Economic activity remained positive in the fourth quarter of 2011, driven by increased consumer and business spending. With employment showing signs of improvement, the outlook for commercial real estate points to a positive year.
The indexes for buyer and seller traffic, based on information in the Realtors® Confidence Index, have been relatively constant for the past 5 months, probably reflecting current economic conditions. Economists continue to predict continued recovery of the economy, and if the recovery is accompanied with additional net job creation in excess of approximately 125,000 jobs per month on average, then we should see some pickup in the housing markets. At this time job creation is the major issue for most of the American public: modest economic growth without significant job creation does not appear to help the large number of people currently unemployed.
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 factory 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 Home Price Index.
After blowout budget deficits, it is understandable that some people want to reduce the role of government. However, now is not the time to reduce the limit on government-backed mortgages, which is a decision set to take place at the end of this month. A recovery in housing is the key to broader economic recovery. A home price recovery is the key to small business job creation, because housing equity has been an important source of funds in starting small businesses. Small business start-ups, not surprisingly, have been exceptionally low in the past three years just as housing equity was getting crunched. Home prices have returned to fundamentally justifiable levels, if they have not overcorrected, in just about every local market.
Undue obstacles to the housing recovery should not be put in place just as there are signs that the housing market is starting to stabilize – exemplified by several consecutive months of national home price gains and modest home sale increases. Yet the lowering of the loan limit is an obstacle to recovery.
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 discusses jobless claims and the FHFA House Price Index.
The August 2011 Realtors® Confidence Index survey reports that housing market indicators were basically unchanged in August:
- Distressed property sales continued in the low 30 percent range, moving from 29 percent of residential sales in July to 31 percent in August.
- The percentage of homes on the market for six months or more fell from 30 percent in July to 26 percent in August.
- Rising apartment rents were reported by 50 percent of Realtors®.
- 54 percent of Realtors® projected constant or rising prices for the forthcoming year, down from 55 percent in July.
- Overall Realtor® confidence in current single family market conditions was basically unchanged, falling to 31 from 31.3 in July.
Implications for Realtors®: Despite the negative economic news and major drop in consumer confidence in August, market indicators for the residential real estate markets remained approximately constant. This shows some potential underlying strength in the residential markets—suggesting that we are near the bottom if we can get some economic expansion.
- Between 2007 and 2011, there were almost 3 million more doubled-up households.
- According to David Johnson and the Census Bureau data, the number and share of doubled-up households and adults sharing households across the country increased over the course of the recession. The “doubled-up” households are defined as those that include at least one “additional” adult, a person age 18 or older who is not enrolled in school and is not the householder, spouse or cohabiting partner of the householder.
- In spring 2007, there were 19.7 million doubled-up households, amounting to 17.0 percent of all households. In the spring of 2011, the number of such households jumped to 21.8 million, or 18.3 percent. In total, 61.7 million adults, or 27.7 percent, were doubled-up in 2007, rising to 69.2 million, or 30.0 percent, in 2011.
- Young adults were especially hard-hit, with 5.9 million people ages 25 to 34 living in their parents’ household in 2011, up from 4.7 million before the recession. The remaining 14.2 percent of young adults lived in their parents’ households in March 2011, up more than two percentage points over the period.
- These young adults who lived with their parents had an official poverty rate of only 8.4 percent, since the income of their entire family is compared with the poverty threshold. If their poverty status were determined by their own income, 45.3 percent would have had income falling below the poverty threshold for a single person under age 65.
- This data is available from the Annual Social and Economic Supplement to Current Population Survey. For more information: http://www.census.gov/cps/.
There are some markets with fewer jobs this year compared to last, a situation which is not helping the local housing market despite very high affordability conditions. However, there are also many markets that added jobs on net over the past 12 months. In fact, in total there are 1.3 million more jobs in the country as measured by asking companies about their payroll count – which is known as payroll employment. By another measure, taken by asking households whether they are working or not, there are 360,000 more people working – which is known as household employment. However, even in the job-creating markets, consumers have been hesitant to make a major purchase like buying a car or a home. Nonetheless, continuing job additions in the aggregate should lead to higher home sales at some point.
Signs Point to a Broad Spring Improvement
Employment growth has improved, consumer confidence reflects growing optimism, and affordability is at record levels driven by sub-4% mortgage rates. The spring market is nearly here and there is much anecdotal evidence that it will be stronger than recent history. One indicator, foot traffic, is the strongest that it has been in several years.
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