June 7, 2022 – The Jobs Report Gives Us an Indication. The market analysts are looking for any indicator as to where this economy is headed.


Economic Commentary

The Jobs Report Gives Us an Indication. Recession – Inflation – Stagflation – Bear Market. All words/phrases that have been bantered about in the past several weeks. The market analysts are looking for any indicator as to where this economy is headed. And there is no stronger indicator than the employment report. As we mentioned, there can be no recession while we have been adding almost a half-million jobs each month thus far this year.

This does not mean a slowdown in jobs growth is not on the way. As a matter of fact, a slow-down should be expected as we have replaced just about all the jobs which were lost in the pandemic-induced recession. The unemployment rate has hit near pre-pandemic levels as well. So, what did the numbers for May tell us? The addition of 390,000 jobs was lower than the previous months, but higher than expected. The unemployment rate remained at 3.6%. Slower, but certainly not an indication of an up-coming recession by any means.

Of major importance are the numbers for wage inflation. Wages grew 0.3% over the past month and 5.2% over the last year. These numbers were close to expectations and you can be sure the Governors of the Federal Reserve took note of these numbers as they consider their next moves when they meet next week. The markets have “baked in” a half-percent increase in short-term interest rates and will be more focused on what the Fed is saying about the future. Our guess is that the increase in jobs will solidify those predictions. We will know for sure in seven days.

Weekly Interest Rate Overview

The Markets. Mortgage rates were stable last week, but rose as the survey week came to a close. For the week ending June 2, 30-year rates fell one tick to 5.09% from 5.10% the week before. In addition, 15-year loans increased one tick to 4.32% and the average for five-year ARMs fell to 4.04%. A year ago, 30-year fixed rates averaged 2.99%, over 2.00% lower than today. Attributed to Sam Khater, Chief Economist, Freddie Mac, “Mortgage rates continued to inch downward this week but are still significantly higher than last year, affecting affordability and purchase demand. Heading into the summer, the potential homebuyer pool has shrunk, supply is on the rise and the housing market is normalizing. This is welcome news following unprecedented market tightness over the last couple years.”  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

Many home sellers are making a profit on their sale. But if that profit is high enough, they may be on the hook for capital gains taxes. Capital gains taxes kick in when profits exceed $250,000 for single sellers or $500,000 for married couples who file together. As home prices have soared, longtime homeowners may be more likely to see a tax bill “It’s become a huge part of the conversation now,” John Schultz, a certified public accountant and partner at Genske, Mulder & Co. in Ontario, Calif., told CNBC. Profits from the sale of a home are considered capital gains, but the rate at which they are taxed depends on the filer’s taxable income. The current rates are 0%, 15%, and 20%, CNBC reports. Many rules affect the rate. For example, sellers must own and use the home as their primary residence for two of the five years preceding the sale, but those two years don’t have to be consecutive. Some homeowners are converting a rental property to a primary residence for two years to get a partial exclusion. Certain home improvements can also affect the rate, Schultz told CNBC. For example, home additions, patios, swimming pools, or other improvements may qualify for exclusions if they can be shown to add value. Homeowners will need to keep detailed records. Source: CNBC

Since the pandemic began, a “Great Resignation” has taken root as people left their jobs. Many of them apparently may have shifted careers to real estate. From January 2021 to January 2022, the top trending career search entry was “how to become a real estate agent,” according to Google searches. More people have entered a career in real estate between 2020 and 2021, recording a 60% increase compared to the two years prior, The New York Times reports. With the real estate market booming across the country, job hunters may be drawn to the profession and the opportunity to build their own businesses. “I think many people have gone through the journey over the past number of years now of exploring, I’ll call it self-employment, and perhaps the kind of role that is both flexible and knows no boundaries,” Ryan Gorman, CEO of Coldwell Banker Real Estate, told Fortune. “And there is no more boundaryless role than a real estate agent. So, we literally have real estate agents—with the same license that anyone can obtain over the next few months—who enjoy an income of seven and even eight figures, because they’ve realized that they can get out of it what they put into it. There is no telling you what the limit is to your potential.” While the sky may be the limit for a real estate professional’s salary, most agents don’t make six figures, however. The median annual earnings for a real estate sales agent were $48,340 in May 2021, according to the U.S. Bureau of Labor Statistics. People are being drawn to a career in real estate for better work/life balance, increased income potential, and gratitude for having a job, according to a new Coldwell Banker Real Estate survey of 1,405 licensed real estate agents and brokers. The National Association of REALTORS®’ latest total membership count, reflecting April data, was at nearly 1.55 million members. Source: Fortune.com

Owning a home is seen as a sign of success and financial stability, and while Asian people in the U.S. tend to have higher educational attainment and household income than any other racial and ethnical groups; their homeownership rate at nearly 60% remains lower than the national rate of 65.5%, and the white community rate of 74.4%, according to a new report from Realtor.com. A recent study by CAPACD shows that language barriers in the buying process and the prevalence of multigenerational living, which often coincides with higher housing cost burdens, are among the challenges faced by Asian American households nationwide. The outbreak of the pandemic also changed the trajectories of Asian American homebuyers. During the first half-year, the buying pace of Asian American homebuyers slowed significantly, ultimately lagging behind their non-Asian counterparts over this period. The average Asian American HSI dropped to 109.5, 8.1% lower than their pre-pandemic levels and 9.5% lower than their non-Asian peers. Although Asian American homebuyers experienced significant challenges, they are the group that had the largest homeownership rate increase in recent years. For example, between Q4 of 2020 and Q4 of 2021, the homeownership rate of Asian American households increased from 59.5% to 61.2% —up 1.7 percentage points, while all other racial groups saw homeownership rate declines over the same period. Source: DS News

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