Dave:Big economic news dropped over the last week from strong labor data to huge revisions about the data we got last year, a new inflation print. All this together brought us new insights that can help us see where the economy and the housing market is heading. So in today’s episode of On the Market, we’re diving into the latest economic news to help you make sense of the markets and help drive decision making. We’re talking about new jobs, reports, inflation data, consumer sentiment, and how all of that comes together to impact our mortgage rate outlook. We’re also going to discuss some particular sectors, the housing market that are poised to shine and which areas might be at greatest risk. This is on the market. Let’s get into it.Hey everyone, it’s Dave. Welcome to On the Market. Last week was a big one for economic news and all the things we learned are going to directly impact mortgage rates. They’re going to impact buyer demand and the direction of the housing market. So we’re going to dive into the latest data today and talk about what it means as we head into the hopefully busy spring buying season. First up we’re going to talk about labor data. What’s going on in the job market? This is a big question out there because over the last couple of months we’ve had a lot of conflicting signals. But before I dive into what we learned, I just wanted to make clear why this even matters for real estate investors because labor market might not seem obvious what this means for the housing market. But first, it helps us understand buyer activity.People who are losing their jobs or are fearful of their jobs, probably not going to buy a house. Second, it helps us to understand rental demand and rent growth because same sort of thing about demand applies for renters. If they are worried about their job, wages aren’t growing, that sort of thing, it’s probably going to stagnate rent demand. Third, it helps us predict what happens with interest rates because the Federal Reserve, they’re watching closely bond investors who dictate where mortgage rates go. They watch these things closely. So we need to keep an eye on what’s going on in the labor market. It really does impact the housing market. So let’s talk about what we learned. Overall, it was good news. We saw strong overall job growth with non-farm payrolls, which is basically how the BLS tracks labor data. We saw an addition of 130,000 jobs in January, which is great.That actually beat expectations of just 75,000, so that’s a significant beat. We also saw the unemployment rate, which has its flaws, but is still a good metric to track alongside everything else we’re looking at. Unemployment rate actually ticked down from 4.4% in December to 4.3%. Now, I’ll just spill the beans here. That’s not necessarily from an increase in hiring, although we did see jobs added. The unemployment rate most likely is ticking down because we a smaller labor force due to less immigration. When you dig into the labor data, you see that the economy is kind of splitting. Most of the jobs that were added in January, were highly, highly concentrated in healthcare. That area of our economy is still growing. They are hiring, but if you look at other sectors in the economy, it’s not doing that great. We see that manufacturing is down a hundred thousand jobs in the last year.Same with it. Basically tech. We also see professional and business services down big. These are white collar jobs down 200,000 over the last year. So the big headline is good. It is good that unemployment is shrinking. It is good that we added over a hundred thousand jobs in January, but it really depends on the market. If you work in tech or or manufacturing, you’re probably not feeling great about the labor market because those sectors are actually losing. Whereas if you work in healthcare, you probably feel great about your job prospects. So that was the big headline news, but there was actually some other news that came out with this BLS report that I think maybe is even bigger news in January. The BLS always releases their annual revisions. Basically the way that the BLS tracks employment data is not very good. I don’t know how else to say it.People have been critical of it for a long time. What I always say on the show when we talk about labor data is that there is no one perfect labor metric. You kind of have to look at the big picture. There’s 5, 6, 8 different things that you should be looking at and you can, if you look at them, all get a holistic sense of where things are going. That said, the BLS, this is the big thing that investors look at. It’s on the front page of the Wall Street Journal. This is the big number, but it’s also not very good, and you see massive revisions from time to time where the BLS actually says what we released. That preliminary estimate wasn’t very good and actually the data is changing and they released their big annual revision for the year in January. So what it actually shows that between 2024 and 2025, the total number of jobs that they had previously announced was revised down by nearly 1 million jobs.That is crazy. So basically they were releasing data, thought that we had these million jobs added. They said more than that, but they’ve come out and said, actually, we overstated how many jobs were added by a million jobs. And I know that’s a lot. It’s crazy. It’s actually the second largest negative revision on record. So yeah, that’s a