Job Gains Hit the Brakes
The Fed’s Rate Cut Looms as Hiring Slows
Job growth in the U.S. slowed significantly in August, with private employers adding just 99,000 jobs, according to ADP, far below the forecast of 145,000. This marks the weakest monthly job growth since January 2021 and follows a decline in job openings, as revealed in the JOLTs report. The combination of slowing hiring and rising layoffs comes as the Federal Reserve gears up for its September 18 meeting, where the first rate cut of the year is expected. With the labor market softening, the Fed’s decision on whether to cut rates by 25 or 50 basis points will likely hinge on the upcoming jobs report.
Valley View: What This Means Locally
The job slowdown seen nationally is being mirrored in the Lehigh Valley, where job growth has also cooled in recent months. According to the Lehigh Valley Economic Development Corporation, unemployment in the region rose slightly to 4.2% in July, reflecting a modest increase in layoffs across several sectors. Job postings in manufacturing and logistics, which are central to the Valley’s economy, have declined by 2.5% month-over-month. Despite the dip in hiring, the Valley still maintains a lower unemployment rate than the national average.
Impact on the Lehigh Valley
For buyers in the Lehigh Valley, this slowdown could be a mixed bag. On the one hand, a weaker job market may keep more people from making big financial commitments, potentially easing the competition for homes. Sellers, on the other hand, could see a slowdown in offers as economic uncertainty grows. But for both buyers and sellers, the upcoming Fed rate cut should translate into lower mortgage rates, which could re-energize the market and bring some relief to home affordability.
Overall Market Outlook
With hiring slowing both nationally and locally, and the Fed’s rate cut just around the corner, the Lehigh Valley real estate market could see a period of transition. Mortgage rates are expected to drop, which could boost buying activity, but economic concerns might temper this effect. While the labor market cools, it will be crucial to watch how lower borrowing costs influence buyer confidence and whether sellers adjust their expectations accordingly.
Mortgage Rates Make a Comeback
Affordability Rises as Rates Fall—Is It Time to Move?
Mortgage rates have been on a steady decline, with the average 30-year fixed-rate mortgage now sitting at 6.33%, the lowest since April 2023. This drop comes as bond yields fall due to weakening signals from the jobs market. Over the last four months, mortgage rates have decreased by 110 basis points (1.1%), offering a much-needed boost to affordability for homebuyers. With signs of a softer economy, and rate cuts expected from the Fed on September 18, buyers may see rates drop further, potentially opening the door for more people to enter the housing market.
How the Lehigh Valley Stacks Up
In the Lehigh Valley, the drop in mortgage rates is being welcomed by prospective buyers who have been battling affordability issues for months. According to the Greater Lehigh Valley REALTORS® (GLVR), the average 30-year mortgage rate in the region has mirrored the national decline, with rates now hovering around 6.35%. This marks a significant improvement in home affordability compared to earlier this year, when rates spiked above 7%. As a result, the number of mortgage applications in the area has started to pick up, suggesting that buyers are becoming more active.
Impact on the Lehigh Valley
For buyers in the Lehigh Valley, the drop in mortgage rates is a game-changer. Lower rates mean more affordable monthly payments, which could help some buyers qualify for loans they couldn’t before. Sellers, however, may see an uptick in interest from buyers, but price sensitivity will remain a factor, especially in a market where wage growth has slowed. This rate reduction could spur more activity in the Valley, with first-time buyers and those who were priced out earlier this year coming back into the market.
Overall Market Outlook
With mortgage rates hitting a five-month low and affordability improving, the Lehigh Valley housing market could see renewed interest from buyers. However, the broader economic conditions, especially the job market slowdown, may temper that demand. As we look ahead, the combination of lower borrowing costs and a softer labor market will likely drive the Valley’s real estate trends for the remainder of the year. Buyers should act quickly to take advantage of these lower rates, while sellers might benefit from the increased activity, even if prices remain steady.
The Down Low on Down Payments
Forget 20%—Most First-Time Buyers Pay Way Less
One of the biggest myths in homebuying is the idea that you need a 20% down payment to secure a mortgage. In reality, recent first-time buyers have been putting down much less—on average, just 8%. This trend is being supported by a variety of mortgage programs that allow for lower down payments. For instance, eligible applicants using VA loans can buy a home with no down payment at all, while USDA loans also offer zero-down financing in rural areas. These options are making homeownership more accessible, particularly as home prices remain high.
The Lehigh Valley: Not Bucking the Trend
In the Lehigh Valley, many first-time buyers are also benefiting from these lower down payment options. According to the Pennsylvania Housing Finance Agency (PHFA), local buyers have been increasingly utilizing state-backed assistance programs that offer down payment and closing cost assistance. The typical down payment in the Valley for first-time homebuyers hovers around 7-9%, well below the 20% figure that’s often assumed. Additionally, local lenders and housing programs provide guidance on securing FHA loans, which require as little as 3.5% down.
Impact on the Lehigh Valley
For buyers in the Lehigh Valley, understanding that 20% is not a requirement can be a huge relief. It means many potential buyers, especially first-timers, can enter the market much sooner than they thought. With mortgage rates currently lower, this could be the perfect time to take advantage of these flexible down payment options. Sellers should also be aware that these programs are helping more buyers qualify, which could lead to more activity in the market, especially for lower-priced homes.
Market Mood: Myth...Busted
The myth of the 20% down payment is slowly being busted, and that’s good news for the Lehigh Valley real estate market. As more buyers realize they can purchase a home with much less upfront, demand could rise, especially for entry-level homes. Combined with lower mortgage rates and continued support from housing assistance programs, the market could see increased activity as we head into the fall season. First-time buyers should act now to take advantage of these opportunities, while sellers may find a larger pool of interested buyers than expected.
As always, if you’d like to discuss the current market further, or if you have any questions, don’t hesitate to reach out.