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Updated: 48 min 13 sec ago

October Existing-Home Sales Cool but Low Inventory Drives Prices Higher

Wed, 11/20/2013 - 14:24
  • Today NAR released a summary of existing home sales data showing that overall existing home sales fell by 3.2 percent from September to October 2013 but are 6 percent higher than October 2012.
  • The national median existing-home price for all housing types was $199,500 in October, up 12.8 percent from October 2012, which is the 11th consecutive month of double-digit year-over-year increases.
  • Low inventories, a lower distressed sales share from a year ago, and gains in sales at the high end of the market combined with falling sales at the low end of the market were all factors pushing prices higher.
  • Next Tuesday, both Case Shiller and FHFA house price data will be released for September. Based on NAR data for the comparable period, expect Case Shiller to show a 12 to 13 percent price gain while FHFA should show a 7 to 8 percent gain.
  • See the full NAR Existing Home Sales press release here and data tables here.
  • Find a full graphical summary of the data here.

The Latest on Industrial Production

Fri, 11/15/2013 - 10:52

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 the latest data on industrial production.

  • It’s a bit surprising that industrial production fell a notch (falling 0.1%) in the latest month, but is nothing to be worried about.  This series has generally been on an upward trajectory of 2 to 4 steps forward followed by one step back.  Industrial production is up 3.3 percent from one year ago.
  • Today’s data is essentially matching the prior cyclical peak activity right before the big recession in 2008-09.  It’s been a long and steady climb out from the hole but good progress has been made.  However, much of the production increases have been due, it appears, to improved automation and other labor-saving measures.  Jobs in the manufacturing sector are not climbing as fast as production.
  • Home sales have also been making progress but not to the degree of industrial production.  Home sales would need to rise by another 40 percent to get us back to the prior peak in 2005.  This will not happen for at least a decade because the 7 million existing home sales came about from lax credit conditions and fortunately we will not return to bubble lending conditions.
  • One long-term chart to be mindful of is the decline in manufacturing employment even with the rise in production.  Though very painful for the workers involved, it is also a measure of progress for the country.  Just as in agriculture, we have more food even with fewer farmers.  Many bright minds are getting employed in industries such as medical technology, software development, and other new product areas.  No one would have thought of carrying capabilities like watching TV, phone, Hollywood movies, library books, and picture albums on such a small device like an iPhone ten years ago.  But that is progress in life from more production at all levels in older industries with fewer workers.  That is why education and job training to satisfy new industries become ever more important.

Business Activity of REALTORS®

Thu, 11/14/2013 - 15:05
  • Earlier today we took a look at labor productivity.  REALTORS® on average are very productive, and labor productivity across the board has long term ramifications on homebuyers’ purchasing power.
  • In 2012, the typical agent had 12 residential transaction sides—an increase from 10 transaction sides in 2011 and eight in 2010.
  • Additionally, 26 percent of members reported having at least one commercial transaction side. Members who are residential specialists typically had a total of 12 transaction sides overall compared to commercial specialists who typically had a total of 10 transaction sides overall.
  • REALTORS® with two years of experience or less had a median of four transactions, compared to brokerage specialists with 16 years of experience or more who had a median of 13 transactions.
  • The typical member had one transaction side involving a short sale and one transaction involving a foreclosure.
  • REALTORS® are hard working. The typical REALTOR® worked 40 hours per week in 2012, a trend that has continued for several years. Managers and appraisers reported working the most hours, at 50 per week. All other members reported working 40 hours per week.

The Latest on Labor Productivity

Thu, 11/14/2013 - 11:19

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 the latest data on labor productivity.

  • U.S. worker productivity rose in the latest data.  It rose 1.9 percent on an annualized basis, but the latest gain is coming after the declines in the prior quarters.  From one year ago, productivity barely changed, rising by only 0.1 percent.
  • Productivity is a very important gauge of long-term prosperity.  The rapid productivity gains on a consistent basis as happened during the Industrial Revolution in the 1800s in Britain and during the post-War period in the U.S. in the 1950s assured that the younger generation will be living much better than their parents.  In countries like South Korea where productivity increases have been very fast along with the expansion of schooling, the current working generation is earning about 5 times more than their grandparents.
  • It seems more Americans are beginning to doubt whether such prosperity can be passed on to the next generation.  However, productivity data still points to about 1 to 2 percent annual productivity gains in America.  In the last 10 years, from 2003 to 2013, productivity has advanced by 1.9 percent annually.  That means the real income (purchasing power after adjusting for inflation) of a typical American should double in about 40 years.

