Commentary
~ December 11, 2015
It was one of the slowest weeks for housing and economic data in a very long time. We might have shut off the lights and gone to the beach but for two monthly jobs reports.
The Bureau of Labor Statistics Employment Situation report showed November to be another solid one for payroll growth, providing more ammunition for a short-term rate increase at next week’s Federal Open Market Committee (FOMC) meeting. The Employment Situation report showed the addition of 211,000 new non-farm jobs, on the high end of the range (160,000 to 219,000) of analysts’ prediction. The October estimate, already a strong one, was upgraded by 27,000 jobs to 298,000.
The JOLTs report, however was a different matter. JOLTs (Job Openings and Labor Turnover) isn’t familiar to a lot of people but it is a forward looking indicator of employer hiring plans gathered through a Department of Labor telephone survey. It dropped from 5.534 million openings in September to 5.383 million in October. That isn’t huge, but as Bloomberg points out, it is a significant downturn from the recovery peak of 5.668 million in July. The hiring rate held steady at 3.6% while the “quits” rate remained at a low 1.9% – an indication that workers may not have a lot of confidence about moving to a new job.
Fannie Mae reported that the number of repeat homebuyers dropped a significant 40 percent between 2002 and 2014. Its analysis indicated this pattern held even among those with reasonable credit scores and speculates that it could be a lack of equity in the existing home that is locking these owners in place. This of course jams up the supply chain and is probably partially responsible for the lack of inventory everyone has been complaining about.As the problem drifts down the price tiers it ultimately means little room at the bottom for entry level buyers.
One potential solution, as the company points out, is for homeowners to explore possibilities beyond the vanilla 80% fixed-rate mortgage. In addition to the new 97% LTV products offered by both Fannie and Freddie and the low downpayment FHA alternative are loans that help a “locked in” homeowner to add-on and upgrade, eliminating the need to move. Recent changes in underwriting rules also make it easier to finance a new home while converting the existing one to a rental.
No chance of hitting the beach next week – housing data will be coming thick and fast and the long awaited FOMC meeting results will be out as well.