THE INFORMATION PRESENTED IN THIS ARTICLE IS FOR EDUCATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSIDERED LEGAL, FINANCIAL, OR AS ANY OTHER TYPE OF ADVICE.
Inheriting a property is a bittersweet experience. Although an inherited house might mean acquiring a house that could drastically improve your life, it also means that a loved one has passed. There’s a lot to consider if you don’t want it, like knowing if you should sell an inherited house or not.
Grieving is a difficult process, and dealing with your newly acquired property might be the furthest thought from your mind. However, it’s important to manage your inherited property before it becomes not only an emotional stress factor but a financial one too. Knowing how to sell an inherited house doesn’t have to be an added stress.
How To Sell an Inherited House Made Simple
The Center of Wealth and Philanthropy, at Boston College, projects that the baby boomer generation will inherit upwards of $27 trillion over the next four decades. A large portion of that figure includes inherited homes.
But the sudden acquisition of an inheritance can leave you with many questions. As a benefactor, you might ask yourself: what do I do when I inherit a property? What kind of taxes do I pay after claiming the house? How do I sell an inherited home?
How To Sell an Inherited House – Your Options
If you are in a position where you need to sell an inherited house, you’ll need to know your options.
An heir has three options when deciding what to do with their inherited home: they can rent out the property, move into it, or sell. Although it’s a personal choice and all options have their positives, selling an inherited house will provide the seller with the ripest rewards.
Renting out an inherited property may help you keep the home in the family, but it also comes with a hefty cost and high risk.
Rental properties are hard to maintain: a landlord needs to interview prospective tenants, collect rent, pay for upkeep, and be on-call for complaints often 24 hours a day.
That’s why many landlords hire property management companies, especially if they live too far from the rental property. These companies can be unreliable, neglectful, and ask for up to 30% rent while managing.
They’re an unnecessary risk when handling your loved one’s home.
You might want to move in if the inherited home is a vast improvement to your current residence. However, with an upgraded home comes an upgraded price tag. Living in your inherited property may result in an increase in property taxes. Since the house more than likely has appreciated when considering the stepped-up value (the fair market value of the property at the time of the previous owner’s passing) you’ll have to pay more to live there.
Generally the best option is to sell an inherited house when dealing with a new property. Once the home sells, a benefactor will be able to pay off the home’s mortgage, will save money by avoiding capital gains taxes, and may even see a profit of their own.
Before the Sale
Before selling an inherited house, J.D. Esajian, a Fortunebuilders.com contributor, wants you to be realistic about your new house. “Inheriting a piece of property isn’t anywhere near as straightforward as you would imagine,” he warns. There’s a lot to consider when accepting an inheritance. Becoming acquainted with the property, assessing the housing market, and hiring help when needed are all viable considerations before you sell an inherited house.
First, know where you stand. Familiarize yourself with the inherited home’s status. The property might have been the home where you spent most of your adolescence, but you might not know everything about your newly acquired home. What state are the major home systems (septic, HVAC, etc.) in? Does the property have any major liens? How does it compare to other homes in the neighborhood? Knowing the answers to these questions will help you estimate your inherited property’s worth.
Assessing the current market might also help you decide how to sell an inherited home in Orange Seminole Volusia Lake Osceola Counties, FL. If the market is favorable and the house has appreciated, you’ll most certainly receive a sizable profit at closing. Also, you won’t need to worry about the selling an inherited house taxes. Any appreciation gained during your loved one’s life is forgiven and you’re only taxed on appreciation gained after inheriting the property. “Unless the property goes up in value very quickly or you hold the home for a long time, you most likely will have very little tax liability,” adds Demand Media’s Solomon Poretsky.
Hiring a professional organizer to help empty out your inherited home while salvaging sentimental pieces is a necessary step before the sale. After a loved one passes, it’s hard to imagine going through their items and sorting out what’s valuable enough to keep and what needs to be donated or trashed. Yet, the property needs to be sifted through and cleaned before making any kind of sale. Don’t carry the emotional burden alone; hire someone to help clean out belongings and depersonalize rooms to get your inherited home in selling condition.
Realtors, Estate Sales, or House Buyers
So, you’ve decided to sell, researched your inherited home, and cleaned out your loved one’s property. Now, what? According to Amber Keefer, an eHow blogger, and real estate expert, there are three options in when to sell an inherited house: listing with an agent, sell at an estate sale or auction, or utilize a cash buyer.
