Every week the Research staff analyzes key data releases and explain what they mean for you and your business. In this update, we give the highlights of the most important data releases for the week of July 25-July 29, 2011, along with graphs that show the latest movement and overall trends.
In a recent study by the Federal Reserve Board of Governors, two authors examine the post-foreclosure experience of U.S. households. In a descriptive analysis, the authors find little evidence to confirm anecdotal suggestions that many people end up living in larger households in order to defray living expenses. Although the changing tenure status from owner-occupancy to renting increases the chance a post-foreclosure household will live in a multifamily structure, the majority of these households still live in single-family housing units. Also, the authors suggest that post-foreclosure individuals move to rental units in denser urban areas, but the new neighborhoods do not seem to be much less desirable.
The extended foreclosure process seems to allow many to stay in their homes long after the foreclosure starts. About half of individuals have not even moved two years after the foreclosure starts, suggesting that the foreclosure process is frequently never completed. Additionally, migration was less likely in judicial states and in those where there was rapid house price appreciation.
Only about 20 percent of post-foreclosure borrowers move far enough to participate in a different labor market. Thus, it appears that post-foreclosure migrants may choose a new location that allows them to stay in the same local job market. The authors find no evidence that post-foreclosure migrants are more likely to remain in the same school district or Census tract, so maintaining ties to a local school seems not to be important in the relocation decision.
Looking at the neighborhood characteristics, post-foreclosure individuals are more likely to move to denser areas with a lower homeownership rate. Their new neighborhoods also tend to have a higher fraction of female-headed households, smaller houses, a shorter average commute time, and lower income, although the magnitude of these differences is very small. On the other hand, the authors find little difference between the post-foreclosure and comparison groups in other measures of neighborhood affluence including educational attainment, racial and ethnic composition, house value, or rent.
To read the full paper, click here.
Each day the Research staff takes a look at recently released economic indicators, addressing what these indicators mean for REALTORS® and their clients. Today’s update highlights jobless claims.
Precious metal prices have been rising fast. It seems both gold and silver are setting new highs with each passing day. Gold is now at $1,620.00 per ounce; silver at $41.00 per ounce. Just 10 years ago, the respective prices on gold and silver were $270.00 and $4.40 per ounce.
People have turned to precious metals for various reasons. Fast economic growth in emerging countries like China, India, Russia, and Brazil have created a new class of high net worth individuals who need some shiny jewels. Some are looking to hedge their bet against potentially high and ruinous inflation. Some are just mistrusting of countries. Europe is shaky, with Greek debt default near certain and Portugal, Italy and Spain getting a possible downgrade on their sovereign debts. The United States is fighting default as well over the raising of debt ceiling. Then where is the safe haven? Naturally for some, it is in precious metals – globally recognized store of value, scarce, and easily portable. It may turn out to be a prudent decision or people unfortunately may be buying at the peak.
Simple math says that silver prices may be running ahead a bit fast. Both gold and silver prices should hold relative value to each other unless there is a sudden increase in industrial use for silver vis-à-vis gold. To my knowledge, that is not the case. But gold prices, which use to command 50 to 70 multiples against silver prices in the past 30 years, are now at multiples of 40 multiples. That is to say, the gold to silver price = $1640/$41, or 40. This means either gold is underpriced or silver is overpriced. I am not an investment advisor, so it is hard to say which reasoning is more correct.
One thing I do know is that another traditional good hedge against inflation and a store of value in times of economic crisis had been real estate. But this time around real estate values are holding low, perhaps due to fresh memories of the harsh painful bubble crash of recent years, or simply inaccessibility of mortgage funds. If inflation fears or global economic uncertainty drags on, however, then one wonders whether people will seek out real estate for investment purposes.
Each day the Research staff takes a look at recently released economic indicators, addressing what these indicators mean for REALTORS® and their clients. Today’s update highlights mortgage applications and durable goods orders.
Each day the Research staff takes a look at recently released economic indicators, addressing what these indicators mean for REALTORS® and their clients. Today’s update highlights the Case-Shiller Index, Consumer Confidence and New Home Sales.
- Buyers who purchased a home in 2010 to use as their primary home were typically the youngest buyers compared to vacation home buyers and investment home buyers.
- Vacation home buyers typically had the highest median household income at $99,500, compared to investment buyers at $87,600 and primary home buyers at $69,600.
- Vacation home buyers are slightly more likely to have at least two income earners, while investment buyers are slightly more likely to have less than two income earners in their household. Primary home buyers are equally split between having two income earners and having only one income earner in their home.
- Investment home buyers are the most racially and ethnically diverse among the types of home buyers—15 percent of investment buyers are Asian or Pacific Islander.
- For more information from the Investment and Vacation Home Buyers Survey, click here.
Each day the Research staff takes a look at recently released economic indicators, addressing what these indicators mean for REALTORS® and their clients. Today’s update highlights the rising prices of gold and oil.
Here in Washington, D.C., the debt ceiling debate continues, with the the deadline for a deal fast approaching. If there is no resolution and the U.S. technically defaults on August 2nd, then the unemployment rate could hit 9.5 percent by year-end, up from the current 9.2 percent. The employment conditions had made some progress with the unemployment rate dipping from a cyclical high of 10.1 percent in late 2009 to 8.8 percent in March of this year, but the very slow economic recovery is doing nothing to push down the jobless rate.
The higher unemployment scenario comes about from higher interest rates for everyone: governments at all levels, businesses, and consumers, including mortgage rates. If global bond investors of U.S. debt become skittish then the supply of loanable funds will shrink and higher interest rates will be required to woo bond investors.
So far, global bond buyers have shown absolute calm. The benchmark 10-year U.S. Treasury borrowing rate is only 3 percent, near historic lows.
By contrast, the borrowing rates by other sovereign governments are as follows:
Some of these differences are attributed to differing inflationary conditions in the respective countries. Japan’s low borrowing cost is due in part to falling prices. Still a higher borrowing cost, for example Italy vis-à-vis Germany, shows the investors’ level of trust that Germany more than Italy will honor its debt commitments. Greece certainly made mistakes in the past, by offering way too many promises as related to government spending versus what the country could reasonably honor. There is no free lunch of easy promises.
Back to the United States. If there is no debt ceiling resolution then it is possible (though not certain) that U.S. interest rates will rise. If the 10-year Treasury borrowing cost goes up to 4 percent, with other no other economic news, then it will shave U.S. economic growth such that the unemployment rate could rise to 9.5 percent by year end.
More specifically, GDP growth in the second half could be in the 1 to 2 percent range. GDP needs to expand by 4 percent to make a steady, meaningful improvement to the job picture. GDP growth of about 2 percent essentially means a neutral economy with an unchanging unemployment rate. Growth of less than 2 percent means a higher unemployment rate. A fresh GDP figure for the second quarter will be released later this week, and I am afraid it could be as low as 1.5 percent. Continuing this pace of sluggishness will be very bad news for job hunters.
- In 2010, based on data from the NAR Investment and Vacation Home Buyers Survey, 73 percent of homes bought were to be used as primary residences, 17 percent as investment properties, and 10 percent as vacation homes.
- Many regions in the country are showing much higher shares of investment home purchases, however during the 2010 time period, there was an influx of first-time buyers and move up buyers from the Home Buyer Tax Credit.
- In 2005, there was the smallest share of primary residences bought, just 60 percent in the last seven years. In 2005, there was also the highest share of investment properties purchased, at 28 percent.
- In 2006, the highest share of vacation homes purchased at 14 percent.
- For more information from the Investment and Vacation Home Buyers Survey, click here.
