March 7, 2023 – More Food For The Fed. Two weeks from now the Federal Reserve will be meeting again.


Economic Commentary

More Food For The Fed. Two weeks from now the Federal Reserve will be meeting again. Meanwhile the members of the Open Market Committee have been on a feeding frenzy. While mere mortals like us feed on regular food such as meat, carbs and dairy, the Fed feeds on data. And they have had plenty of data to feed on. Two weeks ago, we had the inflation reports showing that, while annual inflation is still subsiding, inflation has not gone away. This is why Chairman Powell expects the war on inflation to be a longer process than the markets would like.

As a matter of fact, we get to add a new word to describe inflation. Traditionally there are the consumer and producer price indices. For each of those is also provided a measure of core inflation, which excludes the volatile components of food and energy. Now we have “intrinsic” inflation. Basically, this is inflation which is persistent instead of transitory because it is ingrained into the core of our economic systems. For example, the cost of goods could fall, but if we still have a labor shortage, the cost of labor necessary to enjoy those goods could continue to rise.

Even more reason for the Fed to feed on the February jobs report – especially since we had such a surprise on the upside with January’s numbers. But there has been plenty of other food for thought on the way – including surprisingly high retail sales and consumer spending data for January. At this point it does not seem as if the consumer is slowing down, something that the Fed was counting on. The Fed will also have additional inflation reports to chew on a week before they meet. It is our hope that the February Consumer and Produce Price Indices are a bit tamer than January’s numbers.

Weekly Interest Rate Overview

The Markets. Rates continued their upward climb in the past week, as the February jobs report draws near. For the week ending March 2, rates rose to 6.65% from 6.50% the week before. In addition, 15-year loans increased to 5.89%. A year ago, 30-year fixed rates averaged 3.76%, more than 2.5% lower than today. Attributed to Sam Khater, Chief Economist, Freddie Mac, “As we started the year, the 30-year fixed-rate mortgage decreased with expectations of lower economic growth, inflation and a loosening of monetary policy. However, given sustained economic growth and continued inflation, mortgage rates boomeranged and are inching up toward seven percent. Lower mortgage rates back in January brought buyers back into the market. Now that rates are moving up, affordability is hindered and making it difficult for potential buyers to act, particularly for repeat buyers with existing mortgages at less than half of current rates.”  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

ATTOM said U.S. home sellers nationwide realized a $112,000 profit on the typical sale last year, up 21 percent from $92,500 in 2021 and up 78 percent from two years ago. Despite a market slowdown in the second half of last year, profits rose from 2021 to 2022 in 98 percent of housing markets with enough data to analyze, ATTOM said in its Year-End 2022 U.S. Home Sales Report. The latest nationwide profit figure, based on median purchase and resale prices, marked the highest level in the U.S. since at least 2008. The report noted the $112,000 profit on median-priced home sales in 2022 represented a 51.4 percent return on investment compared to the original purchase price, up from 44.6 percent last year and from 32.8 percent in 2020. The latest profit margin also represented a high point since at least 2008. “It seems pretty likely that home seller profits peaked for this cycle in 2022,” said Rick Sharga, Executive Vice President of Market Intelligence at ATTOM. “Median prices have declined on a monthly basis since mortgage rates doubled between January and October and are likely to decline further in many markets across the country in 2023, reducing profitability for home sellers.” Both raw profits and ROI have improved nationwide for 11 straight years, shooting up again in 2022 as the national median home price increased 10 percent to $330,000–yet another annual record, ATTOM reported. But at the same time, profits increased at a slower pace than in 2021, reflecting a year when the nation’s decade-long housing boom stalled. The national median home value dipped 8 percent over 2022’s second half as home-mortgage rates doubled, consumer price inflation soared to a 40-year high and the stock market slumped. Source: ATTOM

Single women own roughly 10.7 million homes, compared to 8.1 million for single men, according to a recent analysis from LendingTree that looked at 2021 Census data. That’s a surprising statistic considering the financial hurdles women have historically faced, said Jacob Channel, LendingTree’s senior economist and the author of the analysis. On average, for example, women earn 83 cents for every dollar a man makes. The trend may have long-term financial implications for single Americans given that homeownership is often one of the most effective methods of building personal wealth. A typical homeowner who bought their home in 2011 accumulated $225,000 in housing wealth by 2021 on average, according to an analysis from the National Association of Realtors in 2022. The reasons for women’s unequal homeownership vary by age group. Among older women, longer life expectancies are a factor, said Rutgers professor James Hughes, who studies demographics and housing. “If women become a widow and the couple previously owned a house, most likely the homeownership shifted from male to female,” Hughes said, noting that women are expected to live until age 81 on average, compared to 76 for men. Earlier in life, women have a different motivation for pursuing homeownership, said University of Southern California professor Dowell Myers, who studies how demographics affect housing. Younger women who are approaching the peak of their careers earn salaries nearly equal to men their age. They’re well aware of the wage and wealth gap that persists between genders, and buying a home is one way they try to counter it, Myers said. “They make an effort to try and keep up,” he said. “Homebuying is a good investment and it means more to them personally than men.” More women today are college-educated than men, which gives more of them the opportunity to buy a home on their own, since college degrees translate to earning more money later in life. Source: CBS News

For the first time in a decade, the total number of Americans who moved grew from one year to the next, according to a new study from HireAHelper’s fifth annual U.S. migration study. This year’s migration study reveals nationwide migration trends for 2022, such as the increase (+4%) in the total number of moves nationally. It’s the first time in a decade that the number has increased year-over-year. Americans are moving further than in years prior, as the share of cross-country moves is at a record high of 24%, while average moving distance in 2022 was 74 miles, up 44% compared to last 2021. Some 4% more people moved during 2022 in the U.S. compared to 2021. According to the latest estimates from the U.S. Census Bureau’s Current Population Survey, 27.3 million Americans (8.6% of the population) moved in 2022, which is roughly 4% more than moved in 2021. “It’s been a year filled with big changes, and the latest U.S. moving data reflects this narrative with more people relocating — and moving longer distances,” said Miranda Marquit, Chief Data Analyst at HireAHelper. “People are adjusting to economic or social circumstances, while others are shifting their career or lifestyle. Americans seem to be at an inflection point with many moving in response to adjusting to the post-pandemic era.” Source: DSNews 

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