Unemployment, Wage Growth and Real Estate

wage growthWe’ve been watching the unemployment numbers creep down gradually. But there’s no dancing on the streets. Why? Like most of our lives there’s a mixed bag of good and bad here – once you peel the onion. Yes, the unemployment rate is down but the preponderance of jobs are in the lower wage category. While this puts people back to work, it does not give them the monetary biceps to make a major dent in consumer spending or housing. For those that are working, wage growth has been anemic. Why? Because companies have been laying off people and using technology to do more with less. The folks that remain are thankful to have their jobs and aren’t clamoring for fat pay hikes. On top of this, inflation is very low so they can’t make the ‘higher price of goods’ argument. Want more proof? Fewer people are quitting their jobs. Less people leave their spouses without a perceived better option on the other side. Same here. Many are not confident that they will find an equivalent or better job and will only leave if they are being excoriated beyond limits.

Are These Homebuyers?

Do you see many of these folks as eager beaver home buyers? Don’t think so. That’s why the rise in mortgage rates has seen a sharp drop in loans. Because most of that activity had to do with re-fis to begin with. Robust home buying may have plateaued several years ago. Uncertainty is going to make renting beat out buying every time. That’s why many Home Builders have Build to Rent programs to cater to this growing segment of the population. As long as price growth is reasonable, rental investments will offer good cash flow for investors. That should keep the liquidity faucet open and the renting movement strong.

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