Rocket Fuel Newsletter – 08/12/2024

Summer is winding down and, believe it or not, millions of kids are going back to school this week! This of course means back-to-school shopping – NerdWallet estimates that the average shopper will spend over $500 per student this year on supplies and clothes, and a surprising number of parents would actually go into debt to help their kids’ social lives.

In this edition: what is needed to buy a home in America’s most expensive cities, Boommates and last week’s economic rollercoaster of emotions.

How are parents helping their kids prep for the upcoming school year?

Fuel Up! 🚀  

The Salary Needed To Buy A Home In America’s Most Expensive Cities

According to mortgage analytics firm HSH, the average income needed to cover the mortgage principal, interest, property taxes and homeowners insurance payments in the 15 largest cities in the nation is over $104,000! For reference, the U.S. Census Bureau lists the national household median at $74,580.

The two most expensive cities shouldn’t be a surprise – San Jose requires $464,000 per year and San Francisco sits at $336,000 per year for recommended annual income.

Is your city in the top 15 markets for necessary income?

Could ‘Boommates’ Help Ease The Housing Crisis?

Boommates is a term used to define baby boomers that live together or are attempting to live in a shared home. With home prices and property taxes rising, many boomers living alone and living in homes with additional open bedrooms have started renting these open spaces out to people of similar ages.

Read the interview transcript of two boommates!

Are Renters More Vulnerable To Climate-Driven Natural Disasters?

Renter households were slightly more likely to be displaced than homeowner households and were more likely to be displaced for longer periods of time, according to research from the Brookings Institution. Additionally, renters were less likely to have insurance policies in place that would help mitigate the out-of-pocket costs on climate-caused damages.

Read the full report here.

This past week, the U.S. rode the economic roller coaster of emotions – going from celebrating an almost certain upcoming Fed rate cut to a major drop in the stock market, followed by a modest recovery and a bit of reflection where we asked ourselves, “Did we overreact?”

It all started with a weak jobs report on Friday, August 2, where the Bureau of Labor Statistics (BLS) released the Employment Situation Summary reporting an increase in unemployment paired with weaker-than-expected Establishment Survey Data results.

While the Federal Reserve has been focusing on inflation as the driving factor behind any movement in the Federal Funds target rate, employment data is another major indicator of overall economic health. To oversimplify it a bit – when people have jobs, they spend more freely. When people spend more freely, we are more likely to see a rise in inflation.

As we can see below in data from the U.S. Bureau of Labor Statistics, unemployment has been steadily increasing over the last year:

Meanwhile, the Bank of Japan recently made a bit of an unexpected move by raising their benchmark interest rate. Japanese markets reacted to increased borrowing costs and weak U.S. economic data with a major sell-off, which in turn triggered a sharp decline in U.S. markets when they opened on Monday, August 5.

The drastic drop in the stock market and jump in unemployment sent some economists into a bit of a panic, with some going as far as suggesting an emergency Fed meeting to cut rates immediately. The Federal Reserve doesn’t typically call for emergency meetings due to market volatility, and as the week progressed, we saw some stabilization in both U.S. and global markets. While general consensus before the snafu last week was that we would almost certainly see a rate cut at the September Fed meeting, markets are now predicting a 100% chance of a cut, with an over 50% chance of a 50-basis-point drop.

In the mortgage market, stock sell-offs and anticipated rate cuts have led to the lowest mortgage rates in over a year, with average 30-year fixed-rate mortgage rates dropping to 6.47% as of August 8. We can expect prospective home buyers to jump at this opportunity as only time will tell if mortgage rates will bounce back with the stock market or continue to drop in tandem with the federal funds target rate.

The stock market has been a bit of an emotional teenager this week, with the Fed playing the role of exhausted parent – tired, but insistent that everything will be okay.

  1. Annual US Home Price Growth Below 5% For Second Consecutive Month As June Home Prices Cool
  2. MBA Survey: Mortgage Applications Increase
  3. Fannie Mae Consumer Housing Sentiment
  4. Biden-Harris Administration Expands Access To Housing For Veterans
  5. How Often Does The Fed Actually Achieve Its Dual Mandate?

Congrats to Nick S., whose incredible time of 10 seconds led all solvers last week! Eight solvers in total finished in less than a minute, and an additional 20 finished in less than 2 minutes. Great work!

This week’s puzzle gets 5 Rockets out of 5.

Click here to solve!

Good luck!