Unemployment rates are important to the housing industry because without income people can’t afford to buy a house. Fortunately, 2014 ended strong as the unemployment rate dropped by 1.1 points and the total number of unemployed people was reduced by 1.7 million. In fact, the U.S. unemployment rate is now at its lowest level since June 2008 and job growth is the highest it has been since 1999. Although we ended 2014 strong and 2015 projections are optimistic, there are two major concerns - oil prices and wages.
No one knows exactly how much the drop in oil prices will affect the housing market, but they all know one thing - there will be an impact. While on one hand, consumers are expected to have more disposable income available to them as a result of spending less on oil in 2015, those employed in the oil industry face potential unemployment if supply continues to outpace demand. Overall, the country benefits from lower oil prices as it means there is more money to be spent more evenly across other industries. Where some jobs in the oil industry may be lost, the workforce across other industries may increase.
The aha: Beef Up Your Referral Network and Prepare for a Potential Surge in Relocations
Agents in markets where the local economy and job market are primarily driven by oil production need to stay informed about any large scale job reductions that would cause residents to move. This could cause a spike in home sales, but buyers will be in different industries.
For agents in all other areas, you should be prepared for a potential influx of new residents as they change industries in search of employment. Now is a great time to work on building your referral network with other Keller Williams associates and preparing to help clients across the country with their relocation needs.
Even though December 2014 ended with a slight drop in wages (0.2% drop in average hourly wages), overall, U.S. wages grew by 2 percent in 2014. While not impressive, it is a move in the right direction and some think it will keep rising in 2015. Another important factor to note is that the wage growth percentage does not take inflation into account. When inflation is considered, wage growth for 2014 was less than 2 percent.
The aha: Jobs Are Good, but Higher Wages Are Better
The strong job growth we experienced in 2014 appears to be continuing, but we need to keep a watch on wages. If mortgage rates and home prices rise, as they are expected to in 2015, without a significant boost in wages, many buyers may still find themselves unable to secure a mortgage. To help your clients, recommend that they get pre-qualified as early in the home buying process as possible so they know what they can afford.
In October 2014, Keller Williams initiated a new five part blog series, Market ahas. The quarterly series is designed to help our associates better serve as their clients’ local economists. The topics covered each quarter are mortgage rates, unemployment, price change, inventory, and GDP. This is the second article in the series for Q4 2014. Read more Market ahas here!