Hiring a Realtor is common practice when selling an inherited house. Yet, it may not be your best option. Since Realtors cannot guarantee a sale, a home can stay on the market for months. This requires money and time to keep the house in showroom condition. Unless you can afford several months’ worth of insurance, utilities, and tax, not to mention Realtor fees at closing, using an agent to sell an inherited home is out of the plan.
It’s also risky believing a real estate agent’s honest opinion about what your inherited home is worth. “There is always the concern that real estate agents might just be telling you what you want to hear in order to get another listing inked,” Esajian says. Your loved one’s property will not be handled with care if considered just another sale by an unsympathetic agent.
Estate sales offer similar problems when using them to sell an inherited house. There’s no guarantee of sale, and every day not sold means bleeding your wallet dry. Also, auctioneers are likely to mishandle your inherited house if not managed properly. However, unlike hiring a realtor, estate sales mean you earn less money upon purchase. Although the house might sell quicker than if sold by an agent, you’ll lose out on a significant sum.
Sell an inherited house to a house buyer is the quickest, simplest option if available.
House buyers usually offer cash for homes, allowing you to avoid prolonged time on the housing market. Sometimes they cover selling costs to expedite the sale.
Forego spending money on sprucing up your loved one’s home and fixing any major repairs; house buyers buy as-is. They also allow you to skip using a realtor and communicate with you directly. If you have questions about the selling process or want to make sure your parents’ home is getting the attention it deserves, house buyers are more open to assuaging whatever fears are pestering you. Unlike many realtors, house buyers have experience with inherited property and know how to be sympathetic to grieving homeowners.
Selling an inherited house can be emotionally and fiscally daunting, even in Orange Seminole Volusia Lake Osceola Counties, FL. Don’t make it harder than it already is. Considering your options, familiarizing yourself with the market, and sorting the estate before a sale will reduce time on the market. Deciding to sell gives you options, but accepting a cash offer is the surest way to have your loved one’s home taken care of and sold with ease.
We Are Cash House Buyers
PHP Houses is a cash house buyer in Orange Seminole Volusia Lake Osceola Counties, FL. We’ve been buying houses for many years and have helped hundreds of homeowners sell an inherited house fast.
The information presented in this article is for educational purposes only and should not be considered legal, financial, or as any other type of advice.
Why Is It so Important to Be Pre-Approved in the Homebuying Process?
You may have heard that pre-approval is a great first step in the homebuying process. But why is it so important? When looking for a home, the temptation to fall in love with a house that’s outside your budget is very real. So, before you start shopping around, it’s helpful to know your price range, what you’re comfortable within a monthly mortgage payment, and ultimately how much money you can borrow for your loan. Pre-approval from a lender is the only way to do this.
According to a recent survey from realtor.com, many buyers are making the mistake of skipping the pre-approval step in the homebuying process:
“Of over 2,000 active home shoppers who plan to purchase a home in the next 12 months, only 52% obtained a pre-approval letter before beginning their home search, which means nearly half of home buyers are missing this crucial piece of paperwork.”
This paperwork (the pre-approval letter) shows sellers you’re a qualified buyer, something that can really help you stand out from the crowd in the current ultra-competitive market.
How competitive is today’s market? Extremely – especially among buyers.
With limited inventory, there are many more buyers than sellers right now, and that’s fueling the competition. According to the National Association of Realtors (NAR), homes are receiving an average of 2.9 offers for sellers to negotiate, so bidding wars are heating up.
Pre-approval shows homeowners you’re a serious buyer. It helps you stand out from the crowd if you get into a multiple-offer scenario, and these days, it’s likely. When a seller knows you’re qualified to buy the home, you’re in a better position to potentially win the bidding war and land the home of your dreams.
Danielle Hale, Chief Economist for realtor.com notes:
“For ‘a buyer in a competitive market, it’s typically essential to have pre-approval done in order to submit an offer, so getting it done before you even look at homes is a smart move that will enable a buyer to move fast to put an offer in on the right home.’”
In addition, today’s housing market is also changing from moment to moment. Interest rates are low, prices are going up, and lending institutions are regularly updating their standards. You’re going to need guidance to navigate these waters, so it’s important to have a team of professionals (a loan officer and a real estate agent) making sure you take the right steps along the way and can show your qualifications as a buyer at the time you find a home to purchase.
Bottom Line
In a competitive market with low inventory, a pre-approval letter is a game-changing piece of the homebuying process. If you’re ready to buy this year, let’s connect before you start searching for a home.
