Gregory Heym is Chief Economist at Brown Harris Stevens. His weekly series, The Line, covers new developments to the economy, including trends and forecasts. Read on for the latest report and subscribe here to receive The Line in your inbox.
Today, we thank our military veterans, and celebrate another week of lower mortgage rates.
Thank You, Veterans
Veterans Day started out as “Armistice Day'' on November 11, 1919—the first anniversary of the end of World War I. It was renamed Veterans Day in 1954 and is celebrated each November 11, regardless of the day on which it falls. I want to thank all the men and women who have protected our great nation, especially my brother Chris, who served in the Marines.
The Department of Veterans Affairs has a website with some great information on the history of Veterans Day.
Here’s some interesting statistics on veterans, courtesy of the Census Bureau. Data is as of 2022:
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There are 16.2 million veterans in the U.S., comprising 6.2% of the civilian population
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Female veterans comprise 10.3% of the veteran population.
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Percentage of total veterans by war:
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World War II – 0.8%
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Korean War – 4.1%
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Vietnam War – 33.6%
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First Gulf War – 24.4%
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Second Gulf War – 26.3%
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Mortgage Rates Post Biggest Drop in Almost a Year
The average 30-year mortgage rate fell this week by the most since late 2022, dropping to 7.50%. This marked the second-straight weekly decline after seven consecutive increases. The last time mortgage rates were this low, was the first week of October.
As we predicted, the worse-than-expected jobs report last week has pushed down long-term rates, and that’s certainly a good thing for housing. It seems odd that we’re rooting for the economy to slow so mortgage rates will come down, but unfortunately that’s what needs to happen. The spike in mortgage rates has brought home sales down sharply, but at the same time prices have continued to increase due to low supply. That’s a double-shot of bad news for all those potential buyers out there.
We all hope the Federal Reserve can accomplish its goal of a “soft landing” for the economy, which means slowing the economy enough to get inflation under control without causing a recession. While many didn’t think that was possible, it’s looking a lot more likely they will pull it off.
That said, there are many economists who think the Fed shouldn’t get the credit for the decline in inflation. The Wall Street Journal had an article this week that noted the only aspect of the economy to be significantly slowed by the Fed’s hikes was housing, and it was improved supply chains that really brought inflation down rather than the hike in rates.
That seems to make some sense to me, as even with the surge in rates consumer spending has remained strong for the past several months. So strong in fact, that the economy grew at its fastest rate in the third quarter since the end of 2021. To be fair, a sharp increase in credit card debt to a record level of $1.08 trillion helped consumers keep consuming, even as credit card rates hit a record high of over 20%.
All that said, the big takeaway is that things seem to be moving in the right direction. The labor market is cooling just enough to bring mortgage rates down, but not so much as to cause a recession. If we do get that soft landing, we’ll be able to put all the pain of the last year and a half behind us and sell a lot more homes.