Foreign-Born Population: An Increasing Potential Base of Homeowners

Thu, 11/14/2013 - 07:27

The foreign-born population accounts for approximately 13 percent of the total U.S. population, up from about 5 percent in 1960.  California, New York, New Jersey, Florida, and Nevada are the top states in which the foreign born comprise approximately 20 percent of the population.

What this means for REALTORS®: U.S. foreign born residents tend to place a high value on homeownership, frequently purchasing homes significantly above the median price.  This is a growing and potentially profitable market, generally with sound prospects for home ownership. Information on the characteristics of the foreign-born is available at http://www.realtor.org/reports/state-by-state-international-business-reports

Characteristics of Home Buyers

Wed, 11/13/2013 - 07:20

The characteristics of home buyers has changed, likely due to tightened credit conditions. There is a higher share of married couples and a suppressed level of single buyers. There is also a lower than historical share of first-time buyers, and higher incomes among buyers in general. Here are two charts that display this trend:

For more information on the 2013 Profile of Home Buyers and Sellers, click here >

Demand for Residential Rental Properties Still Strong

Tue, 11/12/2013 - 07:27

With potential home owners finding it tough to buy their first home, there is still strong demand for rental units, judging by rental price trends. REALTORS® reported rents that are higher compared to a year ago.

Rising rents add an additional incentive for homeownership. Homeownership provides families with enhanced lifestyles—and a chance to cap major parts of their living costs.

What does this mean for REALTORS®? Homeownership advantages for discussion with clients include housing costs (generally less owning a home), quality of life for the family, continued relatively low mortgage rates, and home affordability. Rents continue to go up, and at the end of the lease the renter has a stack of rent receipts as the final product.

The Foreign Born Population: Renters Today, Home Owners Tomorrow

Fri, 11/08/2013 - 09:05

As of 2012, the foreign-born population accounted for about 13 percent of the total U.S. population, up from only about 5 percent in 1960. What are the prospects for homeownership of the foreign born? Data indicate the majority of the foreign-born become homeowners. Foreign-born home ownership is at par with the homeownership rate of native-born U.S. citizens.

The prospects for home ownership of the foreign-born are bright because they are generally well-educated and comparably earn higher incomes.

What this means to REALTORS®: Increasing contact with the foreign-born is becoming more critical given the increasing presence of the foreign-born and their sound prospects for home ownership. Information on the characteristics of the foreign-born is available at http://www.realtor.org/reports/state-by-state-international-business-reports

REALTORS® Expect Prices to Increase Modestly in the Next 12 Months

Thu, 11/07/2013 - 07:27

About 90 percent of REALTORS® responding to the September REALTOR® Confidence Index Survey expect constant or higher prices in the next 12 months (92 percent in August), with the median expected price increase projected at approximately 4 percent [1].

What does this mean for REALTORS®? Market expansion appears to be continuing on a measured basis—not the potential bubble mentioned from time-to-time in recent months.

[1] The median is the middle value. A median expected price change of 4 percent means that 50 percent of respondents expect prices to increase above 4 percent while the other 50 percent expect prices to increase (or decrease) at less than 4 percent.

2013 Profile of Home Buyer and Sellers: Technology Trends

Tue, 11/05/2013 - 13:41

The 2013 NAR Profile of Home Buyers and Sellers was released on November 4, and as it does each year the report examined the demographics, preferences, motivations, plans, and experiences of recent buyers and sellers.

One recent trend discussed is how much consumers now embrace technology during the home search process. Did you know that…

  • Fifty-six percent of buyers start their home search online, 43 percent found the home they ultimately purchased online (edging out all other sources), and 92 percent used the internet at some point during their search process.
  • Forty-five percent of recent buyers used a mobile or tablet website or application during their home search and among those who did 22 percent found the home they purchased online.

