Even as COVID-19 cases surged, nearly half a million net new payroll jobs were added in January, and that number stretches to more than a million if independent self-employed business owners are included, according to the latest Labor Department report. The job gains could put homeownership within closer reach to more people, but plenty of obstacles remain, and higher interest rates are on the horizon, says Lawrence Yun, chief economist of the National Association of REALTORS®, in response to the latest job numbers.
The recent employment increase means the Federal Reserve will stick to—or even accelerate—its plan to raise interest rates. That has also put pressure on 10-year Treasury bond yields, which mortgage rates tend to follow. Treasury bond yields are at their highest rate since the onset of the pandemic at 1.9%. “Mortgage rates will follow this upward path as well,” Yun says.
The latest job report also showed an uptick in residential construction and industry trade contractor jobs, which are now far ahead of prepandemic numbers. That could imply “more homebuilding and more supply are forthcoming,” says Yun, which would be a welcome sign for a housing market that has seen record-low numbers of homes for sale lately.
However, commercial real estate and construction jobs remain low, even as in-office jobs like accounting, legal services, and management consultancy jobs reach record highs, Yun says. “The work-from-home trend evidently remains strong,” he adds.
Yun predicts that apartment rents will continue to accelerate as new workers seek housing. But he expects homebuying demand to be mixed: “More jobs will help, but higher mortgage rates hinder the decision to buy,” he adds.