Rates Stay Near Zero Due to Fragile Recovery

 The Fed has determined that rates will stay close to zero for several years to come due to the long recovery ahead from the pandemic. The key short-term rate was close to zero after the latest Federal Reserve policy meeting last Wednesday.

American consumers and businesses are struggling because of COVID-19 and will continue to struggle if Congress, the White House and the Fed do not do more to help stimulate the country’s economy.

The Federal Reserve has already slashed the interest rates and started many lending programs as well as other stimulus efforts to support the national economy. It will continue to buy Treasury bonds and mortgage-backed securities.

“Economic activity and employment have continued to recover but remain well below their levels at the beginning of the year,” the Fed said in its statement.

The Fed believes that the course of the virus can determine the path the economy will take. There is hope from the American people with the COVID-19 vaccines becoming available. People will begin to go back to normal spending habits and activities.

The country’s gross domestic product is anticipated to a 4.2% rebound next year. The Federal Reserve also predicts the unemployment rate will go back down to 5% in the year 2021.

“With vaccines on the horizon, the Fed’s economic projections for the next few years all got an upgrade, but don’t gloss over the immediate challenges still confronting the economy,” said Bankrate chief financial analyst Greg McBride in a report after the Fed announcement.

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National Association of Home Builders Announces Positive Housing Recovery

According to the National Association of Home Builders’ (NAHB) Leading Markets Index (LMI), the national housing market is within a 5% range of complete housing recovery compared to what is considered a “normal” housing market which the United States last saw in 2006.  Out of a score of one, the latest LMI scored a .95 nationwide in housing recovery.

How is the LMI Calculated?

The way that the LMI makes a numeric determination is taking statistics of single-family housing permits, employment, and home prices calculated for the entire country and specifically 337 local markets.  Single-family home permits rose from .48 to .49, new home prices increased from 1.38 to 1.40, and employment rose from .96 to .97.  The really good news is that approximately 35% of the 337 markets have a score that exactly equaled 1 or is greater than 1.

The number of markets which increased overall in single-family home permits in a year-over-year comparison rose by almost 65%. Employment numbers increased 71%.  Three hundred twenty-four markets out of the 337 are now showing new home pricing that is considered normal according to the last data recorded in a normal real estate market in 2006.

For communities located in Louisiana, almost all counties accounted for were located in the top 20% of housing rankings.  Approximately 4 areas were in the top 60% – 80% rankings relative to normal housing numbers for new home permits, employment and new home pricing.  Louisiana overall experienced a far softer impact of the slowdown in housing market numbers of the Recession than other states in the United States.  Baton Rouge consistently ranks in the top 10 cities in the United States with the best recovery numbers to date.

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Employment is Rising and Single-Family Homes Are Under Construction

New jobs reports and the falling unemployment rate have brought about a positive economic outlook of many Americans in the U.S. The employment growth is a big reason for both the real estate and housing industries’ latest boom both with new construction homes for sale as well as resale homes for sale. The strong job reports have encouraged many to believe there is not a “double dip” recession looming so many are relieved and feel confident in purchasing a new home. Everything from apartment buildings (multi-family homes) to single-family homes are under construction everywhere you turn in the country.

The rise in household formation by millenials as well college grads that have finally been able to get a job has led to new houses being built which has attracted workers in the construction industry. Employment in the field of construction reflects an average of 20% of the jobs that have been recently created. The American Association of General Contractors showed 80% of construction firms planned to hire this year. JOLTS survey showed an increase of 36% in the number of construction job openings year-over-year.

Mark Vintner, senior economist at Wells Fargo Securities says, “Home building will be one of the economy’s largest upside surprises in 2015.”

This is very good news for those looking for employment in the construction industry. Contractors are desperately seeking those who are skilled in all areas of construction which include part time and full time employees as well as sub-contractors. Vintner points out that overall, nationwide, there is a shortage of skilled construction workers. The American Association of General Contractors also reports that 87% of construction firms are having difficulty filling positions. Moody’s Analytics Adam Ozimek believes the shortage is due to lack of wage growth in the construction industry. However with the decline in unemployment, the job market will soon become an “employees’ market” instead of a employers’ market, which should drive up competitive hourly and salary wages. For the construction industry, this should put many out-of-work carpenters, builders, plumbers, electricians, and day laborers back to work with a healthy salary. Ron Lee Homes has been following this construction employment trend in St. Tammany Parish by expanding its services to include remodeling as well as custom home construction. To build your new, custom home today, Contact Us at 985-626-7619 or E-mail Info@RonLeeHomes.com.

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