✅ A BIG WEEK! THE FED MEETING STARTS TOMORROW JOB NEWS TO FOLLOW ✅

 MARKET MOVING NEWS FOR THE WEEK OF JANUARY 29TH

This week holds a series of pivotal economic updates with significant implications for both homebuyers and businesses. Here's a comprehensive overview of the key events you should closely track:

Federal Reserve's Meeting (Tuesday-Wednesday): The initial 2024 meeting of the Federal Reserve is a critical milestone, setting the tone for the year's monetary policy. Real estate professionals should closely monitor the Monetary Policy Statement and Wednesday's 2 PM ET press conference. The Fed's stance on interest rates and economic outlook holds substantial influence over consumer spending and business investment.

There isn't an anticipated rate hike or cut this week. Notably, inflation data, specifically CORE PCE, the Fed's preferred inflation gauge, is currently at 2.9% year over year, heading towards 1.8%. This aligns with the inflation signal awaited by the Fed.

Housing Market Updates (Tuesday): Updates on home price appreciation for November from Case-Shiller and the Federal Housing Finance Agency offer insights into the housing market's health. This information is crucial for stakeholders in the real estate sector, particularly homebuyers and sellers.

Labor Market Data: An expected rise in the unemployment rate to 3.8% is noteworthy.

JOLTS Report (Tuesday): The Job Openings and Labor Turnover Survey for December provides an updated perspective on job market dynamics, including job openings. Understanding the labor supply and hiring challenges is vital, influencing aspects from wage pressures to consumer spending.

ADP Employment Report (Wednesday): Serving as a precursor to the government's comprehensive jobs report, this report on January's private payrolls is a key indicator of employment trends in the private sector, impacting market expectations.

Jobless Claims (Thursday): Real-time insights into job market health are gleaned from the latest data on unemployment claims, influencing consumer confidence and spending.

BLS Jobs Report (Friday): January's Jobs Report from the Bureau of Labor Statistics, encompassing Non-farm Payrolls and the Unemployment Rate, stands as a crucial indicator of overall economic health. This comprehensive report can sway market sentiment, impact monetary policy, and influence government actions.

 These releases collectively offer valuable insights into various facets of the economy, encompassing consumer spending power to business investment climates. Rising unemployment and a declining CORE PCE would constitute the "concrete evidence" sought by the Fed in determining the trajectory of the Fed funds rate this year. The bond market and, consequently, mortgage rates will be influenced by the Fed's press conference and this week's job reports.

A QUICK MARKET RECAP

In December, there was a marginal uptick in headline inflation, increasing by 0.2%, maintaining the annual rate at a steady 2.6%. Core PCE, a crucial metric monitored by the Fed due to its exclusion of food and energy prices, also experienced a 0.2% increase in December. Notably, the annual rate for Core PCE saw a decline from 3.2% to 2.9%, marking the first instance in nearly three years that it fell below the 3% threshold.

What does this signify? Essentially, after being a significant concern in 2022, inflation is now showing signs of alleviation. The overall inflation rate sits at 2.6%, down from its peak at 7.1%, while the core rate is at 2.9%, a notable decrease from its previous level of 5.6%. Experts are optimistic that inflation will continue to decline throughout the year. This is partially attributed to factors that take time to manifest in reports, such as decreasing housing costs, now beginning to be factored in.

The Federal Reserve has been actively engaged in managing inflation, implementing eleven consecutive hikes in the Fed Funds Rate – the rate at which banks lend to each other overnight – from March 2022 to July 2023. However, in their recent three meetings, they paused these hikes to monitor the trajectory of inflation and other economic indicators.

This upcoming Tuesday holds significance as the Federal Reserve convenes for its next major meeting. The release of their Monetary Policy Statement and a subsequent press conference on Wednesday will be of paramount importance. These events may provide insights into the potential trajectory of interest rates for the remainder of the year, and observers are keenly watching to discern the Fed's next steps in addressing economic conditions.

