The Bureau of Labor Statistics reported This Week in Real Estate that the U.S. economy added 339,000 jobs last month, marking the 14th straight month that job creation came in above Wall Street economists’ expectations and the largest monthly increase since January. Friday’s report comes less than two weeks before the Federal Reserve’s next policy meeting. The Consumer Price Index (CPI), a widely followed inflation measure, scheduled for release on June 13, coupled with this jobs report, will be the leading indicators to influence the Fed’s next monetary policy action. Sustained momentum in the market has been challenged with elevated mortgage rates and home prices amid scarce inventory. Inventory is approximately 46% below the historical average dating back to 1999. Below are a few newsworthy events from the final days of May and early June that influence our business:
Mortgage Rates Quickly Down to 2-Week Lows. After hitting the highest levels in several months last Friday, mortgage rates have fallen fairly quickly in the new week. As bond markets improved this afternoon, many lenders were able to make mid-day adjustments. That brought the average top tier 30yr fixed rate down to the lowest levels since Thursday, May 18th. The credit for the rate reversal is multifaceted. The move began in Europe where friendly inflation data added to an even sharper drop in rates. As is often the case, European rate momentum has an effect on US rate momentum. Traders are also feeling more confident about re-entering the market for US Treasuries–the foundation of interest rates in the US–as the debt ceiling debate progresses. If there’s one important takeaway, however, it’s that the next big move for rates remains up for debate. Upcoming economic reports will set the tone for the Fed meeting in 2 weeks. Several Fed officials commented that they were thinking about “skipping” a rate hike at the upcoming meeting. Others have recently said they would like to hike again. Both sides of the debate may change their minds by June 14th, depending on the data. Read the full story here.
Housing Market Predictions For 2023. The buyer-seller stalemate held steady in May thanks to an uptick in mortgage rates and elevated home prices that together continued to perpetuate housing affordability. The latest Federal Housing Finance Agency (FHFA) House Price Index (HPI) shows home prices rose 4.3% in Q1 2023 compared to Q1 2022, culminating in the index reaching a record high of 398.0 in March. The FHFA HPI is a collection of home price indices that measures single-family home values across all 50 states and over 400 cities with data extending back to the mid-1970s. “Home sales are bouncing back and forth but remain above recent cyclical lows,” said Lawrence Yun, chief economist at NAR, in a report. “The combination of job gains, limited inventory and fluctuating mortgage rates over the last several months have created an environment of push-pull housing demand.” Low housing inventory has been a challenge since the 2008 housing crash when the construction of new homes plummeted. It still hasn’t fully recovered – and won’t in 2023. “We think that it is highly unlikely that the inventory problem will be resolved in 2023,” says Jack Macdowell, chief investment officer and co-founder at Palisades Group. Due, in part, to the ongoing inventory crunch keeping home prices elevated, many economists predict the housing market is more likely to correct itself from the double-digit percentage jumps in home prices we’ve seen over the past few years rather than crash. Read the full story here.
The US Economy Added 339,000 Jobs Last Month, Soaring Past Expectations – Again. The US labor market isn’t ready to slow down just yet. Employers added 339,000 jobs in May, according to the monthly employment report from the Bureau of Labor Statistics released on Friday. That’s an acceleration from April’s job gains, which were revised upwardly to 294,000, and it’s a far hotter number than the 190,000 jobs that economists were expecting. “Overall, the jobs report and broader economic data continues to show an economy that’s certainly not in a recessionary mode and perhaps is growing at a healthy pace,” Preston Caldwell, chief US economist at Morningstar, told CNN. However, the sizable jump in the unemployment rate was also a surprise, rising to 3.7% from 3.4%. The surge in the jobless rate – the largest monthly leap since the early days of the pandemic and, before that, November 2011 – was driven by people who lost their jobs permanently and those who completed a temporary job, BLS data shows. The labor force participation rate held steady in May at 62.6%, while the prime age participation rate, for workers between the ages of 25 and 54, rose to 83.4%, which is the highest since January 2007. Read the full story here.
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