They call it the 'Market Minute Write-Up" & it's done every Monday. This one was good enough to share in it's entirety!
"January 08, 2024 - Americans are feeling more confident about the housing market at the beginning of 2024 as buyers and sellers start seeing a glimpse of hope at the far end of the tunnel. While rates had a slight uptick in the first week of the year, easing inflationary pressure and a soft economic outlook prompted many to believe that mortgage rates will decline, albeit slowly, in the next 12 months. The housing market should see a bounce back in activity in the coming months if the sentiment can maintain its upward momentum. The improvement, however, will likely be gradual as tight housing supply remains the norm in 2024.
Mortgage rates go up slightly to start off 2024: After reaching a 7-month low in the last week of December, mortgage rates kicked off the year with a mild uptake in the first week of 2024. The average 30-year fixed rate mortgage (FRM) reported by Mortgage News Daily inched up from 6.67% on the last trading day of 2023 to 6.74% at the closing on January 8, 2024. The boost in rates was due partly to more upbeat economic data and partly to the recent increase in traders’ doubts about the Fed’s rate cuts in the next 12 months. With the latest jobs report suggesting a stronger-than-expected labor market, rates could continue to see some volatility in the coming weeks. Mortgage demand, meanwhile, remained soft as mortgage applications dropped again at the end of last year. Despite the recent downward trend in rates, the latest purchase application index reported by Mortgage Bankers Association decreased 5% compared to two weeks ago, as supply constraints continued to hold back market activities.
Home purchase sentiment bounces back at year-end: With interest rates dropping to the lowest level in seven months, optimism about the housing market began to come back at the end of 2023. The home purchase sentiment index released by Fannie Mae jumped 2.9 points to 67.2 in December and reached the highest level since April 2022. The share of consumers who said that it is a good time to buy rose to 17%, an increase from the survey low of 14% recorded in the prior month. The surge in confidence last month was driven primarily by the increase in optimism that mortgage rates will soften, as a record-high 31% of the respondents believed that rates will decline over the next 12 months. While rates have been moving mostly sideway in the past couple of weeks, receding inflationary pressures coupled with the expectation of the Fed’s policy rate cuts will likely lead to more downward drifting in mortgage rates later this year.
Solid residential market pushes up construction spending in November: Despite a slowdown in new home sales pace in November, construction spending advanced again in November as single-family construction continued to provide support to new building activity. Total outlays for residential and non-residential posted a solid gain with an increase of 0.4% month-over-month in November and improved for the eleventh consecutive month. Residential spending was up 1.0% from October, with single-family outlays surging 2.9% as inventory remained low in the existing housing market. Multifamily outlays inched up 0.1% month-over-month in November but continued to moderate, as apartment demand remained on a normalizing trend. Builders are expected to pull back further in 2024 as the apartment supply pipeline remains saturated in the next 12 months.
December job gains top expectation: The December jobs report came in stronger than expected yet again, with employers adding a seasonally adjusted 216k jobs last month. Employers added a total of 2.7 million for the year 2023, a sharp decline from 4.8 million in 2022, but still a stronger number compared to the few years preceding the pandemic era. The unemployment rate was unchanged at 3.7% in December, but the labor force participation dipped an unusually large 0.3 points to 62.5%. A slip in the rate is a discouraging sign for the Fed officials, as fewer people being drawn into the labor force could put upward pressure on wages. Average hourly earnings, in fact, rose 4.1% year-over-year in December, a tick-up from 4.0% in November. The latest jobs report, while more robust than the consensus expectation, continues to suggest that the labor market has cooled over the past year. As such, it is unlikely to have a change on the Fed’s rate movement perspective in the next FOMC meeting.
Holiday spending up modestly in 2023: Consumers continued to spend during the holiday season, with U.S. retail sales – excluding automotive - increasing 3.1% year-over-year for the time period between November 1 and December 24, according to Mastercard SpendingPulse. Online retail sales were up sharply by 6.3% from a year ago, while in-store sales posted a more modest gain of 2.2% year-over-year. The restaurant sector recorded a big jump, with sales climbing a strong 7.8% from the comparable period a year ago, as family and friends celebrated their holidays outside of homes. According to Adobe’s Digital Price Index, many shoppers have used the “buy now, pay later” financing option during the holidays, with the payment plans racking up $16.6 billion in online spending during the holiday season, an increase of 14.4% from the year-ago holiday period. This may imply that there could be a pullback in consumer spending in the months ahead as bills come due for those shoppers who borrowed forward at the end of last year."
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