Jobs Clues

Posted on July 8, 2022 by grim

From Fox Business:

Jobs report will offer fresh recession clues

The Labor Department’s monthly jobs report due out Friday is likely to show U.S. employers hired fewer workers last month than in May, and economists say the slowdown may serve as the latest recession clue.

Economists polled by Refinitiv forecasted the report to show that 268,000 nonfarm jobs were added to payrolls in June, which would be the slowest in over a year and down from 390,000 the month before. 

The labor market – along with the economy at large – is expected to cool as the Federal Reserve continues its campaign of bumping up interest rates in an effort to battle roaring inflation, which sits at a 40-year high.

But there are growing concerns that the central bank could go too far in slowing down demand and plunge the U.S. into a recession, which is defined by two consecutive quarters of negative gross domestic product growth.

Some analysts are pointing to signs that a recession is already here: Last week, the Federal Reserve Bank of Atlanta lowered its second-quarter GDP forecast to -2.1%. 

Posted in Economics, Employment, National Real Estate | 70 Comments

Maybe not a recession…

Posted on July 7, 2022 by grim

Some of my favorite folks on Bloomberg:

Ritholtz: Data Doesn’t Support US Recession

Posted in Economics, National Real Estate | 69 Comments

Will prices hold?

Posted on July 6, 2022 by grim

From Bloomberg:

Manhattan Home Prices Hit a Record While Sales Frenzy Winds Down

Manhattan home sales showed continued strength in the second quarter, though there are clear signs that fears of a recession are slowing down the market.

Purchases of condos and co-ops closed at a median of $1.25 million, a record high, appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate said in a report Wednesday.  The 3,834 transactions — a 12% increase from a year earlier — were the most for any second quarter since 2007. But deals going into contract fell throughout the period, signaling a decrease in buyer demand.

“This is a quick pivot from an overachieving market to a market that’s being challenged by an unprecedented amount of uncertainty,” said Jonathan Miller, president of Miller Samuel. While some brokers and agents are depicting the shift as a return to pre-pandemic market dynamics, Miller said that to him, “this is not a normalization.”

Manhattan’s post-lockdown buying surge is cooling down fast. The drop in new contracts began in April, and in June, deals were down 29% year over year, to 932 from from 1,318. Miller pointed to “the spike in interest rates, inflation, economic uncertainty, the war in Ukraine” as parts of the “whole smorgasbord of things the consumer has been grappling with” that are influencing residential sales.

Among closed purchases, there was strength across the market in the second quarter, with the median co-op price setting a record at $865,000, and the median for condos hitting an all-time high at just below $1.9 million, according to Miller’s analysis. Units spent 86 days on the market before finding buyers, down from 137 days in the first quarter. Even with listings moving more quickly, inventory jumped 15% from the first quarter to 7,968 active listings at the end of June.

Posted in Economics, Housing Bubble, Housing Recovery, National Real Estate | 161 Comments

Maybe the kids are alright

Posted on July 2, 2022 by grim

From Full Stack Economics:

24 charts that show we’re (mostly) living better than our parents

If there’s one thing the left and right seem to agree about, it’s that the US economy’s best days are in the past.

“More than a decade of reckless fiscal policies have devalued the US dollar to the point that middle-class people can barely survive in the United States,” Fox News host Tucker Carlson claimed in March.

“In America today, our younger generations, through no fault of their own, now [have] a lower standard of living than did their parents,” Sen. Bernie Sanders (I-VT) said last year. “The American dream is going backwards.”

There’s no doubt that the inflation of the last year has lowered living standards for many Americans. But pundits and politicians have been talking like this for years. During his 2016 presidential campaign, Sanders declared that “our standard of living has fallen” and “the American dream has become a nightmare.”

Donald Trump concurred, stating in 2015 that “the American dream is dead.”

But have average Americans really suffered from falling living standards over the last 30 or 40 years? I’ve spent the last month researching this question, and the data I’ve found simply don’t back up these claims.

Not every facet of our economic life is improving, of course. College tuition has risen a lot, and so have rents in some big metro areas. But even in problem sectors like health care, housing, and education, the situation isn’t as grim as pessimists claim. And there are many other areas of economic life where we are unambiguously better off than our parents.

Posted in Demographics, Economics, Employment | 24 Comments

Oh ayyy, ayy ohhh, what bubble?

