In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses the ISM Index and construction spending.

• Though the sun is scorching, the U.S. is definitely feeling  cool economic drafts from overseas. The European recession and China’s slower expansion have pushed down U.S. manufacturing activity. The latest reading on the ISM index (which surveys manufacturing managers) implies a mild contraction in U.S. manufacturing activity.
• ISM index fell to 49.7 in June and below the critical 50 mark for the first time since 2009. Above the 50 mark implies expansion while below 50 implies contraction.
• This data is one of most timely indicators of what is happening to economy and said to be Alan Greenspan’s favorite data. Production and manufacturing employment components still imply expansion, but the new orders fell below the 50 mark.
• In separate news, the overall construction spending continues to move higher. There were increases to both residential home construction and commercial real estate new buildings coming on line in May. Government construction activity fell for the fifth straight month, no doubt due to stringent budget tightening by state and local governments. Construction employment is bound to show solid gains in upcoming months.
• The combined impact of disappointing manufacturing data with positive private construction activity leads to a downgrading of economy such that GDP will be growing at around 1.5 percent in the second quarter (rather 2 percent as predicted earlier). Economic expansion is slow, but we are nowhere near a recession. Jobs overall are coming around very slowly, probably only 1.5 million net new jobs in 2012. That will mean that the unemployment rate will be stuck at 8 percent and change for the remainder of the year.

• Eighty-nine percent of buyers purchased their home through a real estate agent or broker—a share that has steadily increased from 69 percent in 2001.
• Forty-one percent of buyers found their agent through a referral from a friend or family member and 9 percent used an agent they had used before to buy or sell a home.
• About two-thirds of recent buyers only interviewed one agent before they found the agent they worked with.
• Nearly nine in ten buyers would use their agent again or recommend to others.
• For more information from the annual Profile of Home Buyers and Sellers, click here >

At the time of the nation’s independence the total population in the U.S. was 2.5 million. Philadelphia was the largest city with 40,000 residents – which would only fill about half the capacity at Lincoln Financial Field where its football team plays home games today. The Quaker-populated city back then was very peaceful and civil, very unlike the Eagle fans of today.

In 1776, the next largest cities were New York City (25,000 people), Boston (15,000), Charleston (12,000), and Newport (11,000). All are rough estimates as the U.S. Census enumeration did not begin until the 1790.

Today, in 2012, the U.S. population has blossomed to 311 million. The largest metropolitan areas are, in order, (1) New York City, (2) Los Angeles, (3) Chicago, (4) Dallas, and (5) Houston. The metropolitan statistical areas (MSAs) are used for comparison rather than city geographic boundaries because suburban populations matter in today’s local economy, as evidenced by daily traffic jams in these metro areas.

By the 300th anniversary of the nation’s birth in 2076, the U.S. population will have grown to anywhere between 520 million and 590 million, depending upon whether the population growth rate is somewhat slow at 0.8 percent each year or matches the recent average of 1.0 percent each year.

But which city will be the largest in 2076? So much can change between now and then, but my best guess is that southern cities will see most of the gains while northern cities lag behind.  Job growth has been consistently much faster in Sun Belt cities. For example, Buffalo was considered a large city with nearly ½ million workers in the region in 1950. But Buffalo has about the same number of jobs today while Charlotte zoomed from 200,000 jobs in 1970 to over 800,000 today.

Other similar examples abound of faster growth in sunnier places. Big-shouldered Chicago had more jobs than all of mighty Texas back in 1950. But not anymore. Pittsburgh offers another example of past glory. A thick accented Scottish immigrant named Carnegie literally built Pittsburgh and the city was full of mansions and wealth well into the 1950s. Today, people are heading to the desert in Phoenix with their retirement money.

My prediction, therefore, is that the biggest cities in the U.S. in 2076 will be:
(1) New York
(2) Houston
(3) Atlanta
(4) Washington, D.C.
(5) Phoenix

Real estate values in prime locations of these cities will be especially high. Chicago and Pittsburgh do not make the list, though they can comfort in the fact that there will still be plenty of Bears and Steelers fans cheering at football games played in Phoenix.

Realtors’® confidence about the outlook for residential home sales over the next 6 months continues to increase, according to the  Realtors® Confidence Index .

The RCI Report provides monthly indicators on current real estate market conditions and the expected outlook.  The Report summarizes information pertaining to buyer/seller traffic, price trends, buyer profile, and issues affecting residential real estate based on responses of Realtors® to a survey conducted for the period May 29 -June 8, 2012.  Given that all real estate is local, conditions in specific markets may vary from overall national trends.  A growing number of respondents indicated a growing number of cases of multiple offers, fewer seller concessions, and lower inventories of homes for sale. Overall the residential real estate outlook at this time appears to be favorable.

What Does This Mean For Realtors®?

This month’s RCI shows residential markets that continue to recover.  Realtor® confidence and price expectations are higher than was the case a few months ago.  Rising rental rates have favorable implications for home sales.  Time on market continues to decrease.  Prices and interest rates continue to be lower than has been the case in the past.  These are the reasons that we continue to view the outlook as favorable for home sales.

