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Real Estate Trends Newsletter -- A weekly news update for mortgage professionals
 

Dave Hershman
The Hershman Group
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Centreville, Va 20122
dave1@hershmangroup.com
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February 6, 2018
ECONOMIC COMMENTARY
Jobs Numbers Released Post Fed

And so, the Double Feature played out this week. First, we had a decision by the Federal Reserve Board not to raise the benchmark short-term rate at the present time. The markets were expecting this because the Fed had raised rates in December. However, all eyes were on the Fed statement and certainly this statement held out the possibility that they could raise short-term rates at their next meeting in March.

What data will the Fed be looking at in order to make a decision? Actually, the first report was released just two days later. Last week's jobs report indicated that the economy had added 200,000 jobs in January. The number of jobs added for the previous month was revised upward as well. The unemployment rate came in at 4.1%, which was unchanged. Finally, the focus was upon the wage data, which showed that wages were up 0.3% month-to-month and 2.9% year-to year. The yearly wage increase was higher than expectations. 

Why is the wage data important? With the economy humming and the stock market soaring, the Fed is now most concerned with the threat of inflation. And certainly, any increase in the growth of wages is a big component of inflation. The Fed will get to see another jobs report, as well as a revision of the first estimate of growth for the fourth quarter, before they meet again in March. If the numbers are strong, we could see another hike in short-term rates.
 

REAL ESTATE NEWS
 When touring open houses, watch for signs of larger issues with the property. Jenna Dougherty and Greta Eoff of the DeMasi Group at Keller Williams Realty in Davis, Calif., shared items that should raise alarms for potential buyers.
  • Overpowering scent. Don't be too heavy-handed with scented candles or other fragrances, it could be a signal to buyers that you are trying to cover up the source of more serious odors, such as a musty smell from mold, pets, or something else.
  • Poor tiling. If there are gaps in the tiles or if the tiles are slightly uneven, it may indicate a poor DIY remodeling project that doesn’t meet professional standards.
  • Major cracks. Most homes have a few hairline cracks, but watch out for large cracks. Check for doors and windows that stick or cracks above window frames, which may indicate a larger foundation issue.
  • Mold. Open the cabinets around bathroom and kitchen sinks and look around the drains for any mold. Even small black or gray spots may indicate a more serious issue. Mold can signal water damage or improper ventilation in the home. Source: realtor.com®

 Despite the impact on homebuyers of the tax reforms, economists are confident it will benefit the housing market. That’s because they predict that the positive impact for businesses will mean a boost for the economy and for jobs, handing the housing market new entrants and confident consumers. “We expect that tax reform will boost GDP growth to 2.6% in 2018, and this added economic activity will also bode well for housing, although there will be some transition effects in high-tax jurisdictions,” said NAHB Chief Economist Robert Dietz. “Ongoing job creation, expected wage increases and tight existing home inventory will also boost the housing market in the year ahead.” Not that it will be an easy time ahead for builders with shortages of labor and lots still challenging their ability to meet demand. The panel at a NAMB conference forecast that there will be 1.21 million housing starts with production up 2.7% year-over-year to 1.25 million units. Single-family starts will gain 5% this year and in 2019 to 893,000 and 940,000 respectively. Multifamily starts will decline 1.6% to 354,000 this year (from 360,000 projected for 2017). “Rates on home loans are expected to rise from 4 percent to 4.5 percent by the end of year,” said David Berson, senior vice president and chief economist at Nationwide Insurance “However, housing demand remains strong and wages are solid, and this will more than offset the negative effects from rising rates.” Source: The NAMB

 
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