The job numbers for March give us another indication of where our economy is headed in the short-term. The headline numbers showed 103,000 jobs added and an unemployment rate of 4.1%. While the number of jobs added was disappointing, the report followed a very high number of jobs added for the previous month which was not revised downward. In addition, each month we look at wage growth to see whether inflation is starting to rear its ugly head. March saw wage inflation in line with expectations — a good sign.
The markets are also watching for movements in the labor participation rate, as this measure tells us where there is potential for growth in employment. Even though the headline numbers say that we are at full employment, there are millions who are available to come back into the workforce. When there is more demand for workers, those who are not participating are more likely to become employed, thus raising the labor participation rate. In March, the labor participation rate fell slightly from a five month high and thus there continues to be room for improvement within this indication.
Considering that the markets have turned much more volatile since the first of the year, what do these numbers tell us? To answer that question, we must understand why the markets seem to be uneasy. It is very easy to blame rising interest rates and certainly the movement of rates is a factor. But we must also remember that the markets have had quite a run and there is always a concern as to when the markets might lose some energy. In reality, there are several factors at work and the jobs numbers only serve to put one other factor into the pot which is being stirred enthusiastically this year.
All good things come to an end—even low interest rates on home loans. They’ve been steadily rising and are poised to climb even higher this year. When they do, the cost of buying a home will rise as well. This could make the challenges of today’s buyer’s market even worse for some prospective purchasers—particularly first-time buyers, having to settle for smaller abodes, fixer-uppers (in the real sense, not the TV sense), and homes farther out where real estate is cheaper. Rates on home loans are expected to go up even more as the Federal Reserve raises short-term interest rates. The new Fed chairman, Jerome H. Powell, says the Fed is likely to gradually increase them this year. It is expected to bump up rates at least three times this year, in 0.25% increments. “For the bulk of buyers, it’s not going to kill their decision to purchase a home. If anything, it will get them off the fence by creating a sense of urgency,” says Rick Palacios Jr., director of research at John Burns Real Estate Consulting. Higher rates are “a kick in the pants for you to start thinking seriously about buying.” “Buyers thought they could wait forever because rates were going to stay low forever,” says Palacios. “They’re starting to realize if they’re going to buy they should probably buy now.” Source: Realtor.com®There was a lot of flipping in 2017 with 207,088 single-family homes and condos flipped nationwide, 5.9% of all homes sold. It was a 1% rise in flipping year-over-year and meant an 11-year high in volume terms, and 4-year high in share of sales, according to a report from ATTOM Data Solutions. There was also a 10-year high in the number of entities doing the flipping; a total of 138,410 individuals or institutions, up 4% from 2016. Despite the rise, ATTOM’s senior economist Daren Blomquist says that, rather than mirroring the frenzy of just over a decade ago, this was more considered. “Flippers are behaving more rationally, as evidenced by average gross flipping returns of 50% over the last three years compared to average gross flipping returns of just 31% between 2004 and 2006 — the last time we saw more than 200,000 home flips in consecutive years,” he said. Source: ATTOM Data Solutions
Residents from other countries are increasingly eyeing U.S. real estate as a good investment, and they’re making up a significant portion of buyers in some markets. But who is coming is changing. Chinese buyers have been the biggest portion, spending the most of any foreign group on U.S. real estate. They spent $31.7 billion on residential real estate in the U.S. between April 2016 and March 2017, according to the National Association of REALTORS®. But mainland China has since tightened restrictions on how much capital residents can spend outside the country. That has caused some markets to see a drastic decrease of Chinese buyers. “You turn off one faucet, and another one opens,” says Jonathan Genton, the founding partner and CEO of the Genton Property Group. Buyers from other countries have been coming in to fill the gap. For example, Genton is seeing more buyers coming in from Taiwan, Vietnam, and Thailand and more investors from Dubai, Kuwait, Georgia, and Turkey. “Everyone recognizes the stability and security of the U.S. market more than ever before,” Genton says. “Foreign buyers make up a significant presence in the U.S. luxury market that will only increase as generations come here to study and geopolitical and safety factors continue to play a role,” Shahab Karmely, the CEO of KAR Properties, a New York-based development firm, told Mansion Global. Source: Mansion Global