By Greg Heym, Brown Harris Stevens Chief Economist and host of Crossing The Line

That’s not a misprint, pending home sales—which track signed contracts for existing homes—jumped 4.8% in June. How did this happen? Mortgage rates have been drifting lower since May, but that’s not the main reason for the pickup in activity.

NAR chief economist Lawrence Yun credited the recent rise in supply:

"The rise in housing inventory is beginning to lead to more contract signings. Multiple offers are less intense, and buyers are in a more favorable position."

That certainly makes sense, as low supply levels have muted sales and kept prices rising even as mortgage rates rose significantly. Now that supply is moving in the right direction, hopefully mortgage rates will follow, and housing will be firing on all cylinders in the months to come.

July Job Growth Much Lower than Expected

Payrolls rose by just 114,000 last month, well below the 185,000 Dow Jones estimate. Here are some other highlights of the report:

• The unemployment rate rose to 4.3%, its highest level since October 2021.
• Job growth for May and June was revised down by a total of 29,000.
• Wages rose 0.2% in July and are up 3.6% from a year ago. Both those figures were below forecasts.

So, a pretty bad report on hiring in July, but isn’t that what we were rooting for? Not exactly. We were hoping for a gradual slowdown in hiring and wages so inflation would drift lower, and the Fed could cut rates. This report was so weak that stock futures tanked right after it came out. The worse-than-expected data did have one upside, as it immediately brought treasury rates down. This is good news for housing, as long as we don’t enter into a recession.

So far, the Fed’s been able to bring down inflation without a recession, and we can’t panic too much after one bad employment report. That said, get ready to keep hearing about something called the Sahm rule, a very accurate predictor of recessions. I won’t get into to it in this column, but those who are curious can read more about it here.

See You in September

To nobody’s surprise, the Fed left rates unchanged at their meeting this week. I won’t bore you with what changed in their statement or what Chairman Powell said in his press conference, instead here’s what you need to know:

• They are very happy with the recent progress made on inflation.
• Unless inflation starts rising again before their next meeting, they will be cutting rates in September.
• Expect a second rate cut this year, probably in December.

You may ask if the much weaker-than-expected jobs report might push them to cut 0.50% in September. My guess is no, even though markets are betting on it. Cutting 50 basis points in reaction to one bad jobs report might look like panic, which could hurt the Fed’s credibility going forward.

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