Here are a few charts from the Profile that highlight the growth in technology usage over the years:

How Seller Sold Home, 1991-2012

Fri, 11/01/2013 - 08:09
  • The share of home sellers who sold their home without the assistance of a real estate agent was 9 percent. One-third of those sellers knew the buyer prior to home purchase.
  • The primary reason that sellers choose to sell their home without the assistance of a real estate agent to a buyer they did not know was that they did not want to pay a fee or commission (43 percent).
  • One-third of FSBO sellers took no action to market their home, and 60 percent did not offer any incentives to attract buyers.
  • The typical FSBO home sold for $174,900 compared to $210,000 among agent-assisted home sales.

  • For more information on the annual Profile of Home Buyers and Sellers, click here. The 2013 report will be released next Monday, November 4.

The Latest on Unemployment Insurance Claims

Thu, 10/31/2013 - 10:46

n 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 the latest unemployment insurance claims data.

  • The claims in unemployment insurance filed by those starting a period of unemployment continued to normalize with the reopening of the federal government after a two-week shutdown. The seasonally adjusted initial claims for unemployment insurance filed in the week ending October 26 dropped to 340,000 which is 10,000 claims fewer than previous week’s number. In the wake of the shutdown, claims spiked up to 373,000.
  • Fewer number of claims filed means workers are keeping their existing jobs. However, job creation still remains lackluster given the slow pace of economic growth with tighter government spending being the drag on growth.  Yesterday, the ADP – a payroll company that processes payrolls- reported an increase of only 130,000 payroll jobs.
  • In relation to the low job creation, the Federal Operations Market Committee of the Federal Reserve Board released a statement yesterday that the federal funds rate will be kept at 0 to ¼ percent in light of the slow pace of job creation and the absence of inflationary pressure. The Fed statement, however, pointed to a possible tapering before the year end. Mortgage rates are likely to have a hit a monthly low and could steadily rise.

Latest Case Shiller Index

Wed, 10/30/2013 - 09:11

In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. This update discusses the latest Case Shiller price index.

  • Case Shiller data is yet another source confirming that home price increases continued in August 2013. The 10-city and 20-city indexes each rose by 12.8 percent from August 2012. NAR data released last week showed a gain of 13.4 percent in the same period and showed continued but slowing gains of 11.7 percent in the year ending September 2013.
  • While this increase was the 15th consecutive month of year-over-year increases in home prices reported by the 20-city index and the 6th consecutive month of double-digit year-over-year gains, the index remains 20 percent below the peak it reached in July 2006.
  • NAR reports the median price of all homes that have sold while Case Shiller reports the results of a weighted repeat-sales index. Because home sales among higher priced properties have been growing more than among lower price tiers, the NAR median price has risen by more than the weighted repeat sales index—which computes price change based on repeat sales of the same property.
  • Case Shiller uses public records data which has a reporting lag. To deal with the lag, Case Shiller data is based on a 3 month moving average, so reported August prices include information from repeat transactions closed in June, July, and August. For this reason, the changes in the NAR median price tend to lead Case Shiller. NAR data showed decelerating but continued double-digit growth in September, so expect repeat prices to follow suit.
  • Case Shiller reports price indexes for the 20 cities it tracks in addition to the 20-city index. By its measure of prices, Denver and Dallas are the only metro areas to have fully recovered from housing price declines to reach new highs.
  • As seen in other house price measures such as NAR’s, Case Shiller showed the biggest 1-year price growth in western cities such as Las Vegas (29.2%), San Francisco (25.4%), San Diego (21.5%), and Los Angeles (21.7%). The smallest year-over-year gains were seen in the East and Midwest in cities like New York (3.6%) and Cleveland (3.7%).

Median Days on the Market Increases to 50 Days in September

Wed, 10/30/2013 - 07:34

Properties are starting to stay on the market longer. The median days on the market reported by REALTORS® responding to a survey about their transactions in September 2013 indicated an increase in the median days on the market to 50 days (from 43 days in August).

