The First Jobs Report of the Decade

The January 2020 jobs report released on Friday actually represented the first major data of the new year and new decade. It also came just about one week after our first look at economic growth for the fourth quarter. The preliminary 2.1% growth rate was seen as right on target. Adding 225,000 jobs in January was consistent with this moderate picture of economic growth.

As we look deeper into these numbers, we can see that the previous two months were reported to be revised upward; however, an annual revision brought the total jobs added for 2019 down slightly. Plus, the headline unemployment rate came in at 3.6%, still near historic lows and actually good news because more Americans entered the labor force. Wage growth was reported 3.1% on an annual basis, which means that inflation should remain tame. All in all, the report was seen as good news as moderate growth continues without inflation.

Even though the picture has been pretty steady, we can see that the numbers can change quite rapidly. Already in the past several weeks, we have had escalated tensions in the Middle East and the growing virus scare. The markets have been very volatile as a result, which is not unusual. This has caused interest rates to fall at the beginning of the year. While the travel industry will certainly take a hit with the coronavirus, lower rates will continue to support the real estate markets.

  

The Markets. Rates continued to fall last week, but did start to rise a bit late in the week in the face of positive economic news. For the week ending February 6, Freddie Mac announced that 30-year fixed rates moved down to 3.45% from 3.51% the week before. The average for 15-year loans decreased to 2.97% and the average for five-year ARMs moved up to 3.32%. A year ago, 30-year fixed rates averaged 4.41%, almost 1.00% higher than today. Attributed to Sam Khater, Chief Economist, Freddie Mac - "As rates fell for the third consecutive week, markets staged a rebound with increases in manufacturing and service sector activity. The combination of very low interest rates, a strong economy and more positive financial market sentiment all point to home purchase demand continuing to rise over the next few months." 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
	Feb 6	January
6-month Treasury Security	1.58%	1.56%
1-year Treasury Security	1.51%	1.53%
3-year Treasury Security	1.43%	1.52%
5-year Treasury Security	1.45%	1.56%
10-year Treasury Security	1.65%	1.76%
12-month LIBOR		1.807% (Jan)
12-month MTA		1.966% (Jan)
11th District Cost of Funds		1.036% (Dec)
Prime Rate		4.75% (Oct)

 Americans are feeling upbeat about the housing market. More than half of Americans—or 63%—say now is a good time to buy a home, and 74% of sellers say now is a good time to sell, according to the fourth-quarter findings from the Homeownership Opportunities and Market Experience survey, conducted by the National Association of REALTORS®. Low rates on home loans and a belief that the economy is improving may be helping to ignite some momentum in the housing market and motivate consumers to make a move. “The mobility rate has been very low as many have opted to stay put for longer,” says Lawrence Yun, NAR’s chief economist. “However, this latest boost—Americans saying now is a good time to move—is good news. With rates low, the timing is indeed ideal for those who want to enter into homeownership and for those looking to move on to their next home.” Older adults—those born between 1925 and 1945—appear to be the most eager generation in the buying mood. Respondents from the silent generation were the most likely to say now is a good time to buy, at 73%, followed by younger baby boomers (those born between 1955 and 1964) who also are viewing homebuying favorably at 70%. Among home sellers, 82% of respondents who earn $100,000 or more say now is a good time to sell. Forty-eight percent of respondents said they believe prices will rise over the next six months, with the millennial generation most likely to believe home prices will increase in their communities. Source: NAR

The value of all U.S. owner-occupied homes increased to a record $29.2 trillion in the third quarter, according to a Federal Reserve report known as the Flow of Funds. That was a gain of 4.2% from a year earlier, the slowest annualized increase since 2012. The collective value of U.S. homes is now 21% higher than the bubble peak reached in 2006. Once that bubble popped, it was a decade before values recovered to the same level. Interest rates tumbled through most of 2019 as the American economy showed signs of softening and investors worried about the fallout from trade wars. Lower rates support continued gains in home values, which are based on what comparable homes sell for, because cheaper financing means people shopping for homes qualify for higher-balance mortgages and can bid more for properties they want. The Fed’s tally of home values for all U.S. residential real estate, whether occupied by homeowners or not, was $32.9 trillion, the report said. As home values rose in the first quarter, so did homeowner equity, meaning the worth of a home compared to its financing. American’s owned $18.7 trillion of their homes, giving them a 64% equity stake, the Fed report said. In 2017, the equity stake was 62.5%, the Fed data showed. Source: HousingWire

Having a child can create financial stress for homebuyers in pursuit of property, according to a new study from Freddie Mac. The study noted the real price of childcare (when adjusted for inflation) increased by 49 percent from 1993 to 2018, but the cost of housing increased by 14 percent during that period. Freddie Mac determined that the average family spends $715 a month on childcare. The cost is steeper for children under five ($948 percent, or roughly 10.5 percent of the household’s average income). “The list of expenses for a family can be never-ending, and we know from Freddie Mac’s semi-annual survey of homeowners and renters that the cost of everyday life presents challenges for many looking to buy or rent,” said Sam Khater, Freddie Mac’s chief economist. “One of the major challenges, when it comes to affording a home, is the high cost of childcare. Our analysis finds that those families paying for childcare generally are left with less money for housing. Specifically, we find they, on average, pay about half of the median home loan payment and nearly 80 percent of the median rent.” National Mortgage Professional