More Jobs Will Mean More Demand for Housing

REAL ESTATE TOPICS

By: Jonathan Smoke

A busy week of economic data was capped off today by strong employment numbers.

If we could only pick one area where we’d like to see strong and better-than-expected results, employment growth would be it: Jobs drive household formation, which drive the need for housing.

The Bureau of Labor Statistics reported that nonfarm payrolls added 248,000 jobs in August, while the July numbers were revised up to 180,000.

Earlier in the week, the National Association of REALTORS® reported on pending home sales for August. The index came in 1% lower than the robust July number—but remains above average.

The August index number was also the second-best reading over the last year.

Standard & Poor’s reported its latest data on the Case-Shiller home price indices, which are three-month moving average composites of price changes in major markets. All of the readings show continued deceleration, but this is expected and a return to a normal appreciation pattern for housing.

Remember that deceleration means slowing down the speed of increase—every market reported by Case-Shiller still is showing year-over-year gains.

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The most puzzling data point of the week was the decline in the Consumer Confidence Index reported by the Conference Board. Consumer confidence had been building since the spring, and the August level was the best since 2007.

The September number was down 7.4 points as future expectations dampened, but it should be noted that the number is still higher than all but the last three months of this year.

The lower September number was likely a reflection of negative news and the weak performance of the stock market in September. Typically, confidence is tightly correlated with employment, which remains very positive.

As a result, I expect we will see the September number revised up in October, as even jobless claims continue to fall to levels we haven’t seen in quite some time.