MReport April 2018

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58 | TH E M R EP O RT S E R V I C I N G G O V E R N M E N T S E C O N DA R Y M A R K E T O R I G I NAT I O N DATA DATA DATA From Coast to Coast High property values and taxes in coastal metros are pushing migration inward. T he high cost of living in coastal metros such as Los Angeles, San Francisco, and New York is triggering an inland migration toward more affordable cities. That's the conclusion of a new report by Redfin that looks at the rise of fast-growing non-coastal metros at the close of Q 4 2017. High property values and taxes in coastal metros are pushing migration inward, the report found. The five cities that saw the most outflow (in sheer volume) at the end of 2017 included San Francisco, New York, Los Angeles, Washington, D.C., and Chicago. According to Redfin, nearly 20 percent of San Franciscans using the company's property search site were looking for homes elsewhere, with Sacramento, California, and Seattle, Washington proving the most popular destinations for flee - ing residents of The Golden City. Interestingly, "Seattle saw more users looking to leave than to move to the area for the first time since we began tracking this data at the beginning of 2017," the report stated. At the same time, nine in 10 residents of Chicago, Boston, Washington, D.C., and Seattle who used Redfin were looking to stay within their re - spective cities. A full third of New Yorkers using Redfin to search for new homes looked elsewhere. Redfin found that the favored destina - tion for the more than 12,000 New Yorkers leaving is Boston. And while it only lost 83 people, Eugene, Oregon, saw a third of its Redfin users looking to move somewhere else. According to Redfin, the cities seeing the most significant influx from outflow-heavy metros are Phoenix and Las Vegas in the Sun Belt and Atlanta and Nashville in the South. More than 18 percent of all Redfin searches for homes in Las Vegas in the fourth quarter came from Los Angeles, the report stated. It's estimated that a family earning $150,000 would save about $7,800 in taxes and likely pay less for a similar home if they moved from Los Angeles to Las Vegas. The typical home in Las Vegas costs about $333,000 less than in Los Angeles. Similarly, a New Yorker looking at Atlanta could save $5,800 in taxes for a house that's around $161,000 cheaper, the report found. "Lower taxes and more afford - able housing have historically drawn Californians away from the coast to places like Nevada and Arizona," said Heidi Ludwig, a Redfin agent in Hermosa Beach. "The recent changes in tax law have been coming up in my conversations with prospective home sellers. Last year, several of my home-selling clients followed their employer, Toyota, to its new facility in Plano, Texas. I expect to see more people move in the same direction this year, but for different reasons including taxes and overall affordability." Construction Jobs on the Rise The latest U.S. jobs data saw the maximum increase in jobs in the labor market, with a silver lining for the housing industry. T he U.S. labor market added 200,000 jobs, and unemployment remained flat at 4.1 percent in January 2018 according to data released by the U.S. Department of Labor on Friday. The sectors adding most jobs during the month included construction, food and drink services, healthcare, and manufacturing. Average hourly earnings rose 2.9 percent year over year. "The increase in labor supply is encouraging, supporting our view that there remains an untapped reservoir of workers that could be drawn into the workforce as wage gains pick up amid rising demand for labor," said Doug Duncan, Chief Economist at Fannie Mae. The housing market saw a silver lining to its problem of low supply as the construction indus - try added jobs at a rapid pace in January 2018. According to Labor Department data, the construc- tion sector added 36,000 jobs in January with more than 26,000 of these jobs for specialty trade contractors. For the full year, con- struction added 226,000 jobs. "More construction is on the way. Residential construction jobs had another good month and are the highest since 2008 as builders work to add supply given the tight inventory and rising home prices," said Tendayi Kapfidze, Chief Economist at LendingTree. "The labor market remains tight, but the housing market is more so, and home prices are still outpacing wages significantly." "While residential construction jobs increased by 5,000 from their December 2017 figures, they were only 1.3 percent above the level a year ago," said Mark Fleming, Chief Economist at First American. "The ability to build more homes is strongly related to the size of the construction labor force. It's hard to build homes without home builders. In fact, given today's news, it's reasonable to expect the number of housing starts in January to grow by only 1 percent compared with a year ago." The growth in wages is also driving concerns about inflation and a spike in yields as well as further hikes in rates by the Federal Reserve. "The big news was a solid increase in wage growth to 2.9 percent, which is the high-water mark for the recovery. This provides even more ammunition for the Fed to raise rates next month," said Curt Long, Chief Economist at National Association of Federally-Insured Credit Unions (NAFCU). "The 10-year treasury spiked on the news and rates jumped to 2.83 percent from 2.78 percent immediately following the release of labor data. This is the more relevant rate for the housing market and will place upward pressure on mortgage rates," Kapfidze said. However, supply remains the critical issue for the growth of the housing market. "Solid gains in residential construction employment growth over the past several months should lead to supply growth; however, supply will likely still trail demand growth, boosted by rising disposable household income," Duncan said.

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