Given that the typical homeowner will occupy a house for approximately 8 years after purchase and that home ownership is basically a lifestyle decision in addition to a financial commitment, one can make a very good case that this is a good time to buy a house, remembering that staying within a reasonable budget and acceptable mortgage is important.

• Thirty-nine percent of sellers who used a real estate agent found their agents through a referral by friends or family, and 22 percent used the agent they worked with previously to buy or sell a home.
• Two-thirds of home sellers only contacted one agent before selecting the one to assist with their home sale.
• Ninety-two percent of sellers reported that their home was listed or advertised on the Internet.
• Among recent sellers who used an agent, 85 percent reported they would definitely (69 percent) or probably (16 percent) use that real estate agent again or recommend to others.
• For more information from the annual Profile of Home Buyers and Sellers, click here >

In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses jobless claims and ADP payroll data.

• The employment situation appears to be improving again based on the initial claims for unemployment insurance data released by the Department of Labor and the private payroll count computed by ADP, a payroll processing company. This data points to a likely improvement in the June official employment data to be released tomorrow by the Bureau of Labor Statistics. To note, for Presidential election campaigns, the ADP data will not matter and only BLS jobs data will be mentioned.
• Initial claims for unemployment insurance for the week ending June 30 dropped to 374,000 from the revised (upward) estimate of 388,000 the previous week. The 4-week moving average, which is less volatile, put the average claims for the last 4 weeks at 385,000 thousand. There was an uptick in claims in the last week of May and the first two weeks of June, but the latest data over the past two weeks has initial jobless claims coming back down, although slowly.

• Meanwhile, ADP, a company that processes private payroll, released the private payroll count for June. Private payroll expanded to a better-than-expected figure of 176,000, up from 133,000 in May. The movement in ADP private payroll data has generally tracked the official private non-farm jobs generated figures of the Bureau of Labor Statistics (see chart and table below).
• Thus, we expect that the official June employment data released tomorrow will also show stronger gains in private employment and a slightly lower unemployment rate, assuming that these gains are not severely eroded by the loss of government jobs, which have been in in the range of about 5,000 to 10,000 a month.
• A positive employment situation will make the ongoing uptrend in both sales and prices more robust and sustained.

In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses the BLS  jobs report.

• The job gains are just too slow. Today’s employment figure of 80,000 net new payroll jobs in June marks the third consecutive month of subpar performance. The economy needs to create 250,000 net new jobs every month for the next 10 years to get us to the normal 5 percent unemployment rate.
• Gains occurred primarily in the ‘temporary help’ sector, which added 25,200 jobs. The leisure and hospitality industry added 13,000 jobs, while the manufacturing sector generated 11,000 jobs. The hard hit construction sector, despite increased business activity this year, is barely hiring, with only 2,000 job gains in the month. Construction workers and general contractors who already have jobs are evidently being asked to do more as companies are shy about hiring new workers. Government jobs shrank by 4,000.
• The slow job creation had no impact on the official unemployment rate, which stands at 8.2 percent. If the subpar performance continues then the unemployment rate flashing in peoples’ minds by the November election date could be as high as 8.5 percent. If jobs pick up to over 200,000 per month until the election then the unemployment rate may slide down to 7.9 percent.
• Of those people with jobs, the average hourly earnings rose to $23.50, a gain of 45 cents from one year ago. This gain of 2.0 percent is slightly higher than the most recent 12-month consumer price inflation of 1.7 percent. Inflationary pressure is not building from the job market, something to note among gold investors.
• One disturbing aspect of recent hard times is that the number of people in the labor force, those with jobs and those actively looking for jobs, are at essentially the lowest point in nearly 20 years. There has been a notable increase in the number of people who are of working age but just not looking for work. And they are not counted in the unemployment statistics. Some have extended their schooling years (raking-in college debt). Others have taken an early retirement package or decided to go on disability benefits. And then there are the jobless who have simply given up looking for work for whatever reasons.
• Despite the less than ideal job market conditions, the economy is in no danger of a fresh recession, where jobs get cut. The current job creation is slowly adding up the number of potential homebuyers and number of new occupants for commercial real estate properties. From the low point in early 2010, 4 million net new jobs have been added to the economy. It looks like 1.5 million net new jobs will be created for all of this year. Still worth repeating, the economy needs to create 250,000 net new jobs every month for the next 10 years to get us to the normal 5 percent unemployment rate.

NAR Profile of Home Buyers and Sellers: The Home Search Process

On July 6, 2012, in Uncategorized, by T.J. Doyle, Marketing & Communications Manager

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• For 35 percent of home buyers, the first step in the home buying process was looking online for properties.
• Ten percent of home buyers first looked online for information about the home buying process.
• The use of the Internet in the home search dipped slightly to 88 percent from a high of 90 percent in 2009 as the demographics of home buyers shifted to slightly older repeat buyers from younger first-time buyers.
• Real estate agents were viewed as a useful information source by 98 percent of buyers who used an agent while searching for a home.
• The typical home buyer searched for 12 weeks and viewed 12 homes.
• Nine in ten recent buyers were satisfied with the home buying process.
• For more information from the annual Profile of Home Buyers and Sellers, click here >