LET’S REVIEW, WHAT HAPPENED LAST WEEK?

CoreLogic’s Home Price Index showed that home prices rose again from August to September, hitting a new all-time high for the fifth straight month. The recent updates from CoreLogic and Black Knight indicate a continued rise in home prices, reflecting a robust real estate market and reinforcing the notion that homeownership can be a valuable asset for wealth building. Below is a summary of the key points.

CoreLogic Home Price Index:

• Recent Trend: Showed a 0.3% increase in home prices from August to September.

• Record Highs: This increase marks the fifth consecutive month of reaching new all-time highs.

• Future Forecast: Predicts a modest rise of 0.1% in October and a 2.6% increase over the next year. However, CoreLogic's forecasts historically tend to be conservative.

• 2023 Projection: Based on monthly readings so far this year, CoreLogic’s index is on track for an 8% appreciation in 2023.

Black Knight Index:

• Recent Growth: Reported a 0.4% rise in national home values in September.

• Continued Peak Values: This also marks the fifth consecutive month of reaching new all-time highs in home values.

• Current Status: Home prices are now almost 3% above the 2022 peak.

• 2023 Outlook: Based on the monthly gains observed to date, Black Knight's index is on pace for a 7% appreciation this year.

These findings are in line with the strong growth observed in other major indices such as Case-Shiller, Zillow, and the Federal Housing Finance Agency. The data from CoreLogic and Black Knight reinforce the trend of rising home prices and suggest a positive outlook for the real estate market, particularly for those considering homeownership as a long-term investment strategy.

Recent Developments in Jobless Claims:

The U.S. labor market has shown mixed signals in its latest reports. Initial Jobless Claims have slightly declined, with a reduction of 3,000 in the latest week, bringing the total to 217,000 new filings for unemployment benefits. This figure indicates a relatively stable job market on a historical scale, suggesting that employers are keen on retaining their workforce.

However, a contrasting trend is observed in Continuing Claims, which have witnessed an increase of 22,000. Currently, 1.834 million individuals continue to receive benefits after their initial claim, a number last seen in April. This persistent rise in Continuing Claims for seven consecutive weeks, points to a growing challenge in the job market, particularly for those seeking new employment after being laid off. Basically, it’s harder to find a job once you’ve been laid off.

ZipRecruiter’s third-quarter earnings call shed further light on the situation. The company's Cofounder and CEO, Ian Siegel, highlighted the impact of the Federal Reserve's rapid rate hikes on the hiring landscape. The increased borrowing costs for businesses have resulted in a more cautious approach to hiring. Siegel noted a decline in job openings and hiring rates, leading to longer job search durations for seekers and reduced job switching among employed individuals. Interestingly, the quit rate has reverted to pre-pandemic levels, signaling a shift in workforce dynamics.

Assessing Recession Indicators:

The Bureau of Labor Statistics’ latest Jobs Report revealed an unemployment rate of 3.9% in October, a rise from the April low of 3.4%. Historically, an increase in the unemployment rate has been a reliable precursor to a recession. Since 1970, a 0.5% or more rise typically indicates an ongoing or imminent recession within two months.

The Sahm Rule, named after former Fed economist Claudia Sahm, is another recession indicator to consider. This rule triggers when the three-month moving average of the unemployment rate increases by 0.5% or more compared to its lowest point in the preceding 12 months. A rise to 4.2% in November would activate this indicator, with the next report due on December 8. Keep an eye on that.

A significant metric from the Bureau of Labor Statistics reports showed up on the November 3 report, a 19% year-over-year increase in individuals unemployed for 15 weeks or longer.

While the current labor market trends and recession indicators present a complex picture, it's important to note that recessions often bring lower interest rates. Although a recession can strain the economy, this aspect could provide some relief, particularly in sectors sensitive to borrowing costs. Key recession indicators point towards potential economic slowdown, warranting close monitoring in the coming months.

Why does it matter?

Mortgage rates will improve as unemployment rises because it affirms the Fed’s policy and approach to the market is working. They want to see the economy slow down to stabilize prices and maximize employment. The market will respond well to any news that supports no further rate hikes in 2023.

WHAT PRICE MAKES SENSE?

Buying a home is an intimate process. We offer share the decision, and even parts of the process with friends and family. The feedback adds to the excitement, but be careful. Too much advice isn’t a good thing. When buying real estate, there are no “one size fits all” solutions.

Step one in the process is to get approved for a mortgage. You may be surprised to find out you’re approved for more than you want to spend. Mortgages are approved using the gross income, but you live off your net income. We have to review your budget, net income, credit and debt to come up with a plan that works for you.

Getting pre-approved for a home loan before shopping for a home is crucial for several reasons:

1. Budget Clarity: It gives you a clear idea of how much you can afford, helping you to focus your search on homes within your budget. You can set the parameters with your realtor accordingly.

2. Seller Confidence: Sellers are more likely to take your offer seriously if you have a pre-approval, as it demonstrates financial readiness and reliability. In many markets, its required to show a home.

3. Speed: Being pre-approved speeds up the buying process since a significant part of the financial paperwork is already in place. We pre-underwrite and put you in position for non-contingent offers, with a close times between 10-20 days depending on the loan program.

4. Negotiation Leverage: With a pre-approval, you have a stronger position in negotiations, as sellers are often eager to deal with buyers who have secured financing.

5. Reduced Risk of Disappointment: Knowing your loan amount in advance prevents the heartbreak of falling in love with a home that is out of your price range.