Housing the loser in February jobs report

Jobs are good for housing. No question. That is why some Realtors are dancing a jig around Friday's unexpectedly high gain in the February employment report.

"The strong pace of job creation should lead to continued positive household formation. Combined with substantial pent-up demand for home purchases, we remain confident we will see the strongest spring buying season in a decade," said Jonathan Smoke, chief economist at Realtor.com.

Dig deeper into the numbers, however, and you hit a pretty negative one: Wage growth, or lack of it.

A realtor reviews a listing before taking prospective home buyers on a tour of a house in Helotes, Texas.
Matthew Busch | Bloomberg | Getty Images
A realtor reviews a listing before taking prospective home buyers on a tour of a house in Helotes, Texas.

It was lower than expected in February and chronically lower than home price appreciation. Home prices soared 6.9 percent in January compared to a year ago, and the gains are only getting larger. They are fueled not by increased wages and demand but by a serious lack of supply in markets across the nation.

"Combining the weekly hours with the hourly earnings brought the average weekly earnings down to 1.6 percent year-over-year growth from 2.5 percent in January. I was hoping it was a mix shift with younger workers entering the workforce that was the reason for the low wage number, but the job gains were pretty much evenly spread among age groups, with the key 25-54 year component adding 153,000 household survey jobs," noted Peter Boockvar," managing director at The Lindsey Group.

More people are entering the workforce, and that is surely increasing demand for housing, but not affordability. Low inventory is an issue for several reasons: Millions of borrowers are still either underwater on their mortgages or don't have enough equity in their homes to make a move. Baby boomers, who lost a lot of retirement money during the Great Recession and are working longer, are not selling their homes at the rate expected. Finally, homebuilders are still operating at far below the currently inflated demand and even below historical norms. As demand increases this spring, home prices have nowhere to go but up, and affordability down.

"The economy isn't getting the same bang for the buck from job creation as it used to. February's job surge didn't translate into higher pay," said Nela Richardson, chief economist at Redfin, a real estate brokerage. "For housing, as low inventory pushes prices up at a fast clip, the mismatch between fast-growing home prices and slow-growing incomes continues to be a huge obstacle for would-be buyers."