THE HOUSING MARKET UPDATE

In December, positive developments unfolded in the housing market, signaling encouraging trends. New Home Sales, reflecting signed contracts for brand-new houses, surged by an impressive 8% compared to November. This exceeded experts' expectations, attributed to the simultaneous decline in mortgage rates and a limited supply of existing homes for sale, prompting more individuals to opt for newly constructed houses. Additionally, these sales were 4.4% higher than December of the preceding year.

Alicia Huey, who leads the National Association of Home Builders, offered insight into this phenomenon. She highlighted that the scarcity of available existing homes, coupled with the downward trend in interest rates, motivated a greater number of buyers to choose new construction. This heightened optimism among home builders, as they anticipate increased sales with the continued decline in mortgage rates.

The surge in confidence among builders is particularly beneficial, given the imperative to meet the growing demand from prospective buyers. As of the end of December, there were 453,000 new houses listed for sale, with only 81,000 fully completed. The majority were either still under construction or hadn't commenced construction yet.

Further positive news emerged as Pending Home Sales, indicative of signed contracts for existing homes, experienced a substantial 8.3% increase from November to December – a more substantial jump than anticipated. This heightened interest in home purchases was notably 1.3% higher than the previous December. Pending Home Sales serve as a reliable indicator for predicting future sales of existing homes.

Looking ahead, there is optimism that home sales will gain momentum over the next two years as market conditions gradually return to normal. The emphasis on increasing housing inventory is crucial to accommodate the rising demand, ensuring that there are ample options available for prospective homebuyers.

In the four weeks leading up to January 21, the median home sale price in the U.S. experienced a notable uptick of 5.1%, marking the most significant increase since October 2022. In tandem, asking prices for homes also surged by 6.5%, representing the most noteworthy spike in over a year.

Several factors contribute to these escalating prices. Firstly, the inventory of available homes remains relatively constrained. In comparison to the previous year, there has been a 4% decrease in the total number of homes on the market. Although there is a 2% increase in new listings, this represents the smallest year-over-year growth observed in approximately three months.

Another contributing factor is the increased financial flexibility afforded to buyers. Mortgage rates have stabilized within the mid-to-high 6% range, showcasing a decrease from the 8% levels observed in October. This more stable mortgage rate environment provides buyers with increased purchasing power, enabling sellers to confidently seek and obtain higher prices for their properties. The convergence of limited inventory and improved buyer affordability appears to be driving the recent surge in home sale prices.

WEALTH HACK FOR THE WEEK OF JANUARY 29TH

The US economy has exhibited sustained growth for 44 consecutive months, boasting an average yearly growth in real GDP of 4.9%. However, there is cause for concern as the Leading Economic Index, a predictor of future economic activity, has been on a downward trend for 21 consecutive months.

This prolonged decline marks the longest such trend since the 2007-08 period. The Conference Board, an organization dedicated to economic research, now suggests the possibility of negative growth or a recession in the second and third quarters of 2024. This revised prediction is slightly later than their initial forecast, which anticipated a recession sometime in 2023.

A critical factor in their analysis is the US Yield Curve, measuring the difference between long-term and short-term interest rates. Currently, this curve has been inverted for 457 days, signifying that short-term rates are higher than long-term ones. If this inversion persists for two more weeks, it will surpass the previous record set between November 1965 and March 1967. Notably, during that period, despite the prolonged inversion, a recession did not materialize until years later, beginning in January 1970. This historical context prompts speculation about whether the current inversion might also not immediately lead to a recession.

In the event of a recession or strong recession indicators, interest rates are likely to decline, potentially driving more buyers to the market, especially as unemployment remains low. Even in the scenario of a rise to 5%, buying a house is seen as a prudent move, provided individuals shop within their means. The advice underscores the potential benefits of real estate investment during economic uncertainties.

Emerging Stability: Finding Common Ground in the Dynamic Multifamily Landscape

A recent report from CBRE reveals that cap rate spreads are narrowing, and the anticipated interest rate cuts by the Federal Reserve are enhancing the attractiveness of the multifamily asset class for investors. The national multifamily market appears to be on track to fulfill its 2024 wishlist, characterized by stability, consensus, and a touch of optimism.

