Week of May 6, 2024 in Review

Strong home price appreciation demonstrates the opportunity that remains in the housing market, while unemployment claims saw a breakout. Plus, what might be ahead for consumer spending? Here are the headlines:

  • Opportunity in Housing Remains Strong
  • Initial Jobless Claims Hit 9-Month High
  • Is Consumer Spending Headed for a Slowdown?

Opportunity in Housing Remains Strong

CoreLogic’s Home Price Index showed that home prices nationwide rose a strong 1.2% in March after rising 0.7% in February, showing that home price appreciation is not just continuing – it’s accelerating. Prices are also 5.3% higher when compared to March of last year.

CoreLogic forecasts that home prices will rise 0.8% in April and 3.7% in the year going forward, though their forecasts are typically on the conservative side so we may see even greater levels of appreciation. For example, CoreLogic had forecasted that prices would rise 0.4% in March, and last week’s report showed we tripled that amount. They had also forecasted that we would see 3% appreciation in 2023 but we saw 5.5%. Black Knight also reported that national home values rose 1.2% in March, with their index showing that prices are 5.6% higher than a year ago.

What’s the bottom line? The latest rise in home prices reported by CoreLogic and Black Knight echoes the strong growth seen by other major indices like Case-Shiller and the Federal Housing Finance Agency. These reports continue to demonstrate why homeownership remains a good opportunity for building wealth through real estate.

Initial Jobless Claims Hit 9-Month High

Initial Jobless Claims rose by 22,000 in the latest week, reaching their highest level since last August, as 231,000 people filed for unemployment benefits for the first time. Continuing Claims also rose 17,000, with 1.785 million people still receiving benefits after filing their initial claim.

What’s the bottom line? The jump in Initial Jobless Claims is a breakout for this metric, as it has been extremely stable at low levels for the last several months (ranging from 208,000 to 213,000 in nine of the last ten weeks before this latest report). Continuing Claims are also still trending near some of the hottest levels we’ve seen in recent years.

This data follows other recent reports that also suggested softening in the labor sector, such as weaker than expected job growth in April, declining job openings, and the low quit rate.

Is Consumer Spending Headed for a Slowdown?

The most recent consumer spending data for March was strong (Core Retail Sales up 1.1% and Personal Spending up 0.8%), aided by pandemic savings from stimulus and credit. But there are signs this support may be coming to an end. A recent article by San Francisco Fed analysts revealed that “American households fully spent their pandemic-era savings as of March 2024.” Meanwhile, credit card debt hit a new record high in the fourth quarter of last year, with balances reaching $1.13 trillion, according to the New York Fed’s Quarterly Report
on Household Debt and Credit.

We’ve also seen a growing popularity in Buy Now Pay Later (BNPL) programs, which allow people to purchase something immediately and pay off the balance in equal installments. But BNPL options are also now showing signs of stress.

A recent survey conducted for Bloomberg News by Harris Poll found that 43% of those who owe money to BNPL programs were behind on their payments. Also, within the survey, it was shown that more than 50% said they bought more than they could afford, and over one third said they turned to these programs after maxing out their credit cards. Meanwhile, 24% said their BNPL spending was “out of control.”

What’s the bottom line? Consumer spending makes up 70% or so of GDP, so a slowdown would be significant and could point to a slower US economy, weaker inflation, and lower rates. While this will take time to come to fruition, it will be important to analyze upcoming data for signs of softer spending.

Family Hack of the Week

May 15 marks National Chocolate Chip Day and is the perfect reason to enjoy these Chocolate Chip Muffins courtesy of Food.com. Yields 12 muffins.

  • Preheat oven to 400 degrees Fahrenheit.
  • Grease 12 muffin cups or spray with baking spray.
  • In a large bowl, stir together
    • 2 cups all-purpose flour,
    • 1/3 cup packed light brown sugar,
    • 1/3 cup sugar,
    • 2 teaspoons baking powder, and
    • 1/2 teaspoon salt.
  • In another bowl, stir together
    • 2/3 cup milk,
    • 1/2 cup butter (melted and cooled),
    • 2 eggs (lightly beaten), and
    • 1 teaspoon vanilla until blended.
  • Make a well in the center of the dry ingredients and add milk mixture, stirring to just combined.
  • Stir in 1 bag of chocolate chips and 1/2 cup of chopped walnuts or pecans.
  • Spoon batter into prepared tin and bake for 15-20 minutes until a cake tester inserted in the center of a muffin comes out clean.
  • Place muffin tin on a wire rack and cool for 5 minutes before removing muffins to finish cooling.

What to Look for This Week

We’ll see crucial readings on inflation when the Producer and Consumer Price Indexes for April are reported on Tuesday and Wednesday, respectively. Key housing data will also be delivered, starting with this month’s builder confidence reading from the National Association of Home Builders on Wednesday. April’s Housing Starts and Building Permits follow on Thursday.

Also of note, look for April’s Retail Sales on Wednesday and the latest Jobless Claims on Thursday.

Technical Picture

Mortgage Bonds tested and retreated from the tough ceiling of resistance at their 50-day Moving Average on Friday, but still ended last week trading above their 200-day Moving Average. The 10-year is testing the 4.50% psychological resistance level, which has been keeping yields from moving higher. This week’s inflation data will likely dictate the near-term direction for the markets.

If you have any questions, please contact me today!