If you’re looking for an indicator of where the housing market is headed, there are many data points you can consider. The primary data point of course is the jobless rate. The jobless rate in the United States has reached an ideal level of 5.5%. The reason why many economists are saying that this is the ideal level is because people who are worth employing are already employed. If the unemployment rate in the United States falls any further, there will be a tremendous upward pressure on wages.
The employment pool has been stretched to the limit at least when you factor in the fact that the US is currently suffering from its lowest labor-force participation rate in over 30 years. For some reason, more and more Americans aged 25 to 45 have stopped looking for work. This has really tightened the pool of applicants.
That is the number one indicator you should look at because as wages start to rise due to a tighter labor pool, more and more people would be able to afford homes. Another factor of course is mortgage rates. The rate for the 30-year fixed mortgage in the US declined to 3.86% last week. Previously, it was 3.78%. This is a steep decline and should signal further development in the housing market.
The downside to all this is that there is a countervailing data point. That is many hot housing markets have appreciated so high that it’s actually depressed the demand in those areas. The good news is if would-be homeowners are willing to jump in their cars and take a long drive, there are many cold markets surrounding hot real estate markets throughout the US