The financing fundamentals in the national multifamily sector are showing signs of stabilization, as declining going-in cap rates suggest a growing consensus on the values within this asset class. Concurrently, a decrease in the exit-cap rate for the average project indicates an expanding appetite among investors, coinciding with the Federal Reserve's plans for interest rate cuts in 2024.

CBRE's multifamily metrics report for the fourth quarter of 2023, authored by the firm's chief economist Richard Barkham, head of Americas multifamily research Matt Vance, and associate director of Americas research Travis Deese, concludes that as cap rates increase at a decelerating pace, corresponding values are stabilizing. According to Deese, this signifies a cautious market sentiment, with a reversal in Fed interest rate policy expected to impact cap rates directly.

The average prime multifamily going-in or "entry" cap rate, representing the yield on cost calculated at the time of purchase, has seen a 170 basis points increase to 5.06% since the first quarter of 2022. Notably, the pace of this increase has slowed over the past year, indicating a more measured market sentiment. Vance emphasizes that the decelerating increase in entry cap rates signifies the stabilization of multifamily fundamentals amid challenges such as climbing vacancies and lower rent growth.

CBRE's analysis underscores the challenges faced by investors and lenders in underwriting multifamily projects that cost more to finance than they are projected to earn from rents and market value. Vance notes a shift in market dynamics, with less tolerance for negative leverage and higher borrowing costs influencing cap rates.

The cap rate spread between entry and exit cap rates reached its lowest point, at 11 basis points, in the fourth quarter – a significant decline from 76 basis points in April 2022. This tightening spread is driven by rising entry cap rates and the anticipation of future interest rate cuts, influencing lower exit-cap rates.

Looking ahead to 2024, Vance and Deese express optimism that underwriting metrics for multifamily will improve, especially with potential Federal Reserve interest rate cuts. They anticipate more stable underwriting metrics as cap rates stabilize, providing a positive outlook for the multifamily market.

CALIFORNIA DREAM FOR ALL

The Dream For All Shared Appreciation Loan presents a down payment assistance program tailored for first-time homebuyers, designed to complement the Dream For All Conventional first mortgage by covering down payment and/or closing costs.

Under this program, when the home is sold or transferred, the original down payment loan is to be repaid by the homebuyer. Additionally, a share of the appreciation in the value of the home is included in the repayment terms. This innovative structure allows for a collaborative approach, where both the homebuyer and the program share in the potential appreciation of the home's value over time. It aligns the interests of both parties and provides a unique mechanism for supporting homeownership while fostering a sense of shared responsibility.

KEY CHANGES TO THE LOAN PROGRAM:

1.    You must obtain a signed letter from your loan officer to register for the DFA voucher in April.

2.    The maximum loan amount is up to $150,000 or 20% of the sales price or appraised value, whichever is less.

3.    Yes, all borrowers must be first-time homebuyers.

4.    At least one borrower must be a current resident of California.

5.    A first-time homebuyer is defined as a borrower who has not had an ownership interest in any principal residence or resided in a home owned by a spouse during the past three years.

6.    To qualify for the Shared Appreciation Loan, at least one borrower must meet the definition of a first-generation homebuyer.

7.    A first-generation homebuyer is defined as a homebuyer who has not been on title, held an ownership interest or have been named on a mortgage to a home (on permanent foundation and owned land) in the United States in the last 7 years, and;

To the best of the homebuyer’s knowledge whose parents (biological or adoptive) do not have any present ownership interest in a home in the United States or if deceased whose parents did not have any ownership interest at the time of death in a home in the United States, or; An individual who has at any time been placed in foster care or institutional care (type of out of home residential care for large groups of children by non-related caregivers).

8.    All borrowers must occupy the property as their primary residence within sixty (60) days of closing. Non-occupying co-signers are not allowed.

9.    New income limits by county are listed below.

10. At the time of sale, refinance, payoff or transfer of first mortgage the homeowner must pay back the original loan amount plus any shared appreciation percentage identified below.

11. This loan is not assumable.

12. See below for examples of shared appreciation.

To be approved, apply now using the link below:

LET'S CONNECT

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With gratitude,

Alexandria Ware