Things are looking even brighter for the U.S. housing market as the Labor Department just reported nonfarm payrolls jumped by 379,000 for the month of February 2021 as the unemployment rate fell to 6.2%. February's job numbers dramatically beat market expectations of 210,000 new jobs and the unemployment rate holding steady from the 6.3% rate in January 2021.
The National Association of Realtors Chief Economist Lawrence Yun tells The World Property Journal, "The job market strengthened in February with 379,000 net new job additions. More jobs are very likely, due to the near certain passage of the $1.9 trillion stimulus package and from two million vaccinations per day. Another 9.5 million jobs are needed to get us back to pre-pandemic conditions. The good news on the latest jobs report also means that mortgage rates will likely trend higher in upcoming months because of some edging up in inflation pressure. The key 10-year Treasury borrowing rate has crossed over 1.6% this morning, more than doubling from the second half of last year. The record-low mortgage rate of 2.7% in December and January is long past. An average rate of 3.3% is likely for the remainder of the year."
Yun further stated, "The home-sales market will experience countervailing forces of the higher push from more jobs, but also the pull back of higher mortgage rates. We will have to wait to see which force will be stronger. Back in 2018, the economy roared with 2.3 million job creations, but home sales modestly declined because mortgage rates rose from 4.0% at the beginning of the year to 4.6% by the year's end. This time, rate increases will be occurring but will be well below 4.0%."
The Mortgage Bankers Association's Chief Economist Mike Fratantoni commented, "Job growth picked up sharply in February - welcoming news for the economy in early 2021. The 379,000 gain was led by a 465,000 increase in private sector jobs, but employment is still down 6.2% compared to February 2020, and offsetting these gains were losses in government education jobs (-69,000). The bulk of the job growth (355,000) was in the hard-hit leisure and hospitality sector, which is still down 20.4 percent compared to last year. Similar to last month, temp hiring increased, and there were also widespread gains in the retail trade sector. With January's growth revised up by 117,000, the jobs picture is brighter than expected.
"Despite last month's drop in the unemployment rate, 10 million people are still unemployed, with 4.1 million among the long-term unemployed - up 125,000 from January.
"A potential positive sign for increased downtown activity and hiring in the coming months is the fact that the number of workers returning to the office increased in February - 22.7% teleworked due to pandemic vs. 23.2% in January.
"All in, this report is strongly positive for the broader economy's growth prospects over the next several months. We have been expecting a burst of activity from pent-up demand as the vaccine rollout continues. This may be the first sign of that increase. Higher employment will support a very strong spring housing market, while somewhat higher mortgage rates will continue to slow refinance activity", concludes Fratantoni.