The weakening job market assures several rounds of short-term interest rate cuts by the Fed in the upcoming months. The long-term interest rates, including mortgage rates, are already falling to near 12-month lows. That will enlarge the pool of eligible homebuyers.
The 22,000 net payroll job additions in August were light, which brought the four-month cumulative total to only 107,000, the weakest since the COVID-19 lockdown. Part of the softness is due to the slashing of nearly 100,000 from the federal government payroll this year. Even so, there are a record 159.5 million Americans receiving paychecks. That is 7 million higher than pre-COVID employment levels.
Even with 5% more jobs now compared to before COVID, home sales are essentially 25% lower compared to that “normal” period, principally due to high mortgage rates in recent years. That is why the prospect of lower mortgage rates will help boost home sales.
