The week of September 23, 2024, brought important updates on inflation, the housing market, and the broader economy. Inflation continues to cool off while housing market activity shows signs of improvement. Here’s a detailed breakdown of the week’s key developments and what they mean for homebuyers and sellers.
Consumer Inflation Trending in the Right Direction
Inflation continues its moderating trend, providing some relief to consumers and the broader economy. August’s Personal Consumption Expenditures (PCE) report showed that headline inflation rose by only 0.1% month-over-month. This is a welcome sign, as the year-over-year reading dropped from 2.5% to 2.2% — an indicator that inflation is slowing, albeit gradually.
This data is crucial because inflation has been a primary factor influencing the Federal Reserve’s decision on interest rates, which in turn affect mortgage rates. With inflation trending downward, mortgage rates have the potential to stabilize or even decrease slightly, making home purchases more affordable for buyers.
August New Home Sales Beat Estimates
New home sales outpaced expectations in August, signaling ongoing demand for housing. According to the U.S. Census Bureau, sales of newly built single-family homes rose 7% in August from July’s numbers, exceeding analyst expectations. This uptick reflects homebuilders' ability to respond to the demand for new housing, even in a market characterized by fluctuating mortgage rates.
Many prospective buyers are turning to new construction, which offers modern features and can often be more available than existing homes in certain areas.
Pending Home Sales Tick Higher
Pending home sales, a leading indicator of future housing market activity, also saw an increase in August. The National Association of Realtors (NAR) reported a 1.2% rise in contracts signed to buy existing homes, suggesting that buyers are re-entering the market as mortgage rates show signs of leveling off.
While the housing market remains more favorable for buyers, sellers can still benefit from this demand by pricing their homes competitively.
Another Record High for Home Prices
Despite cooling inflation and fluctuations in mortgage rates, home prices continue to rise. The S&P CoreLogic Case-Shiller U.S. National Home Price Index reported yet another record high for home prices in August, increasing 5.2% year-over-year.
This increase underscores the resilience of the housing market, especially in high-demand areas such as Florida. However, as home prices continue to climb, affordability remains a concern for many buyers. Sellers are likely to maintain strong negotiating positions in this environment, while buyers may need to explore creative financing options or seek properties in less competitive markets.
U.S. Economy Grew by 3% in the Second Quarter
The U.S. economy grew by a solid 3% in the second quarter of 2024, according to the latest GDP data from the U.S. Bureau of Economic Analysis. This growth was fueled by consumer spending, business investment, and strong job creation. A growing economy often leads to increased consumer confidence, which can boost activity in the housing market.
Continuing Jobless Claims Suggest Slower Pace of Hiring
In contrast to the strong economic growth, continuing jobless claims showed signs of a slowdown in hiring. The U.S. Department of Labor reported that continuing claims for unemployment benefits increased slightly in mid-September, signaling a potential shift in the labor market.
While unemployment remains relatively low, any slowdown in hiring could impact consumer confidence and spending, potentially influencing the housing market. This is an area to watch in the coming months, as changes in employment trends can have a ripple effect on the broader economy.
What Does This Mean for Buyers and Sellers?
For buyers, moderating inflation and stabilizing mortgage rates are encouraging signs. The increase in new home sales and pending home sales suggests that opportunities are still available, though affordability may remain a challenge as home prices continue to rise. Buyers should stay informed about financing options, including loan programs like Florida’s Hometown Heroes, which can offer valuable down payment assistance.
For sellers, rising home prices mean that the market is still favorable. However, with more buyers negotiating for lower rates, it’s important to price homes competitively to attract interest. This week’s data shows that buyers are still actively seeking homes, but they are also more discerning in today’s economic climate.
Key Takeaways
Inflation is trending down, creating the potential for more stable mortgage rates.
New home sales and pending home sales indicate that the housing market is still active, despite rising prices.
The U.S. economy grew by 3% in the second quarter, but a slight uptick in jobless claims could signal a hiring slowdown.
Home prices hit another record high, keeping the market competitive for buyers and profitable for sellers.
Staying on top of these economic and market trends is key to making informed real estate decisions. Whether you're buying or selling, understanding the broader economic factors at play can help you navigate the market more effectively.
References
U.S. Census Bureau. "New Residential Sales – August 2024." Available at: https://www.census.gov/construction/nrs/index.html
U.S. Bureau of Economic Analysis. "Gross Domestic Product, 2nd Quarter 2024." Available at: https://www.bea.gov/data/gdp/gross-domestic-product
U.S. Department of Labor. "Unemployment Insurance Weekly Claims Data." Available at: https://www.dol.gov/ui/data.pdf
National Association of Realtors. "Pending Home Sales Report – August 2024." Available at: https://www.nar.realtor/research-and-statistics
S&P CoreLogic Case-Shiller U.S. National Home Price Index – August 2024." Available at: https://www.spglobal.com/spdji/en/indices/indicators/sp-corelogic-case-shiller-us-national-home-price-index/
U.S. Bureau of Labor Statistics. "Personal Consumption Expenditures (PCE) Inflation Report – August 2024." Available at: https://www.bls.gov/pce
Comments