economic update Quarterly Economic Review and Outlook

BY: METRO

US Housing Market

The US housing market may soon be bottoming out. More prospective homeowners are again looking to buying a house. Homebuyers, who had been priced out by last year’s surge in mortgage rates and home prices, began returning as the 30-year fixed-rate mortgage slid roughly 80 basis points between October and February. A leading measure of home prices, the S&P CoreLogic Case-Shiller index revealed home prices continued its trend lower. The national index slid -0.55% in January and slid a total of -2% during the last 3 months. This may not seem much, but it helps regional markets like Portland see affordability improve. The downturn in nationwide housing permits for homes and apartments came to end in February, posting solid gains in both single family houses and apartments. Builder sentiments (i.e., HMI) surveyed by the National Home Builders Association reveal an uptick in the HMI to 44, the third monthly increase in a row.

Bottom line: A rebound in the housing market is unclear but there are early indications that the market is improving. Mortgage rates recently started trending higher again on renewed inflation fears and the economy’s shaky footing makes at best for a very fragile rebound in housing.

Regional Economic Trends

Nonfarm payroll employment is solidly above its pre-pandemic peak. Jobs remain robust in the region; however, the 12-month growth rate is beginning to show signs of slower growth since the FED sharply raised interest rates. Permits for residential single-family construction in the region are anemic but the number of issued permits for apartment construction is still going strong. With housing affordability improving, construction employment rebounded in February. Although the gain was modest and only for 1-month, it might suggest the construction sector is at the brink of recovering if the economy doesn’t tumble into a recession.

Bottom line: Home sales are beginning to show signs of an uptick. Median single-family sales prices have eased in the last two months and along with lower mortgage rates marks a modest improvement in market-rate affordability. The employment situation in the region is not as firm as it once was, so any spillover from a nationwide economic contraction would cause regional growth to tank.