Posted on June 30, 2022 by grim

From SI Live:

‘Fear of missing out’: As buyers scramble for a home in ruthless market, is Staten Island in a real estate bubble?

On a quiet street in Great Kills, a faded turquoise cape is slowly falling apart. Its front steps cracked and guarded by caution tape, layers of time-worn roof shingles drooping from its peak, the 1950s-era home is tired and poorly maintained, its driveway thick with weeds. But despite its offensively overgrown yard and uninhabitable interior, the property boldly boasts a “For Sale” sign on the front lawn and is considered a primo slice of Staten Island real estate. The list price? $569,000.

“In need of major renovations. Being sold ‘AS IS,’” the listing for the small and shabby house reads. “Cash only may be needed…come with an open mind.”

The home’s advantages are few: It’s located on a quiet block and offers a three-car driveway. It’s also a completely detached residence situated on a generous 50×100 slab. But given its poor condition and need for a total overhaul, the half-million price tag seems almost unthinkable. Yet it’s not. In Staten Island’s current housing climate, the asking price might even be considered too low. And properties like this one (yes, there are many others just like it) imply that the borough is at the epicenter of a housing bubble. But is it about to burst?

AN ‘UNPRECEDENTED’ HOUSING CYCLE

“In terms of a bubble, no real estate professional wants to comment on whether or not that is a reality,” noted Joe Tirone, founding broker of Compass Realty in Stapleton, who has been actively involved in Staten Island real estate for three decades. “I’ve been through so many different market cycles over the past 30 years, and this one is unprecedented — completely different than any other cycle I’ve ever seen. But if this is indeed a bubble, I don’t think it’s going to burst; instead, the air is going to leak out of it very slowly.”

Posted in Housing Bubble | 78 Comments

Northeast Holds Out

Posted on June 28, 2022 by grim

From Forbes:

Pending Home Sales See Surprise Rebound In May, But Experts Warn Housing Market Is ‘Undergoing A Transition’

Pending home sales, which measure signed contracts on previously owned and existing properties, unexpectedly rose slightly in May, up 0.7% compared to April and surprising analysts who were largely expecting a drop of up to 4%. 

Home sales were strongest in the Northeast (up roughly 15%), while other regions like the Midwest and West both saw declines of 1.7% and 5%, respectively.

Pending home sales were still nearly 14% lower than they were a year ago—with year-over-year declines in all major regions as buyers have had to contend with rising mortgage rates in 2022.

The average interest rate on the popular 30-year fixed mortgage home loan now sits at nearly 6%, not far off from its highest levels since the 2008 financial crisis.

Though mortgage rates have been shooting up this year, they moderated somewhat in May, which helps explain the surprise increase in pending home sales: The average rate on a 30-year fixed mortgage rose as high as 5.6% in early May before closing out the month at 5.25%, according to Mortgage News Daily.

Posted in Economics, National Real Estate | 146 Comments

The blow off top?

Posted on June 26, 2022 by grim

From the Street:

Something Strange is Happening With Home Prices

The latest news out of the housing market isn’t good. Mortgage rates are soaring, and sales are dropping. 

The one puzzler is what’s happening with prices.

…

“Fixed mortgage rates have increased by more than two full percentage points since the beginning of the year,” Sam Khater, Freddie Mac’s chief economist, said in a statement. 

…

Existing-home sales fell for the fourth straight month in May — 3.4% from April and 8.6% from a year ago, according to the National Association of Realtors.

“Home sales have essentially returned to the levels seen in 2019 — prior to the pandemic — after two years of gangbuster performance,” NAR Chief Economist Lawrence Yun said in a statement.

…

However, prices aren’t behaving intuitively, yet.

The median existing-home price hit $407,600 in May, up 14.8% from May 2021. This marks 123 consecutive months of year-over-year increases, the longest streak in NAR records.

“Those of us who have been anticipating a deceleration in the growth rate of U.S. home prices will have to wait at least a month longer,” Craig Lazzara, managing director at S&P DJI, said in a statement. “The strength of the [data] suggests very broad strength in the housing market, which we continue to observe.”

Posted in Housing Bubble, National Real Estate | 111 Comments

NJ poised to fall?

Posted on June 24, 2022 by grim

From Patch:

NJ Most ‘Vulnerable’ Housing Market In The Nation: Report

When much of the economy shut down because of COVID-19, the good times rolled for many home sellers in New Jersey. But the state’s strong housing market appears headed toward a decline, with several counties among the most vulnerable homebuying sectors in the nation, according to a new report from real estate data curator ATTOM.

