Connect with us


A soft landing for the real estate market. What’s next?

A soft landing is how you end that crazy cycle without the massive pain of a market crash or bubble burst.



About this time last summer, I said  it looked like the U.S. housing market could have a soft landing in 2023. Any time you use the phrase “soft landing” it should come with a trigger warning because some folks get really angry hearing it. But, I think it’s pretty indisputable now that we got a soft landing. 

The market was roaring — way too hot — with bidding wars, speculators and investors who thought they couldn’t lose. A soft landing is how you end that crazy cycle without the massive pain of a market crash or bubble burst.

In the fall of 2022 after mortgage rates jumped to 7.5%, I thought maybe we’d missed the soft landing call. By October 2022, it looked like 2023 would have rising inventory and falling home prices. I grew pretty bearish again. But since January, home buyers have defied all expectations. Sellers have not materialized, and buyers have been buying everything that becomes available. Inventory has fallen all year. The peak of inventory for 2023 so far was the week of the New Year — that is insane. While home prices fell in July and September 2022, they’ve largely recovered now.

Three of the four Altos price measures are now showing positive data compared to 2022. The median price of the homes in contract is higher than last year and the new sales each week are up a few percent over last year. This is what a soft landing looks like. The froth is out of the market. There was no crash. 

Could the market crash from here in the future? Of course, it could. Buyers are very sensitive, so if inflation reheats, unemployment spikes and mortgage rates jump again, then the economy fails at its soft landing and craters hard. We could see inventory from distressed sellers emerge in 2025. But that’s a long way out. So right now — soft landing.


The median price of all single-family homes on the market in the U.S. is $450,000. That’s essentially unchanged from 2022. It is just a few hundred bucks lower. In the dark red line above, the data shows how rapidly home prices were adjusting lower starting in July 2022. This year, prices are past their annual peak and will decline, but in a few weeks, it looks like the market will be up year over year. 

The median price of the newly listed cohort — all the homes that hit the market in the last week — is about $410,000. That’s higher than in 2022 at this time. Last year if you listed your home in July, you priced at a discount because there were no buyers. But buyers are present this year, so prices are not up year over year. In the light red line on this chart, the data shows the rapid price decline of the new listings in the second half of 2022. That seasonal decline will be less steep this year, so annual prices will increase more as the year progresses. 


I’ve been watching the price of the new pending sales each week. This statistic is really compelling as a leading indicator of future sales. The median price of the new pending sales this week is $379,000. That’s down from last week but you can see how the home sales each week now are consistently higher priced than they were in 2022. The dark red line is the weekly curve from this year. The light red line is the curve of last year. Look at those big buyer discounts in July and September of 2022.  

When I talk about a soft landing, this is where you can really see how it could get derailed. Buyers are sensitive to big jumps in mortgage rates. If I’m getting ready to buy a house, and mortgage rates jump in a week, I either hold off, or I have to buy a cheaper home. We can see the immediate impact of the mortgage rate spikes from 2022 in the price of each week’s new pending sales. The data also shows how, right now, home prices are holding up each week. Fortunately for the soft landing, inflation numbers were encouraging last week so mortgage rates fell.


Will the rest of the year continue to show price gains? As of right now, the data says yes. We can see that the homes on the market now are not taking price cuts at any unusual rate. That’s because sellers see demand at the current asking prices. Homes that are on the market now, if they don’t have offers, take a price reduction, get an offer in August, that sale closes in September or October. That data will be reported in October or November. So we can see almost through the end of the year how the soft landing home prices are holding up. 

In this chart, the dark red line is the curve of price reductions through the year so far. Currently, 33.1% of the homes on the market have taken a price cut. This is a rate about the same as 2018 or 2019 for example. It shows us that demand isn’t crazy like during the COVID-19 Pandemic, but is just fine for the current level of supply of homes for sale.  

As the year goes on, more homes still on the market will take a discount in order to attract buyers before the fall. There’s a normal seasonal curve here. This is what a balanced housing market looks like.

As the real estate market’s soft landing has become apparent, the housing bears have switched from fearing that home prices are tanking to pointing out that the sales rate transaction volume is way down. This is accurate. We have fewer sales now than we did a year ago.


Interestingly, as part of the soft landing, the sales rate is now gradually catching up with last year. There are now 378,000 single-family homes in the contract pending stage. That’s 10% fewer than 2022 at this time and fractionally fewer than last week. We’re past the seasonal peak for sales volume, so each week we should generally see fewer pending sales.

