Discussing the latest reports on jobs and unemployment, how home buying helps the economy, home prices, home staging and much more…
Jobless Claims Increase for 3rd Straight Week
From the Department of Labor:
In the week ending July 1, the advance figure for seasonally adjusted initial claims was 248,000, an increase of 4,000 from the previous week’s unrevised level of 244,000. The 4-week moving average was 243,000, an increase of 750 from the previous week’s unrevised average of 242,250.
This is the 122nd consecutive week that initial claims were below 300,000. The 4-week moving average did increase but only slightly.
June Unemployment Report
From the BLS:
Total nonfarm payroll employment increased by 222,000 in June, and the unemployment rate was little changed at 4.4 percent.
The number of long-term unemployed (those jobless for 27 weeks or more) was unchanged at 1.7 million in June and accounted for 24.3 percent of the unemployed. Over the year, the number of long-term unemployed was down by 322,000.
The labor force participation rate, at 62.8 percent, changed little in June and has shown no clear trend over the past year.
While the jobless claims report was not good, this is much better. However, the U-6 did increase from the previous month. U-6 measures the unemployed, those that have given up finding a job and those working part-time but want a full time job.
Private Sector Employment Increased by 158,000 Jobs in June
Private sector employment increased by 158,000 jobs from May to June according to the June ADP National Employment Report®. The report, which is derived from ADP’s actual payroll data, measures the change in total nonfarm private employment each month on a seasonally-adjusted basis.
Ahu Yildirmaz, vice president and co-head of the ADP Research Institute said:
Despite a slight moderation in the month of June, the labor market remains strong. For the month of June, jobs were primarily created in the service-providing sector.
Mark Zandi, chief economist of Moody’s Analytics, said:
The job market continues to power forward. Abstracting from the monthly ups and downs, job growth remains a stalwart between 150,000 and 200,000. At this pace, which is double the rate of labor force growth, the tight labor market will continue getting tighter.
All of the jobs were in the service sector instead of the goods producing sector. This is due to losses in mining and construction offsetting gains in manufacturing.
I find it strange that despite the strong demand for homes, construction employment decreased. If we were seeing our ailing infrastructure getting the attention it needs, we would be seeing much better numbers…
How a Home Purchase Boosts Consumer Spending
Using the Consumer Expenditure Survey (CES) data from the Bureau of Labor Statistics (BLS), NAHB Economics research shows that a home purchase triggers additional spending on appliances, furnishings, and remodeling. NAHB’s most recent estimates are based on the 2012-2014 data and show that during the first two years after closing on the house, a typical buyer of a newly-built single-family detached home spends on average $4,500 more than a similar non-moving home owner. Likewise, a buyer of an existing single-family detached home tends to spend over $4,000 more than a similar non-moving home owner, including close to $3,700 during the first year.
Interesting study and shows the impact of home buying on the economy. Or you could say it shows how the economy is not as strong as it could be IF home sales were better. We are not seeing stronger home sales due to the tight inventory in many parts of the US.
Are Home Prices Really Above Their Pre-Recession Peak?
Interesting stuff from Harvard Joint Center for Housing Studies:
In 2016, national home prices not only rose for the fifth year in a row, they finally surpassed their pre-recession peak in nominal dollars, according to most national measures of home prices. However, when adjusted for inflation, home prices were still 9 to 16 percent below peak, depending on the measure used.
They have a cool interactive map that lets you zoom in and look at what is happening on a more local level.
If we look at home prices in the Anderson SC area since 2000, we see an increase of 0 to 19%. But if we look at home prices in the Anderson are since the peak, they are saying we are still below the peak by 0 to 15%.
While entertaining, I strongly suggest contacting an experienced local Realtor for questions about your home’s value.
Home Staging Decreases Time on the Market
Sixty-two percent of sellers’ agents say that staging a home decreases the amount of time a home spends on the market, according to the National Association of Realtors® 2017 Profile of Home Staging.
Check out the highlights:
CEO Confidence Declined in Q2 2017
From the Conference Board:
The Conference Board Measure of CEO Confidence™, which had increased to prerecession highs in the first quarter, declined in the second quarter of 2017.
CEO Confidence declined in Q2, but sentiment about the overall economy remains positive. CEOs’ appraisal of current economic conditions waned, with 60 percent saying conditions were better compared to six months ago, down from 71 percent in the first quarter.
Business leaders were also less positive in their appraisal of current conditions in their own industries. Now, just 47 percent say conditions in their own industries have improved, down from 60 percent last quarter.
Not good but it could be worse. Hopefully we will see a return to the encouraging results from the first quarter. I would say to remain calm…
Financial System of U.S. Rests on Health of Just Five Mega Banks
From Wall Street on Parade:
According to the Federal Deposit Insurance Corporation (FDIC), as of March 31, 2017 there were a total of 5,856 banks in the U.S. operating under its Federal deposit insurance umbrella. But according to government financial researchers, five of those banks pose an ongoing material threat to the U.S. financial system. Not surprisingly, those five banks hold insured deposits for savers while simultaneously engaging in highly leveraged, high risk trading on Wall Street.
