New housing starts data
It must be noted that traditional news outlets continue to take housing stats out of context and call it good news or bad news without looking at all the pieces of the puzzle. Today, the U.S. Commerce Department released permit data and housing starts numbers for May (which look good), yet the National Association of Homebuilders (NAHB) released their builder confidence study for June which took a nosedive. Regardless, talking heads are saying in one day that permits are up so housing must be stabilizing yet on another day saying that builder confidence is down and we’re in for a bumpy ride. The truth is that the pendulum is still swinging and there are signs of national housing stabilizing but we’re still experiencing the bounce so we can’t say for sure one way or another (although we can say housing is currently a mess).
Permits for housing construction rose in May at the highest rate since December 2010, up 8.7% from April while construction of single family homes rose nearly 4%, both numbers beating economists predictions. Projections were for a continued dip in permits and starts, but with a blip up, all eyes are back on new home construction which is showing signs not of a healthy recovery but of a possibility that it might survive.
There is a major difference between recovery and survival, just visit an emergency room to see for yourself what a recovery from a sprained ankle looks like versus someone who just survived a massive auto collision- one wasn’t bad to begin with while the other was nearly catastrophic and doesn’t make any promises for what the long term recovery will look like (but you know it won’t be pretty).
Builder confidence levels contradict
Traditional news outlets are calling builders “hopeful” but the NAHB reports that after six months of builder confidence numbers “holding low but steady,” June saw a decline of three points in the builder confidence index with the biggest dip being in builders’ expectations of their sales over the next six months. That’s a far cry from hopeful, that’s a very conservative view that is less than optimistic and is in the full swing of survival mode. Remember, the U.S. Commerce Department is a month behind the NAHB survey, so the sentiment is more current than the building stats.
“Builder confidence has waned even further as economic growth has stalled, foreclosures have continued to hit the market and the cost of building a home has risen,” agreed NAHB Chief Economist David Crowe. “Meanwhile, potential new-home buyers are being constrained by difficulty selling their existing homes, stringent lending requirements, and general uncertainty about the economy. Economic growth must pick up in order for housing to gain the momentum it needs to get back on track.”
Various news anchors continue to point to foreclosure data as a sign of a recovering housing market and continue to fail to see all of the moving pieces. It is true that RealtyTrac data out this morning reveals an eighth month in a row of declines with filings dropping 2% from April and an impressive 33% year-over-year. The number of homes actually repossessed in May fell 4% from April and 29% year-over-year.
These numbers look good, but don’t take into account why this process has slowed down. We’ll give you a hint- it isn’t because employment is any better or because consumer confidence is up. No, it’s because the big banks have kinked the hose of the flow of foreclosures in light of the robosigning debacle (where banks didn’t manually review documents before foreclosure leading to illegal foreclosures on wrong addresses, homes paid in full and various other mistakes) as many states attorneys general and federal agencies are investigating the banks’ processes, putting a hamper on how quickly papers are/were being processed.
James Saccacio, the CEO of RealtyTrac, agrees, saying that the declines are likely due to lingering effects of the robo-signing scandal, which broke last September.
When the robosigning scandal is laid to rest and manual review of foreclosure documents are implemented once again, the kink in the hose will be released and the market will see an increase once again, consisting of the backlogged foreclosures.
Media, you can’t keep making soundbites
CNN Money called the housing starts a “glimmer of hope” for builders but is dead wrong. Builder confidence levels (along with the entire new home construction picture alongside housing as a whole) are down and builders don’t believe sales will do well this year. “Glimmer of hope” is so far off, it’s not even funny. Traditional media, you can’t spin individual housing stats into soundbites, it’s like grabbing a number in space- there’s no context or regard for the bigger picture.
Traditional media has never been more disconnected from reality when it comes to housing and their continued use of a single stat as a soundbite translated into good or bad as they arbitrarily see it without regard to hundreds of other moving parts is simply irresponsible.
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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