Real Estate News in Brief: Catching Up on Two Weeks of Market Movements

In April, the average 30-year mortgage rates saw a significant increase, rising more than 50 basis points and briefly exceeding 7.5% . This surge has had a noticeable impact on the housing market:

• Pending Sales Index Drop: The National Association of Realtors (NAR) reported a 7.7% month-over-month and 7.4% year-over-year decline in its Pending Sales Index for April 2024, which fell to 72.3 . This drop to the lowest level in several years suggests that May 2024 existing home sales could fall below 4 million units (seasonally adjusted annual rate).
• National Housing Index: MBS Highway’s National Housing Index showed a decline for the second consecutive month in June, with the Buyer Activity sub-index dropping 6 points to 45. A reading below 50 indicates a contraction in transaction volume. The Northeast showed resilience, while the Southeast was the weakest region.

Home Price Growth Stayed Strong, but Not Everywhere

Despite the pressure on transaction volumes, home prices continued to rise, though regional variations were significant:

• Case-Shiller Index: The Case-Shiller national home price index rose 0.3% month-over-month in March, and 6.5% year-over-year. However, five major city indexes (Dallas, Denver, Phoenix, Seattle, and Tampa) saw month-over-month declines .
• CoreLogic’s HPI: CoreLogic’s Home Price Index (HPI) reported a 1.1% month-over-month increase in April, following similar growth in March. Year-over-year, home prices were up 5.3% .

Job Growth Slowing, but Mixed Signals from BLS Report

The employment landscape has shown signs of slowing, despite mixed signals from different reports:

• JOLTS Report: The April JOLTS report indicated a 5% month-over-month decline in job openings, bringing the total to 8.1 million. This is 18% below the figures from April 2023 and 31% below those from April 2022.
• ADP Report: The ADP employment report showed only 152,000 new private sector jobs added in April, falling short of the expected 175,000 and marking the smallest gain since January.
• BLS Jobs Report: Contrarily, the Bureau of Labor Statistics (BLS) reported a higher-than-expected addition of 272,000 jobs in April. However, the unemployment rate also edged up to 4.0% .

Lower-than-Expected CPI for May

May’s Consumer Price Index (CPI) brought some positive news on the inflation front:

• The headline CPI was flat month-over-month, while the core CPI grew by only 0.2% MoM. These figures were better than expected, leading to a drop in the year-over-year core figure from 3.6% in April to 3.4% in May, and the headline figure from 3.4% to 3.3%.

The Rate Cuts Are Coming?

Central banks around the world have begun to adjust interest rates:

• European Central Bank (ECB): The ECB cut rates for the first time in five years, from 4.00% to 3.75%. However, it warned that domestic price pressures remain strong and did not commit to further cuts.
• Bank of Canada (BoC): The BoC also reduced rates from 5.00% to 4.75%, with Governor Tiff Macklem indicating the possibility of more cuts if inflation continues to moderate.
• US Federal Reserve: In contrast, the US Federal Reserve held steady, maintaining its short-term policy range at 5.25%-5.50%. The updated "dot plot" now forecasts 1-2 rate cuts before the end of 2024 and 100 basis points of cuts in each of 2025 and 2026.

Conclusion

The real estate market continues to navigate through high mortgage rates, fluctuating home prices, and mixed economic signals. As a real estate broker, staying informed on these trends is crucial for advising clients and making strategic decisions. The landscape is complex, with regional variations and economic uncertainties playing significant roles. Keep an eye on these developments to better understand the market dynamics and guide your clients effectively.