Forecasting the future
In years past, the National Association of Realtors (NAR) has taken it on the chin for past Chief Economists painting a rosier picture than reality depicts, but since Lawrence Yun took the reigns, forecasts have appeared to be carefully crafted to most closely match reality. Yun follows the numbers to tell the real estate story, even when it is gloomy.
Today, NAR released their U.S. Economic Outlook outlining their projections for the performance of the American economy from unemployment rates to home sales, with what we feel is a tone of cautious optimism.
Unemployment in 2012
The first forecast that caught our eye is that NAR predicts that in the third quarter of 2011, the unemployment rate will remain at 9.1, unchanged from 2011 Q2, but they forecast that by 2012 Q4, unemployment will drop to 8.8.
While not a major change, it is interesting to note that no wild forecasts of a sharp rise or fall in unemployment is to be seen. Good news doesn’t appear to be in the 2012 forecast for unemployment, which is what we consider to be the largest factor to the weak housing market (no jobs and no job security means no buying or keeping houses).
Dramatic rise in interest rates
NAR predicts a pretty dramatic rise in interest rates after an extremely long time of historically low rates. In 2011 Q2, the 30-year fixed rate was at 4.7%, which they expect to climb to 4.8% in 2011 Q3, all the way up to 5.6% in 2012 Q4. With government regulations changing, this prediction seems quite fair.
Housing to improve?
Housing indicators are all projected to improve by the end of 2012, but only after taking a minor dip in 2011. For 2011 Q2, existing home sales had dipped from Q1, but sales are projected to slowly improve over the next several quarters, with a predicted 10.6% increase between 2011 Q2 and 2012 Q4. With unemployment projected to remain high, this feels a little optimistic, but not dramatically so.
Has the new home sector hit bottom?
NAR also predicts that new home sales and housing starts will improve in 2012 after a slight decline in 2011. Comparing 2011 Q2 with NAR’s projected 2012 Q4, new home sales and housing starts are predicted to rise by 45% each which feels overly optimistic at first, but given the rise in builder confidence, the low inventory rates and the slight recent improvements, it is conceivable that the new home sector could improve at this rate in addition to the dismal performance in recent years. In other words, NAR predicts that the new home sector has hit bottom this year and should improve.
NAR’s most conservative prediction
What we found to be NAR’s most conservative predictions is regarding median home prices. Although NAR predicts new and existing home prices will rise by the end of 2012, the rates of improvement are small. The housing affordability index is also predicted to improve by the end of 2012, both of which spell out better health for the real estate sector.
So, is NAR right?
The forecasting from NAR is interesting and while some economic indicators are predicted to improve drastically, those sectors don’t have anywhere to go but up. Sales and pricing are projected to improve, but NAR’s numbers are cautiously optimistic and in line with what we believe to be possible for 2012.
Is the real estate industry endorsing Carson’s nomination to HUD?
(BUSINESS NEWS) Ben Carson’s initial appointment to HUD was controversial given his lack of experience in housing, but what is the pulse now?
NAR strongly backs Dr. Carson’s nomination
When President-Elect Donald Trump put forth Dr. Ben Carson’s name as the nominee for Secretary of Housing and Urban Development, NAR President William E. Brown said, “While we’ve made great strides in recent years, far more can be done to put the dream of homeownership in reach for more Americans.”
At the time of nomination, the National Association of Realtors (the largest trade organization in the nation) offered a positive tone regarding Dr. Carson and said the industry looks forward to working with him. But does that hold true today?
The confirmation hearings yesterday were far less controversial than one would expect, especially in light of how many initially reacted to his nomination. Given his lack of experience in housing, questions seemed to often center around protecting the LGBT community and veterans, both of which he pledged to support.
In fact, Dr. Carson said the Fair Housing Act is “one of the best pieces of legislation we’ve ever had in this country,” promising to issue a “world-class plan” for housing upon his confirmation…
Job openings hit 14-year high, signaling economic improvement
The volume of job openings is improving, but not across all industries. The overall economy is improving, but not evenly across all career paths.
Job openings hit a high point
To understand the overall business climate, the U.S. Labor Department studies employment, today releasing data specific to job vacancies. According to the department’s Job Openings and Labor Turnover Survey (JOLT) for April, job openings rose to 5.38 million, the highest seen since December 2000, and a significant jump from March’s 5.11 million vacancies. Although a lagging indicator, it shows strength in the labor market.
