Homeownership Rate Flat in 1Q

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • Homeownership rate in 1Q 2018 was 64.2 percent, UNCHANGED from 4Q but up from 63.6 percent in 1Q 2017;
  • 208,000 FEWER household owned homes in 1Q than in 4Q
  • 100,000 FEWER vacant homes for sale in 1Q than in 4Q

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The nation’s housing market remained flat in the first quarter the Census Bureau and Department of Housing and Urban Development reported Thursday.

The homeownership rate which had been growing from the first quarter through the fourth quarter a year ago hit a wall remaining at 64.2 percent. The rate, while still up from the 63.7 percent President Trump inherited from the fourth quarter of 2016, was though below the 65.3 percent average for all the Obama years.

The homeownership rate peaked at 69.2 percent in 2004 and dropped to a 48-year low of 62.9 percent in the second quarter of 2016.

According to the National Association of Realtors (NAR), sales of existing single-family homes in the first quarter averaged 5.51 million (seasonally adjusted annualized rate) down from the 5.54 million in 2017.

New home sales though averaged 668,000 in the first quarter, up from 617,000 in 2017.

Though the homeownership rate has come back, — it had fallen to 62.9 percent in 2Q 16 – it remains far below the 69.2 percent reached in 2Q 2006. One of the reasons is the change of preferences of younger families. From 2000 through 2010 and average of 54 percent of those aged 30-34 owned homes; since then an average of 47.1 percent of those in that age cohort were homeowners. The lower percentage could be directly attributed to the Great Recession when those 30-34 were watching their parents or their friends’ parents struggle in the mortgage meltdown. Since then, of course, while mortgages may have stabilized, that same age cohort has been saddled with student loans which make homeownership more of a dream.

According to Thursday’s report, the percentage of senior-citizens (over 65) owning homes has fallen from almost 81 percent to under 79 percent in the same period.

Hear Mark Lieberman every Friday on the Morning Briefing on P.O.T.U.S. radio, Sirius-XM 124, at 6:20 am Eastern Time. Follow Mark Lieberman on Twitter at @foxeconomics.

 

Initial Claims for Unemployment Insurance Drop to 49-year Low

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 209,000 1st time claims for unemployment insurance for the week ended April 21 a DECREASE of 24,000 from the prior week;
  • The number of initial claims for the week ended April 14 was REVISED UP 1,000 to 233,000;
  • The four-week moving average of first-time claims FELL 2,500 to 229,250;
  • Four-week moving average represented 0.148 percent of employment, DOWN from 0.149 the previous week;
  • The number of continued claims –individuals who have been collecting unemployment insurance — reported on a one-week lag, was 1,837,000 for the week ended April 14, DOWN 29,000 from the previous week’s UPWARDLY REVISED 1,866,000;
  • The four-week moving average of continued claims FELL 9,750 to 1,849,750.

Trends:

  • The 209,000 new claims for unemployment insurance was the lowest since December 6, 1969, when 207,000 claims were filed;
  • The 24,000 week-week drop in filings was the largest decline since January 13 when filings fell 45,000 week-week;
  • The number of first-time claims for unemployment insurance remained below 250,000 for the 15th straight week. [350,000 is considered by labor economists to be the “tipping point” between a robust and weak labor market.]
  • The four-week moving average of continued claims fell to its lowest level since January 5, 1974, when it was 1,838,500

Data Source: Department of Labor

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Claims for unemployment insurance continue to fall at a remarkable pace, falling for 9 of the first 15 weeks this year with an average wee-week decline of 12,400.

The ongoing drop in claims filings suggests a true labor shortage may be in the offing which, while bad news for employers could be good news for job-seekers and jobholders if employers respond to the shortage with wage increases.

The next employment situation report May 4 should show if employers are hiking pay or increasing overtime; either way should mean more in worker pockets.

You can hear Mark Lieberman every Friday at 6:20 am on the Morning Briefing on P.O.T.U.S. radio @sxmpotus, Sirius-XM 124.

New Home Sales Up in March for Second Straight Month

By Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • Pace of contracts for new home sales ROSE 4.0 percent in March to 694,000 (Seasonally Adjusted Annual Rate);
  • Unsold inventory was flat to February at 301,000, computing to a 5.2-month supply
  • Median price of a new home ROSE $11,400 from February to $337,200;
  • Year-year the median price of a new home was up $15,500 (4.8 percent)

Trends:

  • The pace of sales has risen 7.8 percent since December and is up 8.8 percent year-year;
  • The inventory of unsold homes is at its highest level since March 2009 (311,000) the depth of the Great Recession;
  • The dollar increase in the median price of a new single-family home failed to offset the $17,500 decline in median price in January and February;

Data Source: Census Bureau and Department of Housing and Urban Development

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So, the obituary for home sale – and building activity – may have been premature.

