Tag: financial rebound

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Real Estate Market

The Latest Unemployment Rate Fell to 8.4%

The Latest Unemployment Rate Fell to 8.4%

Last Friday, the Bureau for Labor Statistics released their Employment Report for August 2020. The big surprise was that the unemployment rate fell to 8.4%, a full percent lower than what many analysts had forecasted earlier in the week. Though it is tough to look at this as great news when millions of Americans are still without work, the number of unemployed is currently much lower than most experts had projected it would be just a few months ago.

Not Like the Great Depression or Even the Great Recession

Jason Furman, Professor of Practice at Harvard explained:

“An unemployment rate of 8.4% is much lower than most anyone would have thought it a few months ago. It is still a bad recession but not a historically unprecedented event or one we need to go back to the Great Depression for comparison.”

During the Great Depression, the unemployment rate was over 20% for four consecutive years (1932 – 1935). This April, the rate jumped to 14.7%, but has fallen each month since.

During and after the Great Recession (2007-2009), the unemployment rate was at 9% or greater for thirty consecutive months (April 2009 – October 2011). Most economists believe the current rate will continue to fall monthly as the economy regains its strength.

What Happens Going Forward?

The outcome will be determined by how quickly we can contain the virus. In their last Economic Forecasting Survey, the Wall Street Journal reported the economists surveyed believe the annual unemployment rates will be 6.6% in 2021 and 5.5% in 2022. Though that will still be greater than the 3.5% rate that we saw earlier this year, it is lower than the annual rate reported in 2011 (8.5%), 2012 (7.9%), and 2013 (6.7%).

Bottom Line

There are still millions of Americans struggling through this economic downturn. There is, however, light at the end of the tunnel. The unemployment situation did not get as bad as many had predicted, and the recovery is taking place faster than most thought would happen.

 

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The Beginning of an Economic Recovery

The Beginning of an Economic Recovery

The news these days seems to have a mix of highs and lows. We may hear that an economic recovery is starting, but we’ve also seen some of the worst economic data in the history of our country. The challenge today is to understand exactly what’s going on and what it means relative to the road ahead. We’ve talked before about what experts expect in the second half of this year, and today that progress largely hinges upon the continued course of the virus.

A recent Wall Street Journal survey of economists noted, “A strong economic recovery depends on effective and sustained containment of Covid-19.” Given the uncertainty around the virus, we can also see what economists are forecasting for GDP in the third quarter of this year (see graph below):

Q3 GDP Forecast by Leading Economists

Overwhelmingly, economists are projecting GDP growth in the third quarter of 2020, with 5 of the 9 experts indicating over 20% growth.

Lisa Shalett, Chief Investment Officer for Morgan Stanley puts it this way:

“Indeed, the ‘worst ever’ GDP reading could be followed by the ‘best ever’ growth in the third quarter.”

As we look forward, we can expect consumer spending to improve as well. According to Opportunity Insights, as of August 1, consumer spending was down just 7.8% as compared to January 1 of this year.

Bottom Line

An economic recovery is beginning to happen throughout the country. While there are still questions that need to be answered about the road ahead, we can expect to see improvement this quarter.

 

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The Latest Unemployment Report: Slow and Steady Improvement

The Latest Unemployment Report: Slow and Steady Improvement

Last Friday, the Bureau of Labor Statistics (BLS) released its latest Employment Situation Summary. Going into the release, the expert consensus was for 1.58 million jobs to be added in July, and for the unemployment rate to fall to 10.5%.

When the official report came out, it revealed that 1.8 million jobs were added, and the unemployment rate fell to 10.2% (from 11.1% last month). Once again, this is excellent news as this was the third consecutive month the unemployment rate decreased.

