Interest rates are expected to remain stable through homebuying season
By Steve Hovland
Director of Research
Employment growth soared above consensus projections in July as companies filled some of the millions of job openings across the country. Despite having control of both houses of congress and the White House, the cogs of government have moved slowly over the first six months of the Trump administration. As a result, firms have reignited their hiring engines without fear of a major government overhaul significantly impacting their forecast models. A total to 209,000 positions were created last month, while the unemployment rate remained well below the full-employment threshold at 4.3 percent.
Although June and July employment gains indicate the economy is on solid footing, the odds of a rate hike in September remain low. The market is pricing in a 98 percent likelihood of stable interest rates through the fall meeting of the Federal Open Market Committee. A continuation of the low-interest-rate policy benefits single-family rental (SFR) investors and broadens the inventory of deals that pencil out. On the other hand, more first-time buyers will be committed to making the transition into homeownership, keeping competition for entry-level homes stiff. Currently, the market is pricing the odds of a December rate hike at less than 50 percent, though we believe the Fed will move up the federal funds rate one more time before the end of the year.
Leisure and hospitality employers hired 62,000 workers last month, indicative of a mature economy. These jobs are often created later in economic recovery periods as more career oriented positions, including healthcare and professional and business services, provide a foundation for the economy. From a high-level perspective, the economy has moved from a period of economic recovery to one of economic prosperity. To be sure, wage growth and underemployment remain concerns for policymakers. However, full employment, record real estate prices and the highest equities indexes on record are all indicative of economic prosperity. Stagnant wages and household income are not tied to this recovery alone, and are a symptom of a longer-term issue in the world’s largest economy.
Sources: HomeUnion® Research Services, BLS, Board of Governors of Federal Reserve System, CME Group
HomeUnion® is an online real estate investment management firm. Based in Irvine, Calif., it provides all the services needed for individuals to invest remotely in rental properties. The company uses a combination of research and proprietary analytics to incorporate data on over 110 million homes and 200,000 neighborhoods into their database, and then delivers its solutions to an on-the-ground infrastructure that currently serves 11 locations. HomeUnion®’s role spans the lifecycle of the investment transaction: identifying sound investments, handling all aspects of acquisition, maximizing income, protecting asset value, and selling the asset when the time comes.
Communications Manager, HomeUnion®