We have previously brought up the listing shortages which seems to be constraining the real estate market while price growth continues. This shortage of listings presents a major opportunity for builders. Of course, builders are facing several shortages as well and these are constraining their ability to keep up with demand, especially within the first-time buyer market. These shortages include a lack of skilled labor and a lack of buildable lots in many areas. Thus, there are several shortages which are constraining the growth of the real estate market.
Could these shortages be related to the labor situation? We had another jobs report recently which showed a similar pattern. The number of jobs added was disappointing again. Yet, the unemployment rate moved to lows not seen since 2001. Could it be that we are running into a labor shortage? With the overall labor participation rate low, we expected that people would be coming back into the labor force as jobs were created, but perhaps their skills do not match the types of jobs that are open. Similarly, there are plenty of buildable lots in America, but not near many cities which are growing.
If the Federal Reserve Board meets this week feeling that we are facing a labor shortage and that wages are about to rise, they are likely to raise rates. If they feel that we just need to create more jobs, then they may not raise rates. While this one question may be an over-simplification of the situation and will not be the only one they face, it will be interesting to hear their statement after the meeting.
The Weekly Market Update
Rates continue to drift lower, setting another 2017 low this past week. For the week ending June 8, Freddie Mac announced that 30-year fixed rates fell to 3.89% from 3.94% the week before. The average for 15-year loans moved down to 3.16%, and the average for five-year adjustables remained at 3.11%. A year ago, 30-year fixed rates averaged 3.60%.
Attributed to Sean Becketti, chief economist, Freddie Mac — “The 10-year Treasury yield fell 3 basis points this week. The rate on 30-year fixed loans moved in tandem with Treasury yields, falling 5 basis points to 3.89 percent. Mixed economic data and increasing uncertainty are continuing to push rates to the lowest levels in nearly seven months.”
Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.