“The economy has been on a tear,” according to Harvard University economist Kenneth Rogoff. The US economy added 330,000 jobs in March, well above the 231,000 12-month average. Unemployment dipped to 3.8% and has been below 4% for 26 months in a row, a record not seen since the 1960s. The Spring market is in full swing as home sales in the Chicago area surged 37.2% month on month. Inventory remains at historic lows with only 11,106 homes on the market in the Chicago area. It is still a seller’s market.
Sales of new single‐family houses increased 5.9% annually in February to an estimated 662,000, according to estimates released by the U.S. Census Bureau and the Department of Housing and Urban Development.
Buoyed by increasing wages, up 4.1% annually, (Bureau of Economic Analysis) retail sales jumped much higher than expected in March as consumer spending increased 0.7% month on month. Online sales were up 2.7% for the biggest advance. Meanwhile, disposable personal income was up 3.8%.
Stocks rose in March, based on solid readouts on economic growth and corporate earnings. The S&P 500 rose 3% for the month and 10% for the quarter, marking the index’s best first-quarter return since 2019.
U.S. consumer confidence was little changed in March as The Conference Board’s consumer confidence index dipped to 104.7, almost unchanged from a downwardly revised 104.8 in February.
Positive employment data sent the yields on the 10-year Treasury bond higher and mortgage interest rates rose back over 7%. According to the Mortgage Bankers Association, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) increased to 7.01% from 6.91%. Meanwhile, a lack of existing homes for sale pushed the average home price in the Chicagoland region up 10.5% annually.
Despite higher interest rates, inflation is proving to be stubborn, rising 0.4% on the month and 3.5% annually. Oil prices are contributing to inflation as West Texas Intermediate crude prices are approaching $90 a barrel and gasoline rose 2.1% month on month in March due to some states switching to more expensive summer blends, increasing global demand, and the geopolitical shocks from the conflicts in Russia and the Middle East (Oilprice.com).
Because of the expanding US economy, the Federal Reserve Open Market Committee (FOMC) will probably leave rates elevated for now. As Mike Fratantoni, SVP and Chief Economist, Mortgage Bankers Association, stated, “Our view is that recent data continues to point to a slowdown in economic growth in 2024, but the odds of a recession are much reduced given the resilient job market, which will provide support for consumer spending. This report will bolster the case for the FOMC to hold off on any rate cuts in the near term, which will keep mortgage rates elevated for now.”