November 04, 2024 – While Americans are heading to the polls to vote for the next President, state and local representatives, and a range of crucial local issues, the economy remains strong. The Federal Reserve, meanwhile, is ready to cut rates for the second time this year during their upcoming November FOMC meeting. Mortgage rates, after last week’s surge, stabilized while remaining above 7%. As a result, mortgage applications trended downward. The October jobs report was a mixed bag, with low job creation and significant data issues; other positive economic indicators meant the market did not react strongly to the weak report.

Anemic October job growth fails to ruffle the market: The labor market slowed more than expected in October, with the economy only adding 12,000 new jobs, after three months through September when the economy added an average of 148,000 jobs a month. The low figure is largely due to distortions in the data due to weather events, the now-resolved port strike, and the Boeing strike. Also balancing the low figure, publicly listed American companies reporting earnings showed a strong year, with earnings up 8.4% from a year earlier. As a result, the market did not react strongly to the small jobs figure, with the bond market actually inching slightly higher, the opposite of what would be expected after a weak jobs report. Wage growth picked up, with average hourly earnings rising 0.4% month-over-month and 4% year-over-year.

A solid GDP report shows the economy remains healthy: GDP rose at a 2.8% annual rate in the third quarter of 2024, down slightly from Q2’s 3% and lower than an expected 3.1%. However, the report shows a strong U.S. economy buttressed by consumer spending, a strong labor market, and solid business investment, even amid high borrowing costs. Consumer spending rose by 3.7% in the third quarter. Nonresidential fixed investment, a way to look at companies’ outlays on business equipment and investments, rose at a 3.3% rate in the third quarter. Although the rate of growth was slightly smaller than expected, it is still above the average rate of growth from 2009 to 2019, when the GDP rose at an average rate of 2.5%.

Mortgage rates holding around 7%: Fixed mortgage rates leveled off at 7% after reaching their highest level in three months, according to Mortgage News Daily. The average 30-year fixed mortgage rate reached 7.05% as of November 4 after a peak of 7.09%. Higher rates hit mortgage applications, which fell for the fifth consecutive period. Based on the Mortgage Bankers Association's weekly survey results for the week ending October 25th, the purchased application index dropped 0.1% on a seasonally adjusted basis when compared to the previous week. The Refinance Index fell by 6% from last week while, in some good news, there was a 5% increase in mortgage applications to purchase a new home.

Consumer confidence surges to highest level in nine months: The Conference Board Consumer Confidence Index ticked up in October to 108.7 from 99.2 in September, as consumers upgraded their current conditions and felt more positive about their short-term outlook. The share of consumers anticipating a recession in the next 12 months fell to its lowest level since July 2022: the Expectation Index improved by 6.3 points to 89.1, well above the threshold of 80 that signals consumer expectations of a recession. Americans’ assessment of the current labor market situation improved as well, with 35.1% of consumers saying jobs were “plentiful,” up from 31.3% in September. Two out of ten (21.0%) of them expected business conditions to improve, up slightly from 19.4% in September. Even with interest rates elevated, the number of those who planned to purchase a home increased in October. 

A cooling housing market leads to small home equity dip in Q3 of 2024 while underwater home mortgages stay low: ATTOM’s third quarter 2024 U.S. Home Equity & Underwater Report showed that 48.3% of mortgaged residential properties in the U.S. were equity-rich, down from its peak of 49.2% in Q2 of 2024, but still up from 47.4% a year earlier. ATTOM defines “equity rich” as a residential property’s estimated loan balance being no more than half of their estimated market values. Equity has elevated as residential property values continued to rise. Among the 50 highest equity-rich ZIP codes, a whopping 31 were in California. Only 2.5% of mortgaged homes were defined as underwater, up slightly from 2.4% in Q2 but remained the same as Q3 of 2023. ATTOM defines “underwater” as the combined estimated balances of loans secured by properties that are at least 25 percent more than those properties’ estimated market values.

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