MBS Road Signs

Week of August 5, 2024 in Review

The latest home price indexes showed that wealth creation opportunities remain in homeownership. Plus, there were more signs that the labor sector is slowing. Read on for these stories and more:

·         Home Price Gains Still Strong

·         Media Misunderstands Rising Housing Inventory

·         Unemployment Claims Remain Elevated

Home Price Gains Still Strong

CoreLogic's Home Price Index showed that home prices nationwide rose 0.3% in June after rising 0.6% in May, 1.1% in April and 1.2% in March, as appreciation gains are slowing but remain strong. Prices are also 4.7% higher when compared to June of last year. CoreLogic forecasts that home prices will rise 0.3% in July and 2.3% in the year going forward, though their forecasts tend to be conservative.

ICE (formerly known as Black Knight) also reported that national home values rose 0.2% in June after seasonal adjustment, with their index showing that prices are 4.1% higher than a year ago.

What's the bottom line?

CoreLogic and ICE are not alone in their reporting, as home price gains have also been seen in other major indexes from Case-Shiller and the Federal Housing Finance Agency. These reports show that housing still proves to be a great investment for wealth creation.

Media Misunderstands Rising Housing Inventory

Active listings in July rose 5.3% from June and are now up 37% when compared to a year ago. While some media reports have claimed that the increase in inventory could lead to a housing crash, analyzing the figures in context is crucial.

The increases we saw last month are from very low levels, as active listings are still down almost 30% from the pre-pandemic totals seen in July of 2019. The inventory build we have seen this year has also been very concentrated, as there are only four states (Texas, Idaho, Florida and Tennessee) with higher inventory levels than five years ago. This is compared to some parts of the Northeast, where active listings are down 65% to 75% over that same period.

In addition, seasonal inventory building into the summer months is a normal pattern that we see every year. This is mainly due to children and schools, as parents like to have their move done before the start of the school year.

What's the bottom line?

Inventory is still tight comparatively and will likely start to decline heading into the fall due to the normal seasonality we see each year. Demand is also likely to rise when rates come down further. Overall, this situation remains supportive of home prices.

Unemployment Claims Remain Elevated

After hitting the highest level of the year, Initial Jobless Claims fell 17,000 in the latest week, with 233,000 people filing for unemployment benefits for the first time. Continuing Claims rose by 6,000, as 1.875 million people are continuing to receive benefits after filing their initial claim.

What's the bottom line?

Both Initial and Continuing Claims have trended higher this summer when compared to the start of the year, with Continuing Claims topping 1.8 million each week since the start of June. This shows that the pace of layoffs over the last two months has picked up at the same time employers have slowed down hiring.

This sentiment was echoed by ZipRecruiter last week during their second quarter earnings call. Cofounder and CEO Ian Siegel explained, "As we look toward the second half of 2024, we continue to navigate challenging labor market conditions. Per the Bureau of Labor Statistics, seasonally adjusted hires have declined every month on a year-over-year basis since August of 2022. The quit rate has fallen 9% below the average rate in 2019."

The data combined suggests we are seeing a steady weakening in the labor market.

Family Hack of the Week

Plums are in season, and this Honey Plum Parfait courtesy of Allrecipes makes for a light and refreshing breakfast. You can also substitute the Greek yogurt for frozen yogurt or ice cream to enjoy a delicious dessert. Yields 2 servings.

Pit and chop 2 plums. In a large bowl, combine the plums, 2 tablespoons chopped almonds, 2 tablespoons orange juice, 1 tablespoon honey, 1 teaspoon minced fresh ginger and 1 teaspoon ground cardamom.

In a parfait cup, add 1 scoop of Greek yogurt and top with 1 scoop of the plum mixture. Top with an additional scoop of yogurt and plum mixture.

What to Look for This Week

July inflation data will make headlines starting Tuesday with the Producer Price Index, which measures wholesale inflation. The Consumer Price Index follows on Wednesday.

Thursday brings the latest Jobless Claims, July's Retail Sales and an update on home builder sentiment for this month. July's Housing Starts and Building Permits will be reported on Friday.

SOURCE: MBS Highway Marketing Newsletter (8/05/2024).