Market Update - October 9th, 2023
September Jobs Report
In September, the US added 336,000 jobs, which absolutely crushed the expectations of just 170,000. That was the only number the markets cared about and they unleased havoc with the expectation that the Fed is going to have to continue it’s attack on inflation. The Bureau of Labor Statistics also revised July and August numbers UP by almost 120,000 more jobs total. An additional 25bps rate hike is now more likely than ever by the end of 2023.
What wasn’t discussed in a lot of the headlines was the recent DROP in full-time employment. Over the last 3 months, full-time employment is DOWN 692,000 jobs whereas part-time employment is UP 1.2 million. It begs the question : Are cash-strapped folks taking on multiple jobs to fight higher prices?
Key Takeaway : Rate sheets were annihilated on Friday after the markets opened on the heels of the jobs report. We move our attention to Wednesday when September CPI is released. With the tension in the Middle East, oil prices are surging which will have an impact on CPI in the coming months.
Rates Aren’t Coming Down Any Time Soon
The US government has grown by 43% in four years with massive increases in subsidies, credits, and entitlements. As Kreg has mentioned in past videos, they will need to fund this through issuing Treasuries. It’s not going to funded exclusively by taxes. Demand for Treasuries is WAY down from key players like The Fed, China, and Japan who are changing their buying habits. Plus, banks are wary after the recent banking issues in March. Bottom line for us? Don't expect interest rates to drop anytime soon.
Down Payment Requirements Reduced on Multi-Unit Properties
Last week, Fannie Mae dropped the down payment requirements on 2, 3 and 4 unit owner-occupied properties to just 5%. 2 unit properties used to require a minimum of 15% down and 3-4 unit properties required 25% down. This opens up a massive opportunity for an additional pool of applicants to get approved for this type of home. Lenders must adopt the new guidelines by November 18th.
Key Takeaway : In the short-term, we should see prices on multi-unit properties pump with the increased demand. In the long run, we should see builders turn a focus on this type of product, which should stabilize pricing. While this feels like a big win for the industry, I am fearful of the reduced barrier to entry. The number of house hacks on Instagram and TikTok specific to multi-unit housing reminds me of the Airbnb hacks from a few years ago. I’m fearful the wrong, inexperienced buyers, who aren’t prepared for being landlords, may find themselves in a financial pickle down the road.
Instagram Posts from Last Week
Don’t hesitate to reach out if you need anything at all. Have a wonderful week!