As the holidays approach, the Bay Area housing market is wrapping up a very strong 2013, with solid sales volume and double-digit sales price increases compared to last year. No one knows for sure what 2014 will bring, of course, but several new reports out this week provide encouragement for the market as we head into the new year.
Perhaps the strongest bit of good news came Friday when the U.S. Labor Department announced that employers added 203,000 jobs last month, more than analysts had expected. November’s job gains helped push unemployment to a five-year low of 7 percent from 7.3 percent. The past four months have now averaged 204,000 jobs created, up from 159,000 the previous four months.
Friday’s news followed other encouraging signals earlier this week. The Bureau of Economic Analysis announced that the nations GDP grew 3.6 percent in the third quarter, much faster than expected and considerably higher than the BEA’s initial reading of 2.8 percent.
And finally, new home sales soared in October after three months of relatively soft sales, evidence that the housing recovery may be gaining steam. The Commerce Department announced sales of new homes grew 25.4 percent to a seasonally adjusted annual rate of 444,000 – the largest monthly percentage increase since May 1980.
What does this all mean for Wall Street and Main Street? For much of the past year, Wall Street inventors have read good economic news as “bad news” – a paradox driven by investor fear that the Fed would start tapering its bond buying program sooner rather than later if the economy heated up. That could drive interest rates higher and put a damper on investments.
But on Friday, investors took the “cup half full” approach and cheered the good economic news as a sign that a stronger economy could help boost corporate earnings in the year ahead. The stock market finally read good news as good news and rallied on the jobs report, sending the Dow surging 198 points to top the 16,000 level once again.
The improving economic reports also give Main Street and the housing industry reason to cheer as the year draws to a close.
A strong employment market is one of the most critical underpinnings of a healthy housing market. Consumers without a job or in fear of losing the one they have aren’t likely to be buying homes. And while the 7 percent jobless rate and the 200,000+ job creation level still is well below where we want to be, the job market now appears to getting better all the time.
Only time will tell whether this week’s bullish economic reports are the start of even greater improvement for the economy in the coming year. But at least for now, buyers, sellers and real estate agents all have reason to be optimistic that 2014 will indeed be a Happy New Year.
Below is a market-by-market report from our local offices: