Despite a rather disappointing jobs report, unemployment remained at a 17-year low. Wages are finally responding to the tight market; growth picked up the pace at year’s end.
While rising home prices are tough for those wishing to own a home, many who already do are counting their equity bucks; now estimated at more than $5 trillion. Cashing it out may be enticing, but the new tax law could put a wrinkle in some plans.
The final 2017 Employment Situation report was just OK, partially because the beleaguered retail sector lost 20,000 jobs, amidst the holiday shopping season no less, as consumers increasingly bought on-line. Construction jobs however, shone for the third straight month, contributing 30,000 to the 148,000 new jobs created during the month. Hopefully this will ease one of the more persistent constraints on new home building. The unemployment rate stayed at 4.1%, but wages ticked up by 0.3%, for an annual gain of 2.5%.
Analysts had looked for around 191,000 new jobs. Adjustments to the prior two months, down in October, up in November, netted out to a decline of 9,000 jobs.
Black Knight reports that rising prices reduced the number of borrowers with negative equity by 800,000 during the first ten months of 2017. About 1.36 million homeowners remain underwater, 2.7% of all those with a mortgage. This is a far cry from the 25% rate at the height of the housing crisis. US homeowners now have an estimated $5.4 trillion in “tappable” equity, an increase of more than $3 million from the bottom of the market in 2012.
What will homeowners do with their new wealth? Many of those who wish to “liberate” some of it may find refinancing impractical. About half the tappable equity is held by homeowners with first mortgage interest rates under 4.0%. On the surface, that appears to be a market ready made for home equity lines of credit or HELOCs, enabling homeowners to cash out some of their equity and hang on to their existing low rate.
But Black Knight points out the new tax law may shift that equation. While last minute changes in the law kept the mortgage interest deduction for first mortgages, although with a lower cap, it eliminated it for second mortgages, including HELOCS.
Isn’t Technology Wonderful?
Occasionally we find an opportunity to say that without a hint of sarcasm. John McManus, publisher of BuilderOnLine reports from this week’s Consumer Electronics Show in Las Vegas that the same technology that changed the way Americans buy goods and services and meet their mates could be about to further transform buying a home.
Among several technology ideas he proposes is the introduction of ratings or reviews, something available for most products sold in both digital and real worlds, but lacking for homebuyers. The technology now exists to rate all homes based on their energy and water usage, just like the MPH ratings for cars. Further, he expects a star type rating system for homebuilders may be only months away.
We close with a reminder about the new conforming loan limits. For most of the country the cap is now $453,100. Loans in “high cost” counties will have varying limits up to $679,650.
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