Market Moving News

First, Let’s dive into what Fed Chair Powell had to say this week:

So, Powell’s been looking at things after that Fed meeting that wrapped up on May 1st. He’s saying, "Hey, inflation’s gotten a bit better, but it’s still too high and pretty unpredictable." And that’s put the brakes on any plans for slashing interest rates just yet. They were hoping to start cutting rates, but with inflation still doing its thing, they’re holding off until they’re more confident they can rein it in. They’re also talking about slimming down their balance sheet by $35 billion every month. But as for those rate cuts? Looks like we might have to wait a bit longer.

His words caused a stir in the markets. Now, folks are only expecting two rate cuts over the next year, adding up to 0.5%. And there’s even talk that we might not see any rate cuts at all in 2024. That’s a big turnaround from what people were thinking back in December.

During the Q&A, Powell made it clear that they’re not thinking about hiking up rates anytime soon. And he shot down any talk about stagflation or politics messing with their decisions. He straight-up said that the election year isn’t playing into their plans. But he did say that if the job market suddenly tanks, that could push them towards cutting rates. Even though inflation’s climbing up to 3%, the Fed’s still not satisfied and they’re not sure when they’ll start cutting rates.

Let’s review what’s happening with jobs:

The US economy’s been on a job-adding spree for a whopping 40 months straight. That’s a solid streak, with over 100,000 new jobs popping up every single month. It beats the previous record from back in the late '90s by a mile. And April kept the trend going with another 175,000 jobs added. Not too shabby, though it fell short of the 243,000 folks were expecting. They also revised down the numbers for February and March, shaving off 22,000 jobs.

Now, here’s where things get interesting...those headline job numbers? They come from this Business Survey, which relies a lot on guesswork. One big factor boosting job numbers last month was what was called the birth/death model. Basically, it estimates how many new jobs are created compared to how many businesses are shutting down. In April, this model made it look like we added 363,000 jobs. But if we take that away, we actually lost 188,000 jobs.

Average weekly hours worked went down a tad. Businesses tend to cut hours to save money, which means folks are taking home a bit less bacon. Put it all together, and it looks like the job scene might be cooling off. If that keeps up, the Fed might start thinking about cutting rates sooner than they thought.

Despite the headlines about job growth, lots of folks are feeling the pinch. It’s getting harder to make ends meet, with the cost of living shooting up. And even though the job numbers in April looked okay at first glance, it was actually the smallest increase in six months. Plus, the unemployment rate’s ticking up, now sitting at 3.9%.

But hey, it’s not all bad news. ADP’s Employment Report for April was pretty upbeat, especially in the private sector. Employers added 192,000 new jobs, beating the forecast. Small businesses chipped in with 38,000 new gigs, while the bigger players added 160,000.

And about those pay raises? They’ve slowed down a bit. Existing employees got a 5% bump in April, down from 5.1% in March. And if you’re thinking about jumping ship for a new job, the average raise you’d get is down to 9.3% from 10.1% in March. Still not too shabby, though.

Market Expectations for the Fed Funds Rate:

• June 12, 2024: Expected to stay the same.

• July 31, 2024: Expected to stay the same.

• Sep 18, 2024: Expected to cut by 0.25% to a range of 5.00-5.25%.

• Nov 7, 2024: Expected to stay the same.

• Dec 18, 2024: Expected to cut by 0.25% to a range of 4.75-5.00%.

• Jan 25, 2025: Expected to stay the same.

• Mar 19, 2025: Expected to cut by 0.25% to a range of 4.50-4.75%.

• Apr 30, 2025: Expected to stay the same.

Now, onto the housing front:

The housing crisis is hitting folks hard. A survey by Redfin found that a chunk of people are cutting back on essentials like food and healthcare just to keep a roof over their heads. The median income for homebuyers varied a lot depending on how much cash they had to throw around. Not surprisingly, folks with lower incomes had to scrape by on a lot less.

Back in 2020, when mortgage rates were rock-bottom and home prices hadn’t gone nuts yet, some lower-income folks managed to snag a home. But fast forward to now, and the economy’s doing so well that it’s actually harder for regular folks to afford a place. The Fed’s been hiking up interest rates to keep inflation in check, and that’s pushing mortgage rates up too. Add that to the crazy-high home prices, and it’s no wonder lots of folks are feeling the squeeze.

The monthly mortgage payment required to purchase the median-priced home in the US has seen a significant increase over the past four years:

• April 2020: $1,480

• April 2021: $1,690

• April 2022: $2,400

• April 2023: $2,550

• April 2024: $2,890 (reaching a record high)

This represents a 95% increase over the past four years, making homeownership increasingly challenging for many people.

Speaking of home prices, they just keep on climbing:

Home prices are on the up and up, according to the Case-Shiller Home Price Index. From January to February, they shot up by 0.4% nationwide after adjusting for the usual seasonal stuff. Compared to last year, home values jumped a whopping 6.4%, the fastest growth rate since back in 2022.

Another report from the Federal Housing Finance Agency backs that up. They found that home prices climbed by 1.2% from January to February, with a hefty 7% jump from the year before. Basically, no matter how you slice it, home prices are going through the roof.

And it’s not just one or two cities seeing big price hikes. All 20 cities in the S&P DJI composite index are seeing prices shoot up. Tight supply’s not helping matters, but buyers are still hungry for homes, which is keeping prices high.

But what about housing inventory?

Turns out, home prices are still climbing even as more homes hit the market. During the four weeks leading up to April 28th, the median home-sale price either went up or stayed put in all 50 of the biggest US metros. And the national median sale price is nearly at a record high of $383,188, up almost 5% from last year.

But here’s the kicker: Even though more homes are up for grabs, prices keep going up. Some homeowners are holding off on listing their properties because they think interest rates are going to shoot up. And that’s just making it even tougher for folks to find an affordable place to call home.

So, what does all this mean for you? Well, if you’re thinking of buying or selling a home, it’s a wild ride out there. Home prices are through the roof, and they’re not showing any signs of coming back down. And with interest rates on the rise too, it’s getting pricier to borrow money. If you’re already a homeowner, though, this could be music to your ears. After all, a rising market means your home could be worth even more than you thought.

Here's the key housing-market data for the U.S. for the four weeks ending April 28, 2024:

• Median sale price: $383,188, up by 4.8% compared to the previous year, nearly reaching an all-time high.

• Median asking price: $420,450, marking an all-time high and the largest increase since September 2022, up by 7.7%.

• Median monthly mortgage payment: Reached an all-time high of $2,890 at a 7.17% mortgage rate, up by 14.7% year over year.

• Pending sales: 88,408, down by 3.4%, with the decline likely influenced by the Easter effect.

• New listings: 101,065, showing the biggest increase in nearly three years, partly due to the Easter effect.

• Active listings: 856,350, up by 11.8%.

• Months of supply: 3.4 months, indicating seller's market conditions.

These are national averages, but give you a clear picture of strength in housing. For example, in 3 key bay area markets, inventory is much lower than 3.4% months. See below.

While inventory is on the rise, buyer demand remains strong and home prices are rising.

Oakland

San Jose 

Sacramento