June 27, 2023 – Recession Update. Just about every market analyst has been predicting a recession sometime in 2023.

Economic Commentary

Recession Update. Just about every market analyst has been predicting a recession sometime in 2023. Well, here we are ending the first half of the year and we have seen very few signs of a recession. To the contrary, as of last month the economy had added almost 1.5 million jobs in the first five months of the year – on pace for 3.5 million jobs for the year. And job openings are currently hovering around 10 million. That is a lot of jobs to fill.

As the solid economic news has continued to roll in, the market analysts have pushed the recession forecast down the road a bit and have added the phrase “mild recession” to their analyses. Even we have made the statement that job growth cannot continue at this pace, because the unemployment rate is so low. This is not really much of a projection, just logical thinking in this regard.

But we also would remind you of another statement we made months ago – you can’t have a recession if the economy is adding hundreds of thousands of jobs each month. The economy can slow down—but people who are employed spend money and consumers continue to spend in this environment. So, will a recession finally arrive? We don’t know the answer to that question, but certainly employment growth must slow down in order for a recession to take hold. Certainly, the Fed must be confounded by the fact that they have raised rates again and again, but the economy keeps producing jobs. So, employers of the country – keep hiring and stick your tongue out at the Fed!

Weekly Interest Rate Overview

The Markets. Rates were slightly lower again last week, though Fed Chairman Powell’s message before Congress that more rate hikes are ahead caused the markets to reverse course a bit mid-week.  For the week ending June 22, 30-year rates eased to 6.67% from 6.69% the week before. In addition, 15-year loans decreased to 6.03%. A year ago, 30-year fixed rates averaged 5.79%, less than 1.0% lower than today. Attributed to Sam Khater, Chief Economist, Freddie Mac, “Mortgage rates slid down again this week but remain elevated compared to this time last year. Potential homebuyers have been watching rates closely and are waiting to come off the sidelines. However, inventory challenges persist as the number of existing homes for sale remains very low. Though, a recent rebound in single-family housing starts is an encouraging development that will hopefully extend through the summer.”   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

Two different indexes released recently show that home prices continue to increase. The Federal Housing Finance Agency (FHFA) House Price Index showed that prices nationwide in the first quarter of 2023 were up 4.3% from the same quarter a year earlier. It was the 45th-consecutive quarter with a year-over-year increase, the FHFA said. That’s every quarter since the first quarter of 2012. The FHFA index also showed that prices were up 0.5% from the previous quarter, and that Its seasonally adjusted monthly index for March also increased, rising 0.6% from February. “U.S. house prices generally increased modestly in the first quarter,” said Anju Vajja, Ph.D., principal associate director in FHFA’s Division of Research and Statistics. In addition to the FHFA index, the S&P CoreLogic Case-Shiller Indices also showed that prices rose in March, as all 20 major metro markets reported month-over-month price increases. Before seasonal adjustment, the U.S. National Index posted a 1.3% month-over-month increase in March, while the 10-City and 20-City Composites posted increases of 1.6% and 1.5%, respectively, S&P Dow Jones Indices (DJI) said. “The modest increases in home prices we saw a month ago accelerated in March 2023,” said Craig J. Lazzara, managing director at S&P DJI. “The National Composite rose by 1.3% in March, and now stands only 3.6% below its June 2022 peak. Source: National Mortgage Professional

Younger adult Americans may feel like they need a golden ticket to buy a home, but they’re nonetheless undeterred and still optimistic about becoming homeowners soon, according to new data from Bank of America. The bank’s 2023 Homebuyer Insights Report revealed that more than half (55%) of potential homebuyers see this year’s market as more competitive than last year’s was. Fifty-one percent see high prices and interest rates as a challenge to buying. Thirty-nine percent believe this is a seller’s market, compared to 18% who see it favoring buyers and 31% who say it’s neither. Many respondents to the survey, however, remain undiscouraged by such perceptions. Fifty-four percent of poll participants either plan to speed up their home purchases or buy when they originally planned. That share rises when the demographics are narrowed to younger prospective buyers, to 62% of Gen Zers and 55% of millennials. Fifty-six percent of Gen Z and 56% of millennial homebuying hopefuls are planning to purchase in the next two years. For those would-be buyers, wealth-building is a big motivator. Almost half (47%) of all potential buyers would buy a home in the current housing market because they are tired of renting and rent increases. Twenty-eight percent of respondents said that they want to start building equity. And even while on the sidelines, hopeful homebuyers are staying active and engaged. Per the survey, 67% of potential buyers are “actively looking” at homes. Fifty-two percent are scrolling through housing marketplace apps with a certain budget in mind. Sixty-five percent of respondents who scroll through listings are interested in what their current budget would get them if they were to buy a home today. Thirty-one percent are “visiting open house events for fun.” Source: Scotsman Guide

Can’t move, won’t move. That’s increasingly the approach of Americans who are in the market for a new job. The share of job seekers who relocated to take up a new position fell to 1.6%, the lowest level on record, in the first quarter of 2023, according to a quarterly survey that’s been carried out by executive coaching firm Challenger, Gray & Christmas, Inc. for decades. Behind the shift in attitudes lies a post-pandemic surge in remote and hybrid positions, which has made it possible for more workers to stay where they’re living even as they change jobs. What’s more, higher interest rates have made buying a house somewhere else more expensive — especially when it also requires people to sell an existing home that’s financed with a mortgage locked in at low costs. And all of that comes on top of longer-term trends that have seen US workers grow steadily more reluctant to relocate — perhaps because diminishing job security has made the costs of moving house seem like less of a safe investment. “In the 1980s and 90s, nearly a third of job seekers would move for new positions,” said Andrew Challenger, senior vice president at Challenger, Gray & Christmas. “Now, remote and hybrid positions are keeping workers at home.” About one-third of US companies say most of their workers are in the office, according to Challenger — up from just 13% last fall. Still, many workers are digging in their heels and refusing to come back. Fewer than half of workers went to the office in 10 of the largest US business districts in the week ended May 10, according to data from Kastle Systems, an office key-fob firm. Source: Bloomberg