November 30, 2021 – Post-Thanksgiving. The November employment numbers will be especially important because of two factors.

Economic Commentary

Post-Thanksgiving. Is it us, or does the time seem to go more quickly during a pandemic year? We can’t believe that we are passed Thanksgiving and on our way to the end of the year. At least many of us were able to celebrate with our friends and family a bit more this year. And speaking of the end of the year, this week we will have the last jobs report of 2021.

Every month the jobs data is watched closely by the markets. The November employment numbers will be especially important because of two factors. First, the October job gains were very strong. Two strong jobs reports back-to-back would be an important signal that the economic recovery is heating up. Secondly, the recent inflation numbers are a concern as well.

If wage inflation is accelerating at the same time the economy is heating up, this could provide another layer of apprehension for market watchers. Higher inflation is likely to contribute to higher interest rates, which could stifle the economy in the long run. Thus, we want good news for the holiday season, just not too good. Moderate job gains and a quieting of inflation is our wish for the holidays.

Weekly Interest Rate Overview

The Markets. Mortgage rates were steady in the past week, but moved up as the survey data was released.  For the week ending November 24, 30-year rates remained at 3.10% from the week before. In addition, 15-year loans rose to 2.42% and the average for five-year ARMs eased to 2.47%. A year ago, 30-year fixed rates averaged 2.72%, more than .25% lower than today. Attributed to Sam Khater, Chief Economist, Freddie Mac – “Despite the noise around the economy, inflation, and monetary policy, mortgage rate volatility has been low. For most of 2021, mortgage rates have stayed within half a percentage point, which is a smaller range than in past 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

Rents have been surging. Since January of this year, the national median rent has climbed by 16.4%, according to the latest National Rent Report from Apartmentlist.com. Rents aren’t slowing down either as demand continues to remain high. Meanwhile, renters may be missing out on gaining equity. The average homeowner gained about $51,500 in equity over the past year, according to CoreLogic. Rent payments only cover the cost of shelter and the included amenities. “None of your monthly rent payments come back to you as an investment,” notes a recent article at the Keeping Current Matters blog. “That means, by renting this year, you likely paid more in rent than you did in the previous year, and you also missed out on the potential wealth gain of $51,500 you could have had by owning your own home.” The higher rent prices are attracting investors, who have been flooding into the market seeing a rising opportunity, particularly single-family rental homes. “Converging economic trends are driving a surge in single-family rent prices, and consumer confidence has driven an uptick in demand for both renters and buyers,” Molly Boesel, an economist at CoreLogic, recently said in a release. “The ongoing preference toward more living space—and slim for-sale inventory—is forcing would-be buyers back into renting.” Source: CNBC and Keeping Current Matters

Wealthy real-estate buyers from overseas are expected to descend on the nation’s luxury housing markets, giving a second boost to demand for high-priced apartments and mansions. The U.S. lifted the travel ban on about 33 countries for vaccinated visitors, easing restrictions that prevented most foreign real-estate buyers from entering the country to view and buy properties. Buyers from Europe, China, Brazil, and India will now be able to enter the U.S. for the first time in 20 months. Brokers in cities popular with the overseas wealthy — New York, Miami, Los Angeles — say they have a long list of showings scheduled in the coming weeks from buyers who have been anxious to invest in U.S. property. “This represents another upside in demand that just didn’t exist over the last two years,” said Jonathan Miller, CEO of Miller Samuel. “It will be especially beneficial to the high-end and luxury market.” Sales data suggests the wave of overseas buyers could generate tens of billions of dollars in added sales. Foreign buyers spent $267 billion on U.S. real-estate in 2018 and $183 billion in 2019, before the pandemic, according to the National Association of Realtors. In 2021, their spending fell to $107 billion, suggesting large pent-up demand as buyers weren’t able to tour or visit properties. Source: CNBC

The supply of single-family lots ready for homebuilders to build on fell to a new low in the third quarter, reported Zonda, Newport Beach, Calif. The Zonda Lot Supply Index fell 36.8 percent compared to last year. Every top market across the country is considered “significantly undersupplied,” the report said. “More homebuilding is coming, but patience is required,” said Ali Wolf, Chief Economist with Zonda. “Governmental delays and labor shortages are not new problems for the homebuilding industry, but these legacy challenges have only gotten worse over the past 20 months. Those, plus supply chain disruptions are wreaking havoc on development timelines.” The index’s downward trend indicates builders are buying finished lots at a rate quicker than they can be replaced. But a downward trend also suggests that more homes will be built in the short run as builders go vertical on the lots. Zonda forecasts some supply relief over the next few quarters as the measure of upcoming lots increased from last year. “Upcoming lots hold the key to improving the housing supply and demand imbalance,” Wolf said. “Runaway home price growth has been driven by low interest rates and a dearth of inventory. Total upcoming lots are up 14 percent compared to last year, and as those lots turn into homes for sale, the level of home price growth is expected to slow. This is an important factor to keep the housing market chugging along.” Source: MBA