Calculated Risk: Pending Home Sales Index Increases
From the NAR: Pending Home Sales Up for Three Months in a Row
"The Pending Home Sales Index, a forward-looking indicator based on contracts signed in April, rose 6.7 percent to 90.3 from a reading of 84.6 in March, and is 3.2 percent above April 2008 when it was 87.5".These have yet to close -- hopefully the buyers locked in their mortgage rates.
37 comments:
Numerous people on this board have acknowledged that jobs+income are the #1 driver of real estate prices. I did a search on careerbuilder.com for job postings in the last 30 days within 50 miles of the indicated city.
Job_Postings Rank City Population
5417 #10 Boston - 5.2M
10796 #9 Washington - 5.3M
4093 #8 Atlanta - 5.4M
4200 #7 Miami - 5.4M
4494 #6 Houston - 5.7M
8827 #5 Philly - 5.8M
6981 #4 Dallas - 6.3M
9752 #3 Chicago - 9.5M
9753 #2 LA - 12.8M
13650 #1 NY - 19M
Robert,
That is of course good news. However, all local jurisdictions in the DC area are meeting or exceeding their early 1990 and 2000recession unemployment rates.
I agree with you that there is reason to be optimistic that the DC area will again have the great unemployment rates it has had most of the past 20 years. But anytime soon? I don't see it happening any quicker than it did for the early 90 or 00 recessions. And many signs point to this being a harsher recession than those (it's already longer).
So even if we've hit peak unemployment this spring, I don't see why we should expect a bottoming of the unemployment rate before 4Q10 if not later.
Anyone who wants to look at the unemployment rates of localities over the past 20 years can google "[jurisdiction] unemployment rate" in google and can see how things were in Fairfax County, DC, Arlington, etc since 1990.
TBW,
Was there anything that rivaled the $787B Stimulus and the $3.5T Obama budget request during the 1990-1991 recession?
I think we can debate exactly what impact the stimulus and Obama budget will have on the local economy, but it seems the debate is about whether it is large, larger, or largest.
You know I've been posting about the infrastructure spending in the pipeline, foremost is the $5.3B Silver Line to Dulles Airport. You would have to do a spending/per capita vs 1990, but I doubt it would be smaller.
The table in my original post shows that the "Jobs Tsunami" has already begun.
Robert,
I imagine the national security spending after 9/11 was a larger boost than stimulus spending. The national security spending probably was more focused on the DC area than AARP/stimulus will be.
Some of these predate the early 1990 recession but were causes of economic growth in Northern Virginia:
* Completion of Orange Line out to Vienna (1986)
* Completion of Fairfax County Parkway (1987-2001)
* Opening of Reston Town Center (1991)
* Opening of Tysons Galleria Mall and numerous nearby skyscrapers (1988)
* Opening of Dulles Greenway (1995)
* Opening of Fairfax County Government Center (1991) and Fair Lakes area follows (~1994)
There's never been a lack of infrastructure or economic development projects in the Northern Virginia region. At least in the postwar period.
1 new job listing for every 490 people. Compared to 1 in every 16 people is currently looking for a job in our area.
It's way better than nothing and a higher fraction of jobs per people than any of the other listings (by eye). But it's not that great.
anyone have the 1 foreclosures per X households numbers handy? That might be a more realistic comparison.
DC job postings are heavily skewed by all the government contractors keeping many open requests that will never be filled. Lockheed, SAIC, Raytheon, etc all want experts in "x" with a Top Secret+ security clearance and keep the job postings up permanently because it is so much cheaper to hire one than get the clearance for existing employees. Those people just don't exist though in numbers great enough to fill all the jobs.
Jeremy, I believe Robert was implying these were new listings.
For which this doesn't apply as much, just would mean the end to some hiring freezes.
Is that correct, Robert?
TBW,
Good history. In addition to the Silver Line, we have:
Woodrow Wilson Bridge II + intchgs
495 HOT Lanes
Ft. Belvoir NGA, Hosp, Army Msueum
395 HOT Lanes
Dulles Airport Expansion
You can call it a wash if you like. I think it will be enough to absorb the commercial & residential construction workers at minimum.
Post 9/11 spending vs. Stimulus + Obama budget?
I will admit the creation of the Department of Homeland Security was a big boost to the region. That became a $30B agency almost overnight.
What do you attribute the outsize number of jobs listed on careerbuilder to?
Robert,
Outsize relative to the other cities that are also in this same recession is not very impressive. Relative to non-recessionary times in DC would be, is that possible to determine at careerbuilder?
Robert,
http://www.washingtonpost.com/
wp-dyn/content/article/2009/05/
24/AR2009052402153.html
They voted to delay the Dulles expansion last September (see above).
