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Market Insights: Week of 2/12/2024

12 Feb 2024

Week of February 5, 2024 in Review

The latest appreciation and inventory data show why housing remains a great avenue for wealth creation. Read on for more details in these headlines:

Home Prices Expected to “Extend to New Highs”

Black Knight released their Home Price Index for November and December, and home values rose 0.1% in each of those months. Prices were also 5.6% higher than in December 2022.

CoreLogic also released their latest Home Price Index, which showed that national home values fell 0.1% from November to December. While this monthly figure was slightly different than Black Knight’s, CoreLogic’s 2023 level of appreciation was nearly equivalent, with home values up 5.5% last year.  

CoreLogic forecasts that home prices will fall 0.2% in January and rise 2.8% in the year going forward, though it’s worth noting their forecasts tend to be on the conservative side historically. For example, CoreLogic originally forecasted that we would see 3% appreciation in 2023 but we saw 5.5%. Plus going back to 2021, they had forecasted a 6.6% decline in home values, and we saw a nearly 19% gain instead.

What’s the bottom line? The rise in home prices reported by CoreLogic and Black Knight has been echoed by other major indices like Case-Shiller and the Federal Housing Finance Agency, showing that now remains a great opportunity for building wealth through real estate. CoreLogic’s Chief Economist, Dr. Selma Hepp, also noted that “home prices will continue to extend to new highs entering the typically busy spring homebuying season.”

The Real Story on Existing Home Inventory

The National Association of REALTORS® (NAR) recently reported that there were just 1 million homes available for sale at the end of December, which was down 11.5% from November’s 1.13 million available homes.

But these numbers don’t tell the whole story! Many homes counted in existing inventory are under contract and not truly available for purchase. In fact, there were only 666,000 “active listings” in January, well below what’s counted in NAR’s reporting and less than half of what we would expect to see in a normal market.

What’s the bottom line? Tight supply is going to remain a reality for some time. Many homeowners with low-rate mortgages are holding on to their property instead of listing it for sale. Plus, demand is only expected to rise, especially if rates move lower this year and more buyers decide to resume their home search. Fannie Mae’s latest Home Purchase Sentiment Index showed that an all-time survey high 36% of respondents said they expect mortgage rates to decline in the next 12 months.

This ongoing disparity between supply and demand is a key reason why home values continue to rise and why now provides great opportunities to take advantage of appreciation gains.

Is a Rise in Initial Unemployment Claims Ahead?

The number of people filing new unemployment claims was lower than expected in the latest week, as Initial Jobless Claims fell by 9,000 to 218,000. Continuing Claims also declined by 23,000, with 1.871 million people still receiving benefits after filing their initial claim. 

What’s the bottom line? While Initial Jobless Claims are still relatively low, the four-week average is near the highest level since December. There have also been some high-profile layoff announcements recently, and these numbers could be reflected in future initial unemployment filings.

In addition, Continuing Jobless Claims are hovering around the highest levels since 2021, suggesting that people are having a harder time finding new employment once they’re let go.   

Family Hack of the Week

Dish up this Cherry Almond Coffee Cake courtesy of Taste of Home, perfect for brunches, afternoon snacks and National Almond Day on February 16.

Preheat oven to 350 degrees Fahrenheit. In a large bowl, mix 2 1/2 cups all-purpose flour and 3/4 cup sugar. Cut in 3/4 cup cubed cold butter until mixture is crumbly. Reserve 1/2 cup of crumb mixture for the topping.

Add 1/2 teaspoon baking powder, 1/2 teaspoon baking soda and 1/4 teaspoon salt to the remaining mixture. Stir in 1 cup sour cream, 1 egg and 1 teaspoon almond extract. Spread batter onto the bottom of a greased 9-inch springform pan.

In a small bowl, beat 8 ounces softened cream cheese and 1/4 cup sugar until smooth. Add 1 egg and beat on low speed until just blended. Pour cream cheese mixture over the batter, then spoon 1 cup cherry preserves on top. Sprinkle with the reserved crumb mixture and 1/2 cup sliced almonds.

Bake until top is golden brown, approximately 50 to 60 minutes. Cool on a wire rack for 15 minutes before serving.

What to Look for This Week

Critical inflation reports could impact the markets, starting Tuesday when January’s Consumer Price Index is released. The Producer Price Index, which measures wholesale inflation, will be reported on Friday.

Housing data will also make headlines. Builder confidence for February from the National Association of Home Builders releases on Thursday and January’s Housing Starts and Building Permits follows on Friday.

Thursday also brings the latest Jobless Claims, manufacturing data for the New York and Philadelphia regions, and January’s Retail Sales.

Technical Picture

Mortgage Bonds ended last week trading in a range between support at 100.614 and overhead resistance at the 25-day and 50-day Moving Averages. The 10-year is trading in a range with support at the 200-day Moving Average and a ceiling of resistance at 4.20%, which is keeping a lid on yields for now.

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