Rocket Fuel Newsletter – 1/27/2025

Recent data from market and analytics firm YouGov shows that America’s favorite grocery store is... 7-eleven! Check out the full ranked list here.

This week, we'll dive into jobs data, the growing prevalence of higher-rate mortgages, and a potential signal of an upcoming recession.

Fuel up! 🚀  

November job openings and labor turnover

November was a quiet month for job data. Job openings increased in North Carolina, Texas and California and decreased in Colorado and Maine. Nationally, the number of job openings stayed consistent. 

Meanwhile, hires decreased in six states and remained static in the rest of the country. Other jobs data shows a slight decline in total separations – with fewer people quitting, and layoffs and discharges showing little change. Read the full release here.

Share of low-interest mortgages steadily decreasing

During the pandemic, mortgage rates hit historic lows, leading to a surge in the proportion of outstanding mortgages with rates below 3%. Rates have since increased, and we have seen a steady decline in the share of outstanding mortgages with those low rates.

Return-to-office mandates, new employment opportunities, paid-off mortgages and expanding families could all contribute to the growing share of mortgages with rates above 6%. As this cohort grows, so does the share of people who will benefit from refinancing if and when rates come back down.

10-year vs 2-year treasury yield

The 10-2 treasury yield spread recently moved back into positive territory. This is the difference between the 10-year treasury yield and the 2-year treasury yield. Intuitively, a longer-term investment should return a higher yield than a short-term investment. Looking at the 10-2 treasury yield historical graph provided by the St. Louis Fed below, we can see that recessions (grey area) often immediately follow a negative 10-2 yield spread.

While past performance does not guarantee future results, this leading indicator is certainly something top of mind for many economists.

As rates started ticking up quickly in Q4 of 2021, home sales quickly fell off. Potential new homeowners’ ability to finance their homes quickly dwindled as the Federal Reserve looked to cool off the red-hot housing market that had ballooned since the COVID rate cuts.

Plus, existing homeowners had the same issue, as their ability to move to a similar dwelling at a similar price disappeared. The demand for homes had spiked, reducing the supply and increasing home prices at the same time.

In the first year of the COVID pandemic, soaring building supply and labor costs, combined with a surge in demand, left builders struggling to keep up.

As interest rates began to rise, supply issues started to ease. However, supply remained limited enough to sustain higher home prices, despite widespread fears of another collapse in home values.

This perfect storm made affordability one of the biggest challenges in the industry, prompting Fannie Mae and Freddie Mac to focus on products aimed at helping borrowers struggling to afford homes.

We've been eagerly anticipating the Fed to reverse course and introduce federal funds rate cuts to help lower mortgage rates.

However, even with inflation data coming down, uncertainty is back in the picture as a new administration talks a big game on reshaping the geopolitical landscape with tariffs.

The market has consistently overestimated the speed and extent of Federal Reserve rate cuts. Now, some banks, such as Bank of America, are even factoring in the possibility of a rate hike in 2025.

There’s no need to wait for rates to drop – people always need homes to live in.

Start 2025 strong by joining us at these upcoming events.

Secure your spot today and set the tone for a successful year.

Just one solver completed last week’s puzzle in under a minute – congratulations to our winner, whose time of 47 seconds ranked supreme!

This week’s puzzle gets 3 Rockets out of 5.

Click here to solve!

Good luck!