really big revision, but if you pay attention to this stuff, you probably already know that the BLS, the Bureau of Labor Statistics, their data isn’t perfect. And I’ll just say I don’t think that these revisions are a scam. I don’t think they’re necessarily playing games. I just think they have a very bad imperfect way of collecting data. They extrapolate a lot and this has been going on for a long time. This has been going on for 20 years. So it’s not like something has really changed.And I think it’s natural that during times where the economy is shifting a lot like right now or like 2009 when they released the other biggest revision ever, that it’s not as accurate because they’re extrapolating a lot and when patterns shift, it is harder to extrapolate. But I will also say I think these revisions are needed. I would rather them admit that they were wrong and then to release new numbers even though it’s frustrating and it makes it a lot harder to trust the new numbers because they are probably going to change it. And this is one of the several reasons that we need to look at the big picture. Again, many different data sets, none of them. Perfect. We got to take in the whole thing. So beyond just this BLS data, what else are we seeing? We’re seeing that A DP, which is a private company, they track jobs numbers every single month, but they’re a private company, not the government.They showed only 22,000 jobs added, which is a major divergence. It’s still up, that’s good. Still jobs being added but off by over a hundred thousand. So it kind of is a head scratch or it makes you wonder which one is accurate. To me, I think the most important indicator that I’m looking at right now in February of 2026 is job openings. This is a really important indicator of just how many companies are feeling bullish and want to invest in labor and are out there hiring. It is down to 6.54, which in a historical context, it’s a pretty normal number, but it is falling quickly. It is going down a lot in the last two months down almost a full million in two months. That’s like 15% in two months. That’s a big deal and it’s something that I think indicates that companies are going to pull back more on hiring and hiring.So that’s concerning. And something I personally think is going to continue. If you just look at trends in AI and investment cases, people aren’t hiring that much. But on the other side of things, layoffs are really not as bad as the media makes it out to be. If you look at initial unemployment claims, this is a weekly set of data that comes out that just looks at how many people are filing for unemployment insurance for the first time. So that’s a good indicator of who got laid off. People who get laid off, they file for unemployment insurance. And so you look at those claims and they’re actually been really flat. They fluctuate week to week, but if you just look back over 2025 and into early 2026, it really hasn’t changed that much. Jerome Powell, the chairman of the Fed actually said, we’re in the no fire, no hire economy.I think that was like two press conferences ago. If you care about these things, and I think that’s a pretty accurate assessment of what we’re seeing. We’re not seeing massive layoffs, but we are not seeing people hiring either the direction of the labor market, not super strong, but definitely not that weak either. I think we’re still sort of in limbo trying to understand what direction this is going ahead. Alright, so that’s what we’ve learned about the labor market so far. More conflicting signals. Personally, I am not feeling like we’re in a very strong labor market, but I am encouraged to see that we’re not in an emergency status either. An unemployment rate of 4.3 is really low, but there are signs that things are starting to weaken and so we need to keep an eye on that. The other major economic indicator we as real estate investors should be paying attention to is inflation. And we got a brand new report on inflation last Friday and we’re going to get into that right after this quick break.Welcome back to On the Market, I’m Dave Meyer giving you an economic update on all the key indicators we as real estate investors should be watching. First we talk about the conflicting labor data that we have received over the last week or so, but we also got an inflation report, which is going to be really important for the future of mortgage rates. So let’s talk about what was in that. Mostly it was good news. We got a good inflation print last week, which personally I find encouraging the CBI rose 2.4% in January year over year, which is not bad. In December it was up 2.7%, so it actually came down a bit and it was below the 2.5% that economists were expecting. Yes, it is still above the 2% fed target, but it is also way down from where it was a few years ago when it briefly topped 9%.So it’s not where it needs to be, but for me, if we have a 2% fed target, we’re at 2.4%. We’re getting pretty darn close to where we want to be for inflation. I also want to call out that it has been almost a full year now since the quote liberation day tariffs were announced and although data shows that US consumers are footing roughly 90% of the bill for those tariffs, it is not businesses or other countries paying it, 90% of those costs are going to US consumers. Overall. Inflation has not gone up significantly. The products that are subject to tariffs have certainly gone up, but