Growing optimism in the housing purchase market comes from faith in a strengthening job market nationwide. Latest snapshots of the national housing economy by Fannie Mae and Zillow cite job growth as a spur for more durable markets, particularly in western states, where new employments and competition for houses are increasing home prices.
Now Freddie Mac has participated in the chorus. In its newest Economic and Housing Market Outlook, delivered Wednesday, the agency expects home sales to grow along with salaries this year, despite a still-tough job market in most industries. Freddie is projecting a 3 percent rise in home sales and a 20 percent rise in new home construction in 2014, which the agency expects to level out to a 5 percent total growth.
Freddie’s newest analysis paints a complicated picture, particularly when determined against job totals from 2007, the last time the national job market was regarded solid for the entire calendar year. Compared to then, most job sectors, especially manufacturing and construction, are down. In February, construction employment was 5.9 million, 1.5 million less than December of 2007, basing on Freddie.
But these sectors are on a steady rise, with construction at about 80 percent of its 2007 peak and manufacturing at approximately 90 percent, basing on the report. Freddie’s numbers bolster Fannie Mae’s February report revealing that construction jobs and the number of new houses built are up since the start of the year. These factors are key to a better housing market, stated Frank Nothaft, VP and chief economist at Freddie Mac.
“In order to have solid home sales in 2014 we have to see extended improvement in the labor market,” Nothaft said. “Manufacturing and construction are the two sectors that have been slowest to recover. With raised economic growth, these two sectors should begin to improve.”.
Significant growth, according to Freddie, is happening in mining and office jobs, but particularly in education and hospital, which has expanded by 2.4 million jobs since 2007. Despite considerable progress, however, the labor market remains below its potential, and unemployment is stubbornly holding on at 6.7 percent.
But these figures are not as black and white as they may at first seem. While it may look bad that the employment-to-population ratio fell from 62.7 percent to 58.8 percent in February, yearly wages measured that same month grew by 2.5 percent, that is well above consumer price inflation.
Also, according to Freddie, about 40 percent of this decline was driven by baby boomers who have retired between December 2007 and February 2014. This may unlock for more jobs as boomers continue to leave vacancies in the workforce.
“With more jobs, wage development should continue to accelerate, giving American households much needed income to help maintain the arising purchase market,” Nothaft said.