Home values in the most restrictive metropolitan areas grew an average of 23.4 percent, more than double the home value appreciation in the least restrictive metros (9.4 percent) and about one third faster than metros in the middle (17.9 percent).
Most land-use regulations in the U.S. are determined locally. For instance, home builders in Houston face a different and generally easier environment in which to build than builders in San Francisco. Metros can be categorized into three groups: the metros with the most restrictive, moderately restrictive, and least restrictive land-useregulations.
Broadly speaking, the most restrictive metro areas include many large coastal markets such as New York, Los Angeles, Boston, and San Francisco. The moderately restrictive metros include several large markets in the interior and Gulf Coast, including Chicago, Dallas, and Houston. The least restrictive metros are mostly Midwestern or smaller markets, including Indianapolis, St. Louis, and Kansas City.
As the economy recovered and employment grew from 2010, the surplus of homes on the market turned into a shortage and home values began to rise. They tended to rise much more in the most restrictive metro areas, despite those places having only modestly higher job growth.
Source: Zillow Research
What Happened to Rates Last Week?
Mortgage backed securities (FNMA 4.50 MBS) gained +11 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move sideways for the week after three straight weeks of slowly rising mortgage rates.
Overview: The bond market focused primarily on the Fed and Jobs. Both were solid with the Fed keeping their key interest rate unchanged but having a more "hawkish" or "bullish" tone to their commentary. Job gains were solid as well. Generally that type of combination would be something that would pressure bond prices (higher rates) but it was offset by continued uncertainty and concern over tariffs and trade war escalations.
Central Bankpaloza: As widely expected the FOMC (Federal Open Market Committee) kept their key Fed Fund rate unchanged in the 1.75% to 2.00% range. Their policy statement had a little more of a "hawkish" tone than their previous statement (when they met and increased rates in June).
Here are some of the more "hawkish" changes in language from their prior statement:
• Economic activity is "rising at a strong rate,'' an upgrade from prior wording of "solid rate''
• Most of the minor wording changes are mark-to-market in the first paragraph's economic assessment
• Job gains "have been strong,'' and household spending and business fixed investment "have grown strongly''
• Unemployment has "stayed low" rather than "declined"
• Both headline and core inflation remained "near 2 percent''
• Household spending has "grown strongly" rather than "picked up"
• "Further gradual increases'' repeated as expected policy path
• Risks to the outlook still "appear roughly balanced''
Jobs, Jobs, Jobs: Its Big Jobs Friday, and here is the tale of the tape:
Non-Farm Payrolls for July 157K vs est of 190K
Non-Farm Payrolls for June revised from 213K to 248K
Non-Farm Payrolls for May revised from 244K to 268K
The more closely watched rolling three month average is now a very robust 224K
Average Hourly Earnings YOY 2.7% vs est of 2.7%
Average Hourly Earnings MOM 0.3% vs est of 0.3%
The Unemployment Rate 3.9% vs est of 3.9%
The Participation Rate 62.9% vs est of 63.0%
ISM Services: The July Non-Manufacturing data which makes up over 2/3 of our economic engine hit 55.7 est of 58.6. This is a bit of a miss at about 3 points but any reading above 55 is still very strong.