that has been offset by falling prices elsewhere. We see increases in things like ground beef. That’s the highest one is up 17% year over year. Home healthcare hospital care watches, those are all up well above the target, but we’re also seeing declines in gas prices.That’s probably the major thing that’s driving down the overall CPI is that gas prices are going down. We’ve also seen declines in used car prices, which everyone knows have been crazy over the last couple of years and we saw a big drop in eggs. The egg drama continues, it’s down 7% in just one month. Truly, who would’ve thought three years ago that egg prices would be such a subject of interest on an economic show? But here we are, my friends talking about eggs and they’re down 7%, which is good news. Now when we combine these things together, when we look at the labor data and the inflation data that we just got last Friday, it starts to inform what we should be expecting for mortgage rates because as we know, the Federal Reserve, their job is to sort of walk this type rope, keep the seesaw in balance between the labor market and inflation.They don’t want to cut rates too much because they fear that can cause inflation, but if you keep rates too high to control inflation, that can hurt the labor market. So they’re always trying to find this neutral rate is this magical number that they’re trying to achieve that gets us the optimal labor market and the optimal inflation rate and the economic reports, the two that I just shared with you should show you why they have a difficult job right now and why I don’t think rates are going to come down that soon. Look at these reports, hiring was solid, unemployment rate is low. That would suggest holding rates higher, not doing more cuts because the economy, it doesn’t need stimulus right now. However, with lower inflation, many would argue that we now have wiggle room to lower the federal funds rate, lower short-term borrowing costs and provide some juice for the economy.The fact is we just can’t get a clear signal. Everything is too uncertain and often it’s contradictory. Mortgage rates did happen to fall this week. I’m recording this a few days before the release, but we may even see rates in the high fives this week, which would be exciting. I think mentally, psychologically that is helpful. But we’ve seen it before. We know that this could go right back up and I just don’t think we are going to see big moves in the mortgage market because we have constantly contradictory data and there is no clear signal on which way things are heading. Are we going to see inflation spike? Is it going to continue going down? Is the labor market going to be decimated by AI or is that all overblown hype? So that being said, I’m sticking with my forecast this year as of now for mortgage rates to remain in the five point a half to six point a half percent range because nothing in the data suggests that we’re going to see anything else.And I’ve said it before and I’ll just say it one more time that I think this is a relatively good thing. Mortgage rates being stable is what we want as investors, whether you’re, even if you’re an agent or a loan officer out there, more stable conditions create predictable underwriting, it creates home buying conditions that people can wrap their head around. They’re not sitting around waiting, wondering if they wait a month, is there going to be a quarter point better rates or a half point better rates? People will get used to it if we have these stable rates. And so when we look at the labor market and inflation data together, I think stability, it’s still going to fluctuate a quarter a point here and there, but I think it’s going to stay in this five and a half to six point a half percent range and personally that is something I can deal with. Now of course, I would love to get to a place where we don’t have to talk about mortgage rates all the time, but the fact is it is going to impact the direction of the housing market and there is one other dataset I want to go over that is also going to impact the direction of the housing market, which is consumer sentiment. How people are feeling about the economy is going to impact demand for rentals, it’s going to impact demand for homes and we’re going to dive into that data right after this break.Welcome back to On the Market, I’m Dave Meyer going over the latest economic data. Before the break we talked about the confusing signals from the labor market, the good inflation print that we got, but how those two sort of conflicting pieces of information are probably going to keep mortgage rates relatively stable and that should help the housing market gain a little bit of traction. Stability is good. Mortgage rates, yeah, they’re not going to move that much, but they’re down a hundred basis points from where they were last year. But there is one other less talked about variable in the housing market that we should talk about, which is consumer sentiment. It as of three months ago was just dropping, dropping, dropping was really at one of the lowest points we’ve seen in a long time and the good news is that over the last three months it has gone up.We’ve seen it start to inch back up, but I want to be honest that it’s still not very good. It’s still 40% roughly below where it was a year ago. So people are not feeling great about the economy. Now when you dig into the data, and this is going to really inform