Record closing clouds economic data, and housing is caught in the middle
Without key government data during this record-breaking shutdown, the signals we have on the economy are mixed and housing construction ends up in the middle.
The federal government shutdown is now the longest on record, surpassing the 2018-2019 shutdown, which lasted 35 days.
While lenders have solutions to keep many home sales on track, I expect sales to slow in October when we get that data in a few weeks.
Another impact of the shutdown: We didn’t get the labor market data we would normally see. We have several alternative indicators, and the picture they painted was mixed: job growth rebounded and profits rose while layoffs increased, and the unemployment rate is expected to rise. The lack of data not only makes the Fed’s job more challenging, but is also likely to weigh on the decisions of businesses and households.
Meanwhile, mortgage rates rose, up 5 basis points, as markets adjusted to last week’s Fed meeting. Although there was a Fed rate cut in October, Chairman Jerome Powell‘s statement that a rate cut in December was not guaranteed, and in fact far from it, has reset market expectations for what lies ahead.
Looking at the weekly trends in housing data, this week marked two solid years, 104 weeks, of growing inventory, but the pace of growth has been moderate. We also saw a turnaround in new listing activity, which fell after growing in recent weeks, putting a question mark over the future for the number of homes for sale across the country.
The Realtor.com® October’s Hottest Markets report continues to highlight that the “national” housing market is made up of thousands of local housing markets and that local trends can vary widely. In fact, the Northeast and Midwest remain relatively warm, even though demand is cooler nationally.
Two other reports this week highlight the importance of local data in real estate. The Realtor.com The investor report shows that just over 1 in 10 buyers in the second quarter were investors. However, in several metro areas, investment activity is more than twice the national average.
Additionally, while investors across the country tend to focus on lower-priced homes, this is not the case everywhere. In some markets, the home purchased by an investor was nearly 20% more expensive than the average home recently sold on the market.
The Realtor.com International Demand report also shows that real estate seekers from abroad tend to focus on key markets, with Miami, New York and Los Angeles capturing the largest shares of international shoppers in the third quarter.
And more international shoppers come from Canada than any other country, but the share has fallen over the past year as the exchange rate and policy volatility may have dampened demand from our neighbors to the north.
