Friday, May 17, 2024 What’s Up with Real Estate?

Inflation a bit cooler

That makes three in a row: a lower than expected BLS jobs number, flat retail sales in April, and now "core" CPI (Consumer Price Index = inflation for you and me) easing from +3.8% YoY in March to 3.6% YoY in April. None of these screamed recession, but they did at least point to a slowing economy and a loosening job market - exactly what the Fed needs to see more of before cutting rates. [Source: BLS, BEA]

Back below 7%

As you'd expect, the bond market LOVED the flat retail sales and slower inflation figures. And when bond prices rise, bond yields fall (inverse relationship). And when bond yields fall, mortgage rates tend to fall too. Average 30-yr mortgage rates dropped back below 7%, which (if they can hold) should boost transaction volumes for existing and new home sales in the coming months. [Source: Mortgage News Daily]

An inevitable snapback

4 million existing homes sold in 2023. That's 21% below its pre-pandemic average (5.1 million) and about the same level as in 2008 (15 years ago). That alone suggests a big rebound in sales is imminent. But the US population has grown by 40 million over the same time period! On a per population basis, existing home sales were incredibly (and unsustainably) low last year! [Source: NAR]