As we close the books on February’s data, it’s worth noting that the U.S. Economy had strong momentum ahead of the global geopolitical issues that have since transpired. Employment outperformed expectations with its 14th consecutive month of growth while labor force participation inched up. However, the invasion of Ukraine has created a period of uncertainty in the short-term and complicates the Fed’s ability to deal with already-high inflation. Despite all this, buyer demand remains relatively strong as mortgage rates ease up—closed sales inched up and inventory seems to be finally heading in the right direction on a consistent basis.
Active Listings Start to Trend Up in California: The total number of homes available for sale in California has been rising in 7 out of the past 8 weeks. There was still slightly less inventory on the market than there was one year ago, but last week marked the largest weekly increase in active listings since early January. Most of the increase was in homes priced over $1,000,000, but declines in active homes priced under $1 million has lost momentum in recent weeks so we may see an increase in entry level homes on the MLS as we enter the spring homebuying season.
US job growth blows past forecast: U.S. employers added 678K new jobs last month — the most since July 2021 and pushed the unemployment rate down to 3.8% from 4%. Moreover, average hourly earnings growth paused in February, which should help to relieve some pressure on rising inflation. Initial jobless claims also dropped to new lows with California and Florida reporting the biggest decreases in unadjusted UI claims. This impressive performance in the labor market raises optimism that the economy will continue to withstand the pressures of inflation, geopolitical tensions, and higher interest rates.
Mortgage interest rates dipped further: Concerns over the escalating war between Russia and Ukraine caused U.S. Treasury yields to recede last week as investors took safety in the bond market. This flight to financial safe haven led to a drop in mortgage rates as the 30-year fixed rate mortgage dropped 8 basis points to an average weekly rate of 3.76% in the latest Freddie Mac survey. This pause is good news to potential buyers thinking of jumping into the market. However, uncertainty will likely only keep interest rates low in the short-term, because rates are expected to resume an upward trend in the coming months as the Fed begins to actively combat inflation.
Pending home sales decline as buyers struggle with low inventory: The national index measuring the number of contract signings, fell 5.7% %from the prior month, and while the West was the only region with an increase month-to-month, all regions fell below last year’s level. Typically, this index is an indication of future market closing activity 30-45 days ahead. And, while the index has seen a drop in recent months, all-time low inventory numbers contribute to buyers having a difficult time getting into a home. However, affordability challenges are also increasing as all aspects of the cost of living rise.
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