Why the hell is this still happening? Obviously, the idiots in DC have a different interpretation of “Too big to fail” than I do…
How Much Does Crime Affect Rent Prices?
Neighborhood safety is closely connected with the number of businesses, access to public spaces, and most notably, rental prices. We all know the friend that’s moved to a “bad” neighborhood because of more affordable rent prices. When searching for apartments, understanding crime rates can make you a more informed shopper. You’ll know if you’re truly getting a deal or if the apartment is just cheap because no one else wants to live there.
So it’s generally understood that rent and crime are connected, but how much do crime rates impact rent prices?
Our analysis confirmed the initial assumption that crime was negatively correlated with rent prices (meaning the higher the crime the lower the prices and vise versa). It also showed us that the full answer is more nuanced. Certain crimes matter more than others, with violent crime and burglary the most negatively correlated when looking at major US cities.
A very interesting must read for anyone looking to buy or rent. My hands are tied due to Fair Housing laws when discussing different areas and crime. This is why buyers must do research on their own when determining areas they would like to call home.
Why Washington Can’t Fix the New Housing Crisis
Donald Trump campaigned on restoring the “American dream,” a 1931 metaphor for economic success that has become political shorthand for homeownership. But as president, Trump faces a unique challenge delivering on that promise: The country is in the grip of a new kind of housing crisis that Washington has virtually no power to solve.
The crisis is a shortage of houses. Nationally, the inventory of homes for sale has been shrinking for 24 straight months, stoking bidding wars for even the lowliest fixer-uppers. In January, a measure of supply hit its lowest in history, according to the National Association of Realtors. That scarcity has helped push the homeownership rate to a near 50-year low. As 83 million millennials approach homebuying age, the shortage is expected to get only worse.
Hopefully, we will see the idiots in Washington work together to help with the limited number of homes for sale. We are already facing a serious shortage of affordable homes in many areas of the country.
If the number of country clubs suddenly became a problem, would our elected officials and policy makers be more concerned?
The Great Unfinished Business of Post-Financial Crisis Reform
Comments from Federal Reserve Governor Jerome H. Powell in a speech earlier this week:
My topic today is the urgent need for fundamental reform of our system of housing finance–the great unfinished business of post-financial crisis reform.
The Federal Reserve is not charged with designing or evaluating proposals for housing finance reform. But we are responsible for regulating and supervising banking institutions to ensure their safety and soundness, and more broadly for the stability of the financial system. A robust, well-capitalized, well-regulated housing finance system is vital to achieving those goals, and to the long-run health of our economy. We need a system that provides mortgage credit in good times and bad to a broad range of creditworthy borrowers.
While reforms have addressed some of the problems of the pre-crisis system, there is broad agreement that the job is far from done. The status quo may feel comfortable today, but it is also unsustainable. Today, the federal government’s role in housing finance is even greater than it was before the crisis. The overwhelming majority of new mortgages are issued with government backing in a highly concentrated securitization market. That leaves us with both potential taxpayer liability and systemic risk. It is important to learn the right lessons from the failure of the old system. We can also apply lessons from post-crisis banking reform. Above all, we need to move to a system that attracts ample amounts of private capital to stand between housing sector credit risk and taxpayers. We should also use market forces to increase competition and help to drive innovation.
It is ironic that the housing finance system should escape fundamental reform efforts. The housing bubble of the early 2000s was, after all, an essential proximate cause of the crisis. Housing is the single largest asset class in our financial system, with total outstanding residential real estate owned by households of $24 trillion and roughly $10 trillion in single-family mortgage debt. While post-crisis regulation has addressed mortgage lending from a consumer protection standpoint, the important risks to taxpayers and the broader economy and financial system have not been robustly addressed.
I see two reasons why this is a good time to address the housing finance system’s shortcomings. First, the economy and the housing sector are healthy. It would be far more disruptive to implement fundamental structural changes during difficult economic times.
Second, memories of the crisis are fading. If Congress does not enact reforms over the next few years, we are at risk of settling for the status quo–a government-dominated mortgage market with insufficient private capital to protect taxpayers, and insufficient competition to drive innovation. There is a serious risk, if not a likelihood, that this state of affairs may persist indefinitely, leaving our housing finance system in a semi-permanent limbo.
Fortunately, we are blessed with a growing menu of reform options available for public vetting. And there appear to be areas of broad agreement among them. One of those plans, or a combination of different features of various plans, might well suffice to move us to a better system. Housing finance reform will protect taxpayers from another bailout, be good for households and the economy, and go some distance toward mitigating the systemic risk that the GSEs still pose.
I am amazed we are still kicking the can down the road when it comes to housing finance reform. This issue needs to be addressed and as Powell points out, now is a great time to do it.
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