August 30, 2022 – Speaking of Jobs. This week we get an early look at the August jobs picture because the release comes before Labor Day.

Economic Commentary

Speaking of Jobs. Last week we pondered the employment situation. This week we get an early look at the August jobs picture because the release comes before Labor Day. Thus, this weekend coming up will be referred to as Labor Day weekend for more than one reason. While we are very curious as to whether the strong job growth of this year will continue, we are also wondering where our summer has gone.

Is it just us, or does it seem like the summers seem to come and go more quickly? A few years ago, we blamed the pandemic because so many of us spent the summer inside. But now that we are out and about, shouldn’t the clock move forward more slowly? Surely, we can pass a law to extend summer just a bit more. On the other hand, global warming seems to be extending summer weather, so perhaps summer will not really end until fall comes on September 22.

Regardless, school is starting up again and vacation season is ending. Now we will get to see if the real estate market picks up again. And going back to the employment situation, we will be interested to see if there is a revision of the surprisingly high number of jobs added last month. Going forward, we still feel that job growth will moderate as the year comes to an end, as we have already recovered the jobs lost during the pandemic. Though even a stable economy needs job expansion to accommodate our population growth.

Weekly Interest Rate Overview

The Markets. Mortgage rates rose sharply in the past week and continued to rise after the survey was released. For the week ending August 25, 30-year rates rose to 5.55% from 5.13% the week before. In addition, 15-year loans climbed to 4.85% and the average for five-year ARMs decreased to 4.36%. A year ago, 30-year fixed rates averaged 2.878%, more than 2.50% lower than today. Attributed to Sam Khater, Chief Economist, Freddie Mac, “The combination of higher mortgage rates and the slowdown in economic growth is weighing on the housing market. Home sales continue to decline, prices are moderating, and consumer confidence is low. But, amid waning demand, there are still potential homebuyers on the sidelines waiting to jump back into the market.” 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

The average price per square foot of a home hit a new record in July as a new study revealed that these prices have increased 310% since 1980. According to Home Bay, a California-based real estate brokerage, the increase in the price of a square foot of property has exceeded inflation by 139% since 2020 topping out at $169 per square foot. As a benchmark, a new single-family home currently has a median square footage of 2,356 with an average price of $397,100 per home averaging $169 per square foot. Comparing these numbers to 1980, the cost per square foot was $42, as astronomical rise of 310%. “We’ve already found that raises in annual income are barely keeping pace with inflation. Since 2000, the overall price of goods in the U.S. has risen by 67%. After adjusting for inflation, however, the median American household income has increased by just 7% in the same time period. That’s only 0.3% per year.” According to the study, examining the price per square foot is more important than it was in the past due to the fact that housing prices are also outpacing income. The study went on to further analyze metropolitan areas at the top and bottom of price per square foot using data from the U.S. Census Bureau, the U.S. Bureau of Labor Statistics, and Realtor.com. The median square footage of a newly built single-family home has increased 50% since 1980 from 1,570 to 2.356 today while the occupancy rate decreased from 2.8 to 2.5 meaning people today have more space per person than previous generations. Source: DSNews

Older homeowners are nearly two times less likely than younger generations to consider using home-equity loans, despite being in a position to benefit the most from these financing solutions — U.S. homeowners age 62 and older hold more than $10.6 trillion in housing wealth. That’s one finding from the first-ever Home Equity Punch List report, produced by Finance of America Reverse LLC (FAR), a retirement solutions innovator and part of Finance of America Companies. The report’s findings are based on The Harris Poll, commissioned by FAR, that surveys 2,000 U.S. homeowners 18 and older to determine their understanding of home equity and its potential uses, as well as whether and how home equity can fit into homeowners’ long-term financial goals. According to the report, 94% of the Silent Generation and 89% of Baby Boomer respondents said they were unlikely to use home-equity products — including a reticence to consider the merits of home equity, a noted lack of knowledge around product benefits, and misaligned expectations that financial advisors would recommend home-equity solutions if appropriate for their clients. These findings prove there is a need for more collective understanding of the merits of housing wealth leverage for certain older homeowners, including a deeper understanding within the financial advisor trust they would suggest a home equity loan if in their best interest, FAR said. Yet, only 29% of survey respondents with a financial advisor have ever spoken to them about a home-equity loan. Source: National Mortgage Professional

Data from the Census Bureau’s Current Population Survey (CPS) revealed housing consolidation as an outcome of the pandemic, as 2.5 million households disappeared in early 2020. The national total fell from 130.3 million to 127.6 million during this time as younger adults decide to give up their independent living arrangements and move in with family. This consolidation, however, was short-lived as the 2.5 million households lost in 2020 re-formed by the end of the year. An additional two million formed throughout 2021. Recent housing trends of the past few years have made housing unpredictable and less affordable. When 2.5 million households evaporated in 2020, 2.5 million fewer homes were in demand. However, when four million households suddenly reappeared, some markets went from over-supplied to under-supplied in a matter of months. Ultimately, dramatic shifts in household volume led to equally dramatic shifts in home prices. Housing has come back slightly as home prices have skyrocketed. According to a recent ATTOM report, median-priced single-family home and condo sales across the U.S. in Q2 2022 hit another new record of 55.5%, following the largest quarterly gain in a decade. As of June 2022, the U.S. reportedly contained 131.8 million unique households, down slightly from an all-time high just seven months earlier. The Census Bureau’s report found that single-person households have the greatest impact on overall household growth. Those who live alone have greater flexibility, and are highly mobile by nature, and as soon as they move in with others, a net household is lost. Single-person households accounted for 61% of the 2.5 million households that dissolved in early 2020, and 82% of the 4.5 million households that formed thereafter. Despite the need to distance socially, high unemployment and economic uncertainty appear to have discouraged people from living alone at the start of the pandemic. But that quickly changed. There are currently nearly 38 million people living alone across the country, representing 29% of all households. Source: MReport