REAL ESTATE MARKET UPDATE

	Existing Homes Selling Fast Sales of existing homes fell 1.9% in April to a 4.14-million-unit annualized pace, per the National Association of REALTORS® (NAR), though sales in March were revised higher and this offset some of the decline.

	New Home Sales, which measure signed contracts on new homes, fell 4.7% from March to April, missing forecasts that were expecting them to rise. Signed contracts were also 7.7% lower than they were in April of last year.

We thank Dan Doyle of Nations Lending for this weeks real estate market update!

Reach out to one of us on the MOPG Team with any questions about the Southern Oregon Real Estate Market!

REAL ESTATE MARKET UPDATE

Week of May 6, 2023 in Review

Strong home price appreciation demonstrates the opportunity that remains in the real estate market, while unemployment claims saw a breakout. Plus, what might be ahead for consumer spending? Here are the headlines: 

• Opportunity in Housing Remains Strong
• Initial Jobless Claims Hit 9-Month High
• Is Consumer Spending Headed for a Slowdown?

Real Estate Market | Opportunity in Housing Remains Strong 

CoreLogic’s Home Price Index showed that home prices nationwide rose a strong 1.2% in March after rising 0.7% in February, showing that home price appreciation is not just continuing – it’s accelerating. Prices are also 5.3% higher when compared to March of last year.

CoreLogic forecasts that home prices will rise 0.8% in April and 3.7% in the year going forward, though their forecasts are typically on the conservative side so we may see even greater levels of appreciation. For example, CoreLogic had forecasted that prices would rise 0.4% in March, and last week’s report showed we tripled that amount. They had also forecasted that we would see 3% appreciation in 2023 but we saw 5.5%.

Black Knight also reported that national home values rose 1.2% in March, with their index showing that prices are 5.6% higher than a year ago.

What’s the bottom line? The latest rise in home prices reported by CoreLogic and Black Knight echoes the strong growth seen by other major indices like Case-Shiller and the Federal Housing Finance Agency. These reports continue to demonstrate why homeownership remains a good opportunity for building wealth through real estate.

Initial Jobless Claims Hit 9-Month High

Initial Jobless Claims rose by 22,000 in the latest week, reaching their highest level since last August, as 231,000 people filed for unemployment benefits for the first time. Continuing Claims also rose 17,000, with 1.785 million people still receiving benefits after filing their initial claim.

What’s the bottom line? The jump in Initial Jobless Claims is a breakout for this metric, as it has been extremely stable at low levels for the last several months (ranging from 208,000 to 213,000 in nine of the last ten weeks before this latest report). Continuing Claims are also still trending near some of the hottest levels we’ve seen in recent years.

This data follows other recent reports that also suggested softening in the labor sector, such as weaker than expected job growth in April, declining job openings, and the low quit rate.

Is Consumer Spending Headed for a Slowdown?

The most recent consumer spending data for March was strong (Core Retail Sales up 1.1% and Personal Spending up 0.8%), aided by pandemic savings from stimulus and credit. But there are signs this support may be coming to an end.

A recent article by San Francisco Fed analysts revealed that “American households fully spent their pandemic-era savings as of March 2024.” Meanwhile, credit card debt hit a new record high in the fourth quarter of last year, with balances reaching $1.13 trillion, according to the New York Fed’s Quarterly Report on Household Debt and Credit.

We’ve also seen a growing popularity in Buy Now Pay Later (BNPL) programs, which allow people to purchase something immediately and pay off the balance in equal installments. But BNPL options are also now showing signs of stress.

A recent survey conducted for Bloomberg News by Harris Poll found that 43% of those who owe money to BNPL programs were behind on their payments. Also, within the survey, it was shown that more than 50% said they bought more than they could afford, and over one third said they turned to these programs after maxing out their credit cards. Meanwhile, 24% said their BNPL spending was “out of control.”

What’s the bottom line? Consumer spending makes up 70% or so of GDP, so a slowdown would be significant and could point to a slower US economy, weaker inflation, and lower rates. While this will take time to come to fruition, it will be important to analyze upcoming data for signs of softer spending.

Family Hack of the Week

May 15 marks National Chocolate Chip Day and is the perfect reason to enjoy these Chocolate Chip Muffins courtesy of Food.com. Yields 12 muffins.

Preheat oven to 400 degrees Fahrenheit. Grease 12 muffin cups or spray with baking spray.

