In January, job creation fell short of expectations, but this was counterbalanced by upward revisions to the totals for November and December. Additionally, wage growth exceeded forecasts, and the unemployment rate decreased to its lowest level since March 2024, according to the Bureau of Labor Statistics’ This Week in Real Estate. Despite signs of a softening labor market, it remains resilient, likely dissuading the Federal Reserve from altering the federal funds benchmark interest rate. Homebuyer confidence saw a slight increase in January, as reported by Fannie Mae’s Home Purchase Sentiment Index (HPSI), coinciding with a decline in the average 30-year fixed-rate mortgage for the third consecutive week. Sam Khater, chief economist at Freddie Mac, noted, “Mortgage rates have been stable over the last month, and incoming data suggest the economy remains on firm footing. Although rates are higher compared to last year, the last two weeks of purchase applications are modestly above what we saw a year ago, indicating some latent demand in the market.” Below are key events from the first week of February impacting our business: OVERALL HOUSING SENTIMENT TICKS HIGHER DESPITE CONSUMERS’ GROWING AFFORDABILITY CONCERNS. The Fannie Mae Home Purchase Sentiment Index (HPSI) increased 0.3 points in January to 73.4, bouncing back slightly after falling last month for the first time since July. Improvements in consumer optimism toward both homebuying and home-selling conditions, along with even greater expectations that home prices will rise over the next 12 months, drove the increase. However, after a surge in mortgage rate optimism in the second half of last year, January saw a 13-percentage-point decline in the net share of consumers who believe mortgage rates will go down in the next 12 months. Year over year, the HPSI is up 2.7 points. “Consumers seem increasingly pessimistic that housing affordability conditions will improve across the board, as a growing share expects home prices, rent prices, and mortgage rates will all go up,” said Kim Betancourt, Vice President of Multifamily Economics and Strategic Research. “The lower optimism toward the mortgage rate outlook was largely expected, as rates have continued to stay elevated and even crossed the 7% threshold in mid-January. As noted in our latest forecast, we currently expect mortgage rates to end 2025 around 6.5%, relatively little changed from where we are today, which will likely continue to hinder relief for housing affordability and home sales activity.” Read the full story here.MORTGAGE APPLICATIONS INCREASE MARGINALLY IN JANUARY. The Market Composite Index, a measure of mortgage loan application volume from the Mortgage Bankers Association’s (MBA) weekly survey, increased by 3.1% month-over-month on a seasonally adjusted (SA) basis, primarily driven by purchasing activity. Compared to January last year, the index is higher by 3.4%. The Market Composite Index which includes the Purchase and Refinance Indices: purchasing experienced a monthly gain of 3.8%, while refinancing decreased 2.3% (SA). On a year-over-year basis, however, the Purchase Index is lower by 3.4%, while the Refinance Index remains higher at 18.6%. The average 30-year fixed rate mortgage reported in the MBA survey for January ticked up 20 basis points (bps) to 7.02% (index level 702). This rate is 24 basis points higher than the same period last year. Read the full story here.JANUARY JOBS REPORT DAMPENS HOPE FOR LOWER MORTGAGE RATES. The January jobs report is not good news for those hoping that the Federal Reserve will cut interest rates at its meeting in March. In January, the U.S. economy added 143,000 nonfarm payroll jobs compared to a month prior, according to data released Friday by the U.S. Bureau of Labor Statistics (BLS). This number is slightly lower than originally projected, but economists attribute the slower than anticipated job growth to the impacts of winter storms in the East and South, as well as the wildfires in Los Angeles. “At first glance, on net, these data indicate a job market that remains reasonably strong,” Mike Fratantoni, the Mortgage Bankers Association’s SVP and chief economist, said in a statement. “Job growth over the past three months has averaged a gain of 237,000, likely above what can be sustained this year.” Despite the slower job growth, unemployment fell slightly to 4.0%, with 6.8 million people being unemployed. “With employers still adding jobs at a healthy pace and inflation above the Fed’s 2% target, the central bank is likely to keep interest rates unchanged at its meeting in March, which means mortgage rates could remain in the high 6% range heading into spring,” said Lisa Sturtevant, chief economist at Bright MLS. Read the full story here.
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