Jobs and More--The Look Back

The numbers are in for 2019. We will start with jobs, as the December report was just released last week. The month's numbers generally were slightly disappointing, which is good news for the economy and interest rates, as it is in line with predictions of slower growth but no recession. For the year? Even though the December numbers are subject to revision, for the year, we added 2.1 million jobs, or an average of 176,000 per month. This compares with an average monthly gain of 223,000 jobs in 2018 -- pumped up by the effects of the tax overhaul -- and 217,000 jobs per month in 2017. The recent peak was 227,000 jobs added monthly in 2015.

All in all, job gains have been pretty consistent for the past several years, but this was the slowest year for job growth since 2011. The final numbers for the economy are not out yet but, based upon the numbers for the first three quarters of the year, the economy slowed as well. For the year, economic growth (GDP) is projected to come in around 2.25%. This compares to close to 3.0% last year, a year pumped up by the effects of the tax plan. The Federal Deficit continued to increase, coming in at $984 billion, soaring from $585 billion just four years ago, also affected by the tax plan.

On the market level, stocks had a great year in 2019, with the major indices gaining over 20%, despite slower growth. This could be attributed to lower interest rates which prevailed in 2019. Freddie Mac pegged the average 30-year fixed rate home loan at 3.9% for 2019, the fourth lowest average in the past 50 years. These lower interest rates also pumped up the real estate markets, as many took advantage of lower rates to purchase new homes or refinance their existing homes. In November, new home sales were 17% higher than one year ago. Of course, as we have seen, markets can turn on a dime and certainly the threat of the escalation of tensions in the Middle East provides an example of that possibility.

  

The Markets. Rates fell due to Mid-East tensions in the past week, but started to rise late in the survey week as tensions eased. For the week ending January 9, Freddie Mac announced that 30-year fixed rates moved down to 3.64% from 3.72% the week before. The average for 15-year loans decreased to 3.07% and the average for five-year ARMs moved down to 3.30%. A year ago, 30-year fixed rates averaged 4.45%, more than .75% higher than today. Attributed to Sam Khater, Chief Economist, Freddie Mac - "Rates fell to the lowest level in thirteen weeks, as investors sought the quality and safety of the U.S. Treasury fixed income markets. The drop in interest rates, combined with the strong labor market, should propel a continued rise in homebuyer demand." Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes. 

	Daily Value	Monthly Value
	Jan 9	December
6-month Treasury Security	1.56%	1.58%
1-year Treasury Security	1.54%	1.55%
3-year Treasury Security	1.59%	1.63%
5-year Treasury Security	1.65%	1.68%
10-year Treasury Security	1.85%	1.86%
12-month LIBOR		1.996% (Dec)
12-month MTA		2.053% (Dec)
11th District Cost of Funds		1.035% (Nov)
Prime Rate		4.75% (Oct)

 The U.S. housing market will be an “engine of growth” for the economy in 2020, dispelling the risk of recession, according to Fannie Mae Chief Economist Doug Duncan. “Housing appears poised to take a leading role in real GDP growth over the forecast horizon for the first time in years,” Duncan said. “We now expect single-family housing starts and sales of new homes to increase substantially.” The homebuilding industry, decimated during the housing crash, still hasn’t returned to a level of production that would meet the demand of a growing population. In a normal economy, home construction adds as much as half a percentage point to GDP growth. In 2018, it was a drag on GDP, according to data from the Bureau of Economic Analysis. That’s going to change next year, according to Duncan. Sales of new houses probably will jump 12% in 2020, reaching the highest level since 2007, Duncan said in a Wednesday forecast. Single-family housing starts probably will increase to 888,000, also a 13-year high, he said. “We now expect single-family housing starts and sales of new homes to increase substantially, aided by a large uptick in new construction as builders work to replenish inventories,” Duncan said. “Despite the expected increase in the pace of construction, the supply of homes for sale remains tight and strong demand for housing is continuing to drive home prices higher.” Source: HousingWire

The traditional spring season for housing market activity may be brought forward somewhat in 2020 according to a new report. January is set to be a busy month for the real estate and residential finance industries as buyers adjust their strategies amid tighter inventories and rising prices. That’s the finding of an analysis by realtor.com which shows that, while April was the peak month for viewings of listings on its site in 2015, in 2019 February was the most active month with January just 1% behind. However, in 20 of the 100 largest metro areas January was the top month for listing viewings. Source: realtor.com

Allowing for even modest amounts of new density in the nation's overwhelmingly single-family neighborhoods could lead to millions of new homes nationwide, according to a Zillow® analysis, helping alleviate a housing affordability crisis that has been decades in the making. Building at the status quo over the next two decades is expected to produce about 10 million new homes across the 17 large metros analyzed nationwide, a more than 20% boost over the almost 50 million homes these markets currently have. Allowing for two units on just 10% of single-family lots would add an additional 3.3 million homes on top of that 10 million, a boost of almost 27% over current levels. Single-family neighborhoods account for the lion's share of land in metropolitan America, and over the years have generally become insulated from denser redevelopment by a thickening tangle of regulations, reflecting entrenched local interests that benefit from keeping a neighborhood as it is. In America's expensive coastal cities especially, natural barriers and environmental concerns have exacerbated that trend, limiting most new housing to islands of density – often near transit or in formerly non-residential areas – in an otherwise stagnant sea of no-growth. Source: Zillow