Home Prices Reach New Highs, Unemployment Claims Rise, and Recession Indicators Flash Warning Signs

As we delve into the financial landscape of the week of November 6, 2023, a mixed bag of economic indicators and market developments comes to the forefront. Home prices are soaring, unemployment claims are trending in a concerning direction, and recession indicators are sending cautious signals. Let's break down the key highlights:

Home Prices Reach Dizzying Heights

• CoreLogic's Home Price Index: Home prices surged 0.3% from August to September, marking the fifth consecutive month of new record highs. Projections indicate a further 0.1% increase in October and a steady climb of 2.6% for the coming year. Although these forecasts may be somewhat conservative, the trend suggests an impressive 8% appreciation in home values for 2023 based on the year's performance thus far.

• Black Knight's Findings: Black Knight reports a 0.4% increase in national home values in September, extending the streak of all-time highs for the fifth consecutive month. Remarkably, home prices now sit nearly 3% above the 2022 peak, indicating a trajectory for 7% appreciation this year.

Takeaway: The consensus across various housing market indices, including Case-Shiller, Zillow, and the Federal Housing Finance Agency, underscores the robust growth in home prices. For those seeking a pathway to wealth through real estate, these reports reaffirm the wisdom of homeownership.

Concerning Trend in Continuing Jobless Claims

• Continuing Jobless Claims: These claims increased by 22,000, reaching a seven-month high, with 1.834 million individuals still receiving unemployment benefits after their initial claim. This upward trajectory raises concerns about the ease of reemployment for those who have been displaced from their jobs.

Takeaway: Although initial jobless claims remain historically low, indicating employers' efforts to retain workers, the sustained increase in continuing claims, totaling 176,000 over seven weeks, suggests a more challenging job market for those seeking new employment. This sentiment aligns with recent observations from ZipRecruiter, where a cautious approach to hiring has emerged due to the Fed's aggressive rate hikes.

Recession Indicators Flashing Warning Signs

• Unemployment Rate: The Bureau of Labor Statistics reported an unemployment rate of 3.9% in October, marking a rise from April's low of 3.4%. Historically, when the unemployment rate has increased by 0.5% or more from the expansion low, a recession has either occurred or begun within two months.

• Sahm Rule: Named after former Fed economist Claudia Sahm, this indicator triggers when the three-month moving average of the unemployment rate rises by 0.5% or more compared to its low within the past year. If November's unemployment rate reaches 4.2%, it would activate this indicator.

• Long-Term Unemployment: Another indicator involves the number of people unemployed for 15 weeks or longer, rising by 19% or more year-over-year. This threshold was recently crossed, as evidenced by the November 3 report.

Takeaway: While a recession brings economic challenges, one silver lining is the likelihood of lower interest rates.

For additional insights and up-to-date information on the economic landscape, explore the following resources:

• CoreLogic

• Black Knight

• Bureau of Labor Statistics

• ZipRecruiter

Keep in mind that economic conditions can evolve rapidly, and it's prudent to consult with financial professionals for personalized advice and to stay well-informed.