Rocket Fuel Newsletter – 12/23/2024

Most of us don’t think of the internet as an option, yet 8% of households are still without broadband in the average state. In Mississippi, over 13% of households do not have broadband internet!

Read the full analysis from Overflow Data here.

This week’s edition has inflation data, another Federal Funds rate decision and insights into the rising age of the average home buyer.

Fuel up! 🚀

Fed rate decision

The Federal Reserve lowered the federal funds target rate by 0.25% last week. While this move had been widely expected, mortgage rates have edged up slightly. This is largely due to recent data from the Consumer Price Index (CPI) and Producer Price Index (PPI), which point to higher inflation. As a result, it’s unlikely we’ll see another rate cut anytime soon. Settle in, as we are expecting to stay at higher rates for longer.

Read the full Federal Open Market Committee (FOMC) statement here.

Producer Price Index

The Producer Price Index (PPI) measures the change in prices that domestic producers receive for the goods and services they produce. When PPI increases, it means producers are paying more to make their products. This often leads to higher prices for consumers, which often results in higher inflation. The Bureau of Labor Statistics reported PPI rose 0.4% month-over-month in November, bringing the year-over-year increase to 3%. With a rise in PPI hinting at a potential increase in inflation, along with the recent Fed rate cut, we are not likely to see another rate cut for a while.

Read the full report here.

U.S. international transactions, third quarter 2024

The U.S. current-account deficit measures the overall exchange of monetary value between U.S. and foreign residents via imports and exports of goods and services, along with income exchanged. The Bureau of Economic Analysis reported the third quarter of 2024 saw the U.S. current-account deficit grow to nearly $311 billion – meaning U.S. residents are paying out more to foreign residents than they are bringing in from foreign residents.

Read the full news release here.

Aging homeownership

The U.S. Census Bureau released the new 2019 - 2023 American Community Survey. It had some interesting findings on the housing market:

Owner-occupied housing units in the U.S. increased by 8.4%.
Nearly all U.S. counties had more homeowners than renters.
Owner-occupied households without a mortgage increased by 3.9 million units, making up 38.8% of housing.

It is interesting that the number of households without a mortgage has increased, and close to 40% of all homes have no mortgages at all. This is likely linked to the National Association of Realtors data that came out in November showing that the home buyer age has hit an all-time high of 56 years of age. The aging population of homeowners are paying off their mortgages or buying homes in cash.

To add fuel to the fire, fewer entry level homes (Pew Research Center defines entry level homes less than 1,400 sq ft.) are being built in comparison to two decades ago. In 2004, 186,000 entry level homes were built in comparison to only 87,000 in 2023. This can be seen in the graphic below with dark purple showing 2023, while the light purple shows 2004.

These findings suggest that the U.S. housing market is becoming increasingly unaffordable for younger generations. The rise in mortgage-free households and the shrinking supply of entry-level homes could exacerbate this trend, making it even more challenging for younger generations to enter the housing market.

Kick off 2025 with these can’t-miss events

Start the year strong by connecting with top industry professionals and gaining valuable insights at our upcoming tradeshows. Hear exclusive keynotes from our very own Executive Vice President Mike Fawaz and Don Chiesa, Vice President at the New England Mortgage Expo!

Use code ROCKETFREE for free registration at these shows: