Only 1.8% of homeowners have negative equity

Plus: U.S. labor market defies slowdown

December 11, 2023

👋 Happy Monday to you! Today's newsletter is 635 words, a 2.5-minute read.

Disclaimer: Average mortgage rates as of Dec 08, 2023. © MND's Daily Rate Index.

1. U.S. labor market defies slowdown

November's jobs report shows the American labor market is still flourishing with strong employment and wage growth — alongside workers flooding into the labor force.

  • Payrolls rose 199,000 in the month, more than the 185,000 average estimate of economists. The unemployment rate tightened to 3.7%, below all forecasts and a four-month low. And the participation rate ticked up to 62.8%. Weekly hours also rose, a sign of demand.

  • Job gains were led by health care, government, and manufacturing. Payrolls got a 30,000 boost from auto workers returning from the picket lines.

This report, especially if this kind of strength is repeated in December, complicates the Fed’s outlook (in regards to rate hikes/cuts). Payrolls and labor demand were expected to start slowing, but the opposite happened.

2. Only 1.8% of homeowners have negative equity

Although housing affordability has deteriorated to unprecedented levels, only a fraction of homeowners have negative equity, meaning they owe more on their house than it’s worth. That’s according to CoreLogic’s Q3 2023 report.

The report reveals that across the nation, negative equity affects just a small percentage of mortgage borrowers, with Louisiana leading at (6.1%), followed by Iowa (4.92%), Oklahoma (4.13%), North Dakota (3.71%), and Kentucky (3.42%).

On the other hand, states like California (0.63%), Nevada (0.73%), Arizona (0.82%), Florida (1.04%), and Massachusetts (1.12%) have the smallest percentages of homeowners with negative equity.

The reason few borrowers are underwater? Home prices, as measured by the Case-Shiller National Home Price Index, are up +45.1% since March 2020.

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3. Catch up quick

❌ No, Wall Street investors haven’t bought 44% of homes this year. (HousingWire)

⚖️ Wells Fargo settles lawsuit with ex-LO who alleged that he was fired for complaining about the institution's discriminatory lending practices. (KNX News)

🏡 Jeff Bezos is funding a real estate startup buying up family homes to rent. (Vice)

4. Fannie Mae: Homebuyer sentiment hits a new low

Consumer sentiment regarding the housing market remains persistently pessimistic.

Only 14 percent of Americans surveyed last month said November was a good time to buy a home — a new record low in monthly surveys Fannie Mae has been conducting since 2010.

However, it's important to note that this survey, conducted between November 1 and 16, and involving 1,058 homeowners and renters, may already be somewhat outdated because most respondents were contacted when mortgage rates were just beginning a dramatic retreat from their 2023 highs.

This change in mortgage rates might not be fully reflected in the survey's results, suggesting that the actual current sentiment could be somewhat different. LINK

👋 See you on Wednesday!

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