The upcoming week in the financial world is set to be data-rich, especially in the sectors of housing and employment.
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Inflation in the U.S. is gradually decreasing. The October Personal Consumption Expenditures (PCE) report, which is a key measure of inflation, showed no change in overall inflation for the month and a decrease in the annual rate from 3.4% to 3%. The core PCE, which excludes food and energy prices and is closely watched by the Federal Reserve, went up slightly by 0.2% in October, but its annual rate dropped from 3.7% to 3.5%, the lowest in over two years. This news quickly shifted the market perspective on rate cuts.
Inflation has significantly reduced since its peak last year, with the overall rate now at 3% and the core rate at 3.5%. If we look at the last six months, the core PCE is around 2.4%, close to the Fed's target of 2%.
The recent improvement to inflation could play a big role in the Fed’s decision to pause rate hikes in their next meeting on December 13. This week’s job news will add to it if numbers come in below expectations.
HOME VALUESIn October, Pending Home Sales, which are signed contracts on existing homes and predict future home sales, dropped 1.5% from September. This is the lowest level since the National Association of REALTORS® started tracking it in 2001. High mortgage rates discouraged many buyers, and a lack of available homes is another big issue. NAR's Chief Economist, Lawrence Yun, emphasized the importance of increasing housing supply to meet demand. Keep in mind, as rates increased for 3 months in a row, it makes sense that activity slowed down. Now that rates have improved 5 weeks in a row, and mortgage applications are picking up, activity will also pick up. New Home Sales, representing signed contracts on new homes, also fell by 5.6% in October to a 679,000-unit annual pace. Despite this drop and the influence of high mortgage rates, these numbers are still stronger than in August and significantly higher than last October. At the end of October, there were 439,000 new homes for sale, but only 76,000 were completed. The median sales price of new homes was $409,300, lower than before, but this doesn't mean overall home prices are falling. This price change is due to more lower-priced homes being built. The housing supply is 40% below its historical average and home prices are now 80% above the 130 year historical average. Home values have hit new all-time highs according to Case-Shiller, FHFA, CoreLogic, Black Knight and Zillow, more than recovering from the downturn we saw in the second half of 2022. Prices are now on pace to appreciate between 6-8% this year depending on the index, based on the reported pace of appreciation through September. These indexes show that now remains a great opportunity for building wealth through homeownership and appreciation gains. Homeownership is important, and attainable. To learn more about what you can be approved for, use the link below to schedule a call with me. |
WEALTH THROUGH REAL ESTATEAccording to the 2022 Survey of Consumer Finances (SCF), the median homeowner has 38 times the household wealth of a renter. Homeowners are wealthier than renters at every income level. For families in the bottom 20 percent of incomes, median net worth was nearly $147,000 for homeowners, and only $3,400 for renters. Housing emerges as the most substantial component of net worth for the majority of households. The interesting part is that the lower a household's income, the higher the proportion of their wealth is derived from homeownership. For households with middle-range incomes, home equity accounts for about 37% to 68% of their total net worth. In contrast, for those in the top 10% income bracket, home equity comprises only about 23% of their net worth. This data highlights the crucial role of homeownership in wealth accumulation, especially for lower and middle-income families. The best time to buy, is when you’re buying within your means. Don’t hesitate to reach out and find out how much you can be approved for today. |
