Job Report has positive effect on Housing Market
The US economy continues to add jobs at a blistering pace, as indicated by 213,000 jobs added in June versus the 195,000 expected by economists. In addition, 601,000 people came off the sidelines and re-entered the work force. This influx of labor participation actually caused the unemployment rate to tick up to 4%. Wharton School finance professor, Jeremy Siegel, referred to the most recent jobs report as “the best possible outcome – strong job growth, a rise in the participation rate, and less pressure on unemployment.” Siegel went on to indicate that this strong job report gives him hope that the Federal Reserve may slow the pace of interest rate hikes, because it would put a squeeze on labor supply.
Effect on Housing
As more people enter back into the work force, the demand for housing will increase naturally, as these same individuals will begin to set their sights on home ownership. This notion was supported by Mike Fratantoni, chief economist of the Mortgage Bankers Association, stating, “The strong job market continues to bolster demand for homes.” Strengthening this notion, mortgage application volume rose 2.5% last week, seasonally adjusted, as compared to the previous week. This increase was driven entirely by purchase applications. Now all we need is inventory to pick up to match the demand, and we may finally be seeing the light at the end of the tunnel. Danielle Hale, chief economist for Realtor.com touched on that notion, stating, “Even though inventories continue to decline, they are doing so at a slower pace. Before we see inventories increase, we need them to slow, and the data has shown four months of deceleration.”