In a large bowl, stir together 2 cups all-purpose flour, 1/3 cup packed light brown sugar, 1/3 cup sugar, 2 teaspoons baking powder, and 1/2 teaspoon salt. In another bowl, stir together 2/3 cup milk, 1/2 cup butter (melted and cooled), 2 eggs (lightly beaten), and 1 teaspoon vanilla until blended.

Make a well in the center of the dry ingredients and add milk mixture, stirring to just combined. Stir in 1 bag of chocolate chips and 1/2 cup of chopped walnuts or pecans.

Spoon batter into prepared tin and bake for 15-20 minutes until a cake tester inserted in the center of a muffin comes out clean. Place muffin tin on a wire rack and cool for 5 minutes before removing muffins to finish cooling.

What to Look for This Week in the Real Estate Market

We’ll see crucial readings on inflation when the Producer and Consumer Price Indexes for April are reported on Tuesday and Wednesday, respectively.

Key housing data will also be delivered, starting with this month’s builder confidence reading from the National Association of Home Builders on Wednesday. April’s Housing Starts and Building Permits follow on Thursday.

Also of note, look for April’s Retail Sales on Wednesday and the latest Jobless Claims on Thursday.

Technical Picture

Mortgage Bonds tested and retreated from the tough ceiling of resistance at their 50-day Moving Average on Friday, but still ended last week trading above their 200-day Moving Average. The 10-year is testing the 4.50% psychological resistance level, which has been keeping yields from moving higher. This week’s inflation data will likely dictate the near-term direction for the real estate markets.

We thank Dan Doyle of Nations Lending for this weeks real estate market update!

Reach out to one of us on the MOPG Team with any questions about the Southern Oregon Real Estate Market!

REAL ESTATE MARKET UPDATE

Week of April 29, 2023 in Review

The Fed once again held rates steady, labor sector data showed signs of softening, and there’s more evidence of rising home values across the country. Read on for these stories and more:

• Fed Shuts Down Rate Hike Chatter
• Jobs Report Shows Softening
• Private Payrolls Beat Estimates
• Job Openings Hit 3-Year Low
• Trends in Unemployment Persist
• Home Price Gains Continue

Fed Shuts Down Rate Hike Chatter

After eleven rate hikes since March 2022, the Fed once again left their benchmark Federal Funds Rate unchanged at a range of 5.25% to 5.5%. This decision was unanimous and marks the sixth straight meeting they held rates steady.

The Fed Funds Rate is the interest rate for overnight borrowing for banks and it is not the same as mortgage rates. The Fed has been aggressively hiking the Fed Funds Rate throughout this cycle to try to slow the economy and curb the runaway inflation that became rampant over the last few years.

What’s the bottom line? After some recent inflation readings were hotter than expected, some economists wondered if the Fed would resume hikes to the Fed Funds Rate. However, Fed Chair Jerome Powell emphasized a hike was “unlikely,” adding that the Fed would instead keep the Fed Funds Rate at its current level if tighter conditions were warranted.

Powell also reiterated that the Fed does not expect to cut rates until members are confident that inflation is moving sustainably towards their 2% target as measured by annual Core Personal Consumption Expenditures, which is at 2.8% as of March.

However, a sharp rise in the unemployment rate (which has been in a narrow range between 3.7% and 3.9% since August) could also impact the timing for rate cuts. While the Fed’s latest forecasts showed that seventeen of nineteen Fed members don’t see the unemployment rate rising above 4.1%, an increase over this level could pressure the Fed to cut rates, given their dual mandate of price stability and maximum employment.

Jobs Report Shows Softening

The Bureau of Labor Statistics (BLS) reported that there were 175,000 jobs created in April, which was well below estimates of 243,000 new jobs. Revisions to February and March shaved 22,000 jobs from those months combined. The unemployment rate rose from 3.8% to 3.9%.

What’s the bottom line? The headline job number comes from the report’s Business Survey, which is based predominantly on modeling and estimations. In fact, one of the biggest reasons we saw job gains last month was the birth/death model, where the BLS estimates new business creation relative to closed businesses and how many jobs this created. In April, this modeling added 363,000 jobs to the headline figure, which would have shown a loss of 188,000 jobs otherwise.

Average weekly hours also declined slightly, which is important because one of the ways businesses cut costs is to cut the number of hours worked. This caused average weekly earnings, which is a good reflection of take-home pay, to fall 0.1% from March.

Overall, the data suggests softening in the labor sector. Again, this could pressure the Fed to cut rates sooner if this trend continues.

