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60 | TH E M R EP O RT SECONDARY MARKET THE LATEST O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T A Long-Term Housing Trend Trifecta Housing expert says the market will be most impacted by three long-term trends: the shifting job market, the rising cost of land, and land-use restrictions. A s 2016 came to a close, many entities in the housing industry of- fered their glimpse of what is to come for the housing market this year. With recent clarity brought by election re- sults and a new administration set to begin this month, many in the industry wonder what shifts will take place among various metrics in the market. According to Freddie Mac's November Insight, the metrics to watch are not coming out of left field but have already been slowly working in the market. "These three long-standing trends—ones that have been building quietly over decades—ul- timately will have more influence on housing than the week-to- week oscillations of mortgage rates or any of a host of other short-term indicators of housing activity," said Freddie Mac Chief Economist Sean Becketti. "These three trends affect housing and mortgage markets through their influence on both the demand for and the supply of housing. The change in income distribution shifts the demand for hous- ing—both the total demand for homeownership and the demand for different types of housing. The rising share of land costs shifts the supply of housing—houses cost more than before because of the higher cost of the land component of the house. And land-use restrictions limit the supply of more-affordable housing in richer states. No analysis of the future housing market is complete without considering them." Freddie Mac reported that the most important trend is increasing income inequality between the "relative fortunes of low-, middle-, and high-skilled workers." The analysis said that demand has increased for high- skilled/waged jobs, as well as low-skilled/waged jobs. Trulia Chief Economist Ralph McLaughlin shared the same sen - timent in a recent report, saying metros with the lowest incomes had the highest income growth last year, a clear sign, he said, that regional income convergence is picking up. McLaughlin's report also said that in low-income markets in general, income growth rose about 5.5 percent as median prices rose 3 percent. This dynamic was shared with the highest-income areas, where income grew 3.5 percent and median prices grew 3 percent in 2015. In addition to these findings, the recent Employment Summary from the Bureau of Labor Statistics showed a 10-cent rise from the month prior, welcome news as a large hinderance to homeownership has been wage growth falling behind home-price appreciation. However, Freddie Mac's Insight does not spell relief for middle- skill job demand as it does for low- and high-skill job demand. "Demand for middle-skill jobs has decreased contribut - ing to a 'hollowing-out' of the middle class," says the report. "Technology has eliminated white-collar clerical, blue-collar production and craft, and related jobs." The second trend Freddie Mac listed that could shape the hous - ing market was the rising share of the cost of land in house prices. The share of land costs has risen much faster than real construction costs and is much higher than 20 years ago, according to Freddie Mac. In some markets, such as "These three long-standing trends—ones that have been building quietly over decades—ultimately will have more influence on housing than the week-to- week oscillations of mortgage rates or any of a host of other short-term indicators of housing activity." —Sean Becketti, Chief Economist, Freddie Mac