In fact, the nation’s three most vulnerable housing markets are in New Jersey, according to the report. Passaic, Essex and Atlantic counties top the rankings, in that order, based on factors such as home affordability, unemployment, local wages and the prevalence of foreclosures. 

…

The New York and Philadelphia metro areas, which include much of New Jersey, were among the nation’s most vulnerable housing markets, according to ATTOM. That includes Bergen, Essex, Ocean, Passaic, Sussex, Union, Camden and Gloucester counties.

Major homeownership costs — such as mortgage payments, property taxes and insurance — consumed high percentages of local wages in the nation’s most vulnerable counties.

ATTOM measured local wages against the expenses of median-priced, single-family homes in their respective areas for the first quarter of the year. Three New Jersey counties ranked worst in that regard:

  1. San Joaquin County, California: 48.9 percent of average local wages needed for major homeownership costs
  2. Bergen County: 48.3 percent
  3. Solano County, California: 46.6 percent
  4. Passaic County: 46.5 percent
  5. Ocean County: 42.5 percent
Posted in Housing Bubble, National Real Estate | 126 Comments

King Murphy

Posted on June 22, 2022 by grim

From NJ101.5:

NJ’S MURPHY SIGNALS POSSIBLE WHITE HOUSE RUN

With speculation intensifying that President Joe Biden will not seek a second term, Gov. Phil Murphy is raising his profile for a potential White House bid.

A $2 million ad blitz is underway touting Murphy’s accomplishments and promoting his progressive agenda. The ads are being paid for by the group Stronger Fairer Forward. The group is chaired by Murphy’s wife, Tammy, and run by former aide Dan Bryan.

Stronger Fairer Forward is one of two groups launched in February with the goal of raising Murphy’s profile. One is a political action committee and the other is a register non-profit. The groups do not have to report where their funding comes from.

Murphy cannot seek another term as governor and these types of organizations are often a precursor to a national run. They could fund advertising and pay for national travel.

Most New Jerseyans don’t want to see Murphy launch a national campaign.

Despite having relatively strong approval ratings in the latest Monmouth University Poll, the majority of those surveyed do not believe he would make a good president.

Murphy has a job approval rating of 55%, but 56% think he is the wrong choice for the White House.

Posted in Politics | 127 Comments

Good thing we don’t need to commute anymore

Posted on June 18, 2022 by grim

From the Star Ledger:

Canceled trains were due to an ‘illegal job action’ by engineers, NJ Transit says

NJ Transit officials said an “illegal job action” triggered a rash of canceled trains throughout the day on Friday after locomotive engineers failed to show up for work.

By mid-afternoon on Friday, the job action caused the cancelation of more than 55 trains and shut down the Princeton shuttle after engineers called out of work at “nearly triple the rate of an average weekday,” said Jim Smith, an NJ Transit spokesman.

Trains deep into the evening schedule were canceled this afternoon and rail passengers were advised to check NJ Transit’s Twitter page and other alerts before traveling.

“NJ Transit became aware of a rumor late in the day yesterday that the locomotive engineers’ union, Brotherhood of Locomotive Engineers and Trainmen (BLE&T), could potentially initiate an illegal job action today,” Smith said in a statement.

“It is clear that this is the result of an illegal job action. NJ Transit is disappointed that the union would perpetrate such an act on the more than 100,000 commuters who depend on NJ Transit rail service every day,” he continued.

The Brotherhood of Locomotive Engineers and Trainmen union did not immediately respond to emails and phone calls to comment on the matter.

Posted in New Jersey Real Estate, Unrest | 90 Comments

Just wait until rents follow…

Posted on June 16, 2022 by grim

From Fortune:

Mortgage rates hit 6.3%—the real cost to buy a house has officially spiked over 50% in just 6 months

Heading into the year, Fannie Mae predicted that the average 30-year fixed mortgage rate would climb from 3.1% to 3.3% by the end of 2022. The Mortgage Bankers Association was a bit more bullish for mortgage rates, predicting the average rate would rise to 4% by the end of 2022. 

At the time, Ali Wolf, chief economist of Zonda, told Fortune that “the impact of rising interest rates depends on where they land. If [mortgage] rates approach 4% before the end of the year, there will be a notable downshift in housing demand…If mortgage interest rates gradually rise throughout the year, allowing home sellers to price their homes accordingly, then the shock to the system will be less noticeable.”

