Economic Roundup – October 4, 2010
by Robert T. Boyer, Ph.D. on Nov.08, 2010, under Economics
Consumers have money to spend, but are keeping a tight grip on it. That was last week’s word from the Bureau of Economic Analysis, which reported that personal income for August increased just 0.5 percent over July to $59.3 billion, and disposable personal income (DPI) increased $52.0 billion, or 0.5 percent, as well. Personal consumption expenditures (PCE) increased by $41.3 billion, or 0.4 percent, over July.
“Real” DPI (i.e., after taxes) was up 0.2 in August, which marked a turnaround from July’s 0.2 percent decline. Similarly, real PCE was up 0.2 percent.
With income outstripping spending, personal savings (DPI minus personal outlays) was up $661.9 billion in August, compared with July’s $650.0 billion, putting personal savings as a percentage of disposable personal income at 5.8 percent in August, compared with 5.7 percent in July.
An instinct to save is definitely in line with the Conference Board’s report last week that consumer confidence is dipping. The Conference Board’s Consumer Confidence Index retreated in September to 48.5 (the 1985 baseline is 100), down from 53.2 in August. September’s Present Situation Index, how consumers feel about their current financial circumstances, decreased to 23.1 from 24.9. The Expectations Index, how consumers feel about the economy’s future, declined to 65.4 from 72.0 last month.
“September’s pull-back in confidence was due to less favorable business and labor market conditions, coupled with a more pessimistic short-term outlook,” said Lynn Franco, director of the Conference Board Consumer Research Center. “Overall, consumers’ confidence in the state of the economy remains quite grim. And, with so few expecting conditions to improve in the near term, the pace of economic growth is not likely to pick up in the coming months.”
Consumers’ assessment of current conditions also worsened in September with those saying business conditions are “bad” increasing to 46.1 percent from 42.3 percent, and those claiming business conditions are “good” declining from 8.4 percent to 8.1 percent. Those claiming jobs are “hard to get” rose to 46.1 percent from 45.5 percent, while those stating jobs are “plentiful” decreased to 3.8 percent from 4 percent.
Construction spending rounded out last week’s headlines with not unexpected news of declines in August. Spending on private construction was at a seasonally adjusted annual rate of $498.2 billion, down 0.9 percent from July’s revised estimate of $502.6 billion. August’s residential construction was at a seasonally adjusted annual rate of $238.5 billion, down 0.3 percent from the revised July estimate of $239.1 billion.
Early this week look for news on factory orders and inventories (October 4) from the Census Bureau, but the big news will come later in the week when the Federal Reserve releases its monthly report on consumer credit (October 7). The Bureau of Labor Statistics will provide data on non-farm payrolls (October 8 ), hourly earnings (October 8 ) and the average workweek (October 8).
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Economic Roundup: September 27, 2010
by Robert T. Boyer, Ph.D. on Sep.27, 2010, under General
Last week’s housing news led with the Census Bureau’s report that building permits for private housing in August were at a seasonally adjusted annual rate of 569,000, which was 8 percent above July’s revised rate of 559,000. Permits for single-family homes in August were at a rate of 401,000, which was 1.2 percent below the revised July figure of 406,000. In terms of construction, starts on privately owned housing in August were at a seasonally adjusted annual rate of 598,000, which was 10.5 percent above the revised July estimate of 541,000. Starts on single-family homes in August were at a rate of 438,000, which was 4.3 percent above the revised July figure of 420,000.
Sales of new homes were flat for August, with sales of new single-family homes at a seasonally adjusted annual rate of 288,000, which was unchanged from the revised July rate of 288,000. The median sales price of new houses sold in August was $204,700 and the average sales price was $248,800.
While new home sales were flat for August, the National Association of REALTORS® reported last Friday that sales of existing homes increased 7.6 percent in August to a seasonally adjusted annual rate of 4.13 million from July’s revised rate of 3.84 million. NAR’s median price for existing homes for all housing types was $178,600 in August.