Anyways, I'm not arguing with you as to whether this federal government spending will help the region. I'm sure it will. However I'm saying I do not think it will be as quick as you believe.
Sorta parallel to what Jeremy notes is the specialization these jobs require. You only have so many applicants with 5-10 years of experience in the various areas these jobs want. You can't hire as quickly as you could for a blue collar job.
Also, I think numerous studies have shown that the vast majority of stimulus spending will not affect the economy until 2011-12.
The government moves slowly. You cannot expect this to solve everything in less than a year.
I think when I say 4Q10 I am being optimistic.
Many people (including some on this blog) think we are never going to hit the low unemployment rates and economic growth we saw in the past 30 years.
Cara,
Silly to say, but, of course, careerbuilder.com does not have ALL of the jobs available in the Metro area.
I know what Jeremy is talking about. I will give in to some of his points. SAIC, who I used to work for, did have open "funded" slots that did go quite a while before being filled. You might win a contract and an expert with TS/SCI clearance would be required and the post would go unfilled because nobody showed up with that qual. So, I will give some ground on that point.
Yes, these listing are "new", the last 30 days. Does LMT keep reposting every 30 days? I doubt that Lockheed is using careerbuilder to find TS/SCI people....I guess I could browse through the job listing to get an idea. Jeremy, why don't you browse through 10, 50, or 100 listings and let me know what % are for the types of jobs you are talking about. Can't imagine it's 50%.
yeah, it's just one site. Which makes the comparison even less possible to ground.
Good for a lower-bound though.
Robert,
When do you predict the local unemployment rate will go back to pre-recession levels?
The other problem (which you usually ignore) is that even pre-recession there had not been enough income growth to sustain the 2006-07 home prices. Remember that the massive foreclosures *predated* the recession (indeed was one cause of the recession). So even once we get past this recession we are unlikely to have incomes that warrant the 2006-07 prices.
TBW,
Okay, some Dulles expansion projects have been deferred until there is an economic recovery.
And I will give you Obama Health Care, Education, and Energy jobs won't materlize in force until 2011-12, but stimulus jobs? No, quicker than that.
Just to pluck one thing out of the news...The Auto Task Force? That's jobs right here. How many? I don't know. 25? 50? Good paying jobs too. Who's going to run Citigroup? Where will they work? It goes on and on. The bigger chunk of the American economy Obama absorbs the bigger the government gets. Think of all the ink they'll need at the Mint downtown.
TBW,
I think you are missing the point focusing on the unemployment rate. The better question is when do you think the personal income of the Metro are will return to pre-recession levels. I highly expect the population to expand as people come here looking for work. Maybe one spouse finds a job and the other is looking -- unemployed. The unemployment rate doesn't really matter, total personal income is the right gauge.
robert,
if the other spouse left their job voluntarily to move, then they won't get counted in the usual unemployment percentage, they might be listed in the U6 though.
(I know, not the point you were making... just making an aside here, move along.)
Cara,
Oh, okay. I thought it was a simple random call to a 703 number, "Are you looking for work?" Answer, "Yes" -- check unemployed.
Robert,
Just in case you weren't making a joke, which you sounded like you were... this is the trouble with blogs...
nevermind, I'm going to assume you were making a joke and stop over-explaining things. Sorry, my bad.
Robert,
Citigroup is not being moved to DC or the DC area. Let's not be silly.
As for the Auto Task Force:
http://en.wikipedia.org/wiki/Presidential_Task_Force_on_the_Auto_Industry
It's comprised of a bunch of people who hold other government positions. Maybe the "Senior Advisor on Auto Issues at the Treasury Department" is a new position although it may have already existed. But okay I will grant you one new job via the auto task force. ;)
I hate to support the bullish argument too much, but where I am currently working got $billions in the stimulus package, and from what I've heard, are staffing up, right now, somewhere between dozens and 200 or so decently professional-level jobs.
Cara,
From the USG website:
Who is counted as unemployed?
Persons are classified as unemployed if they do not have a job, have actively looked for work in the prior 4 weeks, and are currently available for work.
Someone who voluntarily quits, of course, does not receive unemployment benefits or is counted in the initial jobless claims, but if they are living in the Metro area and they are looking for work, they are counted as an unemployed person for regional statistics.
I meant to add--I'm seeing some of these seats being filled already, and we are right in the middle of downtown DC.
Robert could have been harsher about it:
http://www.bls.gov/cps/cps_htgm.htm
"Some people think that to get these figures on unemployment, the Government uses the number of persons filing claims for unemployment insurance (UI) benefits under State or Federal Government programs. But some people are still jobless when their benefits run out, and many more are not eligible at all or delay or never apply for benefits. So, quite clearly, UI information cannot be used as a source for complete information on the number of unemployed. "
Plenty more specifics on there as well as some caveats and methodology explanations.