Despite changes to the tax code discouraging homeownership, contracts for sale of new single-family homes rose in March for the second straight month. This report, which reflects future sales, is probably more significant than the report by the National Association of Realtors which covered closings on sales of existing (pre-owned) homes.

The increase in contracts for the sale of new single-family homes was the sharpest since last November when the pace of contracts rose 15.4 percent, possibly due to concerns about the tax law then wending its way through Congress. At that point the provisions relating to real estate taxes and home mortgage interest were more draconian than they turned out to be.

That’s not to say housing and home building are back to where they were. There still appears to be a reluctance to invest in a new single-family home as suggested by the high unsold inventory. The number of new home completions in March continues to exceed sales adding to the inventory of unsold homes. Inventory as measured by months’ supply also remains relatively low reducing choices for potential m=home buyers.

Hear Mark Lieberman on P.O.T.U.S. (Sirius-XM 124) Friday at 6:20 am Eastern Time. You can follow Mark Lieberman on Twitter at @foxeconomics.

Case Shiller Home Price Index Jumps in February; 20-City Index At Record High

By Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • Case Shiller CoreLogic national Home Price Index IMPROVED in February for the 25th straight month, increasing 0.4 percent to 197.01;
  • The 10- and 20-city indices each GREW for the 16th straight month with the largest month-month gains since last summer
  • The 10-city index was up 1.57 points to 220.71, largest gain since July; the 20-city index grew 1.51 points to 206.67, the strongest increase since last May;
  • Index ROSE in all 20 cities surveyed in February;
  • Year-year prices were UP in all 20 cities but the year-year increase slowed in six cities.

Trends:

  • The 20-city index climbed past its previous peak (206.52 in July 2006)
  • The National Index set a record high for the 15th straight month;
  • 10-city index is 2.5 percent below its record high, 226.29 (June 2006)

Data Source: S&P Case Schiller/Core Logic

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Home values, measured by the Case Shiller Core Logic Home Price Index rose in February despite the new tax law which capped some of the tax advantages to homeownership.

Indeed, the increase may have been the result more of tight home sale inventories than of buyers considering what the tax law would do to home values. But the higher values could also reflect transactions (contracts) agreed to in December, before the tax law, which didn’t close until February.

Values rose in February in all four Census regions, increasing 1.1 percent in the West, 0.6 percent in the Northeast and 0.5 percent in each of the Midwest and South.

According to the National Association of Realtors, the median price of an existing single-family home rose a scant $100 in February to $240,900 with increases in the South and West offsetting declines in the North and Midwest.

Prices nationally rose sharply in March according to the NAR which could mean another jump in the Case-Shiller Index.

According to Case-Schiller, prices rose more than 1.0 percent from January to February in seven cities: Seattle (1.7 percent), Denver (1.2 percent), San Diego and Detroit (1.1 percent) and Las Vegas, Los Angeles and San Francisco (1.0 percent).

February values were up more than 10 percent year-year in three cities Seattle (12.7 percent), Las Vegas (11.6 percent) and San Francisco (10.6 percent)

Hear Mark Lieberman this Friday on P.O.T.U.S. radio’s Morning Briefing, Sirius-XM 124, at 6:20 am Eastern Time. You can follow Mark Lieberman on Twitter at @foxeconomics.

Initial Claims for Unemployment Insurance Dip; Trend Remains Low

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 232,000 1st time claims for unemployment insurance for the week ended April 14 a DECREASE of 1,000 from the prior week;
  • The number of initial claims for the week ended March 31 was UNCHANGED at 233,000;
  • The four-week moving average of first-time claims ROSE 1,250 to 231,250;
  • Four-week moving average represented 0.149 percent of employment, UP from 0.148 the previous week;
  • The number of continued claims –individuals who have been collecting unemployment insurance — reported on a one-week lag, was 1,863,000 for the week ended April 7, DOWN 15,000 from the previous week’s UPWARDLY REVISED 1,878,000;

Trends:

  • The graph used in the Labor Department’s press release showed the four-week moving average of initial claims to be essentially flat over the last year except for an upward spike during last year’s hurricane season;
  • The number of first time claims for unemployment insurance remained below 250,000 for the 14th straight week. [350,000 is considered by labor economists to be the “tipping point” between a robust and weak labor market.]
  • As an indicator of the employment situation report for April (to be issued May 4), the data show first time claims rose 5,000 from mid-March to mid-April and the four-week moving average rose 8,000 in that span, both suggesting unemployment increased dashing hopes for a further decline in the unemployment rate.

