June 8, 2021 – Did We See It? We were looking for some “bounce-back” numbers in the employment report last Friday.

Economic Commentary

Did We See It? We were looking for some “bounce-back” numbers in the employment report last Friday. We believed that the stage was set with the progress of our vaccination program having a real effect on the number of COVID cases in our country. As of the middle of May, cases had dropped approximately 90% from the peak of early this year.

As the cases drop, our economy continues to open. States are relaxing restrictions and there are signs of life everywhere—from restaurants to traffic on the road. This is why most economists are counting on a robust recovery this year, especially in the second quarter which is now coming to a close. But the recovery does not happen unless America goes back to work.

So how did we do?  The increase of 559,000 jobs was less than expected, but a pick-up from last month.  In addition, the previous two months were revised upward by 27,000 jobs. The headline number is the unemployment rate, which moved down to 5.8%.   Keep in mind that we can add a lot of jobs without moving that number significantly, as the labor participation rate increases. In this case, the participation rate came in at 61.6%, little changed from the previous month, which means there is still plenty of slack to take up within the recovery.  Was it a bounce back month? Absolutely, but not as strong as some expected.

Weekly Interest Rate Overview

The Markets. Rates were slightly higher in the past week. For the week ending June 3, Freddie Mac announced that 30-year fixed rates increased to 2.99% from 2.95% the week before. The average for 15-year loans remained at 2.27% and the average for five-year ARMs rose to 2.64%. A year ago, 30-year fixed rates averaged 3.18%, almost .20% higher than today. Attributed to Sam Khater, Chief Economist, Freddie Mac – “Home prices continue to accelerate while inventory remains low and new home construction cannot happen fast enough. There are many potential homebuyers who would like to take advantage of low mortgage rates, but competition is strong. For homeowners however, continued low rates make refinancing an option worth considering.”  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

Occupancy rates for single-family rental homes have reached a generational high, driving up SFR rent growth, two new reports said. CoreLogic, Irvine, Calif., reported single-family rent growth reached 4.3 percent in March, up from a 3 percent pace a year ago. Molly Boesel, Principal Economist at CoreLogic, said the rent growth indicates a “preference shift” from multifamily apartment communities to standalone properties as renters seek more space in less dense areas. “Prior to the pandemic, rents for detached properties and attached properties grew at similar rates,” she said. “However, starting in June 2020, rent growth for detached properties accelerated and by March, grew at five times the rent growth rate of attached properties.” Arbor, Uniondale, N.Y. said SFRs are starting to fill the role that starter homes played for previous generations and noted professional residential operators are “racing” into the sector. “All else equal, 2020 proved a banner year for the SFR sector,” Arbor said in its first-quarter Single-Family Rental Investment Trends report. CoreLogic said higher-priced SFRs are seeing the most rent growth. Assets with rents priced at 125 percent or more of the regional median saw 5 percent rent growth in March, compared to 3.2 percent for properties priced at 75 percent or less of the regional median. Source: The Mortgage Bankers Association

At the height of the pandemic that drove an exodus from US cities, there was talk that with Americans and companies becoming increasingly comfortable with the work from home dynamics — it could mean that cities were dead. Not so! Recent data suggests that a revival of cities is already underway, according to this Reuters report. Cellphone tracking firm Unacast had earlier noted that phone users were shifting their overnight locations out of New York, but now sees them coming back. “New York is growing again,” with the city adding a net 1,900 people in the first two months of 2021 versus a loss of 7,100 in the same two months of 2019 and the 110,000 estimated by the company to have left the city throughout 2020. Similarly, Bank of America economists wrote recently that they “don’t see evidence of a broad urban exodus,” a conclusion that combined analysis of the company’s own card spending data as well as a survey of other reports. Source: Rise and Shred

A new analysis by Redfin has found that, for the calendar year 2021, a record $2.53 trillion worth of home sales will transact in America—a 17% year-over-year gain and the largest annual increase in percentage terms since 2013. Fueled by record-low rates, strong demand, and a wave of migration made possible by remote work, the market comes into a strong spring season after suffering some weather-related setbacks to start the year. These factors helped March become the hottest month in housing history, with home values, price growth and selling speed all hitting new heights. “We expect 2021 to be an even more active year for the housing market than 2020 because homebuyers have a better sense of what the future looks like,” said Redfin Chief Economist Daryl Fairweather. Employers are providing clarity on permanent remote-work policies, the economy is recovering and mortgage rates remain low. All of these factors mean that we’ll likely see even more buyers enter the market this year and in 2022.” According to Fairweather, home prices could grow more slowly if mortgage rates rise, resulting in a more balanced housing market, which could actually lead to more home sales. Source: MReport