Jeff Cox on CNBC reports on last week’s inflation data, highlighting that the U.S. inflation rate rose to 2.4% in September, slightly exceeding expectations. Core inflation (excluding food and energy) increased by 0.3%, bringing the annual core rate to 3.3%. Jobless claims also unexpectedly spiked to 258,000, the highest since August 2023, likely influenced by Hurricane Helene and the Boeing strike. Food and shelter costs were the primary drivers of inflation, while energy prices dropped by 1.9%. Additionally, used vehicle costs, medical services, and apparel prices notably increased.

Source: CNBC (October 2024)

Cox quotes Chicago Fed President Austan Goolsbee as commenting on the data: “The overall trend is what’s important, not the day to day fluctuations…The overall trend over 12, 18 months is clearly that inflation has come down a lot, and the job market has cooled to a level which is around where we think full employment is.”

Jeanna Smialek of the New York Times comments on the data, reporting that inflation remains above the Federal Reserve’s 2% target despite progress. While housing costs, a key driver of inflation, are finally slowing, persistent increases in services and other categories suggest inflationary pressures linger. This mixed data implies that the Fed is unlikely to accelerate rate cuts, but it may still gradually reduce interest rates, as previously projected. However, more significant cuts are unlikely due to inflation risks.

Terry Lane of Investopedia comments specifically on shelter inflation, a persistent hurdle for the Fed’s inflation control efforts. In September, shelter inflation showed signs of easing, rising by 4.9%—the slowest since March 2022. This slowdown in housing inflation, which has remained stubbornly high, could finally reflect the decline in new rental prices over the past months. Fed officials, including Neel Kashkari and Susan Collins, have been closely watching shelter costs, as they are one of the “stickiest” inflation components.

Source: Investopedia (October 2024)

Fan-Yu Kuo of the National Association of Home Builders (NAHB) reports that this softening of housing inflation reflects the impact of increased apartment supply and lower new rental price growth. While the Fed’s easing interest rates may relieve some housing market pressure, the core issue—limited affordable housing supply—remains mainly beyond the Fed’s control. Tight monetary policy has historically constrained housing development by increasing financing costs.

Clear Cooperation

Marian McPherson of Inman reports on the issues surrounding the Clear Cooperation rule implemented by the National Association of Realtors (NAR) in 2020. This rule mandates that agents submit any listing marketed to the public to their local multiple listing service (MLS) within one business day. This rule aims to prevent “pocket listings,” where properties are privately marketed without being broadly advertised, which could limit buyer access. Supporters argue that the rule increases transparency and ensures broader access to listings for both buyers and agents. However, many agents oppose the rule, claiming it restricts their ability to offer exclusive deals and limits client options. 

Brooklee Han of HousingWire reports on the issue, highlighting that this policy has faced significant controversy, particularly as the Department of Justice (DOJ) has reopened its investigation into both the Clear Cooperation Rule and the “no-commingling” rule, which prohibits mixing MLS and non-MLS listings. Initially created to protect MLS data from being leveraged by non-paying entities, the no-commingling rule reflects brokers’ long-standing concerns over public access to listings. While NAR defends these rules as promoting transparency and competition, critics argue that they restrict agent flexibility and limit non-MLS listing exposure.

Robert Reffkin, CEO of Compass, offers the opinion that: “If the industry is going to uphold its commitment to improve transparency, NAR, MLSs, and state and local associations must step up and fully disclose the risks of broad MLS exposure in plain language to facilitate informed consent by homeowners. This is particularly important when policies like Clear Cooperation and MLSs’ Mandatory Submission rules eliminate seller choice by forcing homeowners to list on the MLS and relinquish control over their personal information.”

Lillian Dickerson of Inman highlights that critics of the rule argue that agents need flexibility to market properties based on client needs without being forced into public listings that remain online indefinitely. Supporters, however, emphasize the need for transparency and fairness, as abolishing the rule could benefit larger brokerages at the expense of smaller ones. The rule’s future remains uncertain, with ongoing discussions about balancing agent flexibility with industry transparency.

Zillow President Susan Daimler firmly supports the Clear Cooperation Policy, arguing that private listing networks harm consumers and agents by reducing transparency and limiting access to listings. She believes that scrapping the CCP would allow private listings to dominate, creating a less open market where buyers miss out on available properties and sellers are disadvantaged. While acknowledging that some sellers value privacy, Daimler emphasizes that MLSs offer options to meet those needs. 

Housing and remodeling sentiment

Eric Lynch of NAHB reports on the remodeling market, highlighting that the NAHB/Westlake Royal Remodeling Market Index (RMI) dropped to 63 in Q3 2024, down two points from the previous quarter, marking a third consecutive decline. Despite this dip, remodelers remain optimistic, with an overall RMI score above 50, indicating favorable market conditions. 

Source: NAHB (October 2024)

Lynch reports that challenges such as labor shortages, higher interest rates, and uncertainty around the upcoming election are causing some customers to delay major projects. The Current Conditions Index, which tracks project sizes, fell slightly, while the Future Indicators Index, which monitors leads and backlogs, also declined. However, NAHB still forecasts steady 2% growth in remodeling spending over the next two years.

Indeed, Ana Teresa Solá of CNBC reports that a new survey reveals that 33% of homeowners would consider hiring a contractor with a questionable reputation to save money on repairs despite the risks. While cost-saving is a key factor, experts warn that hiring untrustworthy contractors—those who overestimate skills, do poor-quality work, or fail to complete projects—can lead to greater long-term expenses. 

Source: CNBC (October 2024)

Flávia Furlan Nunes of HousingWire reports on housing sentiment, noting that home purchase sentiment reached its highest level in over two years in September, driven by expectations of lower mortgage rates, according to Fannie Mae’s Home Purchase Sentiment Index. The index rose to 73.9, up 1.8 points from the previous month. However, 81% of respondents still believe it’s the wrong time to buy a home due to rising prices, despite the optimism about mortgage rates. While consumer confidence is improving, home sales activity has yet to significantly increase, with existing home sales on track for their lowest yearly total since 1995.

Nunes quotes Mark Palim, Fannie Mae’s senior vice president and chief economist:

“The recent shift in attitude toward mortgage rates is pushing overall housing sentiment higher, and a growing share are now pointing to high home prices rather than high mortgage rates as the primary sticking point for affordability…Increased positivity that mortgage rates will continue to fall has driven the HPSI to a 30-month high, but we’ve yet to see consumers’ newfound rate optimism translate into a meaningful increase in home sales activity.”