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
THE INFORMATION PRESENTED IN THIS ARTICLE IS FOR EDUCATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSIDERED LEGAL, FINANCIAL, OR AS ANY OTHER TYPE OF ADVICE.
Should You Buy an Existing Home or New Construction?
Finding the right home to purchase today is one of the biggest challenges for potential buyers. With so few homes for sale and construction of newly built homes ramping up, you may be wondering if you should consider new construction in your search process. It’s a great question to ask, and one to look at from the pros and cons of what it means to buy a new home versus an existing one. Here are a few things to consider when making the best decision for your family.
New Construction
When buying a new home, you can often choose more energy-efficient options. New appliances, new windows, a new roof, etc. These can all help lower your energy costs, which can add up to significant savings over time. With programs like ENERGY STAR, your home also helps protect the environment and reduces your carbon footprint.
Lower maintenance that comes with a newer home is another great benefit. When you have a new home, you likely won’t have as many little repairs to tackle, like leaky faucets, shutters to paint, and other odd jobs around the house. With new construction, you’ll also have warranty options that may cover portions of your investment for the first few years.
Another solid benefit to new construction is customization. Do you want a mudroom, stainless steel appliances, granite countertops, hardwood floors, an office, or a multipurpose room to homeschool your children? These items can be customized to your specific needs during the design phase. With an existing home, you’re buying something that’s already completed, so if you want to make changes, you may need to hire a contractor to help get your home ready for your family.
Existing Home
When buying an existing home, you can negotiate with the current homeowner on price, which is something you generally don’t get to do with a builder. Builders know their material and construction costs, and they have a price set for the model you’re buying. So, if you want to negotiate, then maybe an existing home will be best.
For many families, having an established neighborhood is also important. Some buyers like to know the neighbors, if it’s family-friendly, and traffic patterns before making a commitment. When you buy new construction, you won’t have a full view of some of those details until the lots around you are sold.
Finally, timing comes into play. With an existing home, you can move in based on the timeline you agree to with the sellers. With new construction, you need to wait for the house to be built. Depending on the time of the year you’re buying and the region you’re in, the weather can also be a factor in the timeframe. This is something really important to keep in mind, especially if you need to move sooner rather than later. Over the past few months with COVID-19 and social distancing regulations, some areas for new construction have been delayed.
Bottom Line
Whether you want to buy a newly built home or one that’s already established, both are great options. They each have their pros and cons, and every family will have different circumstances driving their decision. If you have questions and want to know more about the options in our area, let’s connect today so you can feel confident making a decision about your next home.
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
THE INFORMATION PRESENTED IN THIS ARTICLE IS FOR EDUCATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSIDERED LEGAL, FINANCIAL, OR AS ANY OTHER TYPE OF ADVICE.
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.
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
THE INFORMATION PRESENTED IN THIS ARTICLE IS FOR EDUCATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSIDERED LEGAL, FINANCIAL, OR AS ANY OTHER TYPE OF ADVICE.
Homes Are More Affordable Right Now Than They Have Been in Years
Today, home prices are appreciating. When we hear prices are going up, it’s normal to think a home will cost more as the trend continues. The way the housing market is positioned today, however, low mortgage rates are actually making homes more affordable, even as prices rise. Here’s why.
“While home prices have risen for 97 consecutive months, July’s record-low mortgage rates have made purchasing the average-priced home the most affordable it’s been since 2016.”
How is that possible?
Black Knight continues to explain:
“As of mid-July, it required 19.8% of the median monthly income to make the mortgage payment on the average-priced home purchase, assuming a 20% down payment and a 30-year mortgage. That was more than 5% below the average of 25% from 1995-2003.
This means it currently requires a $1,071 monthly payment to purchase the average-priced home, which is down 6% from the same time last year, despite the average home increasing in value by more than $12,000 during that same time period.
In fact, buying power is now up 10% year-over-year, meaning the average home buyer can afford nearly $32,000 more home than they could at the same time last year, while keeping their monthly payment the same.”
This is great news for the many buyers who were unable to purchase last year, or earlier in the spring due to the slowdown from the pandemic. By waiting a little longer, they can now afford 10% more home than they could have a year ago while keeping their monthly mortgage payment unchanged.
With mortgage rates hitting all-time lows eight times this year, it’s now less expensive to borrow money, making homes significantly more affordable over the lifetime of your loan. Mark Fleming, Chief Economist at First American,shares what low mortgage rates mean for affordability:
“In July, house-buying power got a big boost as the 30-year, fixed mortgage rate made history by moving below three percent. That drop in the mortgage rate from 3.23 percent in May to 2.98 percent in July increased house-buying power by nearly $15,000.”
