Economic Indicators – are we in the first phase of AI layoffs? UPS announced 48,000 layoffs, Amazon announced 14,000 layoffs and we have seen other recent announcements from Accenture, Salesforce, Paramount, Goldman Sachs, Target and even Walmart putting a hiring freeze on – all pointing at AI. Cell phone bans help kids with better grades and attendance (if not a temporary increase in suspensions). Halloween candy went up in cost by an average of 10.8% with continued shrinkflation.
Mortgage Rates bumped up slightly this week in response to the Fed announcing they would be reinvesting their balance sheet runoff in short term treasury bonds. Rates are down from this time last year by nearly 1%. Mortgage rates remain near the best position we have seen since September 2022.
Home Values – the Case-Shiller Index, considered the ‘gold standard’ for appreciation, showed that home prices rose 0.2% in August. Year over year home prices rose 1.5% a slight moderation from the previous 1.6% figure.
Fed Funds Rate was lowered by 0.25% to a 3.75-4%. As a reminder the fed funds rate is the overnight rate that banks lend each other money at. The board was mostly in alignment with the vote to lower rates, but one member wanted to decrease the rates by 0.5% and one member was not in favor of lowering rates. Even though the fed fund’s rate decreased, mortgage rates increased in response to the Fed announcement regarding balance sheet runoff. Recently the have been letting their bond holdings that have matured ‘run off’ meaning that they aren’t using the proceeds to buy new bonds. On Wednesday they announced they would be using that ‘run off’ to purchase Treasury bonds with maturities of 1-year or less (instead of long-term MBS or 10-year + treasury bonds) which doesn’t help the long-term bond market.
Rents – ApartmentList reported rents decreased 0.8% in October, the third consecutive month of declines. They anticipate continued declines to close out the year. Rents are down 0.9% year over year as vacancies have risen to 7.2%, the highest they have recorded since tracking this metric in 2017.
Mortgage Applications to purchase homes rose 5% last week and refinance applications increased 9% from the previous week. Total volume rose 7.1% from the previous week. Year over year purchase applications are up 20% while refinance volume is up 111%