Employment Report Spotlight
Though the Federal Reserve Board’s comments after their most recent Open Market Committee meeting indicated that the economy is getting stronger, the economic reports released since that time have not supported their statement. The preliminary growth estimate for the economy during the second quarter was much lower than forecast. In addition, consumer sentiment came in slightly less than forecast, while construction spending and factory orders were also lower. Meanwhile the auto and real estate industries continue to show strength.
Overall, these reports made it look less likely that the Fed would be raising rates before the election. However, despite the disappointing economic reports, we know that the most important single economic statistic is the jobs report. A strong report can give the Fed the optimism it needs to raise rates. So how did we do in this regard last week?
The jobs report for July came in strong, with over 250,000 jobs added and the unemployment rate steady at 4.9%. In addition, wages increased slightly more than forecast, a number the Fed is watching carefully for any hint of inflation getting stronger. The bottom line is that we are on pace to add well over two million jobs this year, and because the unemployment rate is not moving down, this means that more Americans are either entering or re-entering the workforce. While the jobs numbers raise the possibility of an increase in rates in September, the other data indicate that rates will still remain very low while we create jobs and this could mean continued good times in the real estate and auto sectors.
Almost half of renters surveyed by Bankrate.com say they haven’t purchased a home yet because they believe their credit isn’t good enough to qualify for a home loan or they can’t afford a down payment. “A lot of people make assumptions that they can’t afford to buy based on just some perceptions, and many have not taken the step to figure out how mortgage-ready they are,” says Marietta Rodriguez, vice president of NeighborWorks America, a national home ownership program. Bankrate.com’s survey found that Hispanics are the ethnic group most likely to say that their credit is blocking them from home ownership. On the other hand, blacks and whites cited the main reason for not buying yet as they just weren’t ready to own a home yet. Many non-home owners are under the assumption that they need a higher down payment to purchase a house than is actually needed. About 20 percent of respondents to Bankrate’s survey said they need between 11 percent to 20 percent for a down payment, while 17 percent said they need 6 percent to 10 percent. Nearly a quarter of non-home owners said they “don’t’ know” how much they need for a down payment. Only 9 percent of respondents said they could do a 1 percent to 5 percent down payment. Source: BankRate.comFifty-five percent of Americans say they are willing to pay more in order to get to work and recreational activities without having to use a car, a new study of transit-oriented developments by the HNTB Corp revealed. Millennials, in particular, show much more willingness to pay more each month than older Americans – 70 percent versus 49 percent. Fifty-one percent of Americans agree the availability of good public transportation increases their interest in moving to and living in a particular area (again, with Millennials the most likely to report this), the survey showed. Nearly three in four Americans – or 73 percent – say they would support changes in land use and zoning regulations in their community to encourage more transit development. “The desire to more fully integrate lifestyle with mobility options is causing Americans to rethink their priorities about where they choose to live, and how they travel to work and play,” says Mike Sweeney, HNTB senior vice president. “The willingness of people to pay more to live in a particular area in exchange for enhanced lifestyle and mobility options sends a clear message about the growing interest, value, and importance of transit-oriented development. This fact will directly impact future decisions about the location and modes of transportation options that respond to these emerging trends.” Source: HNTB
The U.S. continues to be an attractive destination for real estate investors, but the level of property purchasing has fallen off somewhat, according to the National Association of Realtors’ (NAR) 2016 Profile of International Activity in U.S. Residential Real Estate. NAR’s measurement of U.S. residential real estate sales to international clients between April 2015 and March 2016 found that foreign buyers acquired $102.6 billion worth of residential properties, a 1.3 percent dip from the $103.9 billion of property purchases one year earlier. Nonetheless, foreign buyers bought a total of 214,885 U.S. residential properties, or 2.8 percent of all residential sales, and these properties carried a higher median price ($277,380) when compared to all U.S. existing home sales ($223,058). For the fourth year in a row, Chinese buyers commanded the highest dollar volume of sales at $27.3 billion, but that level was below last year’s $28.6 billion level. The second highest level of foreign buying came from Canadians, with a dollar volume of sales at $8.9 billion. Source: NAR