April 5, 2022 – The Employment Picture. There is no more important economic data than the monthly employment report.


Economic Commentary

The Employment Picture. Between the Federal Reserve raising interest rates and the war in Ukraine, it becomes harder to focus upon the day-to-day economic news which tell us how the economy is reacting to these stimuli. There is no more important economic data than the monthly employment report, as the economy’s ability to produce jobs is a key to our recovery.

This report not only gives us the number of jobs added to the economy on a given month, along with the unemployment rate – it also gives us data regarding a key component of inflation. The measure of wage growth is not only a useful measure of inflationary pressures, but it also provides an idea of what type of jobs are being created. The pandemic hit hardest on lower paying jobs in the restaurant and entertainment sectors of the economy and much of the recovery has been focused within these areas.

So how did we do in March?  The addition of 431,000 jobs was seen as evidence that the strong recovery is continuing. In addition, the unemployment rate fell to 3.6% while the labor force participation rate rose, an indication that more are returning to the workforce. Wage growth came in at 5.6% year-to-year, indicating that the tight job market continues to contribute to inflationary concerns. Taken as a whole, the jobs picture remains a strong component of our economic picture, as 93% of jobs lost during the pandemic have been recovered.

Weekly Interest Rate Overview

The Markets. Mortgage rates continued to rise heading into the Spring selling season.  For the week ending March 31, 30-year rates rose sharply to 4.67% from 4.42% the week before. In addition, 15-year loans increased to 3.83% and the average for five-year ARMs also climbed to 3.50%. A year ago, 30-year fixed rates averaged 3.19%, approximately 1.50% lower than today. Attributed to Sam Khater, Chief Economist, Freddie Mac, “Mortgage rates continued moving upward in the face of rapidly rising inflation as well as the prospect of strong demand for goods and ongoing supply disruptions. Purchase demand has weakened modestly but has continued to outpace expectations. This is largely due to unmet demand from first-time homebuyers as well as a select few who had been waiting for rates to hit a cyclical low.”   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.

Real Estate News

Home prices have accelerated at a record pace over the last decade, bringing growing wealth to households from long-term homeownership, according to a new report released by the National Association of REALTORS®. From 2010 to 2020—across income groups and metro areas—the total housing wealth for middle-income households grew by $2.1 trillion, according to NAR’s report, Housing Wealth Gains for the Rising Middle-Class Markets. A homeowner who purchased a typical single-family existing home 10 years ago at a median sales price of $162,600 is likely to have seen an increase in housing wealth of $229,400, according to NAR’s report. Of that wealth gain, 86% can be attributed to price appreciation. Home prices have continued to grow over the last decade. The price for the median single-family existing home has risen at an annual pace of 8.3% from the fourth quarter of 2011 through the fourth quarter of 2021, NAR reports. “Owning a home continues to be a proven method for building long-term wealth,” says Lawrence Yun, NAR’s chief economist. “Home values generally grow over time, so homeowners begin the wealth-building process as soon as they make a down payment and move to pay down their mortgage.” More Americans are experiencing this wealth benefit, too. The number of homeowners is growing. Over the past decade, 58% of 917 metro areas tracked by NAR gained middle-income homeowners. About 6.3 million more new homeowner households sprouted up between 2010 through 2020. Source: National Association of REALTORS®

When it comes to rent growth in 2022, throw traditional seasonal patterns out the window. Average asking rents in the United States increased $10 in February, reaching a record high of $1,628, according to Yardi Matrix. The month’s year-over-year jump of 15.4% is also a new high, up a full percentage point from the annual gain in January. Of the top 30 metros tracked by Yardi, 90% saw double-digit year-over-year rent growth. The sustained increase in rents is indicative of the enduring shortage in the nation’s housing supply, both for renters and buyers. The scarcity has intersected with the ongoing surge in demand, pricing potential homebuyers out of the market and consequently driving up absorption in multifamily rentals. Consider that, in January 2021, occupancy rates were at 95% or higher in 13 of Yardi’s top 30 markets. This year, 28 of the top 30 are at or above that same level. Source: Scotsman Guide

Rising costs are making townhomes more attractive—not just for builders, but for buyers as well. Townhome construction has grown over the last year, making up nearly 13% of all single-family starts, an increase of 38% in one year, BUILDER reports. Robert Dietz, chief economist of the National Association of Home Builders, is bullish on townhome growth, believing they could comprise more than 15% of all single-family home starts over the coming years. That would put townhome construction at a record high. “Many builders are turning to this product, as the price point for sale is lower, and it allows them to build more units,” Brian Lawrence, vice president and relationship manager at Univest Bank and Trust Co., told BUILDER. “Profit on the project increases with increased density.” Another building perk of townhomes is they can be constructed and made operational faster than rental housing options. Townhomes also tend to offer buyers a lower-cost alternative for housing in the current environment of ever-rising prices. They also may prove an important alternative for baby boomers, who may be looking to downsize into a smaller home that is easier to manage, housing experts say. “Prices of homes have increased across the board,” Lawrence told BUILDER. “Townhomes are becoming the starter home in most markets. With inflation and the rising costs of homes, all existing supply of single-family homes has been purchased. It’s a seller’s market, and developers are rushing to finish projects to meet the high demand for housing.” Source: MReport

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