The housing market presumably received a boost from the recent employment report released by the Bureau of Labor Statistics. However, the strength shown in the report may serve to undermine one of the pillars of the surprising strength in the pandemic housing market. Nonetheless, the job numbers will continue to provide support for a housing market that many predicted would collapse under the weight of an economic shutdown. Spring buying season, while postponed for a couple of months, is already underway, and brokers are seeing strength in terms of the number of buyers and the price that they are willing to pay.

The number that everyone is talking about is the employment figures that were released on June 5. Economists were predicting doom after the months-long shutdown of the economy. Predictions were for an unemployment rate as high as 20%, and some estimates had the rate even higher. However, the actual number that came in was much lower as unemployment came in at 13.3%.

The Number Was Not as Bad as Industry Insiders Feared

Previous industry claims were that 15% unemployment would roil the housing market. However, scarce supply and low interest rates have combined to keep a floor under prices. Realtors have even reported that prices are continuing to increase as buyers can afford to pay more with cheaper mortgages. In a way, the strength in the housing market may have been a signal that economists missed that the economy was not in as dire shape as was described.

It is hard to portray the jobs report as strength in the hiring market. You simply cannot talk about a strong job market when more than one in eight Americans are looking for work. The lack of extreme weakness in the employment report could help boost the housing market in the short run. There are still people looking for homes and the estimates of being who may have been taken out of the housing market by job loss have been overstated. This means that people may still be mobile. Enough people are still looking for homes that the market can still remain robust. In this way, the situation may resemble the recession after the "Dot Com" recession when real estate led the economy into recovery and sustained it for years.

However, the stronger jobs report may have other longer-term effects on the housing market. Interest rates are almost artificially low right now since monetary stimulus is aimed at getting financial institutions to lend right now. Interest rates may be at or near zero for the foreseeable future. However, a stronger than expected economy also has the effect of ratcheting up interest rates, making it more expensive for borrowers to purchase a home. Right now, homebuyers have been reported mortgage rates as low as 3% when buying a home or refinancing.

However, the immediate effect of the jobs report was that mortgage rates spiked right after the report was released. Immediately, mortgage rates ticked at least an eighth of a point higher for many borrowers on the day of the report. For other borrowers with worse credit, the jump was a quarter of a point.

Interest Rates Could Be Headed Up More Quickly than Expected

This may foreshadow the fact that interest rates may not remain low for as long as many experts have predicted. However, this may also be a case where the conventional wisdom is not always correct. At 13%, the jobless rate is higher than it was at the depth of the Great Recession. Many jobs have gone away that are either never coming back or will take a long time to recover. Policymakers cannot take their foot off the gas when unemployment is still historically high. Thus, one jobs report that is less than awful is not a sign by any stretch that the economy is out of the woods.

Second, even if mortgage rates increase a quarter to a half of a point, these rates are still historically low. Thus, buyers will still be drawn into the market at these rates. While experts have used words such as "ugly" to describe the impact that the jobs report would have on the housing market, we actually think that it is the best of both worlds. Rates will remain on the low side while buyers will still have demand for homes. In a way, the jobs report was bullish for the housing market.