Job growth will help housing this year. That’s the prevailing opinion of housing watchers, looking hopefully to the spring selling season. A stellar January jobs report only bolstered that belief. It may not, however, turn out that way.
Employment is increasing, no question, but not in the professions that typically own homes. Researchers at Freddie Mac looked at homeownership rates by profession and correlated them to the professions seeing the most and the least job growth.
“What we find is that many of America’s fastest growing careers (in terms of numbers of workers) have average or below average homeownership rates,” said Leonard Kiefer, deputy chief economist at Freddie Mac. “At the same time, the professions with higher homeownership rates are generally headed for average or subpar growth.”
Most of the job openings projected by the Bureau of Labor Statistics over the next decade are in retail sales, food preparation and cashiers. Workers in these professions have homeownership rates below the national average.
“Over the long run, it’s not going to be supportive of a big pop in homeownership,” said Kiefer.
Meanwhile, professions with homeownership rates above the national average, like engineers, lawyers, doctors and computer and math professionals, are seeing only average job growth. Some with especially high homeownership rates, like business managers, have subpar growth rates. The glaring exception is nurses, who have both a high homeownership rate and high job growth rate.
This all may be why higher employment is not driving higher mortgage applications for home purchases. These applications fell for the fourth straight month last week, despite the average rate on the 30-year fixed still hovering below 4 percent, a historically low level.
Home builders may already be aware of this reality. While historically the best housing markets tend to be those with the lowest unemployment rates, those same markets are not seeing big jumps in housing starts. A study by Moody’s Analytics found that multifamily rental construction is passing prerecession peaks, while single-family continues to lag at about 40 percent of the previous peak.
“If low unemployment were sufficient to turn single-family [homebuying] around, then we should see those permits returning to historical levels in the top 20 percent of metro areas. Instead, we see that multifamily is doing even better, but single family is still struggling as in the rest of the U.S.,” wrote Adam Ozimek, an economist at Moody’s Analytics.
Younger Americans are getting jobs again, but they were hit the hardest during the recession and are now only halfway back to their prerecession employment rate. Adding to their homeownership headwinds, are sky-high rents, preventing them from saving enough to buy a home.
“The big thing is the timing. You get a good jobs report, but people are still behind, still catching up. The young age group are just getting jobs, they’re not ready yet. Even if you get the jobs moving, it’s going to be a while before it directly impacts home sales,” said Kiefer.