Economist's Commentary: May 22, 2008

Quick Take on the Economy: May 22, 2008

By Lawrence Yun, NAR Chief Economist

The number of new first-time filers for unemployment checks slid modestly in the past week. The latest figure of 365,000 was down 9,000 from the prior week.
Typically, over 400,000 claims on a consistent basis have correlated with an economic recession when the nation's economic production contracts.
The number of people on continuing claims was unchanged at 3.1 million. This figure has not been falling, implying that finding a job after being laid off has become difficult.
There was a large decrease in the New York state. Michigan saw the biggest increase in people turning to unemployment checks.

Home prices measured based on Fannie and Freddie loans showed a decline of 3.1 percent in the first quarter compared to the same time period a year ago.
This decline of 3.1 percent is much less than NAR's measurement, which showed 7.7 percent decline. The 3.1 percent was also much less than as measured by Case-Shiller price index, which is heavily driven by subprime loans and associated foreclosures.
The top performing states with solid price gains were in Wyoming, Utah, Montana, and Texas. The price declines were heaviest in California, Nevada, and Florida (those states that had the biggest price increases during the housing boom). In particular, Merced, Stockton, and Modesto encountered more than a 20 percent price drop over the year.

All real estate is very local. Not only are there big variations across the country, but a rather modest price decline associated with Fannie and Freddie loans imply that neighborhoods with little subprime exposures are holding on fine.
The biggest price declines are in areas and neighborhoods with the greatest subprime loan exposures.
The economy is soft but not out. Though unlikely at the moment, the very high oil price and recent notable fall in home prices and stock prices, however, could tip the economy into a recession.

This is one in a series of commentaries by the Research staff of the National Association of REALTORS®. Read more commentaries >

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