Discussing the big Jobs Report, construction spending, home seller profits hit 10 year high, home prices in 2018 predicted to rise plus much more!
The Jobs Report
Total nonfarm payroll employment increased by 200,000 in January, and the unemployment rate was unchanged at 4.1 percent, the U.S. Bureau of Labor Statistics reported today. Employment continued to trend up in construction, food services and drinking places, health care, and manufacturing.
Nice! A strengthening economy will give the Fed more motivation to raise their benchmark rate so anyone looking to buy a home needs to be aware of the potential for higher mortgage rates.
Construction Spending Increases
From the Census Bureau:
Construction spending during December 2017 was 0.7% above the revised November estimate. The December figure is 2.6% above the December 2016 estimate. The value of construction in 2017 was 3.8% above the value in 2016.
Spending on private construction was 0.8% above the revised November estimate. Residential construction was 0.5% above the revised November estimate. Nonresidential construction was 1.1% above the revised November estimate.
Great to see the increases but private residential construction is still too low. Which is weird since we have such an issue with low inventory in many areas…
Average Home Seller Profits at 10-Year High
Attom released its Year-End and Q4 2017 U.S. Home Sales Report this week. It shows that home sellers in the 4th quarter of 2017 got an average profit $54,000 when they sold their home. This is the best since way back in the 3rd quarter of 2007!
That is an average 29.7% return on investment compared to the original purchase price! Remember that this is the average and does not reflect what is possible or realistic for every home.
Will Home Prices to Increase 3% in 2018?
According to NAR December 2017 REALTORS® Confidence Index Survey, the median expected price change for the next 12 months was 3.1 percent.
Is this realistic? I think we will see the rate that home prices are increasing slow down. The blistering rate of home prices increases since the housing market has started recovering may be coming to an end.
With mortgage rates likely to rise in 2018, a slower pace of home price growth will be a good thing for many home buyers. Sellers do not need to worry since home prices should still increase.
Something else to consider is that the pace that rent has been increasing could also be slowing down. Check out this snippet from the Harvard Joint Center Housing Studies:
Rents rose faster than inflation in almost three-quarters of the nation’s major housing markets, according to analyses done for our latest America’s Rental Housing report. However, there are multiple signs that while rents are still on the rise, the rate of increase is slowing in most areas, and the long-standing gap between the increases in rents and rise in the cost of other goods is shrinking.
Interesting and this may affect how some people look at the question of renting versus buying a home…
Forgotten Lessons from the Great Recession?
From The Nation:
Amid a roaring stock market and a planet of upbeat CEOs, few are even thinking about the havoc that a multi-trillion-dollar financial system gone rogue could inflict upon global stability. But watch out. Even in the seemingly best of times, neglecting Wall Street is a dangerous idea. With a rag-tag Trumpian crew of ex-bankers and Goldman Sachs alumni as the only watchdogs in town, it’s time to focus, because one thing is clear: Donald Trump’s economic team is in the process of making the financial system combustible again.
Collectively, the biggest US banks already have their get-out-out-of-jail-free cards and are now sitting on record profits after, not so long ago, triggering sweeping unemployment, wrecking countless lives, and elevating global instability. (Not a single major bank CEO was given jail time for such acts.) Still, let’s not blame the dangers lurking at the heart of the financial system solely on the Trump doctrine of leaving banks alone. They should be shared by the Democrats who, under President Barack Obama, believed, and still believe, in the perfection of the Dodd-Frank Act of 2010.
I often wonder why we never saw any big CEOs given any jail time. Then I started realizing who REALLY runs the show..
But you would think that people that are really smart would have learned something from the Great Recession…
Apparently not according to a recent Bloomberg article:
Three words have finally set Wall Street deal-makers loose: President Donald Trump.
Officially, the Trump administration has yet to rewrite Obama-era rules restricting how much debt banks can pile onto companies in buyouts. But a spate of recent transactions shows financiers are letting go of their concerns about the lending guidelines that had tied their hands in recent years.
Well, maybe the big CEOs and financial companies are not that smart…
Besides, if they are going to have the American tax payers bail them out again, what can go wrong?
South Carolina’s Economy Looking Good BUT…
Expectations are that South Carolina’s economy this year should be one that hums along nicely, growing slowly but steadily. But economists say challenges remain in filling many jobs with qualified workers and bolstering rural areas, where economic gains can be elusive.
We really need to work on improving our education system so that we can attract more good paying companies to South Carolina IMHO.
Spend a little now and reap many many rewards later…
UofM Surveys of Consumer Sentiment Decreases
Consumer sentiment has remained largely unchanged for more than a year at very favorable levels. The January Sentiment figure was just 0.2 Index-points below December’s, and just 1.1 points below the 2017 average of 96.8–which was the highest yearly average since 2000. Stock price increases and the passage of tax reforms were mentioned by all-time record numbers of consumers. To be sure, there were small offsetting declines among lower income households and residents of the Northeast. Consumers continued to expect growth in jobs and incomes, but anticipated a slightly higher inflation rate. Importantly, the motivating force behind purchase decisions has shifted from discounts on prices and interest rates to increased confidence in future job security and growth in wages as well as financial assets. This renewed sense of confidence was responsible for the recent declines in savings rates. The tax cuts will increase discretionary spending once higher energy bills due to the unusually cold weather are paid. Monetary policy will need to tighten in the year ahead, but given consumers’ decade long experience with record low interest rates, only modest increases in interest rates will be sufficient to curb any excesses. Overall, the data signal an expected gain of 2.8% in real personal consumption expenditures during 2018.
While it DID decrease, it was not a huge decrease from the previous month. However, the results compared to last January were worse…
Millennials Are Out of the Basement and Into Buying Homes
From Barry Ritholtz:
The state of housing is, to a great extent, being determined by millennials — after moving out of their parents’ basements and forming households, the next step tends to be having kids. The largest home-buying generation since the baby boomers is growing up. To a large degree that is what’s driving the market. And, I suspect, this demographic is likely to continue being the central force in the real estate market for decades to come.
If you are not familiar with Ritholtz, I suggest you read this article and anything else you come across that he writes.
Federal Reserve Drops the Hammer on Wells Fargo
The Fed handed down unprecedented punishment late Friday for what it called the bank’s “widespread consumer abuses,” including its notorious creation of millions of fake customer accounts.
Wells Fargo won’t be allowed to get any bigger than it was at the end of last year — $2 trillion in assets — until the Fed is satisfied that it has cleaned up its act.
Amazing. Obviously all of Well Fargo’s competition will benefit from this but will they also be worried that the same thing could happen to them?
Well that is it for today! Be sure to hit the share buttons if you enjoyed this post and subscribe so you never miss another post!