The Showdown Begins: Who Will Be The Winner

Superbowl mania is in the air, and so is election fever. In fact, this year, we will once again have a rematch as we did in 2020. As of now, it will be Donald Trump vs. Joe Biden and The Kansas City Chiefs vs. the San Fransisco 49ers. Last year’s Super Bowl was the most-watched broadcast in history, and it is likely to set new records this year as well. As for the electoral stage, it will continue to be a spectacle until year’s end.

As the political showdown begins, so does the economic slowdown! The Federal Reserve, often miles behind the pulse of the economy, had its first meeting of the year. As expected, no interest rate actions were taken. More than that, it seems to have telegraphed that there will be no rate cut in March either – which is what I have been saying for months. Chairman Powell declined to commit to specific rate forecasts, saying, “It would depend on the data.”

And so, the showdown commences. But who will be the winner, as the reported economic data doesn’t reflect what is actually being seen in reality? These days, you can’t view a news report without reading about new layoffs in almost every major sector from tech, manufacturing, finance, construction, leisure and hospitality, transportation, utilities, health services, retail, and pharmaceuticals – to name a few.

Employment continues to look strong, but it continues to trend lower, even on paper. We have seen lower wage-pressured inflation in each of the last 19 months. Of note, the “premium” companies were paying to recruit new employees has dropped significantly lately, indicating less incentive to switch jobs – a critical indicator of future economic woes.

The Employment Cost Index measures the cost of labor to employers. It’s an indicator that Jerome Powell studies diligently and is known as one of former Fed Chairman Alan Greenspan’s favorite measures of wage-pressured inflation. It was up quarter over quarter but significantly lower than the expected increase.

Then, there is the real estate market. Many are bracing for a housing slowdown. (not me!) The Case Shiller Home Price Index, the “gold standard” for appreciation, showed that home prices rose 0.2% in the latest monthly reading and have been on the rise since January 2023. The home price index has continued to set new all-time monthly highs in home prices since July 2023.

Similarly, the FHFA (Federal Housing Finance Agency) released its House Price Index, which measures home price appreciation on single-family homes with conforming loan limits. Unlike Case Shiller, it does not include cash buyers or Jumbo loans. The FHFA reported that prices rose 0.3% in the latest reading and are up 6.6% year over year. The FHFH index has set new record highs in monthly home prices since February 2023.

Indeed, there is a battle on the playing field between housing, employment, and the broader economy, which is buckling hard. My biggest recommendation to everyone at this point is to get their “house in order.” Yes, for every home, that means something different, but regardless, I implore each of you to take heed and prepare for a showdown.

Shmuel Shayowitz (NMLS#19871) is President and Chief Lending Officer at Approved Funding, a privately held local mortgage banker and direct lender. Approved Funding is a mortgage company offering competitive interest rates as well as specialty niche programs on all types of Residential and Commercial properties. Shmuel has over 20 years of industry experience, including licenses and certifications as a certified mortgage underwriter, residential review appraiser, licensed real estate agent, and direct FHA specialized underwriter. He can be reached via email at Shmuel@approvedfunding.com.

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