Record Shutdown Clouds Economic Data, and Housing Is Caught in the Middle

Without key government data during this record-breaking shutdown, the signals we do have on the economy are mixed and housing is caught in the middle.

The federal government shutdown is now the longest one on record, surpassing the 2018–19 shutdown that lasted 35 days.

While lenders have workarounds to keep many home sales on track, I expect to see a slower pace of October sales when we get that data in a few weeks. 

One other impact of the shutdown: We didn’t get the labor market data we would typically see. We have several alternate indicators, and the picture they painted was mixed: Job growth rebounded and earnings rose while layoffs picked up, and it’s expected that the unemployment rate edged up. The lack of data not only makes the Fed’s job more challenging, but it also likely weighs on business and household decisions. 

Meanwhile, mortgage rates moved higher, climbing 5 basis points as markets adjusted to last week’s Fed meeting. Although there was a Fed rate cut in October, Chair Jerome Powell’s statement that a December rate cut was not guaranteed, and in fact far from it, reset market expectations for what’s ahead. 

Looking at weekly trends in housing data, this week marked two solid years, 104 weeks, of growing inventory, but the growth rate has moderated. We also saw a reversal in new listing activity, which declined after growing for the past few weeks, putting a question mark on what’s ahead for the number of for-sale homes nationwide.

The Realtor.com® October Hottest Markets report continues to highlight that the "national" housing market is made up of thousands of local housing markets and that local trends can be starkly different. In fact, the Northeast and Midwest continue to rank as relatively hot, even as demand is cooler nationwide. 

Two other reports this week highlight the importance of local data in real estate. The Realtor.com Investor report shows that a little more than 1 in 10 buyers in the second quarter were investors. However, in several metros, investor activity is more than twice the national average.

Furthermore, while investors nationwide tend to target lower-priced homes, this isn’t true everywhere. In some markets, the typical investor-bought home was nearly 20% more expensive than the recently sold median home in the market.

The Realtor.com International Demand report, similarly, shows that property seekers from abroad have a tendency to concentrate in key markets, with Miami, New York, and Los Angeles capturing the largest shares of international shoppers in the third quarter.  

And more international shoppers come from Canada than any other country, but the share declined in the past year as exchange rate and policy volatility may have dampened demand from our neighbors to the North.