I had translated the commonly stated thing that the UI undercounts as referring to the widely held belief that UI is the same as unemployment benefit recipients.
Whereas it's more like details such as so long as you have any employment at all, including unpaid family members working minimal hours, you count as employed, even if you're actively searching for more work.
Scott,
Federal agency or contractor?
Robert,
I'm not forgetting income levels. I find it hard to believe though if DC, MD localities, and VA localities have double their usual unemployment rate that they will end up with higher income levels.
Many people laid off will have to settle for a job that pays less than what they previously had.
TBW,
So you think the net economic impact of the Auto Task Force is one $100,000/year job? The government is going to dump $50B dollars into GM + more into Chrysler and one guy is going to do all the work?
On another point,I did notice that Steve Rattner, the Auto Czar is worth between $200 and 500 million dollars. Hopefully, he'll buy a house in Great Falls and hire a staff of 20. So, at least 21 jobs.
Robert,
I think that's the net economic impact from the Auto Task Force for the DC area.
The auto bailout probably kept all the GM, Chrysler, and Ford dealers from going out of business. However some of them are still going out of business. That's just minimizing losses.
Most of the impact though will be felt in Detroit and from companies that make tires and other car parts. I do not believe any of those companies are based in DC. We aren't exactly a manufacturing base here.
Do you have any evidence that Steve Rattner is going to move his family here? Looking him up he has a wife and four kids. If his government position is only going to last a limited period of time is he really going to move them to the area?
Even if he does move, he is probably more likely to live in DC or Potomac than Great Falls. Very few Obama administration officials have moved to Northern Virginia. Most have moved to DC or Montgomery County.
Cara,
We're quibbling. I'll stop.
TBW,
Just to be clear, I do not think that even if the personal income of the are rises to pre-recession levels that real estate prices will return to the bubble peak. The easy lending will not return. But, we've hit bottom. Someone buying a $300k SFH will do well over the next 3-5 years. Say the peak was $500k for that SFH. Yes, in five years, you'll be looking at something worth $400k. $100k tax free when you sell.
Robert,
I think a good bulk of us are not people looking to buy homes in areas that went from $500k to $300k. Many of us are looking inside the Beltway where homes went from $800k to $750k. I don't think it's the bottom for us.
Nothing inside the beltway that was $500k went to $300k. It's probably $480k now. There may be a bottom in some areas but I don't think it's uniform across this area.
Jeff-
I wouldn't say that nothing went from 500 to 300. I agree that the average didn't but most of the areas I looked at where down 20+%. I was looking at Vienna and Falls Church inside the beltway but close to a metro stop.
Particularly if you look at foreclosures you can find properties that are 40% off. This house would have gone for $700K-$800K at the peak and went under contract at 435K
http://franklymls.com/FX7040878
tbw said:
"I think a good bulk of us are not people looking to buy homes in areas that went from $500k to $300k. "
really? i think me and cara alone fit this profile. i think 75% of those here are first time buyers at least looking in the under 600k range, not 750ish.
as for Robert and his jobs outlook. seems he is praying on every dollar of the stimulus as coming here. if the govt has any idea on how to imporve their situation, they'll revitalize the midwest and detroit and outsource most new jobs to that area as, a) the income for those jobs will be much lower there than here, and b) there is already infrastructure in place, etc.
Robert, the cost of selling that TH in 5 years, and moving, will be close to 10% of the TH itself - 6% for the Realtor fees, plus fixup and selling expenses, financing of the new place, moving, etc. Further, expecting to make zero capital expenditures while you live there is extremely unrealistic. So a $100K increase in value translates to substantially less than that in profit - maybe less than half of it.
Ace,
If the TH goes up 100K, chances are the replacement will go up that much or more. So, really, no gain at all.
TBW--
"Federal agency or contractor?"
Neither, really, but if I used the four words I would use to accurately describe it, you'd know what it is for sure, and I'm not so willing to come out and say.
But from my previous minimal details, you may already be able to figure it out if you think about and are familiar with the stimulus... :)
Robert said...
Numerous people on this board have acknowledged that jobs+income are the #1 driver of real estate prices. I did a search on careerbuilder.com for job postings in the last 30 days within 50 miles of the indicated city.
No, Robert. It’s:
1. Income
2. Income
3. Income
It’s been shown countless times that income did not rise in step with housing prices.
If you bring millions of jobs to an area in which average incomes can not support current average home prices, what happens to average home prices?
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