Market Moving News This Week

This week is jam-packed with significant economic reports that will give us a clearer picture of the housing market, economic growth, and inflation. Here’s a detailed timeline of key events and what to keep an eye on:

Key Events This Week

Tuesday: Existing Home Sales Data

We're diving into the latest data on existing home sales to spot trends in the housing market. Changes in sales volume and pricing can signal shifts in demand and supply, which are crucial for understanding the current state of the market.

Wednesday: New Home Sales Data

The new home sales figures are up next. By evaluating these numbers, we can gain deeper insights into the real estate market. Keep an eye out for regional differences and any emerging trends that might impact future market conditions.

Thursday: Q2 2024 GDP Data

On Thursday, we get the first look at the second quarter GDP. This data will help us gauge overall economic growth. Comparing it with previous quarters will allow us to identify patterns or deviations, giving us a clearer picture of where the economy is headed.

Thursday: Jobless Claims

Also on Thursday, the latest jobless claims will be released. Monitoring these numbers is essential to understand the strength or weakness of the labor market, which can indicate broader economic conditions and potential impacts on consumer spending.

Friday: June PCE Inflation Data

The Personal Consumption Expenditures (PCE) inflation measure is crucial since it's the Fed’s preferred inflation gauge. This report will be key to understanding inflationary pressures and potential Fed responses ahead of their upcoming meeting this month. All eyes are definitely on this PCE report.

Friday: MI Consumer Sentiment Data

On Friday, we'll examine the University of Michigan Consumer Sentiment Index for insights into consumer confidence and spending intentions. This can serve as a leading indicator of economic activity.

Throughout the Week: S&P 500 Earnings Reports

Throughout the week, we’ll be tracking earnings reports from about 20% of S&P 500 companies. These reports provide a sense of corporate health and sector-specific trends, influencing market sentiment and investment decisions. As investor confidence rises, bond prices improve, and mortgage rates tend to drop. If you attended our recent webinar, you'll know we celebrate with the "bond dance" when this happens.

Labor Market Insights

The recent increase in initial jobless claims and continuing claims indicates a weakening labor market, with 243,000 new unemployment claims, the highest since early June. This trend suggests slower job growth, which we expect to see reflected in the upcoming July Jobs Report. A softening job market, combined with rising unemployment, supports the argument for the Federal Reserve to consider cutting interest rates to stimulate economic activity.

Additionally, the latest Leading Economic Index (LEI) and the Fed's Beige Book highlight a slowing economy. The LEI showed a 0.2% decline in June, following a 0.4% drop in May, signaling reduced economic momentum. The Beige Book reports flat or declining growth in five out of twelve Fed districts, an increase from two districts six weeks ago. These indicators of cooling economic activity and consumer spending strengthen the case for the Fed to cut rates to support the economy.

Elections and Real Estate

Housing affordability is a major issue in this year's presidential election, especially for young voters. A survey by Redfin shows that over 90% of Gen Z adults consider housing affordability important when deciding who to vote for. Despite other pressing election topics, housing remains crucial as it affects nearly everyone in the country.

In swing states, housing affordability is a significant concern due to high home prices, rising mortgage rates, and a shortage of available homes. This is particularly challenging for young people with lower incomes who struggle to save for a home. Even though these states traditionally had lower housing costs, they are now facing the same affordability issues seen nationwide. Homeowners benefit from rising property values, but many still find it difficult to upgrade to better homes due to increased costs and higher mortgage rates.

The problem is more acute for Black and Hispanic families in swing states, who have to spend a larger portion of their income on housing compared to white and Asian families. Median incomes in swing states have not kept pace with the rapid increase in housing costs, which have risen much faster due to factors like the pandemic-driven homebuying surge and remote work. With the presidential election approaching, housing affordability remains a top concern for voters across various demographics.

Homeownership Matters

From 2019 to 2022, net housing equity significantly contributed to the increase in Black wealth, with business equity also playing a key role. Despite these gains, the racial gap in homeownership remains substantial, with only 44% of Black individuals owning homes compared to nearly 73% of white individuals. This disparity is rooted in historical discriminatory practices like redlining and blockbusting, which have long hindered Black homeownership.

Encouraging homeownership can be a powerful way to build wealth and bridge the racial wealth gap. Owning a home provides financial stability, equity growth, and long-term investment opportunities. As housing values rise, homeowners can benefit from increased property value, creating a solid foundation for financial security. Prospective buyers, especially in historically underserved communities, should be aware of the potential for wealth accumulation through homeownership and take steps towards purchasing a home to secure their financial future and contribute to greater economic equality.

Bet on Homeownership

A significant wealth gap exists between renters and homeowners due to the equity homeowners build as their property value appreciates and they make mortgage payments. Homeownership acts as a form of forced savings, providing a financial return when the home is sold. In contrast, renters do not gain any financial benefits from their monthly rent payments. Ksenia Potapov, Economist at First American, highlights that renters miss out on wealth generated by house price appreciation and equity gains from mortgage payments.

Home equity is a crucial component of most homeowners' net worth, significantly boosting wealth across all income levels. Data from First American and the Federal Reserve show that home equity makes up a large part of a homeowner's net worth. Nicole Bachaud, Senior Economist at Zillow, emphasizes that homeownership is a key financial asset that promotes stability and wealth preservation across generations.

If you're considering building your net worth, the current real estate market offers opportunities such as lower mortgage rates and increased inventory. A local real estate agent can help you navigate these opportunities and find your ideal home. Owning a home can enhance your overall wealth in the long run, regardless of your income level.