In December, job growth significantly exceeded expectations, with 256,000 positions added compared to the 165,000 anticipated by economists and the 212,000 recorded in November, according to the Bureau of Labor Statistics This Week in Real Estate. Concurrently, the unemployment rate decreased from 4.2% in November to 4.1%. The continued robust economic performance has exerted upward pressure on mortgage rates, which were already at six-month highs. The release of the highly anticipated jobs report further propelled rates to their highest levels since May 2024. Despite a slight decline in the Fannie Mae Home Purchase Sentiment Index (HPSI) in December, the index concluded 2024 with a 5.9-point increase year-over-year, largely due to ongoing expectations of declining mortgage rates. Below are key events from the first full week of January impacting our business:DECEMBER JOBS REPORT COMES IN STRONGER THAN EXPECTED. While the unemployment rate was up compared to the start of the year, the job market ended the year up, with 256,000 jobs added to the economy in December according to data released Friday by the U.S Bureau of Labor Statistics. Unemployment finished the year at a rate of 4.1%, down from 4.2% the month prior. The unemployment rate has hovered at 4.1% or 4.2% for the past seven months. The construction sector showed little month-over-month change, adding just 8,000 jobs. Residential building construction added 3,500 jobs from November, while residential specialty trade contractors added just 500 positions. Economists believe consumers and the Federal Reserve should be pleased to see not only the strong job growth in December, but also that average earning rose 3.9% year-over-year, which is faster than the overall rate of inflation. According to MBA senior vice president and chief economist Mike Fratantoni, the Fed will most likely pause rate cuts as a result of the data. “This will push mortgage rates higher in the near term,” Fratantoni said. Read the full story here.MORTGAGE APPLICATIONS INCREASE MARGINALLY IN DECEMBER. The Market Composite Index, a measure of mortgage loan application volume from the Mortgage Bankers Association’s (MBA) weekly survey, increase marginally by 2.9% month-over-month on a seasonally adjusted (SA) basis. Compared to December 2023, the index is higher by 10.2%. The Market Composite Index includes the Purchase and Refinance Indices, which saw monthly gains of 4.1% and 6.7% (SA), respectively. On a year-over-year basis, the Purchase Index showed a modest increase of 1.1%, while the Refinance Index is 31.7% higher. The average 30-year fixed rate mortgage reported in the MBA survey for December remained relatively stable at 6.82%, reflecting a minor decline of 0.4 basis points. This rate is 9 basis points lower than the same period last year. Read the full story here.HOUSING SENTIMENT FINISHES 2024 HIGHER DESPITE DECEMBER DIP. The Fannie Mae Home Purchase Sentiment Index (HPSI) decreased 1.9 points in December to 73.1 but remained substantially higher than year-ago levels due in part to ongoing mortgage rate optimism. A plurality of consumers continues to expect mortgage rates to decline over the next 12 months; while December’s 42% share was lower than last month’s 45%, it remains meaningfully improved compared to last December’s 31%. Likewise, the shares expressing optimism toward homebuying and home-selling conditions, respectively, declined slightly month over month, but both components remain up year over year. Overall, the HPSI is up 5.9 points compared to this time last year. “Even though the HPSI fell to end the year, consumer sentiment toward the housing market finished 2024 substantially above year-ago levels, attributable in part to respondents’ ongoing expectations that mortgage rates will decline,” said Mark Palim, Fannie Mae Senior Vice President and Chief Economist. Read the full story here.
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