BLS Unemployment Rate

There is, however, still a long way to go before the job market fully recovers. The Wall Street Journal (WSJ) put a potential date on that recovery:

“July’s payroll growth, at 1.8 million, still leaves total payrolls 12.9 million lower than in February. And yet if job gains continued at July’s pace, that deficit will be erased by March 2021. If payrolls reclaim their last peak in 13 months, that would be remarkably fast. It took more than six years after the last recession.”

Permanent vs. Temporary Unemployment

During a pandemic, it’s important to differentiate those who have lost their jobs on a temporary basis from those who have lost them on a permanent basis. Morgan Stanley economists noted in the same WSJ article:

“The rate of churn in the labor market remains incredibly high, but a notable positive detail in this month’s report was the downtick in the rate of new permanent layoffs.”

To address this, the core unemployment rate becomes increasingly important. It identifies the number of people who have permanently lost their jobs. This measure subtracts temporary layoffs and adds unemployed who did not search for a job recently. Jed Kolko, Chief Economist at Indeed and the founder of the index reported:

“Core unemployment fell in July for the first time in the pandemic. That’s the good news I was hoping for.”

What about the housing market?

The housing market has continued to show tremendous resilience during the pandemic. Commenting on the labor report, Robert Dietz, Chief Economist for the National Association of Home Builders (NAHB), tweeted:

“Housing continues to rebound in another positive labor market report. Home builder and remodeler job gains of 24K for July. Residential construction employment down just 56.4K compared to a year ago. Total residential construction employment at 2.85 million.”

Bottom Line

We should remain cautious in our optimism, as the recovery is ultimately tied to our future success in mitigating the ongoing health crisis. However, as Mike Fratantoni, Chief Economist for the Mortgage Bankers Association, reminds us: “The pace of job growth slowed in July, but the gains over the past three months represent an impressive rebound during the ongoing economic challenges brought forth by the pandemic.”

 

Contact us:
PHP Houses
142 W Lakeview Ave
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Lake Mary, FL 32746
Ph: (407) 519-0719
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Home Sales Hit a Record-Setting Rebound

Home Sales Hit a Record-Setting Rebound

With a worldwide health crisis that drove a pause in the economy this year, the housing market was greatly impacted. Many have been eagerly awaiting some bright signs of a recovery. Based on the latest Existing Home Sales Report from the National Association of Realtors (NAR), June hit a much-anticipated record-setting rebound to ignite that spark.

According to NAR, home sales jumped 20.7% from May to a seasonally-adjusted annual rate of 4.72 million in June: 

“Existing-home sales rebounded at a record pace in June, showing strong signs of a market turnaround after three straight months of sales declines caused by the ongoing pandemic…Each of the four major regions achieved month-over-month growth.”

Existing Home Sales

This significant rebound is a major boost for the housing market and the U.S. economy. According to Lawrence Yun, Chief Economist for NAR, the momentum has the potential to continue on, too:

“The sales recovery is strong, as buyers were eager to purchase homes and properties that they had been eyeing during the shutdown…This revitalization looks to be sustainable for many months ahead as long as mortgage rates remain low and job gains continue.”

With mortgage rates hitting an all-time low, dropping below 3% for the first time last week, potential homebuyers are poised to continue taking advantage of this historic opportunity to buy. This fierce competition among buyers is contributing to home price increases as well, as more buyers are finding themselves in bidding wars in this environment. The report also notes:

“The median existing-home price for all housing types in June was $295,300, up 3.5% from June 2019 ($285,400), as prices rose in every region. June’s national price increase marks 100 straight months of year-over-year gains.”

The graph below shows home price increases by region, powered by low interest rates, pent-up demand, and a decline in inventory on the market:

Existing Home Prices

Yun also indicates:

“Home prices rose during the lockdown and could rise even further due to heavy buyer competition and a significant shortage of supply.”

Bottom Line

Buyers returning to the market is a great sign for the economy, as housing is still leading the way toward a recovery. If you’re ready to buy a home this year, let’s connect to make sure you have the best possible guide with you each step of the way.