Higher mortgage rates, a slow economic and job recovery, and strict mortgage underwriting standards are reported as causing some of the slowdown.

Short sales were on the market for 93 days compared to foreclosed properties at 43 days and non-distressed properties at 49 days.

What does this mean for REALTORS®? Real estate markets appear to have slowed somewhat but continue to be in relatively good condition.

The Latest on Retail Sales

Tue, 10/29/2013 - 10:49
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 retail sales.

  • The economy has been simply plodding along like a race horse on a muddy track: slow advances with no spectacular feats.  Today’s data on retail sales further confirms this trend.
  • Retail sales modestly fell in September and were up by only 3.2 percent from one year ago, not close to the more normal expansion gains of 5 to 8 percent.
  • Vehicle sales declined a bit.  But this sector had been going strong and is still up by 6 percent from one year ago.  Since the autos and trucks are typically the second most expensive purchase after a house, it is worth noting how this sector is faring to help gauge consumers’ attitude towards major expenditures.
  • Spending on furniture and gardening remained comfortably positive.  However if home sales continue to weaken further then spending in these sectors will be at risk.
  • Today’s data on weakening retail sales, combined with another of today’s data on virtually non-existent producer price inflation and yesterday’s softening pending home sales, provide assurance that the Federal Reserve will continue its active Quantitative Easing for a while longer.  The “tapering” is likely to be postponed until next year.  That means the low mortgage rates will likely stay around through the Thanksgiving holidays and possibly to Christmas.
  • With Halloween just around the corner and costumes on the mind, it is worth noting that the overall sales activity at women’s clothing shops ($3.5 billion) tends to be about five times higher than at men’s clothing shops ($740 million).  Spending patterns reflect differences in taste between the sexes.  Throughout most of history, women’s life expectancy was  notably lower compared to men’s — a complete contrast to what we observe today.  One reason was accusations of witchcraft (another Halloween topic), particularly against women; a well-known example, Joan of Arc, was one such unfortunate victim.    Also every child birth in the not too distant past was always a threat to the mother’s life.  So when we observe women shopping for clothes, take delight in the progress of humanity (and by the way, men overspend compared to women at electronic and video game stores).

REALTOR® Commercial Fundamentals Impacted by Slow Employment in Third Quarter

Tue, 10/29/2013 - 07:20

With lackluster employment growth, third quarter fundamentals in REALTOR® commercial markets maintained a positive trajectory. However, the specter of government shutdown and the budget debate added headwinds to the market performance. The results of the October Commercial Real Estate Market Survey indicated modestly rising absorption and new construction, accompanied by changing vacancies.

Leasing activity increased 2.0 percent higher over the previous quarter. On the supply side, new construction maintained momentum, increasing 5.0 percent over the second quarter. Vacancies declined for industrial and hotel properties. Office vacancies inched up 9 basis points, to 17.8 percent, while retail availability rose 110 basis points, to 15.7 percent. Multifamily vacancy reached 7.3 percent, as new supply entered the market and the residential rental market added competition.

With slower leasing growth, rent concessions registered a bump, leading to a slower increase in rental rates, up 1.0 percent during the third quarter. In terms of space requirements, tenant demand remained strongest in the 5,000 square feet and below, accounting for 88.0 percent of leased properties. Demand for space under 2,500 feet increased noticeably, driving one out of four lease agreements. Lease terms remained steady, with 36-month and 60-month leases capturing over half of the market.

For the full report along with respondent comments, please visit http://www.realtor.org/reports/commercial-real-estate-market-survey.

The Latest on State-by-State Job Growth Rates

Fri, 10/25/2013 - 11:07

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 job growth rates by state.

  • Jobs will become ever more critical in supporting the housing expansion as housing affordability declines.
  • Some states are doing better than others in this regard.  As one would expect, where there are jobs, good stuff is occurring in those states:  retail vacancy rates decline, the state budget situation improves, mortgage delinquencies rapidly fall, wages rise quickly, among others.
  • The following is the ranking of state-by-state in job growth over the past 12 months.
  • North Dakota has been quite amazing in terms of job growth, not only over the past year but over the past 5 years.  It even skipped the recession experienced by the rest of the country.  The state budget surplus is huge.  The unemployment rate is 3 percent, or essentially non-existent.  The starting wage rate at McDonalds to flip a burger is said to be $18 per hour.  The minimum wage mandate becomes non-relevant if the job market is robust.
  • Alaska is the only state with fewer jobs now versus one year ago.  It is unclear what the reasons are.  But don’t feel too much pity, though: Alaska would rank near the top in job growth if viewing it over the past 5 years.

