January 9, 2024 – All About Jobs

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Economic Commentary

Want to know how strong the economy will be in 2024? Well, it is all about jobs. A healthy economy creates more jobs and the more jobs created, the healthier the economy becomes because those with jobs spend more every month. In 2023, the economy was predicted to evolve into a recession. That never happened. Why? The economy created between 2.5 and 3.0 million jobs in 2023. That is an average of over 200,000 jobs per month. Analysts have indicated that somewhere between 100,000 and 150,000 jobs need to be created monthly to maintain steady growth.

Certainly, the pace of job creation has slowed somewhat since the beginning of 2023 when we added over 300,000 jobs per month during the first quarter of the year. However, after Friday’s announcement of 216,000 jobs created in December, we have added over 150,000 jobs during the last quarter of 2023. The low unemployment rate of 3.7% is an indication that the job market is still healthy going into 2024. As a matter of fact, the Federal Reserve would like the market to be a bit less healthy in order to ease the threat of inflation, so that they are more comfortable lowering interest rates as the year progresses.

Lowering interest rates will contribute to a healthier economy in 2024 as lower rates will encourage more consumer spending. Though, like the job market, the Fed would prefer consumer spending to grow modestly this year so that this spending does not exacerbate inflation. Thus, we see 2024 as a major balancing act. Moderate job and consumer spending growth will keep the economy healthy while inflation continues to improve. That would be the ultimate definition of the coveted “soft landing.” Our fingers are crossed for no recession or rekindling of inflation for 2024.

Weekly Interest Rate Overview

The Markets. As the new year arrived, mortgage rates paused their downward movement leading up to the release of the December jobs report.  For the week ending January 4, 30-year fixed rates rose one tick to 6.62% from 6.61% the week before. In addition, 15-year loans decreased to 5.89%. A year ago, 30-year fixed rates averaged 6.42%, less than 0.25% lower than today. Attributed to Sam Khater, Chief Economist, Freddie Mac, “Between late October and mid-December, the 30-year fixed-rate mortgage plummeted more than a percentage point. However, since then rates have moved sideways as the market digests incoming economic data. Given the expectation of rate cuts this year from the Federal Reserve, as well as receding inflationary pressures, mortgage rates will likely continue to drift downward as the year unfolds. While lower mortgage rates are welcome news, potential homebuyers are still dealing with the dual challenges of low inventory and high home prices that continue to rise.”  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

In their ongoing quest for affordability, more buyers are turning to the purchase of mortgage points to pull down the interest rates on their loans, according to a new study of Home Mortgage Disclosure Act (HMDA) data by Zillow. Mortgage points, also known as rate buydowns and discount points, are an option available to homebuyers who wish to reduce their monthly payments by “buying down” the interest rate on their loan. The points are often presented in the form of an upfront fee. Essentially, borrowers prepay interest to lower their rates and, therefore, the amount due each month for the life of the loan. The 2-1 buydown, a similar program that has also gained traction, lowers the interest rate on a loan for the first two years before reverting in the third year. Usually, the rate is two percentage points lower in the first year and one percentage point lower in the second. Nearly 45% of conventional primary home borrowers purchased mortgage points in 2022, Zillow found. That’s far more than in recent history, considering that interest rates from 2019 to 2021 were historically low. Only 27.3% of homebuyers opted to purchase points in 2019, while 28.4% and 29.6% of buyers in 2020 and 2021, respectively, bought mortgage points. As in previous years, borrowers in 2022 were more likely to buy points to purchase homes in the top- and middle-price tiers, likely because decreasing your interest rate has a larger effect if the principal on your mortgage is higher. Source: Scotsman Guide — Editor’s Note: These numbers will be much higher in 2023 as rates were even higher last year compared to 2022.

Hundreds of thousands of neighborhoods in the United States are seeing population decline as a result of flooding, new research suggests. Those neighborhoods are often located in areas that are growing in population overall. The results underscore how flood risk – which is growing due to climate change – is already affecting where Americans live. “People are being more selective about where they live,” says Jeremy Porter, one of the authors of the study and a researcher at the First Street Foundation, a research and advocacy organization that publishes analyses about climate hazards including flooding. The study was published in the journal Nature Communications. Americans are flocking to some of the most flood-prone parts of the country. At the same time, heavy rain and sea level rise from climate change means floods are getting larger and more frequent. As a result, the cost of flood damage in the U.S. has skyrocketed in recent years. At the same time, people buying homes are increasingly aware and wary of flood risk. More and more states are requiring that homebuyers receive information about whether a house has flooded before, and whether it is likely to flood in the future. Some real estate listing sites include information about flood risk. But if people are trying to avoid moving to flood zones, why are so many people ending up in the most flood-prone parts of the country? The authors of the new study offer some new insight. The results suggest that the influx of new residents into flood-prone cities such as Miami and San Antonio may obscure the millions of people who are moving more locally to get away from the lowest-lying neighborhoods in those cities. Moves to the Sun Belt “are a macro migration trend,” explains Porter. “But they’re dwarfed by the amount of people that move within their same city. Keep the same job, keep the same friends, stay close to family.” Source: National Public Radio

Gen Z, now aged between 11-26-years-old (this report only takes into account those 18-26), moved at rates far above national averages in 2023 according to HireAHelpers’ year-end report based on their internal data. Coming into headlines more frequently nowadays, they seem to be more mobile as they come-to-age based on a litany of factors including workplace habits, home ownership ambitions, political views, and the use of remote work technology. That has led Gen Z to be more mobile, even when facing less favorable economic conditions than previous generations, including poor housing affordability, high rent, and mounting student loan debt. This phenomenon is still occurring as record numbers of young adults are staying put and living with their parents or other family members. When looking at the moving data, however, a different trend emerges. Despite making up just 12% of the population, Gen Z adults (aged 18 to 26) accounted for 17% of all moves that took place in America this year. This number is well above the national average of 8%. By comparison, Millennials moved at a rate of 11%, Gen X (5%), and Boomers (3%). Not only are Gen Z the most mobile generation, but they’re also the ones bucking the overall downward trend in moving. After a drop in 2020, which was likely caused by the COVID-19 pandemic, more and more Gen Z adults have been moving each year. And they’re the only generation to do so. Source: MReport

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