NAR chalked up the post-tax credit increase to a very slowly stabilizing housing market: “Home values have shown stabilizing trends over the past year, even as the economy shed millions of jobs, because of the home buyer tax credit stimulus,” said Lawrence Yun, NAR chief economist, in a public statement. “Now that the economy is adding some jobs, the housing market needs to steadily improve and eventually stand on its own.”
This week will have a fairly busy financial calendar with the Conference Board releasing its consumer confidence figures for last month on Tuesday. Only major shifts in consumer attitudes portend sudden shifts in consumption patterns, and not much change is expected with this report.
The Bureau of Economic Analysis will release its personal income and consumption data on Thursday, which is expected to show moderate increases at the most. Flat or near-flat performance in consumer income and spending will mean no risk of inflation, and thus stable interest rates.
On Friday, the Census Bureau will release its data on construction spending for August, and with July’s data (announced this month) at a 10-year low, good news is not expected in that regard. This could be a long-term trend as some analysts do not expect new home construction to bounce back until 2012.
Also on Friday, the auto manufacturers will release their car and truck sales figures, which are a good indicator of consumer demand, given that they typically comprise 25 percent of total retail sales.
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Economic Roundup – 9/19/2010
by Robert T. Boyer, Ph.D. on Sep.23, 2010, under General
Last week we saw rates move significantly but ended the week with rates essentially unchanged. The week’s data began on Tuesday with Retail Sales, which came in better than expected but interest in bonds remained strong as prices seemed to be correcting themselves after selling off the previous week. Wednesday saw big volatility. Tim Geithner spoke before the Senate about China and their slow currency appreciation and Japan weighed in on their potential Yen intervention. Fears surrounding these topics seemed to influence both bond and stock prices.
Thursday was pretty flat as jobless claims were surprisingly down. Producer-level inflation was tame but was slightly above expectations. Friday saw consumer price data come in essentially in line, while consumer sentiment was lower than the consensus. Poor economic conditions around the globe continue to contribute to a rate-friendly market environment. Until employment improves and/or we see rampant inflation pressure rates almost have to stay low.
This week we have a shorter economic calendar. On Tuesday we’ll see housing starts, building permits, and a Federal Open Market Committee (FOMC) announcement. Housing data has been volatile lately, as the expiration of tax credits has manipulated the natural cycle of home buying. This week is full of housing data, so watch for a clearer picture of the state of residential real estate activity. The FOMC announcement is always a highly anticipated event. Even though there is no chance that the Fed will raise the funds rate, we need to watch their statement for changes in language and tone. The Fed is extremely careful and deliberate in their wording of this announcement. Any small changes compared to last month’s text will be noticed, dissected, and acted upon.
On Wednesday no economic data will be released. On Thursday we will see initial jobless claims, as always. We also have existing home sales and leading indicators on the board. There will be a Treasury announcement on Thursday as well, in which the U.S. Treasury will outline its needs for funding via next week’s auctions. Durable goods orders and new home sales data will round out the week on Friday. Durable goods orders are a great indicator of business activity and business investment. Any noise here should be watched closely. New home sales will complete the trifecta of housing construction (starts and permits), sales of existing homes, and sales of newly built homes. As usual, when the data suggests improving economic conditions, increased business activity, and/or healthier home-buying, MBS prices are likely to falter, sending rates higher. On the other hand, data showing slowing growth, decreased business activity, and/or worsening in the housing sector is likely to help MBS prices, allowing rates to go lower.
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Historic Low Mortgage Rates: Seize YOUR Opportunity
by Robert T. Boyer, Ph.D. on Sep.16, 2010, under General
With all the tough gloom and doom talk out there, it might be hard to believe this, but now has never been a better time to buy a home. True, the economy is in recession, but a quick look at the real estate market — and especially a look at home financing history — will clearly demonstrate that if you are looking to buy a home or refinance your existing loan, now is the time to make your move.
