January of 2023 has been a mixed bag to be completely honest as there were ongoing unstable trends. With the Fed’s latest announcement and key economic data releases, home buyers and consumers are taken on a rollercoaster ride as the future economy is on the brisk of a recession even though it was reported that the job market appeared to be “stronger” and unemployment rates trended down.
With that being said, here’s a quick recap for all market updates for February
Yet… Another Rate Hike!
Yes, it happened again. Even though the interest rate hasn’t been rising aggressively, The Fed (somehow expectedly) announced there will be another round of hike. However, the good news is that this time, it will not be a major one. Yet, the battle against inflation is nowhere near being over despite the recent encouraging development. They also emphasized that by following the current forecast and market conditions, homebuyers should not expect any rate drop coming anytime soon or at least for the next couple of months.
Mortgage Application Trends Down!
Even before the Fed announced the news, according to Mortgage Bankers Assocation’s weekly survey, the mortgage application declined by 9% week over week despite the downtrend of interest rate. Seeing how fluctuating the trend is, the market demand remains extremely volatile due to unpredictable affordability level. It will be extremely interesting to for us to observe this upcoming spring and summer as those seasons have been considered home-hunting season. Though many predict the closed sales possibly increase in February and March, I am not 100% confident that it will be the guaranteed result. Even if there is an increase, it may not be a big increase.
... and Same for Construction Spending
Unlike the Pandemic era, in 2022 and spilling on 2023, total construction spending decreases by 0.4% according to the California Association of Realtors (-0.3% in residential and -0.5% in non-residential). As a matter of fact, this is the 7th month consecutive decrease for residential spending due to slow market growth.
Within the residential sector, single family homes construction spending dipped by 2.3% while multi-family and home improvement spending increased by 3.2% and 0.7% respectively. Additionally, as SFH permits continue to trend downward, we can expect residential construction to remain weak within the next couple months as builders are becoming more conservative with their risk levels.
My Personal Take
I agree with the majority opinion out there. With lots of things going on, despite the strong labor market and lowest unemployment rates in 53 years (3.4%), we appeared to be on track to a recovery route but the Fed continues to make decisions to suppress the inflation rate, which eventually affected the housing market big time and unfortunately, we do not see this battle going away soon unless something significant happens within the next months.
But for now, the future remains uncertain.
For more questions, comments, concerns, feel free to reach out to our team at info@chadvorealestate.com
Have a Topic in mind?
Let us know by filling out the form below or contact us here and we will be more than happy to dive deep in future blogs