With signs of normalization and recent data, many experts believe that inflation is gradually easing, part of a collection of signs that 2024 will be stronger economically
Hiring numbers have admittedly dipped in the later part of this year and the labor market continued to cool, but the economy saw stronger-than anticipated job growth in November, according to a recent report from the California Association of Realtors (CAR).
Consumers in general believe that the worst is over for inflation, and their expectation has also come down. A report from the University of Michigan late last week also said its consumer sentiment index surged to 69.4 in December from 61.3 in November. Economists had expected the index to inch up to 62.0.
“Consumer sentiment soared 13% in December, erasing all declines from the previous four months, primarily on the basis of improvements in the expected trajectory of inflation,” said Surveys of Consumers Director Joanne Hsu.
Hsu added, “Sentiment is now about 39% above the all-time low measured in June of 2022 but still well below pre-pandemic levels.”
The homebuying mood remained on the down slope, said the CAR report, but the dip in interest rates over the last six weeks should pick the housing market back up in coming months. More side-lined homebuyers could reenter the market to take advantage of lower prices and lower rates, as early-year prices tend to be lower.
The CAR report added that “home sales could see a kick-start at the beginning of 2024 and the market will hopefully carry that momentum throughout the next 12 months.”
Adding to the optimism, mortgage rates dropped again for the sixth straight week as soft economic data continued to suggest inflation easing, albeit slowly, as the year comes to an end, said the CAR report. The average 30-year fixed rate mortgage reported by Freddie Mac last week dropped another 19 basis points (bps) from the prior week and has declined 76 bps cumulatively since it peaked in late October.
With the latest jobs report suggesting a normalizing labor market that is still solid, rates potentially could see some volatility this week with the November Consumer Price Index (CPI) release on Tuesday and the Fed’s announcement on their next rate hike move on Wednesday.
At the same time, the share of consumers who said that it was a good time to buy reached a new survey low at 14%, according to the latest Fannie Mae national housing survey.
Given that the survey responses were collected between November 1 and November 16, the sharp decline in rates in the past six weeks might might not yet be reflected, but will hopefully improve consumers’ optimism in December.
Consumers told Fannie Mae that they were more positive on home selling, with 60% in November saying that it was a good time to sell, an increase from 54% recorded in November 2022. While many survey respondents continued to believe that mortgage rates will either go up or stay the same in the next 12 months, 22% said that mortgage rates will go down in the same time frame, the highest level in at least the last three years.
