Weekly Economic Update - Job Gains, Missing Homes

We’re still waiting for most of the shutdown-delayed housing data to come out of the Census Bureau, but we did get another excellent Employment Situation report. There were 304,000 new jobs created in January, almost twice what analysts were expecting.

Tempering the news a bit was a 90,000 downward revision to the 312,000 jobs announced in December, but an upward change to the November report resulted in a net of 70,000 fewer jobs over the previous two months.

Fifty-two thousand of the January jobs were in the construction industry, great news at a time when everyone from Freddie Mac to the National Association of Home Builders is declaring the shortfall in residential construction to be an impending crisis.

The unemployment rate ticked up 0.1% to 4.0% but Econoday says the slightly higher rate of labor participation probably accounts for this as job seekers, including discouraged workers, enter the job market.

Despite the many new jobs, hourly earnings rose only 0.1%, half the December increase. The year-over-year gain was unchanged at 3.2%.

The final home price reports for November both point to even slower appreciation. The CoreLogic Home Price Index says the year-over-year gain in November is 4.7% compared to 6.7% as recently as February. Black Knight puts the November 2017-November 2018 increase at 4.9%, but adds that prices have actually been falling over the last few months.

The average home price declined 0.2% or $580 in November and is down $1,361 over the last three months.

CoreLogic’s Chief Economist Frank Nothaft says he expects to see prices fall by 1.0% in the December report and the average annual price growth in 2019 to be 3.4%.

Aging in Whose Place?

Freddie Mac has been especially vocal about the need for more housing stock, estimating a 2.5-million-unit shortfall this year. While they have focused on the lack of new construction, they say there is another reason so few homes are for sale. The nation’s seniors are still living in them. Better health and advances in technology are motivating them to age in place.

Freddie’s economists compared the homeownership rate of today’s seniors (born between 1931 and 1941) and that of the two previous generations at the same age. They found that homeownership among both groups began to tail off at age 67. By age 87 it had fallen 11.6% among the previous generations but by only 3.6% for the current crop of seniors.

If today’s generation had behaved as the earlier ones, an additional 1.1 million homes would have come to market in the last few years. If the Baby Boomers continue the pattern, that number could grow from 1.1 million to 1.6 million available homes.

02.08.2019

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