“The latest job additions of 194,000 in September are light considering there are still 5 million fewer Americans working now versus before the pandemic. There is some comfort in the 22,000 new jobs in the construction industry, though more jobs went to non-residential sectors rather than for homebuilding. Another 16,000 more workers were hired at building material and garden supply stores, which has consistently been one of the strongest sectors since the onset of the pandemic and clearly implies a greater focus toward home by consumers.
One concern for interest rate-sensitive industries is inflation. The hourly wage rate rose 4.6%. This increase is higher than the usual 2% to 3% annual gains witnessed in the prior two decades before the pandemic but is needed to keep up with broader consumer price inflation (5.2%). Nonetheless, spiraling inflation of prices and wages could feed off each other, thereby forcing an increase in mortgage rates. The first-time homebuyer share has already sunk to a near two-year low of 29% and further affordability challenges loom ahead. Housing affordability looks to be available only in the outlying exurbs and smaller towns.”