Private Payrolls Beat Estimates

After falling in February, signed contracts on new homes rebounded 8.8% in March to a 693,000-unit annualized pace, reaching their highest level since September.Sales were also 8.3% higher than a year earlier, as the persistent shortage of previously owned homes for sale continues to fuel demand for new construction.

What’s the bottom line? Despite the strong headline figure, some media pundits pointed to the decline in the median sales price, which was down nearly 2% from a year ago, to say the report was a miss. But the median sales price did not decline because of falling home prices (which continue to rise per Case-Shiller and other indexes), or a growing number of price cuts from builders. In fact, 36% of builders reported cutting prices in December, versus just 24% in March and 22% in April per the National Association of Home Builders.

The median sales price represents the mid-price of sales, meaning it’s influenced by the mix of sales in any given month. March’s decline in the median sales price stems from the sale of more homes at lower price points. Builders are constructing smaller, more affordable homes to meet buyer demand, and that pushed the median sales price lower comparatively.

Signed Contracts on Existing Homes March Higher

Pending Home Sales rose 3.4% from February to March per the National Association of REALTORS® (NAR), coming in well above estimates

This report measures signed contracts on existing homes, making it an important forward-looking indicator for closings on these homes, which are measured in the Existing Home Sales report.

What’s the bottom line? The Pending Home Sales index hit its highest level in a year, showing that activity is picking up heading into the spring homebuying season. An increase in inventory and eventual decline in mortgage rates will only boost these sales figures, with NAR’s Chief Economist, Lawrence Yun, noting, “Inventory will grow steadily from more home construction, and various life-changing events will require people to trade up, trade down or move to another location.”

First Quarter GDP Weaker Than Expected

The first reading of the first quarter 2024 Gross Domestic Product (GDP) showed that the U.S. economy grew by 1.6%. This was well below both the 2.5% estimate and the 3.4% growth seen in the fourth quarter of last year.

What’s the bottom line? Slower economic growth is typically good news for the bond market, but the hotter than expected inflation component within the report led to a sell-off when the data was reported last Thursday. Note that this data is subject to revision when the second and final readings are released on May 30 and June 27, respectively. However, the weaker than expected initial reading is disappointing given that GDP functions as a scorecard for the country’s economic health.

Initial Jobless Claims Hit 9-Week Low

Initial Jobless Claims fell by 5,000 in the latest week, as another 207,000 people filed for unemployment benefits for the first time. Continuing Claims also declined by 15,000, with 1.781 million people still receiving benefits after filing their initial claim.

What’s the bottom line? The low level of Initial Jobless Claims suggests that employers are still trying to hold on to their workers. Yet, Continuing Claims are still trending near some of the hottest levels we’ve seen in recent years, as challenges remain for job seekers searching for their next position.

Family Hack of the Week

May 2 is National Truffles Day! Celebrate with these delicious and decadent Chocolate Truffles courtesy of New York Times Cooking. Yields 24 truffles.

Heat 7/8 cup of heavy cream in a pot until it steams. Add 8 ounces of chopped bittersweet chocolate to a bowl, pour hot cream on top, and stir until chocolate is melted and incorporated into the cream. Chill until solid all the way through, around 1 to 2 hours.

Using a chilled melon baller, scoop out a tablespoonful and quickly roll into a ball. Repeat with remaining chocolate, lining truffles on a plate or baking sheet. If truffles become too soft to handle, place them in refrigerator or freezer for a few minutes. Roll truffles in cocoa powder, confectioners’ sugar, or a mixture of sugar and cinnamon.

Enjoy immediately or store in refrigerator for up to four days.

What to Look for This Week

Housing and labor sector data will share headlines with the Fed, starting Tuesday with appreciation data for February from Case-Shiller and the Federal Housing Finance Agency. We’ll also see updates on job openings and private payrolls (Wednesday), unemployment claims (Thursday), and nonfarm payrolls and the unemployment rate (Friday).

The Fed’s meeting begins Tuesday, with their Monetary Policy Statement and press conference coming on Wednesday. Investors will be closely listening for news regarding the timing of rate cuts later this year.

Technical Picture

Mortgage Bonds continue to trade in a wide range between support at 98.867 and overhead resistance at 99.647. The 10-year retreated from the yearly high it reached last Thursday, and there is room for yields to improve and move lower if we receive some Bond-friendly news this week.

We thank Dan Doyle of Nations Lending for this weeks insight!

Reach out to one of us on the MOPG Team with any questions about the Southern Oregon Real Estate Market!