Higher Employment = More New Homes

The Mortgage Corner

Twenty Five states had lower unemployment, reports the Bureau of Labor Statistics, as the economic recovery continues. That is probably why consumers continue to be optimistic and housing prices continue to soar—as high as 11 percent in Portland, San Francisco, and Denver, reports the latest S&P Case Shiller Housing Price Index.

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Graph: Calculated Risk

Only 8 states, from New Mexico to Louisiana, now have more than 6 percent unemployment. Even energy-dependent states like Oklahoma and Texas are at less than 5 percent unemployment.

The S&P/Case-Shiller U.S. National Home Price Index, covering all nine U.S. census divisions, recorded a slightly higher year-over-year gain with a 5.3 percent annual increase in November 2015 versus a 5.1 percent increase in October 2015. The 10-City Composite increased 5.3 percent in the year to November compared to 5.0 percent previously. The 20-City Composite’s year-over-year gain was 5.8 percent, up from 5.5 percent reported in October.

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Graph: Calculated Risk

This hardly puts housing prices in bubble territory. They rose more than 10 percent in 2014, before dipping back to the current increases. And it is putting pressure on the housing inventory, now down to a 3 months’ supply for new housing. So look for a continued surge in housing construction this year, which gives another boost to overall growth.

Builders broke ground on 1.11 million homes in 2015, more than at any point since 2007, according to a recent UBS study. That was an 11 percent gain compared to 2014. The consensus view of 1.25 million that UBS cites would represent a 13 percent gain in 2016. Their own forecast is for 1.31 million starts, an 18 percent jump.

The result is more new home sales, as sales ran at an annual pace of 544,000, the highest since February, the Commerce Department said Wednesday. November’s previously-reported 490,000 pace was revised up to 491,000.  In all, some 501,000 new homes were sold during 2015, Commerce said, a 14.5% increase over 2014’s tally.

And consumer spending may not be that strong but consumer confidence is solid, at 98.1 in January, says The Conference Board. “Consumer confidence improved slightly in January, following an increase in December,” said Lynn Franco, Director of Economic Indicators at The Conference Board. “Consumers’ assessment of current conditions held steady, while their expectations for the next six months improved moderately. For now, consumers do not foresee the volatility in financial markets as having a negative impact on the economy.”

Is this a good sign for future employment? That depends if consumers continue to spend. Retail sales have dipped below 4 percent annually in 2015, and the stock market is particularly volatile due to the uncertainty over energy prices. But this has not affected the mood of consumers, yet.

Harlan Green © 2016

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

About populareconomicsblog

Harlan Green is editor/publisher of PopularEconomics.com, and content provider of 3 weekly columns to various blogs--Popular Economics Weekly and The Huffington Post
This entry was posted in Consumers, Economy, Housing, housing market, Weekly Financial News and tagged , , , , . Bookmark the permalink.

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