Contact us:
PHP Houses
142 W Lakeview Ave
Unit 1030
Lake Mary, FL 32746
Ph: (407) 519-0719
Fax: (407) 205-1951
email: info@phphouses.com

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Real Estate Market

When Will the Economy Turn Around?

Experts project an economic recovery is in sight, and real estate is positioned to lead the way. Let’s connect to discuss how this rebound impacts our local housing market.

Contact us:
PHP Houses
142 W Lakeview Ave
Unit 1030
Lake Mary, FL 32746
Ph: (407) 519-0719
Fax: (407) 205-1951
email: info@phphouses.com

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Latest Unemployment Report: Great News…for the Most Part

Latest Unemployment Report: Great News…for the Most Part

The Bureau of Labor Statistics (BLS) released their latest Employment Situation Summary last Thursday, and it again beat analysts’ expectations in a big way. The consensus was for 3,074,000 jobs to be added in June. The report revealed that 4,800,000 jobs were added. The unemployment rate fell to 11.1% from 13.3% last month. Again, excellent news as the unemployment rate fell for the second consecutive month. However, there’s still a long way to go before the economy fully recovers as 17.8 million Americans remain unemployed.

Here are two interesting insights on the report:

What about a supposed misclassification?

The BLS addressed this at length in a blog post last week, and concluded by saying:

“Regardless of the assumptions we might make about misclassification, the trend in the unemployment rate over the period in question is the same; the rate increased in March & April and eased in May.”

They specifically noted the issue in the latest report by explaining that if they adjusted the rate for the potential miscalculation, it would increase from 11.1% to 12.1% (which is lower than the adjusted rate of 16.4% last month). They went on to say:

“However, this represents the upper bound of our estimate of misclassification and probably overstates the size of the misclassification error.”

Does the shutdown of parts of the economy skew the unemployment numbers?

Because the uniqueness of 2020 impacts the employment situation in so many ways, each jobs report is now examined with a microscope to make sure the headlines generated by the report accurately convey what’s happening in the job market.

One such analysis is done by Jed Kolko, Chief Economist at Indeed. He believes the extraordinary number of people in the “temporary” unemployed category confuses the broader issue of how many people have permanently lost their job. He adjusts for this when calculating his “core unemployment rate” (which subtracts temporary layoffs and adds unemployed who didn’t search for a job recently).

The bad news is that his analysis reveals that the number of permanently unemployed is still rising (from 4.6% in April to 5.9% last month). The good news, however, is when you use his methodology to look back at the Great Recession, today’s “core unemployment rate” is significantly lower (5.9% versus 10.5% in April 2010).

Bottom Line

Last week’s jobs report was much better than most expected. However, we should remain cautious in our optimism. As the Wall Street Journal explained in their analysis of the jobs report:

“U.S. job growth surged last month, underscoring the economy’s capacity for a quick rebound if businesses continue to reopen and consumers regain confidence. A recent coronavirus spike, however, could undermine trends captured in the latest jobs report.”

 

Contact us:
PHP Houses
142 W Lakeview Ave
Unit 1030
Lake Mary, FL 32746
Ph: (407) 519-0719
Fax: (407) 205-1951
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A Historic Rebound for the Housing Market

A Historic Rebound for the Housing Market

Pending Home Sales increased by 44.3% in May, registering the highest month-over-month gain in the index since the National Association of Realtors (NAR) started tracking this metric in January 2001. So, what exactly are pending home sales, and why is this rebound so important?

According to NAR, the Pending Home Sales Index (PHS) is:

“A leading indicator of housing activity, measures housing contract activity, and is based on signed real estate contracts for existing single-family homes, condos, and co-ops. Because a home goes under contract a month or two before it is sold, the Pending Home Sales Index generally leads Existing-Home Sales by a month or two.”

