Tuesday, October 14, 2014

October 14, 2014 Real Estate Report - If it is all about jobs, then...

For years we have gone through a tepid recovery from a very deep recession. And all along we have indicated that we don't recover from such an event if Americans are not working. Year after year we waited and waited. Well, the wait is over. The recovery in jobs is more than underway, it has arrived. The average of 220,000 jobs added each month thus far this year -- and the unemployment rate dropping below 6.0% -- is just what the doctor ordered in this regard. This is not to say that we are all the way back. Many of the jobs created have been lower paying jobs, which has held back the pace of personal income growth. In addition, the low labor participation rate tells us that if jobs keep getting created, we will have to absorb many returning to the labor market. On the other hand, the progress we have made will cause a ripple effect throughout the economy. We are on pace to add almost 3 million jobs this year and this will increase consumer spending which will create more jobs. And some of this spending will make the real estate market stronger -- whether it is the purchase of new homes or major renovation projects for existing homes. Already we are seeing the strength in car sales and home improvement projects. But the one area we have not seen strength in this year is within the real estate sector. More recently, we have seen renewed confidence by builders as new home sales have been ramping up. The bottom line is that we can't have a recovery without the creation of jobs and it is the creation of jobs that will bring us a complete real estate recovery. Yes, we still have a long way to go, but if we keep creating jobs at this rate, the road will become a lot shorter. From there, the only question won't be if interest rates will rise -- but when will they rise and how fast. Right now we have the best of both worlds: more hiring and very attractive interest rates. Keith Stewart 773-529-7000

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