Jobless Claims Fall But Americans Still Can't Afford Homes

The latest jobless claims report was another signal that Americans can find work and that companies are hiring in what continues to be a resilient economy. But despite the spending power, Americans are still struggling to buy homes.

On Thursday, applications for unemployment benefits fell by 9,000 to 218,000 for the week ending February 3, according to the Labor Department. This comes after employers added more than 350,000 jobs in January in what economists said is a signal of a continuing growing economy.

"The tight labor market is keeping unemployment claims low," Jeffrey Roach, chief economist for LPL Financial, said in a note shared with Newsweek. "Workers who experience job loss have plenty of opportunity to find other options, thereby avoiding the necessity of unemployment benefits. As long as the labor market remains stable, the economy will continue to grow."

Economists said that the U.S. economy growing and keeping Americans employed should help people be in a better financial position to purchase homes. But analysts said affordability remains an obstacle for prospective buyers.

Mortgage rates, after soaring to two-decade highs, have stabilized in recent weeks. The 30-year fixed rate mortgage averaged 6.64 percent as of February 8, according to Freddie Mac, more than a percentage point lower than the 8 percent peak it hit in October.

"Mortgage rates remain stagnant, hovering in the mid-six percent range over the past several weeks," Sam Khater, Freddie Mac's chief economist, said in a statement.

But buyers are yet to fully take advantage as prices remain elevated. Prices for an existing home was up 3.5 percent to $391,700, while a typical mortgage payment is up 10 percent to about $2,200 a month, according to the National Association of Realtors (NAR). Part of the reason prices remain elevated is that the supply of homes available for sale is limited, according to NAR.

"Sales were restrained due to limited inventory," Lawrence Yun, NAR's chief economist, said in a statement, referring to data for the fourth quarter of 2023. "But increased homebuilding, along with lower mortgage rates, will not only improve housing affordability but also help bring more homes onto the market in 2024."

So, despite Americans being employed and earning, if prices remain elevated and supply is limited, they will still struggle to buy a home.

"The economy and labor market remain strong with wage growth outpacing inflation, which is keeping consumer spending robust," Khater said. "Meanwhile, affordability in the housing market is an ongoing issue due to continued high home prices, elevated mortgage rates and low supply of homes on the market, particularly for first-time and low-income homebuyers."