Unemployment Rate & Labor Force Participation Have Been Holding Steady At Lower Numbers

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Cautious optimism around the U.S. achieving a soft landing, which means slowing economic growth while avoiding a recession, regained momentum This Week in Real Estate following Friday’s release of the July jobs report. The Labor Department reported job growth held steady last month but was less than expected boosting hopes that the Federal Reserve may be able to curb inflation without triggering a sharp jump in unemployment. The unemployment rate dipped to 3.5% in July from 3.6% the month before. The jobless rate has hovered in a narrow range for more than a year, hitting a half-century low of 3.4% in April. An equally important figure, the labor force participation rate (62.6%), has been healthy and consistent for five consecutive months. Below are a few newsworthy events from the first week of August that influence our business: 

Here’s How Much Cash You May Have in Your Home, Thanks to New Record High Prices. Home prices are on a tear again across much of the nation after falling for much of last year. That means giving back to homeowners the equity they lost. Home prices in June hit record highs in 60% of U.S. markets, according to a new report from Black Knight, set to be released Monday. Its national home price index hit a new high in June, up 0.8% from June of last year – a stronger annual growth rate than May. Nearly every major market saw gains month to month, with the overall index gaining 0.67% from May to June. Home prices are rising again, because there is far too little supply to meet the current demand. Higher mortgage rates have been a huge deterrent for current homeowners to list their homes for sale because they don’t want to trade up to these higher rates on another purchase. That home price growth has made homeowners wealthier again. Home equity levels are now back to within 3% of last year’s peaks. Total equity hit over $16 trillion with tappable equity, which is the amount most lenders will allow you to take out while still leaving 20% equity in the home, rising to $10.5 trillion, just 4% off its 2022 peak. Per homeowner, that is roughly $200,000 in cash sitting in the house, ready for the taking. Read the full story here.

Homebuyers Had 45,000 Fewer Homes to Choose From in July as The US Housing Market Remains as Tight as Ever. There were 45,000 fewer homes available to buy on a typical day in July compared to a year ago, according to Realtor.com data. Despite a month-over-month increase, active inventory fell 6.4% year-over-year, marking the first annual decline since April 2022. “The lack of newly listed homes has contributed to a renewed inventory crunch, as July saw fewer homes on the market compared to last year for the first time in several months,” Realtor.com researchers Danielle Hale and Sabrina Speianu wrote. The total number of homes for sale, including those that weren’t sold but remained under contract, fell by 9.1% year over year, marking the third month in a row of annual declines. At the same time, home sellers aren’t participating in the market nearly as much as last year. Newly listed homes cratered 20.8% in July on a year-over-year basis. Read the full story here.

Big Recovery for Mortgage Rates After Jobs Report. In discussing mortgage rates near 23-year highs Thursday, we asked if there was any hope for relief and concluded that the only question was one of timing. In turn, timing would depend on economic data an inflation. Rates got a glimpse of friendly economic data today following the big jobs report from the Labor Department. It was still very strong in a historical context, but not quite as strong as economists had predicted. Wednesday saw the biggest jump after the ADP employment data and an announcement regarding the government’s anticipated borrowing needs (via Treasuries). U.S. Treasuries are at the core of the rate market. When investors become less interested in buying them or when the government becomes more interested in selling them, rates rise. The ADP data hit the demand side of the equation and the Treasury announcement hit the supply side. Despite Friday’s recovery, current rate levels are still uncomfortably close to long-term highs. So, what’s the next big economic report to watch? Easy! The Consumer Price Index (CPI) on Thursday, August 10th. CPI is the only other piece of scheduled monthly economic data that could compete with the jobs report over the past 2 years when it comes to impact on rates. The last CPI report was good for rates, but the market needs to see a pattern that’s repeated for several consecutive months. If inflation is lower than expected this time around, it would be a solid step in that direction, one that likely allows rates to continue to moderate after this week’s push toward long-term highs. Read the full story here.

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