As we kick off the fourth quarter of the year, market conditions are not getting better for home buyers as mortgage rates continue to rise and housing inventory remains challenging. Yes, homes are still moving, being bought and sold, and transactions are happening but conditions are not what we’d love them to be.
Why? Largely because of inflation. And inflation is threatening to rise because of the price of oil. It’s no coincidence that interest rates and oil prices hit highs on the same day last week. High oil prices lead to higher prices throughout the economy. And as we know, inflation is the enemy of low interest rates. So, as inflation rises, traders expect that interest rates will too.
Also weighing heavily on markets is the county’s debt load and the potential government shutdown, that’s since been resolved. Still, back in July, the money the government requested to fund its activities through September led to a downgrade of U.S. debt. And a downgrade leads to higher interest rates the government has to pay on its debt, which leads to the U.S. Treasury yield going higher, leading mortgage rates to go higher as well.
In past markets when interest rates were higher, home prices lowered; however, now inventory is squeezed, keeping home prices elevated. So, where’s it all going from here? Home purchases will be feeling the pinch as we saw last Thursday with the Pending Home Sales numbers declining as home affordability declines.
Ironically though, it’s the above conditions that, if they continue, will set the stage for rates to ultimately come down as the economy slows down. This is the cycle of economics and as we know, the only constant is change.
As for what I’m watching this week…
It’s Jobs week, meaning a slew of very important economic reports are coming out about the nation’s job market. All the fun starts on Wednesday with the ADP report on private sector job creation and culminates on Friday with the government’s report on the nation’s job landscape.
Predictions for ADP’s September private sector job number at a lower 150,000. This would compare with August growth in private payrolls reported by the Bureau of Labor Statistics of 179,000.
For the wider Jobs Report put out by the government, a 160,000 rise is the call for the number of new jobs created in September versus 187,000 in August which was nearly 20,000 better than expected. Average hourly earnings in September are expected to rise 0.3 percent on the month for an annual wage inflation rate of 4.3 percent, steady as compared to last month’s report. September’s unemployment rate is expected to edge lower to 3.7 percent from August’s 3.8 percent which was much higher than expected at 3.5 percent.
I’ll be watching all of it and report back next week. Until then, have a great rest of your week!