sort of what we should be thinking about as investors. When you dig into the data, there is a big gap in consumer sentiments. It reflects a lot of the K shaped economy that we have in the United States right now. If you look at sentiment for consumers who have large stock portfolios, they’re actually feeling really good about the housing market. We’ve seen sure stock market fluctuate over the last couple of months. It’s not just going up and up and up, which is normal I should mention. But those people who own assets are feeling pretty good about the economy.They’re out there buying, they’re making up a huge percentage of consumer spending right now, but for consumers without stockholding, so folks typically on the lower end of the income spectrum sentiment, those for those consumers has not gotten better. It’s actually stagnated at really, really low levels and this K shaped divide matters for the housing market. It matters for housing demand because wealthier buyers are probably more confident. Meanwhile, first time entry level buyers or renters are feeling far less confident. It is one of the reasons you’ve probably seen in recent months these headlines that show that the luxury housing market is on fire. And that is true if you look at listings for crazy listings like over a million dollars, but also listings over $5 million, listing over $10 million. That is one of the strongest areas of the housing market right now while other areas are starting to stagnate.So this is something I want everyone listening to this to take note of because it really matters whether you’re buying an A class, B class, C class, D class neighborhoods, if you’re buying workforce housing, if you’re buying for people for renters in the middle or lower end of the income spectrum, demand is probably going to be softer. Just you have to expect this, right? Sure, affordability has gotten better, but when people are not feeling very good about the economy, they don’t buy a lot. Economics sometimes is called the dismal science because honestly some of it is science, yes, but a lot of it is just some psychology. A lot of what happens in the economy and therefore in the housing market depends on how people feel and in a relative sense, people do not feel good. Yes, people at the high end of the spectrum feel okay, but the majority of people are not feeling very good.We see that reflected in the consumer sentiment survey that comes out every month. We also see that in other surveys in 2025, Gallup actually released some data recently that showed that in 2025, only about 59% of Americans gave high ratings when asked to evaluate how good their life will be in about five years. That’s a pretty important question. It sort of tells you a lot about how people are feeling and 59% might sound high, but it is actually the lowest rating ever. They’ve only been asking this question for 20 years, but in 20 years of data, so that includes the financial crisis, more people are feeling bad about their life prospects in five years than at any other time this data was collected. Now, is this the worst economy it’s been in 20 years? Personally, I do not think so. I think that prestigious award should probably go to 2008 or 2009, but my sense is that there is this cumulative effect going on here.The economy, at least in my opinion, it’s not great. I also don’t think it’s terrible. There are some bright spots, there are some weak spots. What worries me personally is that the bright spots are really concentrated in certain sectors. We’re seeing labor growth in healthcare. We are seeing infrastructure spending in ai. Sure, those are carrying a lot of the economy, but whenever a lot of growth or a lot of strength is concentrated in one area, it feels a little more volatile. It feels more likely to decline in the future than if you had every industry growing, right? That never really happens. But if you had lots of industries that were growing, to me, that would feel better. But the reality is there are bright spots, there are weak spots. It is neither great nor terrible, but I don’t think the average person who’s responding to these consumer sentiment surveys is really looking at geopolitical unrest and monetary policy and fiscal policy.I think the reality is that we have had stagnant wages in the United States for like 40 years, right? They’ve gone up about 12% in real terms in the last 40 years. That is really pronounced in certain industries like manufacturing. And then on top of that, we’ve had just five-ish years of higher than expected inflation, which also followed a period of unnaturally low inflation, right? In the 2010s. We had really, really low inflation by historical standards and people got used to that. We are not as a society used to high inflation. The last time we’ve seen this was in the seventies and eighties, and so most people alive today, myself included, were not prepared. We’re not used to or have no frame of reference for this kind of inflation, and we’ve now had it for five-ish years. The fact that we have 2.4% inflation right now is relatively good news.That’s not a crazy high inflation number. But what people want, whether it’s realistic or not, whether it is good or not, is they want deflation. They want prices to go down. Now, most economists would tell you that’s probably not a good thing. What you want is disinflation and you want the pace of prices going up to slow down, but you don’t actually