Zacks Investment Management

Understanding where to focus can make all the difference in navigating today’s markets. This week in Steady Investor, we’re highlighting key factors every investor should consider, including:

• The rise in home sales
• The decline in consumer demand for credit

The Housing Market Improves in October, but Remains in a Slump – 30-year fixed mortgage rates ticked lower over the summer and touched a two-year low in September (6.08%), which helped boost activity in the U.S. housing market. But not by much. Existing-home sales rose by 3.4% month over month in October, and 2.9% from a year earlier. This marked the first year-over-year increase in over three years, which underscores just how sluggish the housing market has been for some time. Since homes generally go under contract and then take a month or two to close, October sales data reflects a flurry of activity that took place in August and September. November existing-home sales may see a continuation of activity, but we wouldn’t expect it to last through the end of the year. The winter months tend to be slower sales months generally speaking, but as seen in the chart below, 30-year fixed mortgage rates have climbed back up to 6.84% (as of this writing)—which is likely to give would-be buyers pause.¹

30-Year Fixed Mortgage Rates

Source: Federal Reserve Bank of St. Louis²

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Looking further into 2025, it appears unlikely that mortgage rates will make a substantial move lower. 30-year fixed mortgages tend to correlate fairly closely with yields on 10-year U.S. Treasury bonds, which have been experiencing upward pressure given investor expectations for accelerating economic growth, increasing deficits, and perhaps inflationary pressures if tariff policy resembles what was promised on the campaign trail. Elevated mortgage rates will make a tight housing market even less accessible for many households. As of October 2024, the national median existing-home price was $407,000, up 4% year-over-year. Homes are relatively expensive, and there are not many of them—at the current sales pace, there is an approximately 4-month supply of homes on the market, which signals a supply and demand imbalance.

U.S. Households are Borrowing Less Than Many Think – There’s been a narrative in the financial media that American households are wildly over-indebted—a problem that continues to worsen. Some have cited rising delinquencies as evidence that the problem is in a tailspin. A clear-eyed look at the data indicates otherwise. According to Moody’s Ratings, household debt in Q3 grew at a slower pace than GDP—3.8% for debt growth and 4.9% for nominal (not inflation adjusted) GDP growth. While it’s true that total household debt has indeed risen in recent years, when you adjust for inflation total household debt is roughly $1 trillion below 2008 levels. When we factor in population growth over that same period, the data looks even better. In the credit arena, households also look to be in fine shape—credit card debt for the average household is 13% below peak levels, and banks are reporting flat demand for loans over the past three months. The key indicator to watch, in our view, is household debt service payments as a percent of disposable income. This metric tells us how much of a strain credit and loan payments are having on U.S. households in aggregate. And by that measure, we can see that Americans overall are doing better than the media often suggests⁴:

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Disclosure