Week of August 5th, 2024 in Review

TECHNICALS
Prices and Inventory

Your client’s Uncle was wrong. The market will not crash, and yesterday was the best time to buy. I'm just putting those facts out there.

Yes, rates have not been fun for 2+ years.
Yes, this has limited the amount of qualifying or interested buyers.
Yes, this has deterred sellers from listing.

But if these high rates didn’t cause a crash, do we think the rates going down and inviting sellers to list will do it?

We can all probably list 10+ people we know waiting on the sideline for rates to come down to enter the market as buyers (also not a great plan).

So, let’s say rates drop dramatically in the next 6 months. I am talking about quoting stuff with a 4 in front of it… Yes, inventory will JUMP, and there will be some bumps, but the prices will HOLD due to so many people jumping back into the market.

Do I think rates will go that low? Hell no, but you never know if COVID-24 shows up or something.

There is a lot of pent-up demand for buyers right now—there has been for a while—and the barrier of entry is just very high with these rates.

Stay the course. You will likely make it if you are still in the business after the last few years.

🏡 Home Price Gains Still Strong

CoreLogic’s Home Price Index reveals that home prices nationwide rose by:

• 0.3% in June

• 0.6% in May

• 1.1% in April

• 1.2% in March

While the appreciation gains have slowed slightly, they remain strong. Prices are up 4.7% compared to June of last year. CoreLogic forecasts that prices will continue to rise by 0.3% in July and 2.3% over the next year, although their predictions tend to be conservative.

Similarly, ICE (formerly Black Knight) reported a 0.2% increase in national home values in June after seasonal adjustments, with prices up 4.1% from a year ago.

🔑 Key Takeaway: Despite the slowing pace, home price appreciation remains robust, making housing a solid investment for wealth creation. This trend is supported by other major indexes, including Case-Shiller and the Federal Housing Finance Agency.

🏠 Media Misunderstands Rising Housing Inventory

Active listings in July rose by 5.3% from June and are up 37% compared to last year. However, some media reports have misconstrued this increase, suggesting it could lead to a housing crash.

It’s important to understand the context:

• Current inventory levels are still down nearly 30% from pre-pandemic totals (July 2019).

• Inventory growth this year has been highly concentrated, with only four states (Texas, Idaho, Florida, and Tennessee) seeing higher inventory levels than five years ago.

• In contrast, some parts of the Northeast have seen active listings drop by 65% to 75% over the same period.

Additionally, it’s normal for inventory to build during the summer due to seasonal factors, such as families moving before the school year starts.

🔑 Key Takeaway: Inventory remains tight and is likely to decline as we move into fall due to normal seasonal patterns. Demand is expected to rise as mortgage rates decrease, supporting continued stability in home prices.

📉 Unemployment Claims Remain Elevated

After reaching the highest level of the year, Initial Jobless Claims fell by 17,000 last week, with 233,000 people filing for unemployment benefits for the first time. Continuing Claims rose by 6,000, with 1.875 million people still receiving benefits after their initial claim.

Both Initial and Continuing Claims have trended higher over the summer compared to the start of the year. Continuing Claims have consistently been above 1.8 million each week since early June. This data indicates a steady increase in layoffs and a slowdown in hiring.

This sentiment was echoed by ZipRecruiter’s CEO Ian Siegel during their Q2 earnings call, noting a challenging labor market with a steady decline in hires and a reduced quit rate.

🔑 Key Takeaway: The labor market is showing signs of weakening, with increased layoffs and slower hiring. This trend could have broader implications for the economy and the housing market.