The map below shows the last time homes were this affordable by state:
Last time homes were this affordable by state
In six states – Arkansas, Iowa, Kentucky, Louisiana, Maryland, and West Virginia – homes have not been this affordable in more than 25 years.
Bottom Line
If you’re thinking of making a move, now is a great time to take advantage of the affordability that comes with such low mortgage rates. Whether you’re thinking of purchasing your first home or moving into a new one and securing a significantly lower mortgage rate than you may have on your current house, let’s connect today to determine your next steps in the process.
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
THE INFORMATION PRESENTED IN THIS ARTICLE IS FOR EDUCATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSIDERED LEGAL, FINANCIAL, OR AS ANY OTHER TYPE OF ADVICE.
Why Foreclosures Won’t Crush the Housing Market Next Year
With the strength of the current housing market growing every day and more Americans returning to work, a faster-than-expected recovery in the housing sector is already well underway. Regardless, many are still asking the question: will we see a wave of foreclosures as a result of the current crisis? Thankfully, research shows the number of foreclosures is expected to be much lower than what this country experienced during the last recession. Here’s why.
According to Black Knight Inc., the number of those in active forbearance has been leveling-off over the past month (see graph below):
The Number of Mortgages in Active Forbearance is Leveling Off
Black Knight Inc. also notes, of the original 4,208,000 families granted forbearance, only 2,588,000 of these homeowners got an extension. Many homeowners have once again started to pay their mortgages, paid off their homes, or never went delinquent on their payments in the first place. They may have applied for forbearance out of precaution, but never fully acted on it (see graph below):
Forbearance Numbers
The housing market, and homeowners, therefore, are in a much better position than many may think. Much of that has to do with the fact that today’s homeowners have more equity than most realize. According to John Burns Consulting, over 42% of homes are owned free and clear, meaning they are not tied to a mortgage. Of the remaining 58%, the average homeowner has $177,000 in equity. That number is keeping many homeowners afloat today and giving them options to avoid foreclosure.
While ATTOM Data Solutionsindicates that there is a potential for the number of foreclosures to increase throughout the country, it’s important to understand why they won’t rock the housing market this time around:
“The United States faces a possible foreclosure surge over the coming months that could more than double the number of households threatened with eviction for not paying their mortgages.”
That number may sound massive, but it is actually much smaller than it seems at first glance. Today’s actual quarterly active foreclosure number is 74,860. That’s over 7.5x lower than the number of foreclosures the country saw at the peak of the housing crash in 2009. When looking at the graph below, it’s clear that even if the number of quarterly foreclosures today doubles, as ATTOM Data Solutions indicates is a possibility (not a given), they will only reach what historically-speaking is a normalized range, far below what up-ended the housing market roughly 10 years ago.
Number of Consumers with New Foreclosures
Equity is growing, jobs are returning, and the economy is slowly recovering, so the perfect storm for a wave of foreclosures is not realistically in the housing market forecast. As Odeta Kushi, Deputy Chief Economist for First American notes:
“Alone, economic hardship and a lack of equity are each necessary, but not sufficient to trigger a foreclosure. It is only when both conditions exist that a foreclosure becomes a likely outcome.”
While our hearts are with anyone who may end up in foreclosure as a result of this crisis, we do know that today’s homeowners have more options than they did 10 years ago. For some, it may mean selling their house and downsizing with that equity, which is a far better outcome than foreclosure.
Bottom Line
Homeowners today have many options to avoid foreclosure, and equity is surely helping to keep many afloat. Even if today’s rate of foreclosures doubles, it will still only hit a mark that is more in line with a historically normalized range, a very good sign for homeowners and the 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
THE INFORMATION PRESENTED IN THIS ARTICLE IS FOR EDUCATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSIDERED LEGAL, FINANCIAL, OR AS ANY OTHER TYPE OF ADVICE.
With businesses reopening throughout the country and some experts indicating early signs of a much-anticipated economic recovery, more homebuyers are actively entering the housing market this summer. Today, housing is truly driving the U.S. economy forward. With so many buyers looking for homes to purchase and so few houses for sale right now, there’s a disconnect between supply and demand. This imbalance is pushing home prices upward while driving more bidding wars and multiple-offer scenarios. Danielle Hale, Chief Economist at realtor.com explains:
“People are surprised that prices are rising, not falling, because in the last recession home prices fell, the difference this time is the severe shortage of homes for sale…We are seeing bigger price increases with [a limited] number of homes…That is likely to lead to more competition and potentially multiple offers and bidding wars.”
