November 15, 2022 – The New Shining Star. We used to be glued to the jobs report.

Economic Commentary

The New Shining Star. We used to be glued to the jobs report. Every month the analysts made predictions and then analyzed where they got things wrong. Then there is the quarterly growth data (GDP). Together with the jobs report, the markets reacted until the next set of numbers were released. Now we have another focus, or shall we say another shining data star.

Each month, the analysts are obsessing over the inflation numbers. The Consumer (CPI) and Producer (PPI) price reports are “where it is at” with the regard to influencing the stock and bond markets today. We are even reacting to inflation reports from Europe, because the entire world seems to be in the same boat. Last week, it was announced that the CPI increased by 7.7% annually, with the core number increasing by 6.3% annually.  The core excludes the volatile components of food and energy.  Overall, these numbers were seen as better than expected and the stocks and bond markets reacted very positively. Though this is only one month of data, it is hoped that this report represents the beginnings of the improvement we have been waiting for. 

The Producer Price Report is being released today, which could get the markets riled up again. Keep in mind that these are not the only measures of inflation. When the jobs report is released, we also look at wage growth. There is also the GDP price index, which is released along with the quarterly economic growth data. Add in the PCE (personal consumption expenditures) price index, which is released monthly along with personal income and spending. Today, it is all about inflation and the wide range of data gives analysts and the Fed plenty to chew upon.

Weekly Interest Rate Overview

The Markets. Rates moved up last week according to the Freddie Mac survey, but moved down significantly on Thursday after the survey was released — in reaction to the inflation data.  For the week ending November 10, 30-year rates rose to 7.08% from 6.95% the week before. In addition, 15-year loans increased to 6.38% and the average for five-year ARMs climbed to 6.06%. A year ago, 30-year fixed rates averaged 2.98%, more than 4.0% lower than today. Attributed to Sam Khater, Chief Economist, Freddie Mac, “As the housing market adjusts to rapidly tightening monetary policy, mortgage rates again surpassed seven percent. The housing market is the most interest-rate sensitive segment of the economy, and the impact rates have on homebuyers continues to evolve. Home sales have declined significantly and, as we approach year-end, they are not expected to improve.” 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. ***Freddie Mac is making changes to the format of the weekly survey in November***

Real Estate News

More than a quarter of real estate professionals say they avoid having any interaction with an appraiser, falsely believing they legally can’t. Forty-seven percent of real estate professionals say they have had a transaction fall through due to a problem in the appraisal process, according to the National Association of REALTORS®’ 2022 Appraisal Survey. The most common culprits are an appraised value coming in lower than the contract price and a perception that the appraiser lacks knowledge of a neighborhood or uses inappropriate comps, the survey shows. The survey of more than 600 appraisers and 2,500 residential real estate pros was conducted earlier this year. Yet, many real estate professionals say they are fearful of talking to appraisers and try to keep their distance from this part of the transaction. Twenty-one percent say they interact with appraisers only when there is an issue with the value; 19% say they don’t interact with appraisers at all. Of those who don’t interact, most say they avoid contact because they think they’re not legally allowed to speak to the appraiser, or they’re concerned that the interaction might lead to appraisal bias. However, “regulations allow real estate agents, or other persons with an interest in the real estate transaction, to communicate with the appraiser and provide additional property information, including a copy of the sales contract,” according to NAR’s FAQs on the residential appraisal process. Real estate pros who do interact with appraisers say they try to provide additional information to help them in their valuation, the survey shows. These pros also may meet with the appraiser onsite to provide comps, a list of improvements made to the property or information on multiple offers. Source: Realtor Magazine

Earlier this year, you could get a bidding war for swampland in Florida. Now, said Redfin, homebuyers and sellers are getting pickier—and particularly when it comes to climate risk. A Redfin survey found 62% of people who plan to buy or sell a home in the next year are reluctant to relocate to a place at risk of natural disasters, extreme temperatures and/or rising sea levels—although disaster-prone areas including Florida have still been attracting scores of homebuyers. The share is even higher among younger generations, high-earners and people living in the Northeast. The survey said nearly three-quarters (71%) of Gen Z respondents said they would be hesitant to move somewhere at risk of natural disasters, extreme temperatures and/or rising sea levels. That compares with just over half (52%) of Baby Boomers. Respondents in the Northeast were most likely to express hesitance, at 68%. That compares with 59% of respondents in the South. While the lion’s share of respondents expressed skepticism about moving to risky areas, these areas have seen more people move in than out in recent years. That’s partly because they often offer relatively affordable homes and/or access to warm weather and the outdoors. “One of the main questions I get from buyers is, ‘Where can I move that’s close to the beach but not in a flood zone?’ The answer is nowhere. If you’re not in a flood zone this year, you may be in a couple of years from now,” said Isabel Arias-Squires, a real estate agent in Fort Myers, which was among the areas hardest hit by Hurricane Ian. “This is Florida—hurricanes and flooding come with the territory. Homebuyers should always purchase flood insurance and invest in impact windows if they can.” While the places most endangered by natural disasters are still popular with many homebuyers, that could shift as young people who grew up learning about climate change become a larger force in the housing market, said Redfin Chief Economist Daryl Fairweather. “The harsh reality is that most areas face at least some climate risk,” Fairweather said. “House hunters should do their research to get a sense of where their families and finances will be safest. That might mean avoiding cities that in a decade could be underwater or have no water at all.” Source: The Mortgage Bankers Association

As many struggle to afford a mortgage–let alone their dream home–nationwide, many are migrating in search of more affordable areas to obtain homeownership and/or avoid being cost-burdened. CraftJack has analyzed Census Bureau data in order to determine which states Americans are moving to and from the most across the country, and the reason behind their moves. The reasons people move may vary; however, regarding the current housing market, many are motivated to relocate due to economic inflation. Like birds in the winter, many people are flocking further toward the south, where year-round temperatures and winters are historically better. More than 1 in 4 (26%) Americans moved out of state in the last five years. It may be no surprise, 1 in 5 moved in 2021, following the onset of the COVID-19 pandemic. So far, 13% report moving in 2022. As for why Americans are moving, the number one reason is for a job, followed by moving closer to family, wanting a lower cost of living, wanting to live in a new place, and wanting to live in a warmer climate. Many Americans are also changing the type of area where they live. More than half (55%) reported leaving the suburbs, 29% left urban areas, and 15% left rural areas. Meanwhile, 48% moved to the suburbs, 37% to urban areas, and 15% to rural areas. The average cost of moving was $3,946. Overall, most people (88%) are happy with their move. Among the 12% who are not, 88% say they would move back to their former state. Moving again wouldn’t be unlikely, as the average American reports moving six times and living in two different states. Although not everyone has moved in the last five years, 63% of Americans say they’ve thought about it. The top reasons why people are considering moving include wanting a change of scenery (25%), wanting a lower cost of living (22%), and wanting to live in a warmer climate (10%). The majority of people (63%) say the cost of moving is what’s stopping them from actually doing it and more than 1 in 10 say it’s just too much of a hassle. Source: MReport