As forecast, regional yearend housing numbers are not at all jolly, they’re downright Bah, Humbug! After falling 10% in October, sales dropped another 19% in November. In the past six months, sales have fallen 40% (1,156 / 700) although we’re still 7% ahead of 2014 YTD sales (9,174 / 9,915). Historically this is not an unusual yearend trajectory but this year the drop seems somewhat more precipitous than in recent years. Pending sales do indicate that we will see a little spike up in December, likely followed by a dismal January before things start picking up again. We hope.
Signals are mixed heading into year-end with the economy showing some gains, some losses and very slow progress. Even the economists we spoke with at our recent national meetings were only mildly optimistic about 2016, iffy on 2017 and noncommittal for 2018. A recent series of headlines illustrates the schizoid nature of trying to forecast with any accuracy. Trumpeting the 211,000 jobs added in November, headline #1 read ‘Strong jobs report shows economic strength’. That was Page 1. Page 2 headline reads ‘Layoff numbers on track for worst year since 2009’. That was followed by an article proclaiming ‘More uplifting signs for the economy’, followed by an article discussing the ‘Lowest labor force participation in 38 years’.
The dollar is stronger. That’s good. But that makes US goods more expensive overseas impacting exports and manufacturing jobs. That’s bad. Oil prices remain low. That’s good. But that has lead to massive layoffs in the mining/oil sector causing fiscal problems for some cities and states. That’s bad. Retail hiring is up for the holidays. That’s good. That’s part-time, lower wage jobs that will end in January. That’s bad. Surprisingly one sector leading the rebound in November was construction – tied to more housing construction. That’s very good – unusual for a cold-weather month, but good. It’ll be even better if we can keep it rolling into the new year. We desperately need new housing stock.
Of course all that good news is providing the basis for the Fed to start lifting interest rates later this month.
At this point the Fed has ended their lengthy run at near 0% with a raise on 12/16 of .25%. Now the questions are 1) what’s the impact and 2) how often and by how much will the raises continue. Analysts expect a series of increases over the next 18-24 months with mortgage rates rising correspondingly to around 6%. If you haven’t refi-d yet, you’d best act now as these 3-4% rates will soon be just a pleasant memory.
A bright spot in our local market is the continuing strength in median home values. While prices dipped 3% from October to November, they did retain an 8% bump over last November and remain 5% above last year-to-date ($299,652 / $315,055). That’s good news if you’re a homeowner. Of course rising prices make it more difficult for first-time buyers, younger folks and service workers who have seen their wages stagnate to enter the market. Higher prices, lack of inventory and restrictive lending continue to impact the market keeping homeownership rates at a 50 year low, especially among that critical segment of under-35 buyers.