Sunday, October 2, 2011
MARKET TRENDS: Real Estate Outlook: Jobs Key to Recovery
Jobs are more than a pressing concern in today's economy. Their rebound is inextricably linked to a housing recovery. Even President Obama's proposed jobs legislation includes $15 billions dollars allotted towards the purchase and refurbishment of vacant and foreclosed homes. These homes will then be sold at no profit, or at the price it cost to acquire and fix up.
Fewer jobs means less construction. The U.S. Commerce Department reports that nationwide housing starts declined a full 5.0 percent in August. While the majority of the declines were seen on the multi-family housing side of the equation, it shows builders are holding off for the time being.
The Bureau of Labor Statistics shows that while the economy is adding jobs, it's at a rate too slow for a true recovery. The hiring rate in July was at its lowest level since last Fall. The unemployment rate remains near 9.1 percent, though many areas are experiencing much harsher trends.
The numbers were "consistent with NAHB's forecast for the quarter, and are in keeping with the anemic economic and job growth we are seeing across most of the country," said NAHB Senior Economist Robert Denk. "That said, we continue to anticipate modest gains in new-home production through the end of this year with greater momentum building into 2013, and some pockets of improvement are already evident in about a dozen metros nationwide."
Builder confidence dipped, according to the NAHB, in September, but has held relatively steady for the past 6 months. Unfortunately, it has held steady at a depressed rate.
"The fact that the HMI continues to hover within such a narrow, low range reflects builders' awareness that many consumers are simply unwilling or unable to move forward with a home purchase in today's uncertain economic climate," added NAHB Chief Economist David Crowe. "While some bright spots are beginning to emerge in about a dozen select metro areas, the broader picture remains fairly bleak due to the weak economy and job market."
Builders face some steep challenges and are especially concerned in the West, which posted a 3 point decline in confidence in September. The Midwest was the only region seeing sunnier builder confidence. "Very little has changed in terms of housing market conditions so far this year," said NAHB Chairman Bob Nielsen, a home builder from Reno, Nevada. "Builders continue to confront the same challenges in accessing construction credit, obtaining accurate appraisal values for new homes, and competing against foreclosed properties that they have seen for some time. Beyond this, both builder and consumer confidence took a hit in recent weeks with the market disruptions caused by the S&P downgrade and congressional gridlock on the budget deficit."
The good news is that existing-home sales were up in all regions for the month of August, according to the National Association of REALTORS®. Nationwide existing-home sales rose 7.7 percent. This was despite Hurricane Irene interrupting normal business transactions.
Lawrence Yun, NAR chief economist, said there are some positive market fundamentals. “Some of the improvement in August may result from sales that were delayed in preceding months, but favorable affordability conditions and rising rents are underlying motivations,” he said. “Investors were more active in absorbing foreclosed properties. In additional to bargain hunting, some investors are in the market to hedge against higher inflation.”
Regionally, the biggest increase was seen in the West, up 18.3 percent for the month and 20.6 percent higher than August 2010. The Midwest rose 3.8 percent. The South was up 5.4 percent and the Northeast posted a 2.7 percent gain and is 10.0 percent above August 2010.
Prices continue their downward trend, with median home prices down in all regions compared to August 2010. The West saw the largest decline, falling 13.0 percent from a year ago
Carla Hill Realty Times September 26, 2011