Data Source: Department of Labor 

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We’ve yet to see any impact on unemployment from the higher tariffs announced by President Trump but layoffs in steel and aluminum dependent manufacturing could be offset by increased hiring at the retail level or, if as the President expects, new companies open to fill supply needs. According to a new research study by the New York Fed, the “25 percent steel tariff is likely to cost more jobs than it saves.”

The study looked at, among other things, the steel tariffs of up to 30 percent imposed during George W. Bush’s administration in 2002 and a 35 percent tariff imposed on Chinese tires in 2009 by the Obama Administration. Estimates of job losses from the Bush-era tariffs ranged as high as 200,000 (more than the 187,500 workers employed in the industry at the time). In response to the tariffs on tires, the researchers said, China imposed restrictions on U.S. shipments of chicken parts which cost chicken producers about $1 billion in sales in 2011.

The labor market has been one of the highlights of the Trump Administration but how much of it is momentum from the final Obama years and how much is attributable to Trump is hard to determine.

We do know if employment starts to tank, the White House bear the brunt of the blame.

You can hear Mark Lieberman every Friday at 6:20 am on the Morning Briefing on P.O.T.U.S. radio @sxmpotus, Sirius-XM 124.

Single-family Construction Activity Falters in March

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • The rate of single-family housing starts in March FELL 3.7 percent to a seasonally adjusted annual rate (SAAR) of 8967,000 units;
  • The rate of permits for single-family home permits filed in March also FELL, down 5.5 percent to an SAAR of 840,000 units;
  • The rate of permit filings for multi-family homes ROSE 19.0 percent in February to 514,000 units (SAAR); Permits for all housing ROSE 3.5 percent to 1.354 million units
  • The rate of all housing starts ROSE 1.9 percent in February to an SAAR of 1.32 million as multi-family starts improved 14.4 percent to 452,000.
  • The rate of home completions in March DECREASED 5.1 percent from February; Two-thirds of the decline came in from a 4.7 percent drop in single-family completions.

Trends:

  • The March report on single-family permits would have been worse had it not been for a slight downward revision to February data;
  • The seasonally adjusted annual rate of single-family permits dropped to its lowest level since September;
  • Permits for single-family homes represented 62.0 percent of all permits in March, the lowest share since January 2017;
  • At the same time single-family homes accounted for 65.7 percent of all starts, the lowest share since December 2016;

Data Source: Census Bureau and Department of Housing and Urban Development

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Builders may have been right to betray falling confidence in housing in the monthly Housing Market Index survey conducted by the National Association of Home Builders which slipped for the fourth straight month.

Builders were seeing what the data released by the Census Bureau and Department of Housing and Urban Development reported: reduced building activity. The housing data reinforced the old saw that “the plural of anecdotes is data.”

And the future for single-family housing continues to look discouraging as fewer single-family housing permits were filed in March. Thus, the dip in confidence is not a surprise although multi-family housing continues to keep builders active.

Just how much of the drop in single-family activity is attributable to the new tax law which reduced incentives for homeownership is arguable. But, the combination of reduced confidence and fewer construction jobs suggests the law of unintended consequences may be at work.

The tax cut may have put more money is wage earner pockets with reduced withholding rates, but the increased take-home pay is not going toward home buying.

The Census-HUD data also point to a further increase in the inventory of unsold new homes. The rate of new home sales has averaged about 615,000 in the last 12 months while builders are completing new homes at a rate of about 815,000 per month,

Hear Mark Lieberman every Friday at 6:20 am on POTUS Morning Briefing, Sirius-XM 124. You can follow him on Twitter at @foxeconomics.

Builder Confidence Slips in April for Fourth Straight Month

By Mark Lieberman

Managing Director and Senior Economist

Data Highlights:

  • Housing Market Index EDGED DOWN one points in April to 69;
  • The index of current sales FELL two points to 79, the index of future (six months hence) sales DROPPED one point to 75; the index of buyer traffic WASX FLAT at 51;
  • By region, builder confidence FELL two points in the South and one in the West; The index ROSE one point in the Northeast and was flat in the Midwest.

Trends:

  • Overall index has fallen four straight months
  • At 69, the index is at its lowest level since last November
  • The index has been positive (i.e. over 5046 straight months

Data Source: National Association of Home Builders

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Home building continued to slip in April, with builder confidence – measured by The National Association of Home Builders (NAHB) Housing Market Index (HMI) – falling. The drop, attributable to the new tax bill which removed incentives for homeownership, ironically was reported the same day the Commerce Department offered data to suggest other aspects of the tax bill were helping the economy by boosting retail sales.

