The U.S. labor market reported a strong gain of 252,000 jobs on the payrolls for December in data released by the Bureau of Labor Statistics (BLS) on Friday. December's job gain was close to 2014's average monthly increase and 2014 was the best year of job growth in the U.S. since 1999. According to Fannie Mae Chief Economist Doug Duncan, the underlying data may not be so encouraging for the housing market, however.

Duncan said in a prepared statement that while job gains were generally solid each month throughout 2014, there were other aspects of the latest BLS report that were "underwhelming" – specifically, year-over-year growth in wage earnings of just 1.7 percent, the lowest in two years.

Also, while the nation's unemployment rate took another dip of 0.2 percentage points down to 5.6 percent, its lowest level in six and a half years, that decline was accompanied by a drop in labor force participation down to 62.7 percent, tied for the lowest level since October 1977.

"So far, the diminishing slack in the labor market has not yet translated into stronger wage gains, which sends a disappointing signal to the housing market," Duncan wrote in his statement. "We fear that housing may, again, lag the progress of the overall economy this year, as evidenced in results from the Fannie Mae December National Housing Survey, which shows a flat-line in consumer housing sentiment amid rising optimism in the general view of the economy."

It remains to be seen if the lowering of Federal Housing Administration (FHA)'s mortgage insurance premiums by 50 basis points down to 0.85 percent, which was announced by FHA earlier this week and touted by President Barack Obama in a speech in Phoenix on Thursday, will change Americans' currently tepid attitude toward housing. The change is specifically meant to benefit first-time homebuyers, indicating that FHA is attempting to jump-start household formation.

FHA estimates lowering their insurance premiums will result in hundreds of thousands of new homes purchased in the next few years, Duncan said he believes that in order for household formation to flourish, there must be more growth in Americans' income.

"While we expect economic growth to strengthen to an above-par pace this year, our view for the housing market remains cautious, as we believe that meaningful income growth needs to occur to spur household formation, which has been frustratingly anemic in the current economic expansion," Duncan wrote. "That dependence on income growth acceleration means the economy should drag housing upward rather than housing being a leader in growth acceleration."

 by Brian Honea