Jobs, Inflation, Cheap Money and Notes From The Trenches


As I wait for the all important Pending Homes sales number from the National Association of Realtors today, the Jobs report has just come out.  The job creation numbers today point to a modest and continuing recovery.  Inflation remains around 1%, the Fed is pumping $6B into the economy and stocks are at the highest levels since 2008, before the Lehman collapse.  This is all good news.

As I have said in the past, it’s all about the jobs.  When we start creating jobs at a strong enough growth rate that not only keeps job loss at net zero (something today’s numbers accomplish), but actually brings down the unemployment rate, then we will truly be on the road to recovery.  People with jobs, spend money, consume, and ultimately buy houses.  This is what we are waiting for… this and a little bit of inflation.

Speaking of inflation, I read an interesting concept this morning in Scott Reckard’s Los Angeles Times article on mortgage rates, when he quoted San Diego State finance professor Dan Seiver as saying he wouldn’t be surprised if over the next 30 years we saw inflation at 3-4%.  Further that if someone bought a home today with an interest rate on a 30 mortgage of 4%, the effective cost to finance that home purchase would be zero.  That’s really an incredible revelation.  What I really like about this is the return to the concept that real estate is a long-term investment.  Seiver is referring to inflation over a 30 year period and paying off a home over that same 30 year period.  For so long we have been looking at housing as a month over month or year over year, number, when in fact traditionally it is a 15-30 year investment.  So on the idea of getting back to long-term thinking about real estate I say, it’s about time.

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