Market Minute Write-Up by The California Assocation of Realtors®
Sep 13, 2023September 04, 2023 - As the job market continues to show signs of easing, it is looking more likely that the Fed may not raise rates in their upcoming September meeting. With mortgage rates remaining elevated despite their downward movement in the past couple of weeks, the Fed’s hike pause would be welcome news for the housing market. Mortgage applications just started rising after five weeks of retreat, and the housing market could build on its momentum if rates continue to move sideways or even decline in the next few weeks.
Cooling labor market gives Fed breathing room: U.S. employers continued to add jobs in August with the nonfarm payrolls rising a solid 187,000 last month. The labor market shows signs of easing, however, as job growth recorded the third straight month of sub 200,000 gain. Over the last three months, 150,000 jobs were added on average per month, a decline from the 238,000-average registered between March and May. The unemployment rate also jumped to 3.8% last month, partly attributed to the shutdown of trucking firm Yellow in early August. The dip in employment in the entertainment industry due to recent strike activities also contributed to the increase in unemployment. Looking forward, a weaker outlook for hiring and expansion in coming months is expected. The third-quarter survey results from the Chief Human Resources Officer Confidence Index released by the Conference Board show a substantial pullback in workforce expansion plans. Nearly four out of ten (38%) of the survey respondents expected their hiring to increase in the next six months, a decline from 51% reported in the second quarter of 2023.
Mortgage rates dip for the first time in six weeks: After climbing consecutively for five straight weeks, the average 30 year fixed-rate mortgage reported weekly by Freddie Mac ticked down at the end of August but remained above 7%. News about a cooling job market, concerns about the slowing in consumer spending, and a downward revision on the second-quarter GDP all may have contributed to the declining trend in rates in the past week. While the market generally believes that the Fed will keep their policy rate unchanged in the upcoming September meeting, mortgage rates remain elevated, and the volatility will likely continue until the Fed sends a more decisive message to the market about its next rate move. With costs of borrowing near their record high and housing supply expected to be tight for the remainder of the year, home sales could remain soft in the next couple months.
Consumer confidence slips as jobs gain ease: Consumers felt less optimistic in August about the current conditions and their outlook as the job market slowed, while food and energy prices inched up again. The U.S. Consumer Confidence Index pulled back last month after rising back-to-back in June and July. The headline number released by the Conference Board came in at 106.1, well below the 116.0 that had been anticipated by the general consensus. Narrowing job openings, higher interest rates, and a less-than-upbeat stock market performance in August were a few factors that led to the decline in the index last month. Consumer confidence could also be negatively affected by the resumption of student loan payments, which is scheduled to start in October. More than 43 million American borrowers will begin making payments to their student debt again next month, and many of them will have less money to spend on goods and services once the re-payment begins. The economy will be impacted but the effect is not expected to be significant.
Delinquency rate remains near all-time low: The U.S. mortgage delinquency rate – late in payment by at least 30 days - dipped again and registered a 2.6% in June 2023, a decline of 0.3 percentage points from 2.9% in June 2022, and was unchanged from 2.6% in May 2023. The latest monthly figure was near its all-time low and was significantly below the high recorded in 2009/2010 when the housing market collapsed. The national foreclosure rate also remained near its all-time low, with the U.S. registering a 0.3% in June 2023, unchanged from the June 2022’s number. At the state level, California had a foreclosure rate of 0.024%, or one in every 4,188 households, according to ATTOM Data’s July 2023 report. This is well below the double-digits high recorded back in the Great Recession. The counties with the highest foreclosure rate in California were Yuba, Shasta, Sierra, and Tulare.
Mortgage applications increased for the first time in five weeks, but the market remains stuck: With rates showing signs of leveling off, mortgage applications went up from a week ago by 2.3% on a seasonally adjusted basis. Both the purchased index and refinanced index increased from the prior week by 3% and 2% respectively. On a year-over-year basis, however, purchase applications (unadjusted) were down 27% from the same week in 2022. The annual decrease in purchase applications recorded last week is nearly double the year-over-year decline in pending home sales observed in July. The sizable differential between the two measures is not a great start for September home sales. Nonetheless, the market could pick up some momentum in coming weeks if rates continue to move sideways or decline.
Questions? Or are you or someone you know navigating life’s transitions? Let lauded negotiator Pat Kapowich make your next move easy. Visit Kapowich’s website for free area housing data, insights and trends. Or put his artful blend of specialized credentials, decades of experience and endorsed skill set to work for you. Kapowich instills confidence when buying, selling, relocating or resizing homes. Do not just make a move — make the best move. Contact him today, Realtor Pat Kapowich, a career-long consumer-protection advocate.
Office: 408-245-7700; SiliconValleyBroker.com
[email protected] Broker# 00979413
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