Weekly Economic Review

Economic News:

2021 – The Year of Jobs in Review

The unemployment rate fell to 3.9% last year, beating most expectations.

While all the numbers for the 2021 economy are not released yet, the December jobs report has been released. And though the December numbers will be subject to two revisions, we do have a good idea of how we have fared in 2021 – and the news is very good in this regard. Let’s start with the headline number.?

The unemployment rate started the year at 6.3%, as the economy was still recovering from the pandemic shutdown.?We ended the year with an unemployment rate of 3.9%.?That is a reduction of 2.4%.?This is better than what was forecasted at the beginning of the year, as initially it was predicted that we would not reach “full employment” levels until sometime in 2023. Now this target has been moved up to 2022.?The addition of 199,000 jobs in December brought us to 6.45 million jobs added in 2021, the highest on record.?

Along with the 141,000 revision of the previous two months of job gains, this means that approximately 90% of the jobs lost in the pandemic have been recovered.?We really have more jobs to go because of labor force growth during this recovery time. Even though many left the labor force during the recession, some are expected to return, which will increase the labor participation rate. Who could have predicted that we would have a labor shortage in 2021? Certainly, forecasters did not see this coming when we were in the midst of losing 20 million plus jobs during the pandemic induced shutdown.

Current Housing Market Explained

Over the 30 years mortgage rate spikes have shown limited effects on home sales.

First American’s proprietary Potential Home Sales Model measures what the healthy market level of home sales should be based on economic, demographic, and housing market fundamentals.?For the month of November, the main takeaways were: potential existing home sales decreased to 6.26 million annualized rate (SAAR), representing a 79.5% increase from the market potential low in February 1993. However, the market potential for existing-home sales increased 7.2% year-over-year, a gain of 422,000 (SAAR) sales. Currently, potential existing-home sales is 533,000 (SAAR), 7.9% below the pre-recession peak of market potential, which occurred in April 2006.?“Demand for homes was strong prior to the pandemic,” said Mark Fleming chief economist at First American, “then housing demand accelerated amid the pandemic as buyers wanted more space, enjoyed more geographic flexibility in where they could live, and benefited from increased house-buying power driven by record-low mortgage rates. While many of these factors will remain consistent in 2022, mortgage rates are widely expected to rise, so how will that impact home sales?” Fleming explains that existing-home sales don’t always slow down when mortgage rates rise and are often more influenced by why mortgage rates are rising. “Looking back over almost 30 years, there have been six significant rising-mortgage rate eras,” said Fleming. “Rising mortgage rates led to declining existing-home sales in two of the six rising-rate eras.” Overall, Fleming demonstrates through these examples that existing home sales are resilient in a rising-rate environment. “For example,” he says, “mortgage rates spiked in the summer of 2013 when the Fed indicated it would taper its quantitative easing policy of buying Treasury bonds and mortgage-backed securities. But this ‘taper tantrum’ had no negative impact on existing-home sales.” (Source:?National Mortgage Professional)

Real Estate News:

All Under One Roof

Many families have found that pooling their resources helps them to compete in the current housing market.

More family members are moving in together under one roof, a trend that may help many better compete in the ultra-hot housing market. With record-high home prices still climbing, family members who pool their money may be able to afford a larger, higher-end home. Multigenerational households have been on the rise since the start of the coronavirus pandemic. “I think multigenerational households could be a trend that’s here to stay,” Jessica?Lautz, vice president of demographics and behavioral insights at the National Association of REALTORS?, told The New York Times.

Families of Asian and Latino descent are the most likely to live with aging parents,?Lautz?said. Fifteen percent of home buyers purchased a multigenerational property during the first wave of COVID-19 infections in the U.S., according to NAR data. That was the largest share since 2012. The most common reasons for this move were to bring aging parents into the home and to have grandparents help with?childcare. Respondents also cited greater affordability as a reason for family members to pool their finances for a home purchase. (Source: The New York Times)