We Have Hit Bottom........

It is not often that I go out on a limb and make a prediction about the future. That is because if I could predict the future, I would be on a 200 foot yacht in the Greek Islands. However, sometimes I just can't resist. What bottom am I predicting? The rate of home ownership in America. It has been falling for nearly a decade and in the fourth quarter of 2014, it hit the lowest level in over two decades at 63.9 percent, according to the National Association of Realtors.

The peak for the home ownership rate was just under 70% during the real estate boom. Why is it going up from here? There is a few reasons. For one, it is getting easier to own a home because credit standards are lower. Secondly, the cost of renting keeps going up and it just makes more economic sense to own. When renting is more expensive than owning, before the benefits of tax deductions and the forced savings of principal reduction are taken into account, then the economic message can't be ignored.

The most important reason? The time is right. More jobs are being created and that means the rate of household formation is increasing. A report recently issued by the Lusk Center For Real Estate at the University of Southern California indicates that we are now at pre-recessions levels of household formulations. That means that the Millennials are moving out and they will need places to live. The first quarter of 2015 statistics have not been released yet, but we think I are at or near the bottom and the rate of ownership will rise from here unless there is a major intervening economic variable. 


Mike Ervin
Branch Manager/Mortgage Banker
NMLS: 282715
O: 650.735.5261
C: 650.766.8500

The Jobs Report Surprises Again....

Daylight Savings Time is the official start of the spring real estate selling season. With the weather the mid and east coast had during February, I am sure this early rite of spring caught many by surprise. But in my experience I know that things can heat up quickly. The markets will be monitoring how busy traffic is at open houses, builder sites and more when people are able to go out and drive again in certain areas of the country.

Of course, the markets are also monitoring the jobs data closely as well. The jobs data has been so strong lately that analysts now seem to be expecting around 250,000 jobs to be added each month. In February, the numbers did not disappoint these prognosticators, as the economy added just under 300,000 jobs for the month. The unemployment rate slipped to 5.5% from 5.7%, which was also better news than forecasted.

There were some aspects of the report which were considered not as strong. For one, the rise in hourly earnings was disappointing. This is good news with a meeting of the Federal Reserve Board coming up next week. The Fed will be considering the issue of raising rates and the lack of wage inflation takes some pressure off. Of course, this is bad news for workers. Also on the weaker side was the drop in the labor force participation rate. Some are theorizing that the bad weather in February may have discouraged some from coming back into the labor force. Bottom line, the economy continues to improve. Now how about that weather west coast.....

Mike Ervin
Branch Manager/Mortgage Banker
NMLS: 282715
O: 650.735.5261
C: 650.766.8500

Is it Spring & Jobs Report Time Already?

It sure doesn't feel like spring on the east coast. However, our calendar tells us that it is March and this week we have two important events -- Daylight Saving Time starts this week, which means we must turn our clocks forward and we have another jobs report being released. It seems like we just had a jobs report to comment on, but we must remember that February is a short month.

The jobs data has been so strong lately, our guess is that projections are starting to creep up. There was a time not long ago in which 200,000 jobs added was considered a fantastic month. Now 200,000 may be considered a disappointment. If we continue to add jobs at the rate of 250,000 per month, it is possible that the Federal Reserve Board will raise short term rates more quickly than anticipated.

Evidence the fact that rates moved up significantly during the week of the last jobs report. The move was not enough to shake the markets nor enough to deter consumers from purchasing homes. However, that does not mean another strong report could not move rates up another notch. The real estate data released in the past week was not especially strong with existing sales slightly lower than expectations and new home sales slightly higher than expectations. Even though the data was not strong, the numbers continued to be improved on a year-over-year basis -- thus the market is moving in the right direction and the very strong pending home sales numbers released on Friday confirms that assessment.  

Mike Ervin
Branch Manager/Mortgage Banker
NMLS: 282715
O: 650.735.5261
C: 650.766.8500