March 5, 2024 – Will You Buy A House With Me?

Economic Commentary

Don’t know why, but the jobs machine is reminding us of that Credence Clearwater song “Proud Mary.” — “rolling, rolling, rolling on the river.” For months the Federal Reserve has been waiting for the growth of jobs to slow, but it has not happened. As a matter of fact, the growth spurt has gone on so long that members of the Fed have gone out of their way to intimate that they can bring down inflation in a full-employment economy. Though it seems that slowing the pace of wage growth would have to be part of the equation.

This week we will have another picture of the situation. Analysts will not only be looking at how many jobs were added in February and the growth of wages, they will be looking for adjustments in the extraordinarily high number of jobs previously reported for January. Typically, January is a big month for job reductions because of companies letting go of seasonal workers after the holidays. That is what made the addition of 350,000 plus jobs in January so surprising. There could be the potential for a solid revision downward, but that is not guaranteed.

With the Fed meeting in mid-March, you can be sure they will be looking closely at these numbers. We will also see another consumer price index (CPI) release the week before the Fed meeting. This data will also be especially critical because of the hotter than expected inflation reports we received in mid-February. Last week the Fed’s favorite measure of inflation, the Personal Consumption Expenditures Price Index (PCE Inflation Index),was released and was in line with expectations, but still gave a similar view of the fight against inflation – lower year-over-year, but still a bit too high.

Weekly Interest Rate Overview

Mortgage rates continued to rise in the past week, even though the economic data released was a bit weaker during the past week. For the week ending February 22, 30-year fixed rates rose to 6.94% from 6.90% the week before. In addition, 15-year loans decreased to 6.26%. A year ago, 30-year fixed rates averaged 6.65%, 0.29% lower than today. Attributed to Sam Khater, Chief Economist, Freddie Mac, “Mortgage rates continued their ascent this week, reaching a two-month high and flirting with seven percent yet again. The recent boomerang in rates has dampened already tentative homebuyer momentum approaching the spring, a historically busy season for homebuying. While sales of newly built homes are trending in a positive direction, higher rates and elevated prices continue to pose affordability challenges that may leave potential homebuyers on the sidelines.” 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

The average cost of an engagement ring is $5,500—about the same as a 3% down payment on a home in some markets. Many couples may wonder whether, instead of marriage, the right question to pop is: Will you buy a house with me? “Diamonds are forever, but purchasing a forever home—or a starter home—with your significant other can be part of a diversified wealth strategy,” says RE/MAX President and CEO Nick Bailey. Consider that the average homeowner’s net worth is more than $200,000 compared to renters’ $6,000, he adds. Still, “everyone’s situations, budgets and goals are different.” More than a third of Gen Zers and 21% of millennials say they plan to postpone marriage until they sign a property deed, according to a new LendingTree survey. Weddings and homeownership aren’t cheap, which may be sparking a shift in priorities. The average cost of a wedding is $30,000, according to Zola, an online wedding registry and planning site. Add that to the price of an engagement ring and the growing costs of the “big day” may be prompting some couples to delay their nuptials in favor of homeownership first. Some couples are choosing to move in together prior to marriage and pool their money to better afford rising housing costs. For a growing number of couples, they also are turning to their wedding guests to help fund their home purchase. Couples are adding onto their wedding registries cash donations for a “home fund” to be used for purchasing a property or paying for renovations. Home funds have emerged as the most popular wedding registry cash fund option—with “honeymoon fund” a close second—on wedding planning sites like The Knot. And 85% of couples who created a wedding registry over the last two years say they wish they had asked for money for a down payment for a home instead of traditional wedding gifts, according to a realtor.com® survey. Source: Realtor® Magazine

A recent Redfin report indicated that people in their early 20s are buying homes faster today than the generations that came before them. The homeownership rates for 19-to-25-year-old Gen Zers are higher than those for millennials and Gen Xers when they were the same age. For example, 27.8% of 24-year-old Gen Zers are currently homeowners, compared with 24.5% of millennials at age 24 and 23.5% of Gen Xers when they were 24. While circumstantial factors definitely played a role in the slower pace of millennials and Gen Xers becoming homebuyers, housing experts say Gen Zers also came of age with more financial know-how. “Gen Zers have done their research,” Redfin Premier real estate agent Jon Byram pointed out. “They know all of the real estate jargon and are entering the housing market more educated than prior generations. Some young first-time buyers are also coming in with financial help from family or co-buying with family members, which boosts their buying power. And some have savings because they’ve been living with their family rent-free.” While many Gen Z homeowners bought when mortgage rates hit a record low during the pandemic, rates were around 11% in 1989, when the oldest Gen Xers were 24. In the case of millennials, jobs were scarce when they were in their early 20s due to the Great Recession, also making home affordability difficult. “My youngest buyers handled the pandemic homebuying frenzy the best,” Byram said. “Some older buyers had trouble grappling with the significant changes that had occurred in the market since the last time they purchased a house.” Source: National Mortgage Professional

According to the U.S. Census Bureau’s latest estimates, the U.S. resident population grew by 1,643,484 to a total population of 334,914,895. The population growth rate reached its highest level since the pandemic at 0.49%. This is just above the 2019 growth rate (0.46%), while slightly below the 2018 growth rate (0.53%). The Census Bureau reports that the primary source for the increase in population growth was net international migration, as migration levels returned to pre-pandemic levels. Total net international migration has been approximately one million for the past two years, as net international migration levels were at 999,267 in 2022 and at 1,138,989 in 2023. These consecutive high levels of increase suggest international migration trends are returning to normal. The other driver of the U.S. population growth rate was positive natural births (births minus deaths), which increased the total population by 504,495. The level of positive natural births in 2023 was 126% higher than 2022 largely due to the 8.9% drop in the number of deaths in 2023. There was also a decline in the number of births of 0.7%. Regionally, the Northeast region was the only region to lose population, declining 0.08%. The South region led in population growth at 1.11% while the Midwest population grew 0.18% and the West grew 0.17%. Source: National Association of Home Builders