In real estate, pending home sales is a key indicator in determining the strength of the housing market. As mentioned before, it measures how many existing homes went into contract in a specific month. When a buyer goes through the steps to purchase a home, the final one is the closing. On average, that happens about two months after the contract is signed, depending on how fast or slow the process takes in each state.

Why is this rebound important?

With the COVID-19 pandemic and a shutdown of the economy, we saw a steep two-month decline in the number of houses that went into contract. In May, however, that number increased dramatically (See graph below):

Pending Home Sales (Since 2019)

This jump means buyers are back in the market and purchasing homes right now. Lawrence Yun, Chief Economist at NAR mentioned:

“This has been a spectacular recovery for contract signings and goes to show the resiliency of American consumers and their evergreen desire for homeownership…This bounce back also speaks to how the housing sector could lead the way for a broader economic recovery.”

But in order to continue with this trend, we need more houses for sale on the market. Yun continues to say:

“More listings are continuously appearing as the economy reopens, helping with inventory choices…Still, more home construction is needed to counter the persistent underproduction of homes over the past decade.”

As we move through the year, we’ll see an increase in the number of houses being built. This will help combat a small portion of the inventory deficit. The lack of overall inventory, however, is still a challenge, and it is creating an opportunity for homeowners who are ready to sell. As the graph below shows, during the last 12 months, the supply of homes for sale has been decreasing year-over-year and is not keeping up with the demand from homebuyers.

Housing Supply Year-Over-Year

Bottom Line

If you decided not to sell this spring due to the health crisis, maybe it’s time to jump back into the market while buyers are actively looking for homes. Let’s connect today to determine your best move forward.

Contact us:
PHP Houses
142 W Lakeview Ave
Unit 1030
Lake Mary, FL 32746
Ph: (407) 519-0719
Fax: (407) 205-1951
email: info@phphouses.com

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Should We Be Looking at Unemployment Numbers Differently?

Should We Be Looking at Unemployment Numbers Differently?

The New York Times recently ran an article regarding unemployment titled: Don’t Cheer Too Soon. Keep an Eye on the Core Jobless Rate. The piece suggests we should look at unemployment numbers somewhat differently. The author of the article, Jed Kolko, is a well-respected economist who is currently the Chief Economist at Indeed, the world’s largest online jobs site. Previously, he was Chief Economist and VP of Analytics at Trulia, the online real estate site.

Kolko suggests “the coronavirus pandemic has broken most economic charts and models, and all the numbers we regularly watch need a closer look.” He goes on to explain that the decline in the unemployment number reported by the Bureau of Labor Statistics (BLS) earlier this month was driven by a drop in temporary layoffs. If we strip those out, we’re left with what Kolko calls the core unemployment rate. Many economists have struggled with how to deal with the vast number of temporary layoffs, as a complete shutdown of the economy has never happened before. As the article states, in the last unemployment report:

“73 percent of all unemployed people said they were temporarily unemployed, which means they had a return-to-work date or they expected to return to work in six months. Before the pandemic, temporary unemployment was never more than one-quarter of total unemployment.”

The core unemployment rate handles this issue and also deals with another concern economists have discussed for years: the exclusion of the marginally attached. These are people who are available and want to work, but count as out of the labor force rather than unemployed because they haven’t searched for work in the past four weeks.

Kolko’s core rate does three things:

  1. Takes out temporary unemployment
  2. Retains the rest of the standard unemployment definition: permanent job losers, job leavers, and people returning to or entering the labor force
  3. Adds in the marginally attached

Removing the temporarily unemployed makes sense according to the article:

“Initial pandemic relief efforts focused on money for people to manage a temporary loss of income and funds to keep businesses afloat until they could bring their workers back. The hope and the goal is for the temporarily unemployed to return to their old jobs, rather than have them lose their jobs and have to search for new ones when jobs have become scarcer.”

The Bad News and the Good News

Clearly, the adjustments Kolko makes dramatically impact the way we look at unemployment. The bad news is, using his core rate, there was an increase in unemployment from April to May. The conventional rate reported by the BLS showed a decrease in unemployment.

