I thank everyone for their understanding and emails regarding my security and safety issues from the last week. More legal maneuvering this week, but not intrusive enough that I can’t write my blog...
Employment Report
Payroll employment (based on company survey data) fell 80,000 in March. The data was revised lower for prior months, so there have now been 3 straight months of job cuts totaling 232,000. Over a 12-month span, only 536,000 jobs have been added - compared to 2 to 3 million one-year job additions that would normally occur under normal conditions.
Household employment (based on a survey of asking people if they have jobs) fell by 24,000.
The unemployment rate increased to 5.1 percent from 4.8 percent the month prior. The labor force - the number of people searching for jobs -increased by 410,000 during the month.
The construction sector took a big hit with 51,000 fewer payroll jobs and the manufacturing sector continue to bleed with 48,000 fewer jobs. The manufacturing sector has shed nearly 4 million jobs in the past 10 years.
Jobs in the service sector rose modestly by 13,000. But the higher paying jobs in the Professional Business Service fell by 35,000 - these are the jobs that most impact office net absorption.
Big job gains occurred in Education and Health Services, where 42,000 jobs were added. Government jobs rose by 18,000.With the weakening job market, the wage growth also slowed to $17.86, a 3.6% increase from one year ago.
Yesterday's data on first-time and continuing jobless claims had increased notably and took place after the surveying period of today's overall report on employment. That means, that job cuts will most likely continue in the next month's employment report.
Any good news in the data? (1) Household employment figures had been falling steeply in the past few months, but the latest decline is much more modest and household employment has shown a bit of leading information in the past about payroll employment trends; (2) slower wage growth means lower inflationary pressure, which in turn, permits more easing room for the Fed to cut interest rates
What does today's data mean for consumers?
This employment report is the most closely watched economic data. On jobs, we are in a recession. Production wise, we are very close to recessionary conditions - because companies are squeezing additional output with fewer workers.
Recession is certainly not good news. However, the housing market performed well in the last recession due to exceptionally low interest rates. Though we currently also have low rates, the confidence issue is likely to be a bigger factor this round and recession does not help.
There is a better chance for legislation on tax credits for homebuyers.
(National Association of REALTORS, 4/4)
Bankruptcies Increase 30% in March, Led by California, Housing-Bust States - The jump in March bankruptcy filings is another indication the U.S. economy is in recession, led by states where the housing boom turned to bust. (Bloomberg, 4/5)
Lenders Overwhelmed by Foreclosures Let Delinquent Borrowers Stay in Homes - Banks are so overwhelmed by the U.S. housing crisis they've started to look the other way when homeowners stop paying their mortgages. (Bloomberg, 4/4)
U.S. Homebuilders Rise to Highest Since September on Outlook for Recovery - U.S. homebuilders rose to the highest in more than six months this week on the prospect that lower prices and interest rates will help the industry recover. (Bloomberg, 4/4)
Senate takes up $15 billion housing fix - The Senate began debate Thursday on a $15 billion bipartisan housing relief package that could get a final vote by next week. The proposed measures include funding to help borrowers refinance unaffordable loans and help boost activity in neighborhoods with properties in foreclosure. Also in the bill is a tax break for homebuilders, as well as a new tax credit and deduction for homeowners and home buyers. The package also contains measures to make loans that are insured by the Federal Housing Administration - which helps borrowers with weak credit or little or no cash for a downpayment - more accessible. (CNNMoney, 4/3)
Rates on 30-, 15-year mortgages rise - Rates on 30-year and 15-year mortgages rose this week, delivering another dose of unwelcome news to the troubled housing industry. 30-year fixed-rate mortgages averaged 5.88% for the week ending April 3. That was up from last week's 5.85% and was the highest since the middle of March, when 30-year rates stood at 6.13%. The increase in mortgage rates also isn't welcome news to prospective home buyers in an environment where obtaining financing to buy a home or other big-ticket items has become more difficult. Rates on 15-year, fixed-rate mortgages, a popular choice for refinancing, rose this week to 5.42%, up from 5.34% last week. However, rates on shorter term mortgages dipped this week For five-year adjustable-rate mortgages, rates dropped to 5.59% this week, from 5.67% last week. And, rates on one-year, adjustable-rate mortgages averaged 5.19% this week, down from 5.24% in the prior week. The mortgage rates do not include add-on fees known as points. For 30-year and 15-year mortgages as well as one-year adjustable-rate mortgages the nationwide average fee was 0.5 point. Five-year mortgages carried a 0.6 point average fee. (CNNMoney, 3/3)
America’s riskiest real estate markets (Forbes)
Using data from a variety of sources, Forbes has compiled a list of the nation’s “riskiest” real estate markets – which includes San Diego and Sacramento. But, the magazine concludes, there are signs that improvement may be on the horizon for these two major California markets.
MAKING SENSE OF THE STORY FOR CONSUMERS:
The riskiest markets are those with high foreclosure rates, slow or no job growth, and a glut of homes on the market. Markets like Detroit, Cleveland, and Miami display all three characteristics.
By contrast, transactions are rising in San Diego, and that’s a good sign assuming the increase is sustained. Rising transaction numbers may mean credit is becoming easier to come by and buyers are looking somewhat more favorably on the market. In fact, Forbes suggests prices also may begin to rise over the next six months. That’s because there usually is a lag between increases in transaction numbers and price increases.
The Forbes report also projects better times ahead for San Diego and Sacramento thanks to a 125 percent increase in Fannie Mae/Freddie Mac conforming loan limits. In San Diego, the report notes, 18 percent of the market will see improved lending conditions.
Report: Housing slump hitting second homes (Dallas Morning News)
Vacation home sales declined by more than 30 percent in 2007 and home sales to investors fell more than 18 percent from the previous year, according to a report issued Friday by the NATIONAL ASSOCIATION OF REALTORS®.
MAKING SENSE OF THE STORY FOR CONSUMERS:
Sales of primary residences dropped 10 percent nationally over the same period, so it is no surprise that second-home and investment purchases, which tend to be discretionary, would fall as well.
Second home and investment property buyers also have faced the same disruption in the mortgage market that buyers of primary residences have faced. Mortgage credit tightened across the board during the last six months of 2007, creating a significant barrier to the completion of second- and investment-home sales.
Despite the decline in sales, the median price of investment properties remained unchanged at $150,000 and vacation home prices fell by only 2.5 percent from 2006 figures to a median price of $195,000.
Even with a softening in second/investment home sales, buyers remain optimistic: 80 percent of those surveyed by NAR in 2007 said they considered it a good time to invest in real estate.
Banks fail to lower mortgage rates as Bernanke cuts (Bloomberg)
Though they’ve received seven interest rate cuts and a program designed to kick-start borrowing, banks are rebuilding their balance sheets rather than passing on the cuts to consumers in the form of lower interest rates.
MAKING SENSE OF THE STORY FOR CONSUMERS
With home sales continuing to fall, policy-makers have shaved 3 percentage points off of bank borrowing costs, but the average fixed rate has dropped only half a point. Last week, the rate for a 30-year-fixed loan was 5.85.
In 2000, the last time home sales fell year over year, interest rate cuts helped revive the market. During 2001, the Federal Reserve acted 11 times to reduce rates by a whopping 4.75 percentage points. Fixed rates fell to a record low of 5.21 percent in June 2003.
Because they have been holding steady at just below 6 percent in recent years, interest rates would have to fall to 5.7 percent or less to stimulate a wave of home purchase or refinance activity, according to one mortgage broker.
(Source: California Association of REALTORS)
Sources: CNNMoney, California Association of REALTORS, National Association of REALTORS, Bloomberg.com
