There are signs that home sales are slowing as interest rates climbed to 5.25% on a 30-year conventional loan as of April 8. Home sales were down in March 10.5%. Pending home sales, sales that will occur in the following month, were down for the last 3 months in a row.
With inflation increasing to 8.5% and the uncertainty created by the Russian invasion of Ukraine, recession concerns are creeping into the press. These sentiments are reflected in The Conference Board Consumer Sentiment Index, which fell in March from 111.1 to 110.5. Consumers said they don’t expect the economy to take off, but they also don’t expect conditions to worsen. The Fed increased the Federal funds rate by .25% and stated that they would take an aggressive stance toward fighting inflation. This sent ripples through the stock market where most indices fell.
The good news is that the pandemic seems to be receding and the job market remains strong with 431,000 jobs being created in March, corporate profits up a record 25% year on year, and unemployment down to 3.6%. The bad news is that Americans are feeling the pinch as commodity prices, especially natural gas and gasoline, are surging upward. Consumers are rebalancing their budgets to account for higher gas prices as pay raises fail to keep up with inflation. In addition to strong home sales, retail sales grew 8.4% year-on-year (excluding auto sales) in March (Mastercard Spending Pulse™). Since consumer spending represents 70% of economic activity, continued strength in consumer spending combined with a strong job market points to a resilient economy overall.
Home prices are on the rise as the average sales price in the Chicago area rose 7.8% over March of 2021. Inventory is at historic lows and total sales dropped 10.5% not because of a lack of demand but because there are so few homes on the market.
Never before has it been so important to have a professional on your side when buying or selling real estate.
*Bureau of Labor Statistics. **Realtor.com. All data from MRED. All property types in the Chicago PMSA. Data deemed reliable but not guaranteed. Data from March 2022. InfoSparks © 2022