REALTOR® Commercial Sales Rise 10.7 Percent in Third Quarter, Despite Headwinds

Fri, 10/25/2013 - 09:22

With lackluster employment growth, third quarter fundamentals in REALTOR® commercial markets maintained a positive trajectory. However, the specter of government shutdown and the budget debate added headwinds to the market performance. The results of the October Commercial Real Estate Market Survey indicated modestly rising absorption and new construction, accompanied by changing vacancies.

Leasing activity increased 2.0 percent higher over the previous quarter. On the supply side, new construction maintained momentum, increasing 5.0 percent over the second quarter. Vacancies declined for industrial and hotel properties. Office vacancies inched up 9 basis points, to 17.8 percent, while retail availability rose 110 basis points, to 15.7 percent. Multifamily vacancy reached 7.3 percent, as new supply entered the market and the residential rental market added competition.

With sliding vacancies, landlords found fewer reasons to offer rent concessions. In addition, rental rates rose 2.0 percent during the second quarter. In terms of space requirements, tenant demand remained strongest in the 5,000 square feet and below, accounting for 70.0 percent of leased properties. Lease terms remained steady, with 36-month and 60-month leases capturing the bulk of the market.

For the full report along with respondent comments, please visit http://www.realtor.org/reports/commercial-real-estate-market-survey.

REALTORS® Confidence Index Declines in September

Thu, 10/24/2013 - 11:24

The REALTORS® Confidence Index (RCI), an indicator of expectations about the real estate market, slid down again in September. However, confidence about market conditions still remains high relative to the past five years.

What does this mean for REALTORS®? Concern about a possible over-heated housing bubble appear to be misplaced. The economic impact of government fiscal tightening, along with other factors slowing the economy suggests a continued orderly recovery and expansion of the housing markets around the country. All real estate is local—so market experiences will vary. However, overall current expectations currently reflect a modest economic expansion accompanied by relatively normal housing markets.

To view this month’s full RCI report, visit: http://www.realtor.org/reports/realtors-confidence-index

The Latest on FHFA Data

Wed, 10/23/2013 - 13:16

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 second update discusses FHFA data on home prices.

  • FHFA data today confirmed that home price increases continued in August rising by 8.5 percent from August 2012.  Earlier NAR data showed a gain of 13.4 percent in the same period and showed continued but slowing gains of 11.7 percent in the year ending September 2013.
  • While this increase was the 19th consecutive month of year over year increases in home prices reported by the FHFA, the increase remains 9.4 percent below the peak it reached in April 2007.
  • NAR reports the median price of all homes that have sold while FHFA reports the results of a weighted repeat-sales index.  Because home sales among higher priced properties have been growing more than among lower price tiers, the NAR median price has risen by more than the weighted repeat sales index—which computes price change based on repeat sales of the same property.
  • FHFA sources data primarily from Fannie and Freddie mortgages, transactions using prime conventional financing, and misses out on cash transactions as well as jumbo, subprime, and government backed transactions such as those using VA or FHA financing.
  • FHFA releases data at the Census division level and it confirms the trend seen in NAR measures.  The most robust gains from a year ago were in the West.  Year over year prices rose 18.2 percent in the Pacific division which includes Hawaii, Alaska, Washington, Oregon, and California and 13.8 percent in the Mountain division which includes Montana, Idaho, Wyoming, Nevada, Utah, Colorado, Arizona, and New Mexico.  NAR data showed the smallest price gains from a year ago in the Northeast, and FHFA showed a similar pattern.  Prices rose 4.2 percent in New England (Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, Connecticut) and 4.0 percent in the Middle Atlantic states (New York, New Jersey, Pennsylvania) from one year ago.

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