But the new law capped the deductible amount of mortgage interest as well local property taxes.

Builder confidence fell in the same month for which the Bureau of Labor Statistics reported a decline in the number of residential construction jobs, the first decline in those jobs in six months.

The dip in confidence coincided with a steady increase in mortgage rates. Freddie Mac reported last Thursday the rate for a 30-year fixed rate mortgage was 4.42 percent, up from 3.95 percent at the beginning of the year. The average rate for an adjustable rate loan as reported last week was 3.61 percent compared with 3.45 percent at the beginning of January.

The rates combined with the dip in builder confidence could foreshadow another housing crunch with ripple effects throughout the economy.

The Census Bureau and Department of Housing and Urban Development will report tomorrow on new housing permits and starts albeit for March.

Hear Mark Lieberman every Friday on P.O.T.U.S. radio, Sirius-XM 124, at 6:20 am Eastern Time. Follow Mark Lieberman on Twitter at @ foxeconomics.

 

Retail Sales Recover in March; 1Q Shows Modest Growth

By Mark Lieberman

Managing Director and Senior Economist

Highlights:

  • March retail sales – measured by prices – ROSE $2.76 billion or 0.6 percent from February;
  • Auto sales accounted for most of the increase, up just under $2 billion from February;
  • The increase in retail activity came in the same month in which the Consumer Price Index fell 0.1 percent which means consumer activity increased as prices dipped;
  • Sales at gasoline fell though as gasoline prices were essentially flat from February to March.
  • In addition to gasoline stations, sales fell at sporting goods stores, clothing stores and building material/garden supply stores;
  • Other than auto sales, which rose 2.0 percent, the largest jump in sales came at health and personal care stores.

Trends:

  • Year-year total sales ROSE 4.5 percent in March, after a 4.1 percent February-February increase;
  • The increase in retail activity came in the same month in which the Bureau of Labor Statistics reported average weekly earnings rose at a 2.6 percent year-year pace, up from 2.5 percent in February;
  • BLS also reported the number of retail jobs in March fell 4,400 or .03 percent from February.

Data source: Census Bureau 

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Perhaps economists who forecast the demise of the economy in the wake of the wide-ranging tax cut enacted by Congress and signed into law by President Trump as a holiday gift were wrong. That at least could be the first blush conclusion from the Commerce Department’s retail sales report for March reflecting the first full month of increased take-home pay resulting from the new tax law.

The result was as average weekly earnings grew and workers kept more of their paychecks, when they opened their wallets there was something there to spend. They took advantage of lower prices and bought more goods.

BLS also reported the number of retail jobs fell in March, albeit 0.03 percent, but still a decline. Since one measure of retail efficiency is revenue (or perhaps profit) per employee, the drop in the number of jobs suggest even retailers themselves were pleasantly surprised by the sales volume.

Total sales in the first quarter were up $2.9 billion over the fourth quarter but up almost $59 billion over the first quarter last year. With personal consumption accounting for about 2/3 of Gross Domestic Product and retail activity about 55 percent of personal consumption, the numbers don’t suggest a robust GDP for the first quarter, tax cuts notwithstanding.

Hear Mark Lieberman on the Morning Briefing on P.O.T.U.S. radio @sxmpotus, Sirius-XM 124, every Friday at 6:20 am Eastern Time. You can follow him on Twitter at @foxeconomics.  

Initial Claims for Unemployment Insurance Drop; Fail to Reverse Prior Week’s Increase

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • There were 233,000 1st time claims for unemployment insurance for the week ended April 7 a DECREASE of 9,000 from the prior week;
  • The number of initial claims for the week ended March 31 was UNCHANGED at 242,000;
  • The four-week moving average of first time claims ROSE 1,750 to 230,000;
  • Four week moving average represented 0.148 percent of employment, UP from 0.147 the previous week;
  • The number of continued claims –individuals who have been collecting unemployment insurance — reported on a one-week lag, was 1,871,000 for the week ended March 31, UP 53,000 from the previous week’s UPWARDLY REVISED 1,818,000;
  • The four-week moving average of continued claims DECLINED 1,500 to 1,850,250;

Data Source: Department of Labor

Trends:

  • The drop in the number of initial claims for unemployment insurance did not offset last week’s increase which was the largest since the hurricane-inflated 62,000 for the week ended last September 2;
  • The number of first time claims for unemployment insurance though remained below 250,000 for the 13th straight week.
  • Continued claims for unemployment insurance dropped This is the lowest level for this average since January 5, 1974 when it was 1,838,500.

