A brief respite from volatility as jobs report looms
A rare sense of calm and positive sentiment hit Wall Street over the last week as investors saw signs that the brief, albeit volatile, banking crisis may be over. Both the S&P 500 and Nasdaq were up for the month as we entered the final day of March. The Cboe Volatility Index, which measures expected volatility for the S&P 500, was at 19 in the last two days of the month. During the height of the Silicon Valley Bank failure, that index's reading was at 30.
Another slightly positive sign for investors was jobless claims going from 7,000 to 198,000 week-over-week, according to the Labor department. This was above expectations of 195,000 but was still considered meager based on the Fed's hawkish quantitative tightening measures. The labor market has remained tight despite the increased QT and the next jobs report will likely spur greater volatility if it comes in higher than expected.
The 10-year Treasury note yield held relatively steady to end the month, starting the last Friday of trading at 3.566%—about 20-basis points higher than the week prior but about 50-basis points lower than March 1.
That means mortgage interest rates also dropped again for the week. Freddie Mac's 30-year fixed-rate mortgage average came in at 6.32%. That was just a slight decrease from the week prior but at this point even stable readings week-over-week could be enough to draw potential homebuyers off the sidelines. Freddie Mac economists noted in their weekly report the downside of decreasing rates, saying "Economic uncertainty continues to bring mortgage rates down. Over the last several weeks, declining rates have brought borrowers back to the market but, as the spring homebuying season gets underway, low inventory remains a key challenge for prospective buyers."
Buyers are slowly but surely jumping into the historically strong spring buying season. The Mortgage Bankers Association's research showed a slight 2.9% uptick in mortgage application activity for the week ending March 24. This was the fourth-straight increase in purchase applications, according to the MBA's research.
As noted by Freddie Mac this will only serve to strain an already thinned out inventory. Realtor.com's research shows that new listings were down 20% in March year-over-year and inventory is half of what was available at this same time in 2019. Their research also shows that homes are staying on the market for 54 days on average which is 18 days longer than last year.
The problem with the lower inventory is that it will likely stall the decline of home price growth. The S&P CoreLogic Case Shiller National Home Price Index runs a few months behind Realtor.com and the National Association of Realtors' research. The S&P index showed home price growth in December accelerated at a 4.4% pace. That number is positive but keep in mind that this 4.4% growth is on top of the growth that was realized at the height of the housing boom during COVID, which reached nearly 20% at times. So home prices are still elevated and inventory is struggling, which could lead to some increased competition in the normally popular spring buying season. That's why it's best to make sure you have a preapproval from a Movement Mortgage loan officer before you go house shopping so you'll know what you can afford and sellers know you're a qualified buyer.
