Space Economy and Mars Moonshot – you might remember the Rocket that SpaceX launched earlier this year that self-destructed over the Gulf of Mexico. This reusable stainless steel rocket is called ‘Starship’ and it is constructed with the intent of bringing a life-sustaining colony to Mars which requires a payload of 1M tones. While SpaceX is dominating the field – the entire global revenue from satellite launches is only $6B. Right now, the R&D costs of Starship is at $2B. NASA has awarded approximately $4B in contracts to SpaceX so it can develop Starship into a lunar landing vehicle. Currently there aren’t any payloads designed for Starship. If it does become commercially viable there will be whole new industries developed that aren’t currently possible (space factories, mining asteroids, recreation). This is why SpaceX has been valued in the $140B range when the total market is currently only $6B.
Mortgage Rates improved this week thanks to the negotiation of the debt ceiling bill and inflation data continuing to remain mild. Interest rates are up 1.5% from this time last year.
May Jobs Report – while the headline figures for the Jobs report came out stronger than anticipated, it’s worth noting that the main reason for the job gains were due to the ‘Birth/Death model’ – where the BLS estimates hiring from new business creations as a relationship to closed businesses. There is another model in the survey, called the Household survey, which is measured by random phone calls. The household survey showed 310,000 job losses. These losses caused the unemployment rate to rise from 3.4% to 3.7%. The earnings component of the report showed a reduction in wage inflation: average weekly hours fell 0.1% to 34.3 hours, weekly earnings are up 3.4% year over year (a reduction from 3.8%), and hourly earnings are up 4.3% year over year (a decline from 4.4%).
Home Values increased 0.4% during the month of March a tick up from April (0.2%). Year over year, home prices are up 0.6%. We will likely see that number move negative as we get closer to the year over year comparison of peak home prices in June of 2022. It’s estimated we are seeing values down about 2.3% from that time. Case Shiler is still anticipating homes appreciate in value a steady 5-6% in 2023, similar to what we saw in 2022.
Conforming Home Values – when we look at the FHA home price index you see that that the value of homes with conforming loans outperformed the national average in both the month of March and year over year. This shows that the biggest decline in home prices is in the higher tier bracket, as Conforming loans max out at just over $726,200. That means in most markets (there are high balance conforming loans in more expensive counties) if the home price is $900,000 or more it is very likely it will have a jumbo loan. Since homes with conforming loan amounts significantly outperformed that national average in appreciation we can assume the difference is primarily in the luxury market.
Mortgage Applications to purchase homes declined 3% last week and are down 31% year over year. Refinance applications decreased 7% last week and are down 45% year over year.