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Silver lining in news of home ownership rates at 15-year low

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POSTED May 10, 2012 6:32 p.m.

There has been a lot of trepidation this week awaiting the latest jobless report. On Friday morning the government announced that the national unemployment rate dropped to 8.1%. However before you begin to believe that the employment sector is improving, you need to understand the real numbers.

The reason the unemployment figure dropped is because more workers dropped out of the workforce, not because the jobs market got better. It was announced this morning that only 115,000 jobs were created last month which is significantly lower than March’s 154,000 and February’s 259,000. The trend for hiring is heading in the wrong direction.

What is interesting regarding unemployment is that I read an article earlier this week that is disturbing in two ways. The first disturbing factor is that unemployment only includes non working individuals that have sought out locating a job in the last four weeks. Anyone who has either taken a break from looking for a job, or has given up entirely out of frustration is not included in the unemployment statistics.

The second even more disturbing fact is that when you count the number of people who fall into the category of not being counted, but are in fact truly unemployed, there are an additional 86 million people. Imagine what would happen to the national unemployment percentage if those people were counted?

Additional labor news is that the size of the national labor force is the smallest it has been since the 1980’s. Currently there is little optimism that enough jobs will be created to absorb the bulk of this uncounted group. Let me remind you that that we have seen that as technology continues to advance, employers can produce do more with less staffing, which ultimately reduces the need for hiring. I am not suggesting that these individuals in this uncounted labor population will never be re-employed. I am just making a point that there is more going on behind the scenes regarding the national employment picture than the average consumer understands.

The stock market continued its roller coaster ride this week hitting the highest point in 4 years on Wednesday only to drop back down to where the week began on Thursday. Overall there has been steady improvement in the markets however concerns about an economic slowdown are beginning to take hold once again. Additionally, trading volume continues to remain on the lighter side as many investors are sitting on the sidelines waiting to see what happens. With the poor jobs report, the market is down over 100 points on Friday mid-day.

Mortgage rates are once again flirting with all time lows and that is a direct result of investors continuing to place money into the safety of government bonds which drives down the yields which directly impacts mortgage rates. The near record borrowing rates continue to improve the fuel need to improve home purchasing. The MBA reported that applications for home purchases continued the improving trend by rising another 2.9% last week.

A report this week showed that homeownership has hit the lowest point in the last 15 years. Believe it or not, I see this news as a positive sign for housing in the future. As rental vacancy decreases, the cost to rents will increase. The continued decline in apartment vacancy combined with the rising rents will ultimately make home ownership less expensive than renting. This transition will drive buyers into the market. Additionally, qualifying for a mortgage is starting ever so slowly to ease. More creative mortgage programs are hitting the housing market which is opening up the door for more buyers to qualify for financing.

As your mortgage professional, I am happy to assist you with any information you may need regarding mortgage or real estate information. I welcome the opportunity to serve you in any way I possibly can. Please feel free to reach me at 209-825-9383.

 

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