This Week In A Nutshell
Rates are steady heading into the week following a cool inflation report last Friday, but they could rise even if the Fed cuts as expected on Wednesday—if Fed officials push back on expectations for a subsequent cut in December.
Upcoming Attractions
Fed Press Conference (Wednesday): The Fed will cut rates by 25 bps—as priced in by futures markets—but the question is how Chair Powell will characterize expectations for the December meeting. He won’t provide formal guidance, deferring instead to the data. But markets have priced in over 90% odds for a December cut and the September projections from the committee also narrowly showed another cut in December. Of course, the lack of government economic data during the shutdown has muddied the waters.
Case-Shiller home price index (Tuesday): Expected to show home prices increasing about 2% annually in August. Redfin’s home price index data for September is already out.
NAR Pending Home sales (Wednesday): Expected to come in slightly negative in September relative to last year. Redfin’s September pending sales data is also out.
Postponed if shutdown continues: Durable goods, GDP, PCE inflation, jobless claims (state level data still available).
Last Week’s Highlights
CPI report: September inflation came in surprisingly low, but much of the miss is due to a big drop in owners’ equivalent rent (see here for details), which was concentrated in the northeast and possibly a statistical fluke.
Existing home sales: Seasonally adjusted, the level of home sales for September came in at 4.06 million, up 4% from a very low 3.9 million last September, but close to the rate we’ve been averaging since 2022.
Diving a Little Deeper: Government shutdown data impacts
There are two separate issues when it comes to the missing government data: (1) data that was collected pre-shutdown and not yet released and (2) data that is not being collected. Let’s dive into both.
October data that has not been released: The main casualty here is the jobs report that was scheduled for release on October 3. Once that report is released, it should be entirely non-distorted as all data was collected pre-shutdown. The delay is unfortunate, but it’s pretty likely the release of that data would not change the Fed’s expected cut on Wednesday.
Data that is not being collected: Data collection stopped on October 1 for reports scheduled for release in November. This is where the longer the shutdown goes on, the more knock on effects there will be. To keep this simple, we will focus on just the two most important data releases: jobs and inflation.
Jobs data:
Data collection would normally have started the week of Oct. 12-18.
For the establishment survey, which surveys businesses and tells us how many jobs the economy is producing, the delay may not impact the ultimate accuracy of the data since businesses regularly report late. Research has shown that the late responses do not differ much from the on-time responses, perhaps because businesses have data they can rely on.
For the household survey, which surveys households and tells us the unemployment rate, the delay is more problematic. In past shutdowns, the BLS has chosen to conduct the survey later, but ask about the same reference week, which means responses are now subject to individual recall bias. If the shutdown persists, it’s possible the BLS will simply choose to forgo collecting October data.
Inflation data:
The shutdown will meaningfully impact the quality of CPI data for October.
The majority of data is collected by hand. Alternative data can only be used retroactively for a small minority of the basket of prices the CPI includes. There is no good alternative for the BLS and they may need to simply interpolate the missing data using data pre and post-shutdown, meaning that data will always remain missing.
Redfin Data Reports
Homebuyers Are Scoring the Biggest Autumn Discounts Since 2019
The typical home that sold last month went for 1.4% less than its final list price—the biggest September discount in six years—as a slow housing market empowered buyers to negotiate.
The typical home that sold also spent 50 days on the market—the slowest September pace in nearly a decade.
Existing-home sales inched up to the highest level in eight months, but pending sales—a more current gauge of demand—fell from both a month and a year earlier.
Sellers have started to pull back in response to sluggish demand; active listings fell roughly 1%.
U.S. Home Prices Rose 0.2% in September
U.S. home prices increased 0.2% from a month earlier in September on a seasonally adjusted basis.
On a year-over-year basis, home prices rose 3%, the slowest rate recorded in Redfin Home Price Index (RHPI) data going back to 2012.
San Diego (+1.7%) recorded the highest month-over-month price growth of the 50 most populous U.S. metros, while San Antonio posted the biggest drop (-0.6%).
Sellers Are Getting Ghosted: 15% of Homebuying Contracts Were Canceled in September
Housing costs are frightful and economic jitters are in the air, leading some buyers to leave sellers in the lurch.
Austin, TX Is America’s Strongest Buyer’s Market, With Over Twice as Many Home Sellers as Buyers
Nationwide, there are an estimated 37% more sellers than buyers—a near-record gap that’s giving buyers across the country negotiating power.
There are seven metros where sellers outnumber buyers by at least 2-to-1, and all but one are in Texas or Florida.
There are five remaining seller’s markets, the strongest of which is Newark, NJ.
Sale prices are up 1.3% year over year in buyer’s markets versus a 3.8% gain in seller’s markets.
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