Conventional wisdom says the two key indicators of a real estate market are jobs and interest rates. If conventional wisdom is true the U.S. economy is navigating unprecedented times. The U.S. job market remained strong in February as the unemployment rate hovers around a 50-year low at 3.5%. Freddie Mac reported This Week in Real Estate the lowest 30-year fixed mortgage interest rate ever recorded. Below are a few highlights from the first week of March that influence our business:
U.S. Construction Spending Rises to an All-Time High. U.S. construction spending for commercial and residential projects rose to a record in January, according to the Census Bureau. Construction outlays totaled $1.369 trillion at a seasonally adjusted annualized rate, 1.8% higher than an upwardly revised $1.346 trillion in December. January’s gain was the biggest monthly increase in almost two years. Private residential construction rose to an annualized and seasonally adjusted rate of $554.8 billion, the highest since May, after gaining 2.1% from the previous month. “With the Federal Reserve on pause and attractive mortgage rates, the steady rise in single-family construction that began last spring will continue into 2020,” said NAHB Chief Economist Robert Dietz. “Low-interest rates and a healthy labor market combined with a need for additional inventory is setting the stage for further home building gains in 2020,” said Greg Ugalde, NAHB Chairman.
Mortgage Rates Fall to an All-Time Low. The average U.S. rate for a 30-year fixed mortgage fell to 3.29% this week, the lowest ever recorded by Freddie Mac in a series that goes back to 1971. The rate fell 16 basis points from the prior week after the worst stock retreat since the 2008 financial crisis sent investors piling into the bond markets. The yield on 10-year Treasuries, a benchmark for mortgage investors, fell to a record low this week. “Mortgage applications increased 10 percent last week from one year ago and show no signs of slowing down,” Khater said. “Given these strong indicators in rates and sales, as well as recent increases in new construction, it’s clear the housing market continues to be a positive force for the broader economy.” Conventional refinance applications jumped more than 30% last week, Mike Fratantoni, MBA chief economist, said in a report on Wednesday.
Exceptional Job Gains for February. The U.S. job market remained strong in February. Total payroll employment increased by 273,000 for the month. Monthly employment growth has averaged 273,000 per month for the first two months of 2020, compared with the average monthly growth of 178,000 over all of 2019. Meanwhile, the unemployment rate fell slightly to 3.5% in February, from 3.6% in January. It remained near a 50-year low. Monthly employment data released by the BLS Establishment Survey indicates that employment in the overall construction sector increased by 42,000 in February. The number of residential construction jobs increased by 21,900 in February, following a revised increase of 22,400 jobs in January. Residential construction employment now stands at 3.0 million in February, broken down as 842,000 builders and 2.1 million residential specialty trade contractors. Since the low point following the Great Recession, residential construction has gained 986,400 positions.
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