Market Update January 8th, 2024

The notable downward revisions in job data for October and November, which collectively reduced reported payroll figures by 71,000, have broader implications for the economy, particularly in the real estate sector. With 10 of the past 11 months showing a cumulative downward revision of 427,000 jobs, this trend of diminishing job growth potentially impacts the real estate market in a significant way. One of the key effects could be an increase in the number of distressed sellers in the housing market.

The loss of jobs or the uncertainty surrounding employment can lead to an increase in distressed sellers - homeowners who are compelled to sell their properties due to financial constraints. As more individuals face job instability or unemployment, the need to liquidate assets for financial security becomes more pressing. This situation often leads homeowners to sell their properties to capture the equity they have built up. Such a scenario tends to increase the supply of homes on the market, as more sellers are motivated by urgent financial needs rather than market conditions or personal preferences.

This influx of supply can have various effects on the real estate market. In areas with high demand, the increased supply might be absorbed quickly, possibly without much impact on property values. However, in markets with lower demand or higher inventory levels, the additional supply from distressed sellers could lead to a decrease in home prices. This could create opportunities for buyers but might also result in a softer market overall, potentially affecting property values negatively.

Furthermore, the trend of job revisions and its impact on the real estate market underscores the interconnectedness of the employment and housing sectors. It highlights the importance of accurate and reliable economic reporting by institutions like the Bureau of Labor Statistics. Whether the cause of these revisions is due to errors in data collection or intentional misreporting, the repercussions are felt beyond the employment sector, influencing key areas such as real estate. This situation calls for a more cautious and informed approach to both understanding economic trends and making real estate decisions.

All of this, with the combination of dropping mortgage rates, could impact the housing market for this New Year of 2024. The question just lies now, will this change be a good one or a bad one?

“Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble.”
– Warren Buffett

Have a great week everyone!