Fast-forward to today, and it’s clear that neither Fannie Mae’s forecast nor the Mortgage Bankers Association’s prediction was anywhere close to reality. Instead, we’ve tipped over into what Wolf deems the “shock to the system” category. 

As of Tuesday, the average 30-year fixed mortgage rate has jumped to 6.28%—up from 5.3% just a month ago. That marks the highest mortgage rate since 2008. The 3.2 percentage point jump in mortgage rates over the past year also marks the biggest upward swing since 1981.

If a homebuyer took out a $400,000 mortgage in June 2021 at the then average fixed rate of 3.1%, they’d owe $1,708 per month. At a 6.28% rate, that principal and interest payment comes out to $2,471. However, that’s assuming the home didn’t change in value. Now let’s say that home jumped 20%—the latest reading for year-over-year home price growth—in value. That ups the mortgage to $480,000. At a 6.28% rate, a $480,000 mortgage comes out to a $2,965 principal and interest payment. That’s quite a jump.

…

Since April, Moody’s Analytics chief economist Mark Zandi has been telling Fortune this would happen. What we’ve entered into isn’t just a housing slowdown. Instead, Zandi says, it’s a full-blown “housing correction.” Over the coming 12 months, Moody’s Analytics forecasts the year-over-year rate of home price growth will plummet from 20% to 0%, while significantly “overvalued” housing markets like Boise and Atlanta could see home prices drop 5% to 10%. (Moody’s Analytics estimates 183 regional housing markets are “overvalued” by more than 25% relative to what local economic fundamentals would historically support.) 

Posted in Mortgages, National Real Estate | 176 Comments

Worth breaking something

Posted on June 15, 2022 by grim

From Bloomberg:

Fed Mulls ‘Game Changer’ to Jolt Inflation: Decision Day Guide

Federal Reserve Chair Jerome Powell, who’s carefully telegraphed interest rate hikes over four years, looks likely to abandon gradualism and move more forcefully to stamp out inflation along with growing concerns that it will persist.

The Federal Open Market Committee is expected to raise rates 75 basis points by Wall Street firms including Goldman Sachs Group Inc., JPMorgan Chase & Co. and Barclays Plc, who cite rising inflation expectations among Americans in looking for the largest increase in nearly three decades. Citigroup Inc. and Bank of America Corp. economists are among those who still think the Fed will shift by 50 basis points as previously planned.

The Fed will announce a decision and publish fresh forecasts at 2 p.m. Wednesday in Washington. Powell will hold a press conference 30 minutes later.

“The usual rule is, if you are worried about how your moves are going to affect financial markets, you move gingerly,” said Barclays senior economist Jonathan Millar, among the first to call for 75 basis points. “You worry about the risk of breaking something. In this case, it’s worth breaking something. We are at a very critical point where it looks like their credibility is starting to erode.”

Posted in Economics, Politics, Unrest | 156 Comments

Mortgage Rate Bloodbath

Posted on June 14, 2022 by grim

From Mortgage News Daily:

Mortgage Rates Surge Well Into the 6% Range After One of The Worst Days in Decades

It’s hard to quantify just how bad today was for mortgage rates because there’s no quality day-over-day mortgage rate data from before 2009 (when we created our own).  In that time, there has only been one other comparable day to today in terms of the jump in mortgage rates.

As a fan of the whole truth, I feel compelled to say that there were a few days in March 2020 that were bigger, but I’m not counting them as comparable days because they were the product of TWO-WAY volatility and a once-in-a-lifetime combination of market conditions and Fed policy response. 

That leaves July 5, 2013 as the only truly comparable day.  It too came at a time when rates had already been rising rapidly in response to an evolving outlook for Fed policy.  The difference back then was that the Fed had simply decided it was time to finally begin unwinding some of the easy policies put into place after the Financial Crisis.  This time around, the Fed is in panic mode about runaway inflation.  And today specifically, it’s the market that’s panicked about the Fed’s potential panic at the upcoming meeting and policy announcement set to be released at 2pm on Wednesday afternoon.