In 2022 the market was still slowing, so while there are 10% fewer homes in contract, this week there were only 4% fewer newly into contract. Just 4% fewer buyers making offers compared to 2022 at this time. There are 58,000 new contracts on single-family houses this year compared to just over 60,000 in mid-July of 2022. We’re gradually getting closer to last year’s pace. I imagine by later in the summer we’ll be showing more sales each week than we had in 2022 at this time. Especially if mortgage rates drift lower from here. 


The second half of 2023 looks like there will be more sales on less inventory than the year prior. It’s not a lot of sales. Demand is way lower than during the COVID-19 Pandemic frenzy, and we’re so severely limited with supply that any uptick in demand doesn’t really have anywhere to go. But the end of 2022 was stopped cold and this year is warmer, on all measures. That’s what I mean when I say soft landing. 


There are 470,000 single-family homes on the market now. That’s up 1% from last week. It’s 7.5% fewer homes on the market now than in 2022 at this time. That inventory gap between now and last year is growing wider every day. Even with mortgage rates around 7%, the sales rate has remained strong enough to keep the inventory in balance.

2023 began with 490,000 single-family homes on the market. What’s wild is that may prove to be the highest inventory of the year. There were more homes on the market over the New Year holiday than there are now. Most years, inventory peaks at the end of July. In the market slowdown years, for example, 2018 or 2022, inventory can keep growing later into the summer or even the fall. Sellers keep listing and buyers hold back. This year is not a slowdown year. It could be that the first week of January turns out to be the greatest inventory for 2023. That’s what a soft landing looks like.

There are some local markets that have not landed as softly as the whole country. There are some markets where demand hasn’t recovered. For example, downtown San Francisco seems to have a lot of churn still to experience. And as I’ve said before, a soft landing in 2023 doesn’t mean that home prices will never go down. That would be just silly to presume. Soft landing describes how the market has successfully transitioned from crazy hot to much more stable without going through painful over correction

Mike Simonsen is the president and founder of Altos Research

Read More

Continue Reading


February Employment Situation

By Paul Gomme and Peter Rupert The establishment data from the BLS showed a 275,000 increase in payroll employment for February, outpacing the 230,000…



By Paul Gomme and Peter Rupert

The establishment data from the BLS showed a 275,000 increase in payroll employment for February, outpacing the 230,000 average over the previous 12 months. The payroll data for January and December were revised down by a total of 167,000. The private sector added 223,000 new jobs, the largest gain since May of last year.

Temporary help services employment continues a steep decline after a sharp post-pandemic rise.

Average hours of work increased from 34.2 to 34.3. The increase, along with the 223,000 private employment increase led to a hefty increase in total hours of 5.6% at an annualized rate, also the largest increase since May of last year.

The establishment report, once again, beat “expectations;” the WSJ survey of economists was 198,000. Other than the downward revisions, mentioned above, another bit of negative news was a smallish increase in wage growth, from $34.52 to $34.57.

The household survey shows that the labor force increased 150,000, a drop in employment of 184,000 and an increase in the number of unemployed persons of 334,000. The labor force participation rate held steady at 62.5, the employment to population ratio decreased from 60.2 to 60.1 and the unemployment rate increased from 3.66 to 3.86. Remember that the unemployment rate is the number of unemployed relative to the labor force (the number employed plus the number unemployed). Consequently, the unemployment rate can go up if the number of unemployed rises holding fixed the labor force, or if the labor force shrinks holding the number unemployed unchanged. An increase in the unemployment rate is not necessarily a bad thing: it may reflect a strong labor market drawing “marginally attached” individuals from outside the labor force. Indeed, there was a 96,000 decline in those workers.

Earlier in the week, the BLS announced JOLTS (Job Openings and Labor Turnover Survey) data for January. There isn’t much to report here as the job openings changed little at 8.9 million, the number of hires and total separations were little changed at 5.7 million and 5.3 million, respectively.

As has been the case for the last couple of years, the number of job openings remains higher than the number of unemployed persons.

Also earlier in the week the BLS announced that productivity increased 3.2% in the 4th quarter with output rising 3.5% and hours of work rising 0.3%.

The bottom line is that the labor market continues its surprisingly (to some) strong performance, once again proving stronger than many had expected. This strength makes it difficult to justify any interest rate cuts soon, particularly given the recent inflation spike.

Read More

Continue Reading


Mortgage rates fall as labor market normalizes

Jobless claims show an expanding economy. We will only be in a recession once jobless claims exceed 323,000 on a four-week moving average.



