🔴 Video: July 2023 Economic and Housing Market Update

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July 2023

VIDEO TRANSCRIPT:

  • I’m Danielle Hale, Chief Economist at Realtor.com® and here’s what you need to know in July!
  • Recent labor market indicators have moved toward normalcy while still remaining far from it. 
  • Specifically, June saw smaller job gains than recent months, but the unemployment rate ticked down and remains quite low. 
  • Job openings and turnover data show a similar pattern. Both openings and quits are normalizing, registering at or near the lowest level in more than 2 years, but still well above pre-pandemic norms. 
  • Jobless claims mimic this trend, too, coming in at the higher end of their 12 month range, despite being historically low. 
  • On the whole, the labor market remains tilted in favor of workers, and firms still face a competitive hiring environment.
  • Consistent with this, overall economic activity in the first quarter was revised higher yet again! While growth was slower than in the fourth quarter, upward revisions to exports and consumer spending paint a better picture than first estimated.
  • Leftover pandemic savings are important context. They’re helping consumers navigate high prices without having to pull back on spending. Consumers are saving more now than they did when inflation peaked one year ago, but they’re not back to historic norms. In other words, they’re slowing the rate at which they’re drawing down pandemic-era savings, but still in draw-down mode.
  • Fortunately, inflation is clearly improving.The annual headline CPI receded to its smallest rate in more than 2 years, and even Core CPI, which excludes food and energy prices, improved notably. Both measures are not back to the 2% target yet, but if June’s monthly change is sustained–an optimistic but not unfathomable ‘IF’–we’ll be there in early 2024. 
  • The market is expecting a Fed rate hike in July despite June labor and inflation data moving in the right direction largely because in June, Fed members expected another two quarter point rate hikes by the end of this year. At the same time, the Fed continues to be data dependent. If data continue to register like we saw in June, it may mean that a second hike is not needed, but this is admittedly a pretty high bar.
  • Mortgage rates steadied in June around 6.7 percent, but have since climbed higher. I expect mortgage rates to begin to decline as inflation eases, but it will likely be a gradual and bumpy decline.
  • After months of slowing, June list price data finally showed a small drop–a first in this Realtor.com data compiled by Sabrina Speianu. Nevertheless, the median asking price was within 1% of last year’s peak price. In other words, sellers are still in a good position. 
  • Not only do prices remain high, homes continue to sell quickly and sellers are not having to cut asking prices as frequently. 
  • One big reason for this is that newly listed homes continue to decline. In fact, they were lower in the first half of this year than any other year including the first half of 2020, when pandemic disruptions kept many homeowner sellers out of the spring season. 
  • This lack of options is bifurcating the housing market: holding back existing home sales while creating an opportunity for builders and new home sales. Even though construction in June lagged somewhat behind May’s surge for both single- and multi-family homes, builders continue to be optimistic. I expect this trend to continue to dominate in the months ahead and fade away only gradually as mortgage rates ease. In other words, I don’t expect we’re likely to see mortgage rates low enough to bring a flood of existing home sellers into the market anytime soon.
  • One aspect of recent trends that I continue to watch is the number of high-density multi-family units under construction which hit another new high in June. Research Economist Jiayi Xu found that the typical asking rent in May eased for the first-time ever, which is welcome news for renters, and I expect more is on the way. But as always, where you live will impact the trends on the ground. In the Northeast and Midwest asking rents generally continue to climb.
  • And if you’re looking for a bit of real estate fun in this vacation season, let me recommend the Realtor.com AI Dream Home experience. You can join other users in harnessing the power of AI to visualize your dream home and find a match among Realtor.com listings. And in case you’re curious, my colleague Hannah Jones analyzed prompts to find out what users are dreaming about.
  • You’ll find all the details along with our housing data for download at realtor.com/research.  You can also follow us on twitter for real time updates.

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