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July 2023 » thefivestar.com 75 J O U R N A L July 2023 was 100% in May, meaning the typical home that sold was purchased at its list price. That's down from 103.1% a year earlier but is the highest level of any May on record prior to the pandemic and follows nine straight months of sub-100% sale-to-list price ratios. Closed home sales are falling, but not as quickly as they were at the start of the year— sales fell by 19.8% year over year in May, the smallest drop in nearly a year and an improvement from the 35.3% decline in Janu- ary. Pending home sales performed similarly. They fell 21.4% year over year on a seasonally adjusted basis in May, the smallest drop since last summer and an improvement from the record 36.1% decline in November. Pending sales were down 16.1% from May 2019 levels. HOMEOWNERSHIP RATE CONTINUES TO GROW AMONG BELOW-MEDIAN INCOME FAMILIES I t may be a hard pill to swallow, but the U.S. economy is stalling as higher inter- est rates are weighing on rate-sensitive sectors like housing and credit. However, the economy remains resilient, and the broader economy has weathered several adverse shocks since the COVID-19 pandemic and has yet to reach recession conditions. Housing activity has slowed, to be clear, but favorable demographic tailwinds from first-time home buyers have bolstered the housing market and led to surprising news: the total homeownership rate can be attribut- ed to the strong growth in the below-median income homeownership rate, which has increased from 48% to 53.4% since 2016. Looking at the economy, the U.S. Bureau of Economic Analysis reported that the Gross Domestic Product (GDP) was up by 0.2% to an annualized rate of 1.3% during the first quarter of 2023. This marks the third consecutive quarter of positive GDP growth, but the pace is slowing. This number is also influenced by Gross Domestic Income (GDI), which decreased by 2.3% during the first quarter of 2023. According to Freddie Mac, in theory, GDP and GDI should be identical as aggregate expenditures always equal income. However, research has shown that the GDI measure can be more predictive of future output growth than GDP. Despite the potential contraction in ac- tivity indicated by GDI, the labor market re- mains resilient. The unemployment rate did increase in May by 0.3 percentage points to 3.7%; the largest month-over-month increase since the onset of the COVID-19 pandemic. However, an increase in job openings caused the ratio of job openings to unem- ployed persons to jump up to 1.79 in April 2023 from 1.67 the month before. Despite the rise in the unemployment rate reported in the household survey, the establishment sur- vey reported that nonfarm payrolls increased by 339,000 in May. In addition, average hourly wages in- creased 0.3% over the month, and 4.3% year over year, to $33.44/hr. Looking specifically at the housing mar- ket, per the National Association of Realtors (NAR), existing home sales pulled back by 3.4% in April to a seasonally adjusted annual rate of 4.28 million. In addition, a separate report from the U.S. Census Bureau and the Department of Housing and Urban Development found that new home sales increased 4.1% in April. Since the beginning of the year, existing home sales have averaged a seasonally ad- justed 655,000 sales, a 2% increase year over year. The simultaneous decline of existing home sales and increase of new home sales has shifted the composition of the home sales market toward new home sales. Citing a NAR report, Freddie Mac report- ed that as of April, there is 2.9 months' supply of existing homes based on the current rate of sales. Existing homes typically sold in 22 days in April. Looking at new homes, there is a 7.6 months' supply according to the Census Bureau. Overall, the total number of single-family homes available for sale remains low at 1.3 million units, only 8.1% above its all-time low in February 2022. Furthermore, as the number of existing homes available for sale has dwindled while available new homes are relatively higher, the share of active for-sale inventory of new homes has reached nearly 30%. Freddie Mac says the divergence between the new and existing home sales markets are suggestive of the lock-in effect because home- owners with lower rates on their mortgages have a lower propensity to list their home due to today's elevated interest rates. Among recent developments in the mortgage market, the standard 30-year fixed- rate mortgage has begun to increase, recently coming in at 6.79%, the highest reading since November 2022. Originations in the first quarter of 2023 totaled $344 billion, the lowest quarterly total