For starters, new home prices are down. The Census Bureau, which has tracked new home prices since 1963, shows that the average home price for a new home is on a five-month low, with June’s median price currently at $242,00, down from February’s $284,100 (not to mention the heady days of March 2007, when the average hit $329,400). New home prices haven’t been this low since October 2003.
And while the average sale price for existing homes recently ticked up between April and June, with June at $230,900, they were previously on a downward trend that continued from 2009 into March of this year. Comparatively, the overall average existing home price for 2007 was $266,000 and 2008 was $242,700. It should also be noted that the slight upward trend experienced from April to June could have to do with the homebuyer tax incentive, which came to a close in June, so July’s and August’s statistics could show a move to even more inviting home prices.
Attractive home prices aside, the resoundingly inspiring news lies in current home financing rates. The Federal Home Loan Mortgage Corporation (Freddie Mac) recently reported that mortgage rates were at their lowest level so far this year, and that rates for conventional 30-year, fixed-rate loans were heading to an all-time low. The latest reports from Freddie Mac put 30-year mortgages at 4.72 percent. That is the lowest rate since the week ending Dec. 3, 2009, when it hit a record low of 4.71 percent.
Let’s put this in a historical context. The average interest rate for a 30-year loan was 5 percent over the last 12 months. The average over the last 10 years was 6.13 percent. The highest rate since January 1964 was 18.45 percent in October 1981. The lowest rate since January 1964 was 4.71 last December.
That is some history lesson. No matter how you slice it, today’s home prices and mortgage rates represent an historic opportunity that cannot be ignored. Whether you are seeking to purchase a home or refinance, now is your chance. Let me tell you more about how you can leverage this bright point in the economic gloom.
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Economic Roundup – September 13, 2010
by Robert T. Boyer, Ph.D. on Sep.13, 2010, under Economics
American consumers are using less credit, according to the Federal Reserve, which reported last week that July’s total consumer credit decreased at an annual rate of 1.75 percent. July’s total consumer credit was down $3.9 billion from $2.42 trillion.
The big drop was in credit card use, with revolving credit decreasing at an annual rate of 6.25 percent to $827.8 billion in July from June’s $832.2 billion. This was the 23rd straight monthly drop in revolving credit usage.
In line with the Fed’s findings, a survey from Javelin Strategy & Research found that 56 percent of U.S. consumers used credit cards in 2009, which was well below an early 2007 survey’s findings of 87 percent. That reticence to use credit cards is rooted in the uncertain job market, said Javelin President James Van Dyke.
“People are being extraordinarily cautious because of concerns about a double-dip recession, and jobs not being returned,” Van Dyke told USA Today.
While revolving debt continued its tumble, non-revolving credit loans such as those for cars for July actually increased at an annual rate of 0.5 percent. This most likely reflected an increase in auto sales over the summer.
Meanwhile, July’s trade deficit dropped to $42.8 billion down from $49.8 billion, with exports of $153.3 billion and imports of $196.1 billion, the Bureau of Economic Analysis reported last week. July’s exports were $2.8 billion more than June exports of $150.6 billion. July imports were $4.2 billion less than June imports of $200.3 billion.
The trade deficit news came as the Department of Labor reported last week that first-time unemployment insurance claims for the week ending September 4 were down 27,000 from the previous week. Claims dropped to 451,000, from the previous week’s revised figure of 478,000. This was well below most economists’ expectations.
While the nation’s extremely high unemployment level is anything but good, the narrowing trade gap and increased exports, paired with better-than-expected employment news, could be reason for cautious optimism.
This week, keep an eye out for news on retail sales and business inventories (September 14) and export and import prices (September 15) from the Census Bureau; industrial production and capacity utilization (September 15) from the Federal Reserve; and the producer price index (September 16) and consumer price index (September 17) from the Bureau of Labor Statistics.
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California Real Estate $20,000 Tax Credit Bubble
by Robert T. Boyer, Ph.D. on Sep.10, 2010, under General
California and many other states have just lived through another real estate bubble, this one caused by the extension and expansion of the first time home buyer tax credit giving $8,000 to first time home buyers and $6,500 to existing home buyers. As the April 30 deadline to get under contract drew near, homebuyers anxious to take advantage of the tax credit caused a $20,000 spike in the median home price.
The bubble may have been short lived but, it points out the risks of government meddling. This brief bubble also clearly demonstrates the risks of investing with the crowd. Our contrarian investors with the patience to wait for a great deal have watched all of the price gains of 2010 erased. Now we can let the real market determine home values.
Could prices drop further? Sure. How much? That depends on the local economy. Some areas are improving. With interest rates reduced to historic lows, the best rates in 40-years, the cost associated with increases in interest rates will likely occlude any price decreases. This is a great time for the buy and hold investor who can strike a good bargin.
To keep an eye on important trends for your local real estate market, be sure to visit FinestExpert.com
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Welcome to September… and back to school
by Robert T. Boyer, Ph.D. on Sep.02, 2010, under General
Raking leaves, digging out the sweaters, harvesting the last of your summer garden: This month we prepare for change as summer draws to an end and the crisp cool of autumn descends.
Just the facts …
Also in September …
• Labor Day is celebrated this year on September 6 and is always the first Monday in September, decreed by President Grover Cleveland.
• Canada also celebrates Labor Day.
• The first Labor Day was a rally to fight for eight-hour workdays and better working conditions; at the time, in 1882, many people worked up to 16-hour days. (like I do now)
• The Autumnal Equinox is on September 23 and marks the time when the center of the sun is level with the equator, meaning there is no effective tilt to the Earth’s axis and daylight and nighttime are of approximately equal length.
• Leukemia and Lymphoma Awareness Month
• Grandparents Day — Sept. 12
• Working Parents Day — Sept. 16
• Citizenship Day — Sept. 17
• World Alzheimer’s Day — Sept. 21
• Fall Officially Arrives — Sept. 22
• National Comic Book Day —
Sept. 25
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Join Brian Buffini for a FREE, new event!
by Robert T. Boyer, Ph.D. on Sep.02, 2010, under General
There are a few superb professional mentors / trainers / coaches / etc. out in the world that you must pay attention to because they are just soooo good. Brian Buffini is, in my book, one of these. He is hosting a new even for the real estate professionals this fall. You can get more information here… http://www.buffiniandcompany.com/success-seminar.aspx
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Economic Round-up August 30, 2010
by Robert T. Boyer, Ph.D. on Sep.02, 2010, under Economics
Dominating last week’s financial news was a precipitous plunge in sales of both new and existing homes for the month of July.
Sales of existing single-family homes, townhomes, condominiums and co-ops during July dropped a shocking 27.2 percent to a seasonally adjusted annual rate of 3.83 million units, down from June’s downwardly revised rate of 5.26 million units, according to figures from the National Association of REALTORS®. Existing housing sales in July were the lowest figures on record since NAR’s existing home sales data began in 1999.
Single-family home sales (the lion’s share of existing home sales) dropped 27.1 percent to a seasonally adjusted annual rate of 3.37 million in July, down from 4.62 million in June. This was the lowest single-family home sales rate since May 1995, according to NAR.
Once again, the end of the homebuyer tax credit incentive was chalked up as the main driver in July’s plummet.
“Consumers rationally jumped into the market before the deadline for the home buyer tax credit expired,” said Lawrence Yun, NAR chief economist, who added that the poor sales pace will likely continue for a few months. “Since May, after the deadline, contract signings have been notably lower and a pause period for home sales is likely to last through September.”
While July’s existing home sales were off by an alarming amount, prices continued to hold their line. The median price for all types of existing homes was $182,600 in July, up 0.7 percent from a year ago.
Despite the fact that total housing inventory at the end of July increased 2.5 percent to 3.98 million existing units, which represents a 12.5-month supply at the current sales pace, Yun does not predict a tapering in home prices.
“Over the short term, high supply in relation to demand clearly favors buyers,” he said. “However, given that home values are back in line relative to income, and [given] very low new-home construction [rates], there is not likely to be any measurable change in home prices going forward.”
Sales of new single-family homes during July dropped to a record-low rate of 276,000, which was 12.4 percent below June’s revised rate of 315,000, according to figures released last week by the Census Bureau. This is the lowest rate on record since 1963.
In terms of pricing and inventory, the median sales price of new houses sold during July was $204,000 and the average sales price was $235,300. The estimate of new houses for sale at the end of July was 210,000, representing a 9.1-month supply at the current sales rate.
“A double-digit drop suggests to me that there wasn’t just a tax effect at work in July, but a change in sentiment, a change in the willingness to make such a big purchase,” FTN Financial chief economist Christopher Low told the Los Angeles Times. “It is especially surprising given where mortgage rates were. It is just a reminder of how much work there is still left to do before housing can be deemed healthy again.”
This week, monitor the financial headlines for news on personal income and spending (August 30) from the Bureau of Economic Analysis; consumer confidence (August 31) from the Conference Board; car and truck sales (September 1) from the auto manufacturers; construction spending (September 1) and factory orders (September 2) from the Census Bureau; and the unemployment rate (September 3) and hourly earnings and the average workweek (September 3) from the Bureau of Labor Statistics.
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Economic Round-up August 23, 2010
by Robert T. Boyer, Ph.D. on Sep.02, 2010, under General
Topping last week’s financial news was the increase in unemployment claims. The Department of Labor reported that for the week ending August 14, the advance figure for seasonally adjusted initial claims for unemployment insurance was 500,000, a disappointing increase of 12,000 claims from the previous week’s revised figure of 488,000. This was the highest that claims have been in nine months.
Explanations for the jump included increasing layoffs of state and local government workers, as well as an increase in discharges of military personnel and the layoff of temporary U.S. census workers. Regardless of the explanations, the numbers point to continued employment difficulties for the nation.
On the positive side, the nation could be slowly escaping the recession, according to the latest Leading Economic Index (LEI) data from the Conference Board. The U.S. LEI increased 0.1 percent in July to 109.8, following a 0.3 percent decline in June, and a 0.5 percent increase in May.
The LEI comprises 10 key measures of the economy, such as average weekly hours worked; average weekly initial unemployment claims; manufacturers’ new orders; building permits for private housing; prices on 500 different stocks; and the money supply. As an index, these measures can help signal peaks and declines in the economy. Naturally, the increase, however slight, was welcome news.
“The indicators point to a slow expansion through the end of the year,” says Ken Goldstein, economist at the Conference Board. “With inventory rebuilding moderating, the industrial core of the economy has moved to a slower pace. There appears to be no change in the pace of the service sector. Combined, the result is a weak economy with little forward momentum. However, the good news is that the data do not point to a recession.”
“The LEI is growing at its slowest pace since mid-2009 and it has been essentially flat since March,” added Conference Board economist Ataman Ozyildirim. “However, the index is still well above pre-recession levels and the CEI remains on a rising trend that began in late 2009.”
That said, the new housing market is still shaky, with building permits for new housing in July at a seasonally adjusted rate of 565,000, which was down 3.1 from the revised June rate of 583,000. Authorizations for single-family homes in July were at a rate of 416,000, which is 1.2 percent below June’s revised figure of 421,000.
Likewise, starts on construction for single-family homes in July were at a rate of 432,000, 4.2 percent below June’s revised figure of 451,000. Overall starts for all types of private housing were up 1.7 percent from June, which was encouraging, but below most real estate watchers’ expectations.
This week, monitor the financial news for coverage of existing home sales (August 24) from the National Association of REALTORS®; orders for durable goods (August 25) and new home sales (August 25) from the Census Bureau; gross domestic product (August 27) from the Bureau of Economic Analysis; and consumer sentiment (August 27) from the University of Michigan.
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