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Economists Address Jobs Report and Housing Impact

Housing Inventory

The unemployment rate fell to 3.6% in the Federal Government’s latest job report [1], while wages increased 3.2% year-over-year.

April saw the addition of 263,000 jobs, which was the strongest month for job growth since January and the 103rd straight month of gains.

Unemployment rates haven’t been this low since 1969 and the Lyndon B. Johnson administration, and many economists have weighed in on the report and how it could impact the housing market.

Reacting to the report, Doug Duncan, Fannie Mae [2]’s Chief Economist, said, “Today’s report suggests that the labor market remains healthy, which should ease recession concerns and curb expectations of a Fed rate cut for the moment. We expect the Fed to remain patient given a solid labor market and little evidence of upside inflation risks. Meanwhile, employment in the residential construction sector expanded following a decline in February. This should allow builders to continue expanding supply at a gradual pace though labor shortages across the industry remain a concern. This report is directly in alignment with our economic and housing outlook for the year."

However, Tendayi Kapfidze, Chief Economist for LendingTree [3], said, despite the positive report, the Fed could still raise interest rates in 2019.

“The Fed's dual mandate relates to the labor market and inflation,” Kapfidze said. “This report confirms the continued strength in the labor market. If wage gains accelerate, they could result in higher overall inflation and Fed could find itself needing to raise rates later in the year.”

Realtor.com [4]’s Chief Economist, Danielle Hale, said the reported earnings growth of 3.2% is higher than the home sales price growth reported in March by the National Association of Realtors [5] (NAR), in every region except the Midwest. NAR reported home prices in March were $259,400, up 3.8% from March 2018.

“Wages that are growing faster than prices and mortgage rates 40 basis points below [6] last year's level will help homebuyers better keep up, but not everyone is catching up to these shifting dynamics,” Hale said. “The typical seller asking price continues to rise 7% on a year-over-year basis, and as a result, an increasing share of sellers had to cut their listing price [7] to attract a buyer."

CoreLogic’s Case-Shiller National Home Price Index [8]recently reported that home prices in the U.S. grew by just 4.3% in February. The report added that home price growth is at its lowest level since 2012.