February 9, 2021 – First Jobs Reading of 2021. The January jobs report gives us our first look at the job market as we begin 2021.

Economic Commentary

First Jobs Reading of 2021. The January jobs report gives us our first look at the job market as we begin 2021. We entered 2021 knowing that the economy had lost approximately ten million jobs that we have yet to recover. We were making good progress on recovering jobs before the winter COVID spike hit. We now look for the cases to start falling as spring comes near and the national vaccination program takes hold.

The paltry 49,000 jobs added in January was only the latest reminder that the economy has a long way to go in order to dig out of the hole COVID put us in. The previous two months of data were revised downward as well.  The unemployment rate moved down from 6.7% to 6.3%, a surprise on the upside — but it does not appear the dip came from job creation.  Regardless, the unemployment rate is down from a peak of 14.7% in April of last year when the economy came to a halt. 

The operative question is how long will it take the economy to fully recover? Another shot of stimulus would help. The speed and success of the vaccination program will have a lot of say about this as well. And different sectors of the economy will recover at different speeds. While the real estate sector has already recovered, other areas like the travel and entertainment industries will have a longer road to travel. Their success will be a good measure of our return to normalcy in 2021.

Real Estate News

While house prices are rising in a robust market, low interest rates are making homeownership more affordable than it was 20 years ago, according to the winter edition of “The Housing and Mortgage Market Review,” released by Arch Mortgage Insurance Company. The review focuses on affordability and its impact on the rate of homebuilding across the nation. It also examines how historically low rates are contributing to increased affordability for median income buyers across the nation. “Home prices have been rising steadily, but historically low mortgage rates are contributing to increased affordability for median-income homebuyers in large parts of the country,” the report said. “Another factor is that many potential homebuyers are working at home and are increasingly focused on larger properties in suburbs, exurbs, and rural areas where affordability is higher. We also look at how the ability to more easily increase housing stock in a given area impacts affordability.” As for how home construction will impact both supply and affordability, researchers point to the words of Robert Shiller, who theorizes the following in his book “Irrational Exuberance: “If ever home prices were to exceed the cost of construction, there would be an incentive for builders to supply more homes, and a steady increase in supply would continue until the extra supply depressed price back down to cost.” The authors noted that, at a national level, they expect demographics to drive continued robust housing demand as more Millennials reach the age where they will form households and buy homes, particularly in this rate environment. Source: MReport

All net household growth over the next two decades will be from minority households, a new report released from the Urban Institute finds. Between 2020 and 2040, researchers project about 16.1 million net new households will be created. In that time period, Hispanic households are expected to increase by 8.6 million, Black households will grow by 3.3 million, and households of other races—mostly Asian households—will increase by 4.8 million. White households, on the other hand, are projected to decline by 600,000. White households have the highest homeownership “headship” rates currently, but nonwhite group are making up an increasing share of the population. “Such changes in racial and ethnic composition will also affect overall headship rates,” the report notes. Still, the report projects an overall slowdown in household growth rate over the next two decades. From 1990 to 2010, household growth averaged 12.4 million units per decade, but the rate has steadily dropped over the years. The Urban Institute predicts that from 2020 to 2030, household growth will drop to 8.5 million, and from 2030 to 2040, growth will drop to 7.6 million. “This decline is the result of slowing U.S. population growth and lower headship rates for most age groups,” the report notes. Source: The Urban Institute

A report from Redfin revealed that 63% of people who purchased a home last year made an offer on a property that they had not seen in person. This marks the highest share of folks to do so since 2015 and is also up 32% from the previous year. The statistics were derived from a survey that was commissioned by Redfin in November and December, in which 1,900 homebuyers across 32 major markets participated. The results led the company to believe that virtual tours are going to become even more popular. “The virtual home tour is here to stay,” said Redfin chief economist Daryl Fairweather. “Homebuyers who are searching for a home out of town and don’t have the time or ability to view the home in person will use virtual tours as their primary means of viewing a home. The increased use of this technology, coupled with more people relocating, mean the sight-unseen trend will continue, and the majority of homebuyers will make offers sight unseen during their search for a home in 2021.” Source: Redfin – https://nationalmortgageprofessional.com/news/76266/redfin-percent-homebuyers-made-offers-unseen-properties