Finding the relief valve
Positive underlying economic factors are helping relieve a pent-up housing demand, according to a presentation at the National Association of Realtors (NAR) Midyear Legislative Meetings & Trade Expo.
NAR Chief Economist Lawrence Yun said there are many improving factors that are helping home sales. “Historically high housing affordability conditions, ongoing job creation, a solid stock market recovery, rising rents, a larger pool of qualified renters, a pent-up demand and improving confidence are drawing buyers to the market.”
“Smart money, largely from investors responding to low home prices and rising rents, is chasing real estate, and we could see a potential surge once the broad perception of homeownership changes to that of an appreciating asset,” Dr. Yun continued. “We just finished the strongest first quarter for home sales in five years, pending contracts are pointing to a strong second quarter, and the favorable conditions are helping the economy recover from an unusual slowdown in household formation in recent years with more young people now leaving their parents’ homes.”
Mixed housing indicators
Despite a minor gain in total home sales last year, owner-occupied sales fell. “A recovery in investment- and vacation-home sales and a high proportion of all-cash deals are hiding the current dysfunctional mortgage market,” Dr. Yun said.
Dr. Yun continued, “Tight mortgage credit is holding back a stronger recovery. Banks are hoarding cash, possibly from regulatory uncertainties and lawsuits.”
A positive forecast
In recent months, AGBeat had reported that the NAR had shifted their wording and forecast from very cautiously optimistic to a loosening of the tie, revealing a more optimistic outlook.
Home sales had been basically flat from 2008 through 2011. Dr. Yun forecasts 4.6 to 4.7 million existing-home sales in 2012, up strongly from 4.26 million last year, and additional improvement in 2013 with sales rising to the range of 4.7 to 4.8 million.
Mortgage interest rates are projected to rise gradually and then average 4.9 percent in 2013 – still historically favorable. “The pressure of rising rents on consumer inflation could force the Federal Reserve to raise interest rates in 2014, which might be good for home sales. Refinancing would fall and bank staff would be able to focus more on mortgage origination for home purchases,” Dr. Yun said.
Other economic indicators
The NAR says inflation is currently under control as the Consumer Price Index rose roughly 2.4 percent this year and is projected to increase another 2.8 percent in 2013.
Dr. Yun expects the Gross Domestic Product to grow 2.4 percent in 2012 and 3.1 percent in 2013, adding 2.2 million jobs this year and 2.5 million in 2013.
Housing starts, which have been well below the long-term average of about 1.5 million, are expected to rise to 770,000 this year from 610,000 in 2011, and to continue growing to 970,000 in 2013.
New-home sales are seen at 400,000 this year, up from a record low 306,000 in 2011, and rising to 530,000 in 2013. “With a growing population, we could see housing shortages in 2014 or 2015 if builders don’t increase production,” Yun said.
A sustained decline in housing inventory – both for listed homes and “shadow inventory” of those with seriously delinquent mortgages – is the biggest factor affecting home prices, with broadly balanced conditions developing in much of the country. Dr. Yun said the median existing-home price is likely to improve modestly this year, rising just over 1 percent, with a gain of about 3 percent forecast for 2013.
Dr. Yun’s forecast assumes no adverse Washington policy or tax changes affecting homeownership. He adds there would be significant economic fallout if there is no new budget compromise by the end of the year.
Raven Molloy, Senior Economist at the Federal Reserve Board of Governors in Washington, D.C., offered her personal assessment on one residential trend. “Internal migration in the United States is at a 30-year low, and has been declining since the 1980s,” she said. “The widespread nature of the decrease suggests that the drop in mobility is not related to demographics, income, employment, labor-force participation, or homeownership.”
According to Molloy, most short-distance moves are housing related, such as needing a larger home, while most long-distance moves are job related. Younger households move more frequently.
Her research shows the downtrend in mobility has been a fairly steady trend over time, with no sharp drops coinciding with the housing market downturn or economic recession. Although renters move much more frequently than homeowners, the aging of the population may be a factor in the general slowdown.
Molloy notes that migration out of states with many underwater homeowners has not fallen more than in other states. However, other research shows that local moves are lower for underwater homeowners.
Migration within the U.S. remains higher than it is within most other developed countries.
Migration and macroeconomic performance
Molloy said the link between migration and macroeconomic performance has received relatively little attention.
“High levels of migration may reduce commitment to the provision of local public goods or corrode social ties in other ways, in which case lower mobility might raise aggregate well-being and possibly economic output,” said Molloy. “This is an important topic for future research.”
Boomers retirement may be the true reason behind the labor shortage
(ECONOMY) Millennials and Gen Z were quick to be blamed for the labor shortage, citing lazy work ethic- the cause could actually be Boomers retirement.
In July, we reported on the Great Resignation. With record numbers of resignations, there’s a huge labor shortage in the United States. Although there were many speculations about the reasons why, from “lazy” millennials to the number of deaths from Covid. Just recently, CNN reported that in November another 3.6 million Americans left the labor force. It’s been suggested that the younger generations don’t want to work but retiring Boomers might be the bigger culprit.
Why Boomers are leaving the labor force
CNN Business reports that 90% of the Americans who left the workplace were over 55 years old. It’s now being suggested that many of the people who have left the labor force since the beginning of the pandemic were older Americans, not Millennials or Gen Z, as we originally thought. Here are the reasons why:
- Boomers are more concerned about catching COVID-19 than their younger counterparts, so they aren’t returning to work. Boomers are less willing to risk their health.
- The robust real estate market has benefitted Boomers, who have more equity in their homes. Boomers have more options on the table than just returning to work.
- Employers aren’t creating or posting jobs that lure people out of retirement or those near retirement age.
As Boomers retire, how does this impact the overall labor economy?
According to CNN Business, there are signs that the labor shortage is abating. Employers are starting to see record number of applicants to most posted jobs. FedEx, for example, just got 111,000 applications in one week, the highest it has ever recorded. The U.S. Bureau of Labor Statistics projects that the pandemic-induced increase in retirement is only temporary. People who retired due to the risk of the pandemic will return to work as new strategies emerge to reduce the risk to their health. With new varients popping up, we will have to keep an eye on how the trend ultimately plays out.
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.
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