New: 🧠 Market Minds Issue #032

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Here We Go Again…

A robust jobs report on Friday has significantly influenced mortgage rates, reversing the downward trend observed earlier in the week. The U.S. economy added an impressive 272,000 jobs in May, surpassing the average monthly gain of 232,000 over the past year and well exceeding economists' expectations of 180,000. This surge in employment has led to a spike in yields on 10-year Treasurys, which are closely tied to mortgage rates.

Details from the Jobs Report

• Unemployment Rate: Remained steady at 4.0 percent, with 6.6 million people unemployed, a slight increase from last year's figures.

• 10-Year Treasury Yields: Increased by 15 basis points, reaching as high as 4.43 percent, effectively erasing the decline seen earlier in the week.

• Mortgage Rate Trends: According to Optimal Blue, the average rate for 30-year fixed-rate conforming mortgages was 6.88 percent on Thursday, down from a 2024 high of 7.27 percent in April. However, rates surged by 12 basis points on Friday, aligning with the increase in 10-year Treasury yields.

California Preparing For More ADUs

A private planning firm in California, the Community Planning Collaborative (CPC), is introducing a groundbreaking tool aimed at facilitating the construction of accessory dwelling units (ADUs). This initiative is particularly timely, as it aligns with a new state law mandating a streamlined process for ADU approval.

The ADU Plans Gallery is designed to:

• Empower local governments to align with state laws and achieve local housing objectives.

• Assist residents in navigating the complexities of ADU construction by providing access to preapproved plans and connections with qualified designers.

• Save time and money for homeowners through a streamlined process that reduces the bureaucratic hurdles typically associated with building an ADU.

David Driskell, a principal at CPC, emphasized the benefits of ADUs in a recent statement:

Lots of opportunity for agents and investors willing to familiarize themselves with this process.

What Group Do You Fall Into?

According to a recent forecast by Goldman Sachs, the path to recovery for existing home sales appears to be a long one. The investment bank projects a gradual increase from 4.1 million sales in 2024 to 4.5 million by 2027. These figures are significantly lower than the 6.1 million sales recorded during the pandemic housing boom in 2021 and even fall short of the 5.3 million sales considered "normal" in 2019.

Key Points from Goldman Sachs' Forecast:

• 2024: Expected to see a slight increase to 4.1 million existing home sales.

• 2027: Projected to reach 4.5 million, still below pre-pandemic levels.

• Mortgage Rates: Predicted to decrease to 6.5% by the end of 2024 and to 6.3% by the end of 2025.

• Home Prices: Anticipated to rise by 3.8% in 2024 and 4.4% in 2025.

While unlikely for home sales to return to their peak in the near future, Goldman Sach’s prediction is that both home sales and mortgage rates will both trend in the right direction.

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Who Needs Sheetrock Anyway?

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TL;DR (Too Long; Didn’t Read)

A strong jobs report on Friday significantly impacted mortgage rates, reversing the earlier downward trend. The U.S. economy added 272,000 jobs in May, exceeding expectations and leading to a rise in 10-year Treasury yields, closely tied to mortgage rates. Consequently, mortgage rates, which had declined earlier in the week, surged by 12 basis points on Friday. Additionally, a planning firm in California introduced a tool to facilitate ADU construction, while Goldman Sachs forecasted a gradual recovery in existing home sales and a decrease in mortgage rates over the next few years.

Have a great weekend - we’ll see you next Saturday.

Cheers 🍻

-Market Minds Team