Archive for the 'Economy' Category
The benchmark 30 year conforming fixed rate mortgage ended the week essentially unchanged from last week. Freddie Mac’s weekly survey showed an average of 6.16% with .8 points cost for the western U.S.
WEDNESDAY’S FOMC MEETING
The Fed meeting adjourned Wednesday without any change to key short-term interest rates. This was widely expected, however the Fed went on to express continued concern about inflation and wage pressures, creating volatility in late trading.
PPI & Retail Sales
On Friday, the core PPI rate reported flat for the second month in a row, increasing hope for a Fed easing of rates later in the year. Compounding the sentiment was a decline in April retail sales, the biggest drop since September and worse than expected. Earlier in the week a spike in consumer revolving debt use—mostly credit cards—to 9.2% in April from 2.9% in March indicating that consumers will continue to prop up the economy even if it means increasing debt to do it.
read comments (1)The 30 years conforming fixed rate loan ends this week unchanged at 6.16 with .5 points, according to Freddie Mac’s weekly survey.
BEHIND THE NUMBERS
The April jobs report showed the slowest job growth rate in two years, as predicted earlier by Wednesday’s ADP jobs report. The Wall Street Journal reports 88,000 new jobs, fewer than than the 110,000 consensus figures, along with a small rise in unemployment. This could well be the delayed reaction I mentioned in yesterday’s article. Coming on the heels of weak 1st quarter GDP growth, hopes for a Fed rate cut before the end of year were rekindled.
I’ll apologize in advance for the length of this article. But it will enlighten you if you have the patience to finish.
Despite the bursting housing bubble and a fall in housing starts of over 30%, unemployment remains very low. How can that be? Home builders downsize crews, shrink their land acquisition and development departments, and put the brakes on construction.
Yet the employment statistics remain strong. Don’t get me wrong. I’m happy, but puzzled. So I’ve been poking around trying to understand this phenomenon since the real estate downturn got its full head of steam last year.
Recently I was talking with Jim Bayless of Treasure Homes, who shed first light on this for me. He explained to me that much of the construction labor employed by sub-contractors consists of undocumented workers. Since these folks are never officially on the employment rolls to begin with, they don’t show up in the unemployment numbers when the work dries up. That’s pretty nice for us, an extra big shock absorber on the plane’s landing gear so we get that “soft landing” everybody’s talking about.
But where do those folks go? Well they go on home, or they move on to someplace where there is work.
THE HIDDEN WORK FORCE
Then I ran across an article by Nouriel Roubini entitled: Falling Remittances from the U.S. to Latin America as Evidence of the Housing Slump which references a recent Wall Street Journal story and research by Walter Molano at BCP Securities, who writes:
Sacramento Region Housing Forecast
What’s next for the high flying Sacramento real estate market?
To find out, last week I attended the North State Building Industry Association (BIA) Sacramento Region Housing Forecast in downtown Sacramento to see what four experts had to say.
Elliott Eisenberg is a housing policy economist with the National Association of Home Builders. Michael Lyon is President of one of Sacramento’s largest privately held residential real estate firms. Greg Paquin heads the Gregory Group, and Harry Elliott III is President of Elliott Homes, a national home builder based in Folsom CA. I figured that from their altitude, there might be a clearer view of what’s on the horizon.