of 1,000 shoppers visiting NewHomeSource.com, a site where folks can search for newly built houses, 1 in 4 said they’d be happy to purchase their homes entirely online. Many would even pay their deposits, closing fees and design consultation charges online. And why not? After all, today’s consumers buy everything else online. Even automobiles: Customers look at the available inventory and pick the model, color and options. They might only visit the dealership to take a test drive and validate the paperwork. To catch the trend, BDX is building an e-commerce program for homebuilders. In the initial phase, buyers can put down a deposit to reserve the lot of their choice. But eventually, according to McKenzie, the program will do much more. Working with a group of builders who see the internet as the next great sales frontier, BDX has mapped out a consensus of what steps in the buying process it can bring online, and in what order. One facet will allow visitors to a builder’s website to walk through an entire model home that does not exist, eliminating the need to erect and maintain an expensive sample house. Another would create an online design center where buyers could view the myriad choices available to customize their purchases. The online center would feature hundreds of thousands of products, all with prices listed, so you can look at flooring, lighting, appliances, countertops, cabinets and more until you find exactly what you want at a price you can afford. “Everything would be in the library,” says McKenzie. Source: New Sichelman, The Housing Scene

New Western, a private online marketplace for flippers, has released a new report on the state of real estate investment throughout the country. This new analysis offers insight and uses proprietary data from New Western and surveys from its network of 150,000 buyers and found that overall buyers remained confident in 2022 and into 2023 even though housing inventory remains low and interest rates continue to rise. All-in-all, the report found that 73% of investors surveyed said their respective businesses grew between the years of 2021 and 2022, and 70% said they plan to continue investing in 2023. Additionally, 63% of investors who are interested in purchasing for the first time in 2023 said that interest rates are not a barrier for them as 59% plan to use cash reserves or private money. Further, the survey revealed a greater market share of youth moving into residential real estate investment as 7% of investors on the platform are between 18-29-year-old as are 15% of investors looking to purchase for the first time in 2023. “Even though rising interest rates present a challenge, the reality is we have a deficit of five million families that need homes,” said Kurt Carlton, President and Co-Founder of New Western. “So the demand is there, but inventory nationwide is still very low. We know there will not be enough new builds to close the gap, while the exit of iBuyers from the investor market will open up a surplus of options for individual investors to scoop up deals and provide inventory by rehabbing existing homes. Traditional market headlines will focus on a macro environment that won’t appear favorable, but there’s more to the story in 2023. Smaller investors will leverage their local know how and nimble operations to find opportunities in their neighborhoods and will continue to grow their fix-n-flip or rent businesses.” Source: DSNews

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