The Labor Department reports that the number of hires in April fell to 5 million, which indicates a weak point in the strong report, and although the volume remains near recent highs, this indicates a talent gap and highlights the number of people who have left the labor market and given up on looking for a job.
Good news, bad news, depending on your profession
That said, another recent Department report notes that employers added 221,000 jobs in April and 280,000 in May, but the additions are not evenly spread across industries. Construction jobs rose in April, but dipped in professional and business services, hospitality, trade, and transportation utilities. In other words, white collar jobs are down, blue collar jobs are up, which is good or bad news depending on your profession.
Additionally, the volume of people quitting their jobs was 2.7 million in April compared to the seven-year high of 2.8 million in March. Economists follow this number as a metric for gauging employee confidence in finding their next job.
If you’re in the market for a job, there are an increasing number of openings, so your chance of getting hired is improving, but there is a caveat – not all industries are enjoying improvement.
If you’re hiring talent, you’ll still get endless resumes, but there appears to be a growing talent gap for non-labor jobs, so you’re not alone in struggling to find the right candidate.
Economists suspect the jobs market will continue to improve as a whole, but this data does not pertain to every industry.
Gas prices are down, so are gas taxes about to go up?
Do low gas prices mean higher gas taxes are on the way? Budgeting for 2015 just got a bit more complicated, if some politicians have their way.
Gas taxes and your bottom line
Many industries rely heavily on time in their vehicle, not just truck drivers and delivery trucks. Sales professionals hop in their vehicles throughout the day, as do many other types of professionals (service providers like plumbers, and so forth). For that reason, gas prices and taxes are a relevant line item that must be budgeted for 2015, but with politicians making the rounds to push for higher gas taxes, budgeting becomes more complicated.
Gas prices are down roughly 50 cents per gallon compared to a year ago, which some analysts say have contributed to more money in consumers’ pockets. Some believe that this will improve holiday sales, but others believe the timing is just right to increase federal taxes on gas. The current tax on gas is 18.40 cents per gallon, and on diesel are 24.40 cents per gallon.
Supporters and opponents are polar opposites
Supporters argue as follows: gas prices are low, so it won’t hurt to increase federal gas taxes, in fact, those funds must go toward improving our infrastructure, which in the long run, saves Americans money because smoother roads mean better gas mileage and less congestion.
Gas taxes have long been a polarizing concept, and despite lowered gas prices, the controversial nature of the taxes have not diminished.
While some are pushing for complete abolition of federal gas taxes, others, like former Pennsylvania Governor, Ed Rendell (D) tell CNBC, “Say that cost the average driver $130 a year. They would get a return on that investment” in safer roads and increased quality of life, he added.
The Washington Post‘s Chris Mooney points out that federal gas taxes have been “stuck” at 18 cents for over 20 years, last raised when gas was barely a dollar a gallon and that the tax must increase not only to improve the infrastructure, but to “green” our behavior, and help our nation find tax reform compromise.
Is a gas tax politically plausible?
Mooney writes, “So, this is not an argument that a gas tax raise is politically plausible — any more than a economically efficient tax on carbon would be. It’s merely a suggestion that — ignoring politics — it might be a pretty good idea.”
Rendell noted, “The World Economic Forum, 10 years ago, rated us the best infrastructure in the world,” adding that we “need to do something for our infrastructure, not in a one or two year period, but over a decade.”
Others would note that this rating has not crumbled in just a few years, that despite many bridges and roads in need of repair, our infrastructure is still superior to even the most civilized nations.
Regardless of the reasons, most believe that Congress won’t touch this issue with a ten-foot pole, especially leading up to another Presidential campaign season starting next year.
“I think it’s too toxic and continues to be too toxic,” Steve LaTourette (the former Republican congressman best known for his close friendship with his fellow Ohioan, Speaker John Boehner) tells The Atlantic. “I see no political will to get this done.”
Whether the time is fortuitous or not, and regardless of the positive side effects, many point to a fear of voters’ retaliation against any politician siding with a gas hike, so this matter going any further than the proposal stage is unlikely.
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