Most major business and real estate indicators are still pointing to an economy trending towards target inflation, with increasing signs that the elusive “soft landing” scenario is within reach, according to a recent report from the California Association of Realtors (CAR).
The Treasury market and interest rates were surprised by a better-than-expected jobs report two weeks ago that has kept mortgages elevated, but the housing market in California continues to enjoy rising inventory, which may ease competition for available homes, said the report.
There were nearly 49,000 homes available for sale on MLSs across California last week, said the CAR report, within striking distance of the highest level of inventory since before the pandemic began.
Homes priced between $400,000 and $800,000 have joined the higher-priced segments for 3 months of consecutive year-to-year gains in new listings, the report added.
Initial signs from the first two weeks of October show that buyers are beginning to take advantage of the extra supply, said CAR, as pending sales have risen by double digits compared with the first two weeks of October 2023.
At the same time, pending sales numbers suggest that buyers have begun to take advantage, said CAR, in spite of the typical seasonal fall slowdown.
Additionally, according to the Bureau of Labor Statistics’ (BLS) latest report, the Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent on a seasonally adjusted basis, the same increase as in August and July. Over the last 12 months, the all items index increased 2.4 percent before seasonal adjustment.
That is the lowest level since March of 2021 when inflation first ramped up and shows that the economy continues to make progress to the Fed’s 2% target for headline inflation, said the BLS.
“However, core inflation, which excludes certain volatile categories like food and energy prices, remains stubborn with only incremental progress of late due to high housing costs and ongoing wage growth owing to a strong labor market.”
Meanwhile, offered the CAR report, the PCE Index, which is the Fed’s preferred measure of inflation over the CPI, has shown slightly better progress with core PCE growth dipping below 3% for the past 7 months consecutively, with September data still to be released. As such, the market consensus now expects two additional 25 basis-point rate cuts in 2024.
While Freddie Mac’s average 30-year fixed-rate mortgage was 6.32% last week—its second weekly gain, Mortgage News Daily puts the numbers closer to 6.6% early this week, and the odds of a 50 basis-point cut at the next Fed meeting in November have fallen to zero after the jobs report, despite nearly 1/3 of respondents still holding out hope for a larger cut just one week before, said the CAR report.
“The economy still looks like it is on track to facilitate the cuts the Fed suggested after their September meeting, but expectations are adjusting to the reality of the likely 2 25 basis-point cuts rather than the 100 basis-points they had hoped for,” the report added.