The good news is that the core rate compares more favorably to the last recession in 2008. Here’s the breakdown:

CORE Unemployment Rate

Bottom Line

The unemployment rate is a key indicator of how the economy is doing. Heading into a highly contested election this November, the BLS report releasing next week will be scrutinized like no other by members on both sides of the aisle. Mr. Kolko’s take is just one additional way to evaluate how unemployment is impacting American families.

Contact us:
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Real Estate Will Lead the Economic Recovery

Real Estate Will Lead the Economic Recovery

With more U.S. states reopening for business this summer, and as people start to return to work, we can expect the economy to begin improving. Most expert forecasts indicate this economic recovery will start to happen in the second half of this year. As we get back to work and the financial landscape of the country begins to turn around, many experts also agree that real estate has the potential to lead the way in the recovery process.

According to Ivy Zelman of Zelman & Associates:

 “Housing will fare better than expected during this severe downturn.”

In addition, CNBC notes:

“Mortgage demand from home buyers shows unexpectedly strong and quick recovery…The quick recovery has surprised most forecasters.”

Robert Dietz, Chief Economist and Senior Vice President for Economics and Housing Policy of the National Association of Home Builders (NAHB) says:

“Overall, the data lend evidence to the NAHB forecast that housing will be a leading sector in an eventual economic recovery.”

One of the big reasons why housing has the potential to be such a driving force is the significant impact it has on the local economy. This impact is particularly strong when a newly constructed home is built and sold. According to a recent study by the National Association of Realtors (NAR), the average new home sale has a total economic impact of $88,416. As outlined in the graphic below, this is a combination of income generated from real estate industries, expenditures, and new home construction.

Average Economic Impact of One Home Sale in the US

With so many unknowns today, especially in the wake of a worldwide pandemic, one known factor is the bright spark the housing market can play in local and national recovery. Buying and selling a home goes well beyond personal growth and satisfaction – it supports our economy as a whole.

Bottom Line

According to experts, the economy will begin to recover in the second half of this year. With real estate as a driver, that recovery may start sooner than we think.

 

Contact us:
PHP Houses
142 W Lakeview Ave
Unit 1030
Lake Mary, FL 32746
Ph: (407) 519-0719
Fax: (407) 205-1951
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Economists Forecast Recovery to Begin in the 2nd Half of 2020

Economists Forecast Recovery to Begin in the Second Half of 2020

With the U.S. economy on everyone’s minds right now, questions about the country’s financial outlook continue to come up daily. The one that seems to keep rising to the top is: when will the economy begin to recover? While no one knows exactly how a rebound will play out, expert economists around the country are becoming more aligned on when the recovery will begin.

According to the latest Wall Street Journal Economic Forecasting Survey, which polls more than 60 economists on a monthly basis, 85.3% believe a recovery will begin in the second half of 2020 (see graph below):

Wall Street Journal Survey of Economists

There seems to be a growing consensus among these experts that the second half of this year will be the start of a turnaround in this country.

Chris Hyzy, Chief Investment Officer for Merrill notes:

“We fully expect the economy could begin to pick up in late June and July with a strong recovery in the fourth quarter.” 

In addition, five of the major financial institutions are also forecasting positive GDP in the second half of the year. Today, four of the five expect a recovery to begin in the third quarter of 2020, and all five agree a recovery should start by the fourth quarter (see graph below):

Major Financial Institutions are Forecasting Positive GDP in the Second Half of the 2020

Bottom Line

The vast majority of economists, analysts, and financial institutions are in unison, indicating an economic recovery should begin in the second half of 2020. Agreement among these leading experts is stronger than ever.

 

Contact us:
PHP Houses
142 W Lakeview Ave
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Lake Mary, FL 32746
Ph: (407) 519-0719
Fax: (407) 205-1951
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