What will drive demand for housing in 2013? Will it be pent up demand? That was the primary driver in 2012 when interest rates fell to the lowest on record for mortgages. Will it be investors who accounted for approximately 28% of all sales last year? Or will it be good old fashioned job growth adding to demand for homes?
Pent up demand is finite. After a certain period of time that demand becomes satisfied. Any sudden increase in interest rates and that demand disappears.
Investors are price sensitive buyers. They are driven by the bottom line. It is a non-emotional business decision unlike a family that is purchasing a home for their family.
The number of purchases this year by investors will be determined by price and available inventory. If banks begin releasing the millions of foreclosed properties they have withheld from the market and sell at a discounted price there will be plenty of investors at the ready, because rental demand remains high.
That leaves us with jobs. We were blessed that President Obama shared he would pivot to jobs again for the fifth straight time in his State of the Union address. He did not disappoint.
It is good that Obama finally understands the need for job creation because as John Ransom shared:
Employment didn’t go up by 157,000 jobs in January.
True, the BLS estimates that 157,000 jobs were created, but there were 143,305,000 jobs in December while there are 143,322,000 jobs in January.
That’s a net gain of 17,000 jobs if you do the old-fashioned math.
Or as ZeroHedge pointed out before the speech:
From Bloomberg’s data from December 2011 (the last NFP before 2012’s SOTU) to January 2013 (this year’s last NFP) - Non-Farm Payrolls (NSA) dropped from 133.292 million to 132.705 million (or a 587,000 job loss).
In other words Obama’s record for job creation with government as the solution has been abysmal. In fact the worst in history following the end of a recession.
So what is Obama’s plan for job growth?
$50 billion for infrastructure spending called fix it first. $15 billion for tearing down homes in blighted neighborhoods. $6 billion to help communities attract new business when a major employer leaves. An energy security trust fund paid for by oil companies. $1 billion for innovative manufacturing hubs. Raising the minimum wage from $7.25 and hour to $9.00. Lowering the Corporate tax rate while eliminating deductions.
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