Everyone was waiting to see if this week’s jobs report would send mortgage rates higher, which is what happened last month. Instead, the 10-year yield had a muted response after the headline number beat estimates, but we have negative job revisions from previous months. The Federal Reserve’s fear of wage growth spiraling out of control hasn’t materialized for over two years now and the unemployment rate ticked up to 3.9%. For now, we can say the labor market isn’t tight anymore, but it’s also not breaking.

The key labor data line in this expansion is the weekly jobless claims report. Jobless claims show an expanding economy that has not lost jobs yet. We will only be in a recession once jobless claims exceed 323,000 on a four-week moving average.

From the Fed: In the week ended March 2, initial claims for unemployment insurance benefits were flat, at 217,000. The four-week moving average declined slightly by 750, to 212,250

Below is an explanation of how we got here with the labor market, which all started during COVID-19.

1. I wrote the COVID-19 recovery model on April 7, 2020, and retired it on Dec. 9, 2020. By that time, the upfront recovery phase was done, and I needed to model out when we would get the jobs lost back.

2. Early in the labor market recovery, when we saw weaker job reports, I doubled and tripled down on my assertion that job openings would get to 10 million in this recovery. Job openings rose as high as to 12 million and are currently over 9 million. Even with the massive miss on a job report in May 2021, I didn’t waver.

Currently, the jobs openings, quit percentage and hires data are below pre-COVID-19 levels, which means the labor market isn’t as tight as it once was, and this is why the employment cost index has been slowing data to move along the quits percentage.  


3. I wrote that we should get back all the jobs lost to COVID-19 by September of 2022. At the time this would be a speedy labor market recovery, and it happened on schedule, too

Total employment data

4. This is the key one for right now: If COVID-19 hadn’t happened, we would have between 157 million and 159 million jobs today, which would have been in line with the job growth rate in February 2020. Today, we are at 157,808,000. This is important because job growth should be cooling down now. We are more in line with where the labor market should be when averaging 140K-165K monthly. So for now, the fact that we aren’t trending between 140K-165K means we still have a bit more recovery kick left before we get down to those levels. 

From BLS: Total nonfarm payroll employment rose by 275,000 in February, and the unemployment rate increased to 3.9 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in health care, in government, in food services and drinking places, in social assistance, and in transportation and warehousing.

Here are the jobs that were created and lost in the previous month:


In this jobs report, the unemployment rate for education levels looks like this:

  • Less than a high school diploma: 6.1%
  • High school graduate and no college: 4.2%
  • Some college or associate degree: 3.1%
  • Bachelor’s degree or higher: 2.2%

Today’s report has continued the trend of the labor data beating my expectations, only because I am looking for the jobs data to slow down to a level of 140K-165K, which hasn’t happened yet. I wouldn’t categorize the labor market as being tight anymore because of the quits ratio and the hires data in the job openings report. This also shows itself in the employment cost index as well. These are key data lines for the Fed and the reason we are going to see three rate cuts this year.

Read More

Continue Reading


Inside The Most Ridiculous Jobs Report In History: Record 1.2 Million Immigrant Jobs Added In One Month

Inside The Most Ridiculous Jobs Report In History: Record 1.2 Million Immigrant Jobs Added In One Month

Last month we though that the January…



Inside The Most Ridiculous Jobs Report In History: Record 1.2 Million Immigrant Jobs Added In One Month

Last month we though that the January jobs report was the "most ridiculous in recent history" but, boy, were we wrong because this morning the Biden department of goalseeked propaganda (aka BLS) published the February jobs report, and holy crap was that something else. Even Goebbels would blush. 

What happened? Let's take a closer look.

On the surface, it was (almost) another blockbuster jobs report, certainly one which nobody expected, or rather just one bank out of 76 expected. Starting at the top, the BLS reported that in February the US unexpectedly added 275K jobs, with just one research analyst (from Dai-Ichi Research) expecting a higher number.

Some context: after last month's record 4-sigma beat, today's print was "only" 3 sigma higher than estimates. Needless to say, two multiple sigma beats in a row used to only happen in the USSR... and now in the US, apparently.

Before we go any further, a quick note on what last month we said was "the most ridiculous jobs report in recent history": it appears the BLS read our comments and decided to stop beclowing itself. It did that by slashing last month's ridiculous print by over a third, and revising what was originally reported as a massive 353K beat to just 229K,  a 124K revision, which was the biggest one-month negative revision in two years!

Of course, that does not mean that this month's jobs print won't be revised lower: it will be, and not just that month but every other month until the November election because that's the only tool left in the Biden admin's box: pretend the economic and jobs are strong, then revise them sharply lower the next month, something we pointed out first last summer and which has not failed to disappoint once.

