Economic and Market Update: Week Ending April 20, 2024

TL;DR: A challenging week saw a spike in mortgage rates following inflation concerns, with the housing market grappling with elevated prices and affordability issues. Buyer interest remains strong despite the economic headwinds, as evidenced by persistent mortgage applications and home touring activities.

Market and Economic Indicators:

• Inflation Concerns: The Consumer Price Index for March reported a year-over-year rise to 3.5%, up from February, with inflation trending upwards.
• Retail Spending: Consumers spent more than expected in March, suggesting economic vitality.
• Fed’s Stance: With strong job growth and spending, the likelihood of rate cuts this year has diminished.

Stock Markets:

• Market Movement: Stock markets fell, with the Dow holding nearly steady, while the S&P 500 and Nasdaq saw declines.

Mortgage and Real Estate Trends:

• Mortgage Rates Climbing: Rates reached their highest since November, with a 30-year fixed rate now at 7.1%.
• Southern California Market: Home prices soared to a new record in March, pushing the median monthly mortgage payment to unprecedented levels.

Housing Affordability:

• Cost of Homeownership: The combination of rising mortgage rates and home prices has pushed the median monthly housing payment to record heights.
• Persistent Demand: Despite rising costs, indicators such as mortgage-purchase applications and home touring activity suggest buyers remain active in the market.

The current economic climate showcases a resilient housing market, even as homebuyers navigate the challenges of high mortgage rates, which have surpassed 7.4%. The Consumer Price Index’s latest uptick indicates persistent inflationary trends that could keep the Federal Reserve from lowering interest rates. The strong labor market, exemplified by robust job additions, is a double-edged sword, driving both economic growth and inflation concerns. Despite these factors potentially dampening affordability, leading indicators like increased mortgage-purchase applications and a near seven-month high in Redfin’s Homebuyer Demand Index reflect enduring consumer confidence and a willingness to engage in the housing market.