More Taxes = More Homes For Sale?

Sounds bizarre but Vancouver, British Columbia is going to try just that.

You see, they have the same problem that we have here in the U.S.A, tight inventory. With inventory levels so low, they have been struggling to find a way to get inventory controlled by "hoarders" back into the market place.

Vancouver is slapping thousands of empty homes with a new tax as part of a government effort to tame the out-of-control Real Estate bubble that just won't quit there and is being closely watched by many U.S. metro markets to see if it works.

Approximately 4.6% or 8,481 homes in Vancouver have stood empty or underutilized for over six months in 2017, down from 10,800 in 2016 according to declarations submitted to the municipality by homeowners. Empty properties will be charged a 1% tax on the assessed value - not much, but with average detached home prices hovering below C$1.8 million, attached units going for C$715K and condominiums at C$571K, 1% is still a large sum of money.

The problem of a hot housing market and tight inventory levels gets even worse as foreign buyers move in which effectively takes a residence out of the market and it sits vacant as thousands of home buyers are scrambling to find a home for sale. According to local sales agents, investors from Hong Kong, Mainland China and other parts of Asia have been acquiring as much as 40% of the units going up for sale and just sitting on them afterwards.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.00 MBS) lost -7 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move sideways for the week.

Overview: We continue to see very strong economic data with Jobs (ADP Private Payrolls and BLS Non-Farm Payrolls) as well as a very upbeat economic review by the 12 districts of the Federal Reserve. Both of those are providing pressure on mortgage rates. But the resignation of Gary Cohn and the uncertainty of tariffs and a potential trade war is providing support for rates.

Jobs, Jobs, Jobs: We had Big Jobs Friday! You can read the official BLS report here.

Here is the Tale of the Tape:

Jobs - Non Farm Payrolls:

February 313K vs est. of 200K

January was revised upward from 200K to 239K

December was revised upward from 160K to 175K

The more closely watched rolling 3 month moving average increased to 242K which is very robust.

Wages: Monthly Average Hourly Earnings increased by 0.1% over the prior month. Market was expecting 0.2%.

YOY Average Hourly Earnings increased by 2.6% form this time last year. Market was expecting 2.8%.

The national average hourly rate for private non-farm workers increased to $26.75

Hours Worked picked up by 0.1% to 34.5 which was higher than expectations of 34.4

Unemployment Rate: The February Unemployment Rate hit 4.1% which is the same rate as January. The market was expecting a small improvement to 4.0%.

The Participation Rate had a very rare increase and hit 63.0% vs est. of 62.5%

The February ADP Private Payrolls came in hotter than expected (235K vs est. of 195K), plus January was revised higher from 234K up to 244K (10K).

Productivity: The revised 4th QTR data was revised a little higher. Non-Farm Productivity was revised from -0.1% up to 0.0% and Unit Labor Costs were revised higher from 2.0% to 2.5%.

Geo-Political: President Trump's Senior Economic Advisor Gary Cohn resigned presumably over his objection to the proposed tariffs.

The Talking Fed: On Wednesday we got the Fed's Beige Book. This is prepared specifically to be used in the decision making process during the March Fed policy meeting. It is a compilation of all 12 Fed districts on their views of how each of their fiefdoms are doing economically. You can read the official release HERE.

Overall, the picture is stable growth and concern over impending wage inflation.

What to Watch Out For This Week: