All Eyes On Jobs
The Federal Reserve’s 12-region survey released September 9, 2009, found that economic activity in all but one region was “firm,” “stable” or “showing signs of stabilization.” Only the St. Louis region reported “moderating” declines in the regional economy.
The Fed economists were “cautiously positive” about the economic outlook, with third quarter growth expected between 3 and 4%, even while consumer spending remained soft.
That’s because, for the rest of us, it’s about jobs, not supporting the economy by overusing credit. A continued housing recovery will depend on more than stimulus packages, it will depend on jobs, and they may be slow in arriving.
In a television interview on September 20, 2009, President Obama said that the economy will create jobs through the end of 2009, but not enough to keep up with population growth, or to make up for the job losses occurring earlier this year.
“"I think we'll be adding jobs, but you need 150,000 additional jobs each month just to keep pace with a growing population," the president said. "So if we're only adding 50,000 jobs, that's a great reversal from losing 700,000 jobs [a month] early this year -- but, you know, it means that we've still got a ways to go."
In August, the unemployment rate rose to 9.7 percent, says the Department of Labor Bureau statistics. According to household survey data, the number of unemployed persons increased by 466,000 to 14.9 million. That’s a net loss of about 5.3 million jobs year-over-year from July 2008 to July 2009, which shows an oversupply of available of labor.
Showing an equally grim demand for labor is the number of “open” jobs, which fell 50% over the past two years, says the Labor Department. To put that figure into perspective, there were 6.05 unemployed people for every job opening, compared to the beginning of the recession December 2007, when there were 1.72 people for every job opening.
Job loss is hitting people at all education levels, but it’s hitting unskilled laborers harder. Of those with less than a high school diploma, the unemployment rate was 15.6% in August, 9.7% for high school graduates, and 8.2% for those with some college or an associate’s degree. Those with a college diploma or post-graduate diploma enjoyed a low unemployment rate of 4.7%.
Job loss is impacting the mortgage industry and housing by adding more distressed homes and foreclosed homes to the market.
The National Association of REALTORS® reported in August that July 2009 sales of existing homes increased for the fourth month in a row, largely driven by the first-time home buyer stimulus and artificially low interest rates on benchmark 30-year fixed rate loans at 5.22%, a quarter point lower than June.
However, housing inventories rose 7.3%, with added sales offsetting rising inventories to keep the supply of homes at 9.4 months on hand. Housing prices fell 15.1% year-over-year weighed down by increasing inventories of distressed homes, about 31% of all transactions.
According to the U.S. Treasury’s assistant secretary for financial institutions Michael Barr, more than six million Americans could lose their homes in the next three years. He reported to House Financial Services committee in early September 2009 that only 9% of borrowers eligible to take advantage of the Home Affordable Modification Program had their loans modified, and that some banks had done nothing to help eligible borrowers.
With friends like this, who needs enemies?
The reason distressed homes are adding to the marketplace is job loss. The Mortgage Bankers Association said that one in three foreclosures from April to June were prime, fixed rate loans, up from one in five in Q-2, 2008.
David Lereah, chief economist for REECON, says, “Foreclosed properties usually sell at 10 to 25 percent price discounts compared to non-foreclosed properties, exerting additional downward pressure on a local market’s home values.”
Until we see an improvement in employment, housing prices may flatten or continue to fall. On the bright side, affordability has improved so much that buyers may keep coming to the table.
Blanche Evans is CEO of Evans Emedia, Inc. and publisher of The Evans Ezine. As an award-winning journalist, Blanche has been named one of the "25 Most Influential People In Real Estate" by REALTOR Magazine, and twice recognized as one of the industry's most "Notables."
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