Job market's health check gives housing market a headache

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Published Date 2/10/2025

Good news for some doesn’t necessarily spell good news for others in the real estate industry. While we can celebrate a healthy, promising jobs report even when it’s not as robust as the month before, it can have the effect of backfiring into the faces of borrowers waiting for interest rates to come down. Why? Because the Feds see no need for a reduction to stimulate an economy that appears to be on an acceptable trajectory.

RealEstateNews’ Dave Gallagher reports that while roughly 143,000 jobs were created in January, monthly wage growth came in stronger than forecast and the unemployment rate ticked down. Translation? No reason for short-term rate cutting by the Feds accompanied by the very cautious approach it has taken over the past few months.

"The Fed has emphasized the need for either 'real' inflation progress or 'some' labor market weakness before delivering additional rate cuts, and the January jobs report provided neither," said Sam Williamson, senior economist at First American, adding that rates cuts would likely remain "off the table until May/June at the earliest."

Gallagher says that while not directly tied to mortgage rates, the continued pause in short-term interest rate cuts should keep the 30-year mortgage rate pretty much unchanged for the coming weeks. The question becomes whether pent-up demand can help determine whether homebuyers will jump into the market even at current rates.

"With more jobs being added in relatively high-wage sectors, and overall earnings on the rise, prospective home buyers will feel more confident heading into the spring housing market," said Lisa Sturtevant, chief economist at Bright MLS. Her caveat, however, is that elevated rates will still be challenging from an affordability perspective.

Inventory is building, however. Gallagher reports that early 2025 housing data indicates there will be more choices this spring compared to recent years. Citing Realtor.com’s latest report he says, “Newly listed homes in January are up 10.8% compared to a year ago while homes actively for sale are up 24.6% year-over-year.

That same report also found that homes are spending 73 days on the market on average, making this January the slowest since 2020, but also keeping inventory levels steadily increasing as we head into spring.

"While rates remain elevated, it is possible that we might be seeing that chiseling effect starting as sellers may grow tired of waiting for significant changes in rates," according to the report, authored by economists Danielle Hale and Sabrina Speianu.

RealEstateNews, TBWS

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