want prices to go down because that actually creates all these other economic problems. It removes the incentive to spend and continue into this tailwind, or at least that’s the theory. But theories aside, that’s what people want. People want their grocery bill to go down. And so consumer sentiment I think is just reflecting five years of frustration. Now, just think about this. If inflation were at 2.4% in 2017 after years of low inflation, would anyone have even noticed? I don’t even know if it would have made the news.I’m saying this because I just think that the sentiment that is out there is a reflection of people’s fear about their jobs and fear about layoffs. That is true, but I don’t really think it’s an accurate assessment of what’s going on in inflation. I think it is a combination about fear of the labor market and this cumulative effect of being above the Fed target for five years. Look at the cost of housing. Look at the cost of groceries. There is a reason people are feeling GLO about the economy because their pocketbooks are hurting and they’ve been hurting for four or five years now, and I talked about this a lot in an episode back in November when I came up with my concept of the normal person recession. This is basically my concept that yeah, GDP is growing. It’s been growing for years, but people feel further and further behind.And that’s because GDP doesn’t really measure the personal finances of the average American. And as we can see, the average American is not feeling very good about the economy, and I think we are awfully close to what I would call the normal person recession. And although a lot of this is kind of semantics, what’s a recession or not, the fact that people are feeling less confident about their economic prospects will weigh on housing, it will weigh on the economy. It just does, and this is going to matter for real estate investors. It’s going to matter for both housing demand if you’re trying to sell a home. It’s also going to matter for rental demand. I don’t expect a lot of rent growth in the lower ends of the market. I know a lot of people have said that we are working our way through the supply GLO and rent growth is going to be strong.I’ve debated my friend Scott Trench about this. He thinks it’s going to be super strong. I’ve said I think it’s going to be pretty stagnant this year, and I’m sticking with that. When you have low consumer sentiment, people are not as willing to go move into that new apartment or to stop living with roommates or to move out of a family home because they’re worried either about inflation or about the labor market. So I’m just telling you all this because I think it’s wise to underwrite conservative right now for both appreciation and rental growth. I’ve said that before. I know people are getting excited that we have a new fed chair and that things are going to go up and home prices are going to go up. Maybe that’s true, but I still think given what we’re seeing in the economy right now, the smart bet is to be conservative right now to not stretch too far on any deal, on any estimations of red growth because consumer sentiment is indicating people don’t want to spend that much right now.Now, there is a positive flip side to this for real estate investors. If rental demand is a little bit slow, if people are still going to be listing their homes, that means that better deals are going to be coming on the market. We have seen indications of this all across the housing market. We’re talking mostly about macro today and not about the housing market, but just as a reminder, inventory is up about 10%. There was a recent Redfin report that showed that buyers are getting the biggest discounts they’ve gotten in more than 13 years. So there are still good things going on here for real estate investors, but you need to adjust your tactics. This is exactly why we look at this economic news every single month because it helps us understand what segments of the market are going to be strong luxury. We’re seeing that high end stuff is still doing well, and which ends of the market have the highest risk.Now, I’m not saying things are going to crash or that things are falling apart, but the data that we have shows us that there’s probably not going to be strong rent growth and that at the lower ends of the market, we’re probably not going to see enormous housing demand. And so that’s just something you need to take into account as you formulate your strategy going into the spring buying season and as you make decisions about your portfolio in 2026. For me personally, I’m still interested. I’m still looking at deals. I haven’t pulled the trigger on anything in 2026 yet, but I’m seeing better and better deals. I actually was talking to James and Henry the other day. They said they were both loading up, was the exact words both of them used in different conversations. They both said they were unquote loading up on projects Right now. They seem optimistic about buying better and better deals, so there’s still good things to be looking at. I just want to point out where opportunity and risk is. That’s the whole point of the show. That’s the whole thing that we’re doing here on the market community. So that’s it. That’s what we got for you guys today. Thank you all so much for listening to this episode of On The Market. I’m Dave Meyer and I’ll see you next time.
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