…

In total, rates moved up from the high fives to the low 6s.  But pinning down an actual rate is very tricky right now due to the structure of the mortgage bond market.  It’s hard to explain without getting into esoteric details, but the gist is that there is normally more profit for banks when their clients choose a higher interest rate.  This is why no-closing-cost loans can exist.  The rates are high enough to cover the lenders’ cost and profit.  Those same lenders could also quote lower rates, but with the difference being that the borrower would be paying some closing costs.

At present, that “premium pricing” just isn’t so premium.  That means in many cases, it may make more sense to pay higher upfront costs because they will do more than normal to bring you down to the next rate lower.  To put this in perspective, if it normally costs roughly 1 point to drop your rate quote by 0.25%, that same point can bring the rate 0.50% lower in many cases today.  So if you can opt to pay a point to get your rate down to 5.625%-5.875%, but a more typical closing cost structure suggests rates are 6.125-6.375%, what’s the going rate?  

Our index accounts for fluctuations in upfront cost in order to accurately represent the day over day change.  It suggests the average going rate for the average lender rose from 5.85% to 6.18% on a flawless scenario from Friday to today.

Posted in Economics, Mortgages, National Real Estate | 161 Comments

Different this time?

Posted on June 13, 2022 by grim

From Business Insider:

The Great Recession misled millennials: It made them think high home prices will eventually come down

History often repeats itself — but when it comes to the current housing market, don’t hold your breath. 

If you were a homebuyer in the mid-2000s, today’s hot market might look eerily familiar. Like many of your fellow Americans, you might be wondering when this housing cycle will come to a close and bring prices back down to earth. 

It won’t be that simple this time around. 

That’s because the US housing market is in uncharted waters and it’s throwing homebuyers for a loop. 

A typical real-estate cycle occurs in four phases: expansion, hyper supply, recession and recovery. This is the pattern that gave rise to the housing bubble of the mid-aughts, a time when a combination of cheap debt, predatory mortgage lending, and complex financial engineering led to a foreclosure crisis as well as a credit crisis among investors — and by 2008, a global recession.  

During the Great Recession, US home prices — which had soared during the housing bubble of 2006 and 2007 — tanked to a 17-year low. This created a chance for many Americans to afford a home if they had managed to escape the crash financially unscathed.

As some of the factors that contributed to the housing crash of 2008 reemerge, many Americans, especially millennials — the largesthomebuying cohort of the 2020s who witnessed their parents navigate the rocky real-estate landscape of the 2000s — are expecting a similar outcome. However, the current housing market is a vastly different beast. Although the US is bracing for a possible recession in 2023, home prices won’t be crashing anytime soon.

As Axios’ Nathan Bomey recently wrote in a newsletter, “As an older millennial, the financial crisis trained me to think that housing prices that go up must come down. But this has the makings of a softer landing.”

Posted in Demographics, Economics, Housing Bubble, National Real Estate | 155 Comments

Let’s get those steaks sizzling – if you can afford it

Posted on June 10, 2022 by grim

From CNBC:

Consumer price inflation in May expected to run sizzling hot as energy, food and rent rose

Economists expect inflation in May continued to burn white hot, with energy, food, rent and health-care costs all rising.

According to Dow Jones, economists expect the consumer price index rose 0.7%, up from 0.3% in April. On a year-over-year basis, that would work out to an 8.3% rate, the same pace as April. The CPI report is released at 8:30 a.m. ET Friday.

Economists expect to see some cooling in core inflation, meaning the measure with energy and food excluded. Core CPI is expected to rise 0.5% or 5.9% year over year, according to Dow Jones. That compares to 0.6% in April, or 6.2% on a year-over-year basis.

“It’s a very disquieting number. It’s going to re-energize concerns about has inflation peaked,” said Mark Zandi, chief economist at Moody’s Analytics. “I think we peaked. On a quarter basis, it was 8% in Q1.”

Year-over-year inflation reached a high of 8.5% in March.

Sarah House, senior economist at Wells Fargo, does not expect oil prices have peaked, and therefore she does not expect inflation has either. She expects headline CPI rose by 8.4% in May.

“That’s what changed our view over the last few weeks. We’ve seen gasoline hit record levels. And naturally what’s prevented the peak from being behind us is what’s coming out of the energy sector,” she said. The national average for gasoline reached $4.97 per gallon Thursday, according to AAA.

The market has been keenly focused on whether inflation has peaked since that will affect how aggressive the Federal Reserve may be with interest rate hikes.

Posted in Economics, Politics | 147 Comments