According to the recent Realtors Confidence Index (RCI) survey conducted by the National Association of Realtors (NAR), this trend is growing:
“On average, there were about three offers on a home that closed in May, up from just about two in April 2020 and in May 2019 (2.3 offers).”
“42% of homeowners who made a purchase during the January to May time period ended up in a bidding war, demonstrating the strong demand for homes amid low inventory.”
With more people returning to work we’ll continue to see the number of interested buyers increase. So, if you’re among the many people looking for a home to buy this summer, it’s important to ensure you have the right guidance from the start. This way, you make sure your offer stands out from the crowd when it really counts. Here are two tips to follow.
1. Hire a Trusted Local Expert
A trusted local real estate professional matters more than ever right now, as noted in a recent survey shared by NAR. In fact, according to respondents, 54% of buyers and 62% of sellers indicated that “Particularly during the pandemic, a real estate agent’s guidance is especially valued.”
We’re not in a normal market. We are in one of the greatest health crises our nation has ever seen. The pandemic has had a dramatic impact on the journey consumers must take to purchase a home. To successfully navigate the landscape today, you need a true expert on your side.
2. Get Pre-Approved for a Mortgage
When there are more buyers than sellers on the market, the process to find a home becomes much more challenging. One way to show you’re serious about buying a home is to work with a lender to get pre-approved for a mortgage before starting your search. With a pre-approval letter, sellers will see your true desire to buy this year, potentially helping your offer rise to the top.
Bottom Line
If this is the year you’re ready to buy, let’s connect to get the process started so you can make sure your offer is a strong one when the competition heats up.
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
THE INFORMATION PRESENTED IN THIS ARTICLE IS FOR EDUCATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSIDERED LEGAL, FINANCIAL, OR AS ANY OTHER TYPE OF ADVICE.
Taking Advantage of Homebuying Affordability in Today’s Market
Everyone is ready to buy a home at a different time in their lives, and a health crisis or not, today is no exception. Understanding how affordability works and the main market factors that impact it may help those who are ready to buy a home narrow down their optimal window of time to make a purchase.
There are three main factors that go into determining how affordable homes are for buyers:
Mortgage Rates
Mortgage Payments as a Percentage of Income
Home Prices
The National Association of Realtors (NAR), produces a Housing Affordability Index, which takes these three factors into account and determines an overall affordability score for housing. According to NAR, the index:
“…measures whether or not a typical family earns enough income to qualify for a mortgage loan on a typical home at the national and regional levels based on the most recent price and income data.”
Their methodology states:
“To interpret the indices, a value of 100 means that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced home. An index above 100 signifies that family earning the median income has more than enough income to qualify for a mortgage loan on a median-priced home, assuming a 20 percent down payment.”
So, the higher the index, the more affordable it is to purchase a home. Here’s a graph of the index going back to 1990:
Housing Affordability Index
The green bar represents today’s affordability. We can see that homes are more affordable now than they have been at any point since the housing crash when distressed properties (foreclosures and short sales) dominated the market. Those properties were sold at large discounts not seen before in the housing market.
Why are homes so affordable today?
Although there are three factors that drive the overall equation, the one that’s playing the largest part in today’s homebuying affordability is historically low mortgage rates. Based on this primary factor, we can see that it is more affordable to buy a home today than at any time in the last seven years.
If you’re considering purchasing your first home or moving up to the one you’ve always hoped for, it’s important to understand how affordability plays into the overall cost of your home. With that in mind, buying while mortgage rates are as low as they are now may save you quite a bit of money over the life of your home loan.
Bottom Line
If you feel ready to buy, purchasing a home this season may save you significantly over time based on historic affordability trends. Let’s connect today to determine if now is the right time for you to make your move.
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
THE INFORMATION PRESENTED IN THIS ARTICLE IS FOR EDUCATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSIDERED LEGAL, FINANCIAL, OR AS ANY OTHER TYPE OF ADVICE.
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
email: info@phphouses.com
THE INFORMATION PRESENTED IN THIS ARTICLE IS FOR EDUCATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSIDERED LEGAL, FINANCIAL, OR AS ANY OTHER TYPE OF ADVICE.
