In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses employment.
- The economy added 175,000 net new jobs in February, thereby bringing total in the past 12 months to 2.2 million. Job creations provide the foundation for a new set of homebuyers and for increased demand for commercial real estate.
- The unemployment rate moved up one notch to 6.7 percent. At its worst a few years ago, the unemployment rate was 10 percent. Though this is progress, there is a bit of murkiness in the unemployment figure because of those who dropped out of the labor force and are not counted. A cleaner measure is the employment rate: the proportion of the working age population with jobs. The employment rate has remained stuck at 58.8 percent, about the same level for the past five consecutive years. Before the recession hit, the employment rate had been about 63 percent. In short, there has been an improvement in the unemployment rate, but absolutely no improvement in the employment rate.
- Construction related jobs have increased by 152,000 in the past year. However, the degree of recovery is very weak considering the massive job cuts that occurred in this sector. Moreover, there appears to be sizable pent-up hiring demand in construction since home building activity has increased by 50 percent from the low of few years ago while the residential construction jobs have increased by only 12 percent.
- The average hourly earnings are beginning to move up. It rose to $20.50 per hour for nonsupervisory jobs. That is up 2.5 percent over the year and the fastest gain since 2010.
- The number of part-time workers who wish to have full-time jobs remains elevated. There are 7 million Americans in this status.
- A total of 91 million Americans are not in the labor force. Retirees, spouses looking after kids, college students, and the disabled are among those not in the labor force. Because of rising population, this figure should also rise over time. However, the pace of increase of the people not working in recent years has been higher than normal.
- Americans are defined not by birth, but by what they can achieve. It is said that common sense and hard work are all one needs to succeed in America. For example, an unschooled drifter named Benjamin Franklin ended up inventing many new things to improve the lives of ordinary people because he was out there working every single day. Not hindered by his parent’s illiteracy, Abraham Lincoln learned to read and write on his own without formal schooling in another example. Andrew Carnegie delivered newspapers in Pittsburgh as a teenager to get ahead and eventually became one of the wealthiest, after gladly leaving the old, stuffy world of Downton Abbey. Harriet Tubman risked her life many times to re-enter slave states in order to help more people gain freedom. Her words: “Even when you are tired, you keep going.” Fewer Americans today appear to live by the same enterprising spirit.
- Previously, we looked at the FHFA and Case-Shiller release focusing on national data trends. Today, we’ll dig a bit deeper to look at more local data at the regional, state, and city or MSA level.
- Monthly FHFA releases data at the Census division level and quarterly it releases state and metro area data. Case-Shiller offers data on 20-cities monthly. Both of these sources confirm the trend seen in NAR measures.
- At the regional level: the most robust home price gains from a year ago were in the West. NAR reported price change of 15.5% in December and 14.6% in January. According to FHFA year over year prices in December 2013 rose 14.9 percent in the Pacific division which includes Hawaii, Alaska, Washington, Oregon, and California and 12.6 percent in the Mountain division which includes Montana, Idaho, Wyoming, Nevada, Utah, Colorado, Arizona, and New Mexico.
- Likewise, NAR data showed the smallest price gains from a year ago in the Northeast (3.5% for the year ending in December and 6.6% for the year ending in January), and FHFA showed a similar pattern. Prices rose 2.7 percent in New England (Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, Connecticut) and 2.1 percent in the Middle Atlantic states (New York, New Jersey, Pennsylvania) from December one year ago.
- State by state data, pictured below, shows more detail. Some states in the South had very robust growth: Florida, Georgia, and Texas, but the region as a whole had more moderate growth because of states with more modest home price growth or mild declines such as West Virginia, Arkansas, and Mississippi.
- Among cities, Case-Shiller reported the biggest year over year gains in Las Vegas, San Francisco, and Los Angeles. Each had more than 20% year over year gains. The smallest gains in Case Shiller’s cities were Cleveland at 4.5 percent and New York at 6.3 percent. While the cities covered differ, NAR saw similar trends with the largest home price gains in the 4th quarter out West in cities such as Sacramento and Las Vegas. NAR also saw substantial home price gains in Atlanta, a city that showed an 18.1 percent year over year gain by Case Shiller’s measure. In the quarterly release, FHFA produced a similar list of the top-20 metro areas. Again, the specific areas covered are different, but many of the top metro areas on FHFA’s list are out West including Modesto (CA), Stockton-Lodi (CA), and Vallejo-Fairfield (CA) as the top 3.
- According to data found in NAR’s annual Profile of Home Buyers and Sellers, home buyers and sellers consistently report they truly rely on referrals from friends and family to find an agent or they use an agent they had worked with before.
- Fifty-four percent of buyers and sixty-four percent of sellers found the agent they worked with either from a personal referral or they used an agent they had worked with before to buy and sell a home.
- Due to this fact, two-thirds of both buyers and sellers only contact one agent before choosing an agent to work with.
- Buyers are being assisted by professional real estate agents and brokers in what is often the most important transaction of their life. Their home purchase is not only the roof over their head or the garden they want to plant, but their nest egg for their future.
- The most important skills and qualities buyers look for are honesty and integrity. The most important factors to sellers are the agent’s reputation, and that the agent is honest and trustworthy.
- Annual data in the Member Profile validates what we hear from buyers and sellers on this point.
- Forty-two percent of member business is from referrals and repeat clients – this increases as the member’s experience in the field of real estate increases, reaching sixty-four percent for those with 16 or more years of experience.
- While many buyers find the home they purchase online, very few find the agent they end up working with online.
Rising home values and an improved economy changed the foreclosure picture dramatically over the last two years. The decline in foreclosures and distressed sales resulted in less downward pressure on prices and more buyer confidence. To find out how your market performed, see the 4th quarter 2013 Local Market Reports.
Here are a few highlights from the reports:
- All 48 of the states in this sample experienced a decline in their foreclosure rates between the 3rd quarter of 2012 and 2013.
- The states with the largest declines were concentrated in areas hardest hit by the market decline, including Arizona and California.
- More than a third of markets bettered the U.S. average of a 25.7% drop in the foreclosure rate between the 3rd quarter of 2012 and the 3rd quarter of 2013.