To be fair, not every aspect of the jobs report was stellar (after all, the BLS had to give it some vague credibility). Take the unemployment rate, after flatlining between 3.4% and 3.8% for two years - and thus denying expectations from Sahm's Rule that a recession may have already started - in February the unemployment rate unexpectedly jumped to 3.9%, the highest since February 2022 (with Black unemployment spiking by 0.3% to 5.6%, an indicator which the Biden admin will quickly slam as widespread economic racism or something).

And then there were average hourly earnings, which after surging 0.6% MoM in January (since revised to 0.5%) and spooking markets that wage growth is so hot, the Fed will have no choice but to delay cuts, in February the number tumbled to just 0.1%, the lowest in two years...

... for one simple reason: last month's average wage surge had nothing to do with actual wages, and everything to do with the BLS estimate of hours worked (which is the denominator in the average wage calculation) which last month tumbled to just 34.1 (we were led to believe) the lowest since the covid pandemic...

... but has since been revised higher while the February print rose even more, to 34.3, hence why the latest average wage data was once again a product not of wages going up, but of how long Americans worked in any weekly period, in this case higher from 34.1 to 34.3, an increase which has a major impact on the average calculation.

While the above data points were examples of some latent weakness in the latest report, perhaps meant to give it a sheen of veracity, it was everything else in the report that was a problem starting with the BLS's latest choice of seasonal adjustments (after last month's wholesale revision), which have gone from merely laughable to full clownshow, as the following comparison between the monthly change in BLS and ADP payrolls shows. The trend is clear: the Biden admin numbers are now clearly rising even as the impartial ADP (which directly logs employment numbers at the company level and is far more accurate), shows an accelerating slowdown.

But it's more than just the Biden admin hanging its "success" on seasonal adjustments: when one digs deeper inside the jobs report, all sorts of ugly things emerge... such as the growing unprecedented divergence between the Establishment (payrolls) survey and much more accurate Household (actual employment) survey. To wit, while in January the BLS claims 275K payrolls were added, the Household survey found that the number of actually employed workers dropped for the third straight month (and 4 in the past 5), this time by 184K (from 161.152K to 160.968K).

This means that while the Payrolls series hits new all time highs every month since December 2020 (when according to the BLS the US had its last month of payrolls losses), the level of Employment has not budged in the past year. Worse, as shown in the chart below, such a gaping divergence has opened between the two series in the past 4 years, that the number of Employed workers would need to soar by 9 million (!) to catch up to what Payrolls claims is the employment situation.

There's more: shifting from a quantitative to a qualitative assessment, reveals just how ugly the composition of "new jobs" has been. Consider this: the BLS reports that in February 2024, the US had 132.9 million full-time jobs and 27.9 million part-time jobs. Well, that's great... until you look back one year and find that in February 2023 the US had 133.2 million full-time jobs, or more than it does one year later! And yes, all the job growth since then has been in part-time jobs, which have increased by 921K since February 2023 (from 27.020 million to 27.941 million).

Here is a summary of the labor composition in the past year: all the new jobs have been part-time jobs!

But wait there's even more, because now that the primary season is over and we enter the heart of election season and political talking points will be thrown around left and right, especially in the context of the immigration crisis created intentionally by the Biden administration which is hoping to import millions of new Democratic voters (maybe the US can hold the presidential election in Honduras or Guatemala, after all it is their citizens that will be illegally casting the key votes in November), what we find is that in February, the number of native-born workers tumbled again, sliding by a massive 560K to just 129.807 million. Add to this the December data, and we get a near-record 2.4 million plunge in native-born workers in just the past 3 months (only the covid crash was worse)!

The offset? A record 1.2 million foreign-born (read immigrants, both legal and illegal but mostly illegal) workers added in February!

Said otherwise, not only has all job creation in the past 6 years has been exclusively for foreign-born workers...

Source: St Louis Fed FRED Native Born and Foreign Born

... but there has been zero job-creation for native born workers since June 2018!

This is a huge issue - especially at a time of an illegal alien flood at the southwest border...

... and is about to become a huge political scandal, because once the inevitable recession finally hits, there will be millions of furious unemployed Americans demanding a more accurate explanation for what happened - i.e., the illegal immigration floodgates that were opened by the Biden admin.

Which is also why Biden's handlers will do everything in their power to insure there is no official recession before November... and why after the election is over, all economic hell will finally break loose. Until then, however, expect the jobs numbers to get even more ridiculous.

Tyler Durden Fri, 03/08/2024 - 13:30

Read More

Continue Reading