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While unemployment insurance claims remain in a low zone, labor economists are bracing for a tariff impact when the higher cost of imported good – due to retaliatory levies – starts to cut into profits of US-based companies which rely heavily on imported goods.

There are of course ways around the higher tariffs but they could come at the cost of American jobs. In 2003, a study by the U.S. International Trade Commission found some steel consumers in response to higher tariffs on steel, shifted from importing steel to importing assembled steel part which were not subject to the higher duties. To the extent the tariff war has an impact on jobs, statistically it will likely show up in claims for unemployment insurance as workers are laid off.

You can hear Mark Lieberman every Friday at 6:20 am on the Morning Briefing on P.O.T.U.S. radio @sxmpotus, Sirius-XM 124.

Economy Adds a Disappointing 103K jobs in March; Unemployment Rate remains 4.1% but Earnings Improve

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • Number of payroll jobs INCREASED 103,000 in March, smallest monthly increase in jobs since September’s hurricane-impacted 14,000;
  • Private sector jobs INCREASED 102,000;
  • Prior month job totals REVISED DOWN net 50,000: UP 13,000 in February to a growth of 326,000 jobs (from 313,000) but DOWN 63,000 in January to a gain of 176,000 (from the last report of a 239,000 increase);
  • Average weekly earnings ROSE $2.76 to $925.29, a 3.2 percent year-year gain;
  • Unemployment rate in March remained at 4.1 percent for the sixth straight month; number of persons unemployed FELL 121,000 but number of person employed also FELL 37,000;
  • Average hourly earnings GREW 8¢, in March a 2.6 percent annual increase after a 2.5 percent year-year boost in February;
  • Average weekly hours REMAINED at 34.5 in March;
  • Labor force – DROPPED 158,000 in March after a jump of 806,000 in February;
  • The number of persons NOT in the labor force INCREASED 323,000; labor force participation rate FELL BACK 0.1 percentage points to 62.9 percent;
  • Employment-Population ratio REMAINED at 60.4 percent,
  • Number of construction jobs FELL 15,000, with 7,000 fewer residential construction jobs;
  • Retail sector SHED 4,400 jobs;

Trends:

  • The 3.2 percent (year-year) increase in average weekly earnings was the strongest since August 2010 (3.4 percent)
  • First quarter saw 605,000 new payroll jobs, up from 532,000 gain in 1Q 2017
  • Number of full-time jobs DROPPED 311,000 in March, largest month-month decline since last May (357,000)
  • Part time jobs represented 18.0 percent of employment, up 0.3 percentage points – largest month-month increase since last October
  • Number of new entrants to the labor force (as unemployed) was 625,000 in March, down from 704,000 in February;
  • Unemployment rate for Blacks dropped back to 6.9 percent in February just above the record low of 6.8 percent recorded in December (rate had increased to 7.7 percent in January);

Data Source Bureau of Labor Statistics

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Color the labor picture blue in March as both employment and new entrants to the labor force dropped suggesting discouragement among workers.

Even the good news in the report, a relatively robust increase in average weekly earnings came with a discouraging word: earnings rose because the two lowest paying job sectors – retail and leisure-hospitality – added a combined 600 jobs compared with an average gain of 34,600 in the past three months.

There were some nuggets suggesting optimism: the unemployment rate among Blacks was 6.9 percent as it had been in February. That’s the second lowest unemployment rate among Blacks – who have been among the first to suffer in a struggling economy –in history. The Black unemployment rate dropped to 6.8 percent last December.

The March report came too soon after President Trump’s announcement of higher tariffs to suggest they may have contributed to the disappointing job numbers. However, the drop in residential construction jobs – the first since last September – could be directly attributed to the new tax laws which reduced the tax incentive for homeownership.  Indeed, residential construction jobs slipped by 7,000 in March after increasing an average of 20,000 a month in the last five months. (Then too, the weather may have played a role: since the end of the recession, residential construction jobs have increased in March four time, declined three times and were unchanged once.)

The drop in retail jobs came primarily at department stores which announced cuts following a disappointing holiday shopping season. Even the boost in take-home pay resulting from the tax code changes didn’t help.

The number of temp jobs – often considered a leading indicator for all jobs – fell 600 in March compared with a three-month average gain of 6,200.

Hear Mark Lieberman every Friday morning at 6:20 am on The Morning Briefing on POTUS on Sirius-XM 124. You can follow Mark Lieberman on Twitter at @foxeconomics.