Redfin Economists’ Weekly Take: Odds Firm for December Rate Cut Despite Limited Data

This Week In A Nutshell

Rates are a little lower with investors more hopeful for a rate cut at the December 10 Fed meeting after a mixed jobs report and New York Fed President John Williams signaling openness to another cut “in the near term.” But it truly feels like a coin toss, with no new data of significance coming before the meeting and the Fed entering their blackout period on November 29.

Upcoming Attractions

This is a quiet week with no Fed speeches and few important data reports, just mostly delayed data releases from September.

• September retail sales (Tuesday): Expected to increase about 0.3%
• September PPI (Tuesday): expected to increase 0.2% from prior month

Last Week’s Highlights

• Jobs Report: The delayed September jobs report showed both a higher unemployment rate (mostly due to most people entering the labor force rather than people losing their jobs) and stronger than expected hiring (highly concentrated in leisure/hospitality and healthcare).
• NAR Existing Home Sales: October existing home sales came in at 4.1 million seasonally adjusted at an annual rate, according to NAR. That is the highest level since February’s 4.27 million read, which was likely due to a statistical quirk, so it’s probably actually the highest of the year. However, it’s only a hair higher than the average so far for the year, which is around 4.05 million. Sales remain very sluggish despite lower mortgage rates.

Diving a Little Deeper: Employment Data

The September jobs report did not provide a clear signal for the Fed as they wrestle with whether to cut rates for a third time. Given the tone of the minutes and press conference from the October meeting, it seems like the Fed needs a reason to cut again and this report did not appear to meet that bar.New York Fed President Williams gave the markets some hope on Friday, however, when he said he was open to another cut “in the near term.” That nudged markets up to a 70% probability for a cut. Williams is a voting member of the FOMC and his speech could be viewed as a signal from the committee. There is also little on the calendar between now and December 10 that seems like it could move market expectations, with no more Fed speeches and no other major economic data to be released. The BLS has announced that the October jobs report will only have hiring data (not unemployment rate) and will be released at the same time as the November jobs report on December 16. The October CPI report is canceled and the November report will not be released until December 18. Still, it’s not out of the question that the Fed would hold since the labor market has not fallen apart and inflation remains a risk. It truly feels 50/50.

Redfin Reports:

• U.S. Luxury Home Prices Jump 5.5% in October, Triple the Pace of Non-Luxury Homes
  • Luxury home sale prices rose 5.5% year over year to a median $1,278,950, a record high for October. Non-luxury home prices grew 1.8% to a median $373,249.
  • Luxury home sales increased 2.9% year over year, while non-luxury sales rose 0.7%; both remain near decade-low October levels.
  • Luxury inventory climbed 6.4% year over year, compared with a 9.5% increase in non-luxury inventory, with both categories posting their highest October levels in at least five years.
  • Luxury home prices rose most in Warren, MI (+14.9%), Milwaukee (+13.5%), and San Jose, CA (+11.9%). The only declines were in Tampa, FL (-2.9%) and Oakland, CA (-2.4%).
• The Housing Affordability Crisis Is Accelerating Fastest in Rural America
  • Rural homebuyers need to earn $75,000 to afford the typical home, up from $36,000 before the pandemic. Suburban and urban areas have also seen affordability erode—but not as severely.
  • The median home sale price in rural areas is up 61% from before the pandemic, compared with a 49% increase in suburban areas and a 46% gain in urban areas.
  • The median household income in rural areas has climbed 33%, less than the 37% increase in suburban areas and the 39% uptick in urban areas.
• It’s the Strongest Buyer’s Market in Records Dating Back Over a Decade
  • Home sellers outnumbered buyers by a record 36.8% in October, giving buyers who were in the market room to negotiate.
  • The number of buyers in the market dropped 1.7% to the lowest level on record aside from the start of the pandemic amid high housing costs and economic uncertainty.
  • The number of sellers dropped 0.5% to the lowest level since February as sellers retreated in response to low buyer demand.
  • The strongest buyer’s markets are in Texas and Florida, while the strongest seller’s markets are in the Tri-State area. San Francisco quickly shifted to a balanced market.
• The U.S. Housing Market Is Stuck, With Sales and Listings Barely Budging
  • Home sales and new listings were little changed from a month and a year earlier in October, and prices have also shown signs of flattening. Housing-market activity is plateauing as Americans grapple with high costs and economic uncertainty.
  • Still, buyers have the upper hand; the typical home that sold went for 1.5% less than its final list price—the biggest October discount since 2019. Buyers are able to negotiate because they are outnumbered by sellers.
  • While sales and listings are plateauing on average, that isn’t the case everywhere; in San Francisco, for example, demand is jumping and supply is shrinking.
• U.S. Home Prices Rose 0.3% in October
  • U.S. home prices rose 0.3% from a month earlier in October on a seasonally adjusted basis.
  • Home prices increased 2.9% year over year, down from 3.1% in September and the slowest growth since 2012.
  • Prices fell in 14 of the 50 most populous U.S. metros, down from 37 metros posting drops in July. The biggest declines were in Fort Lauderdale, FL (-1.4%) and Philadelphia (-0.6%).

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