New homes sold in May at the fastest pace in more than two years. The increase suggests a modest recovery is continuing in housing, despite weaker job growth.
The Commerce Department said Monday that sales of new homes increased 7.6% in May from April to a seasonally adjusted annual rate of 369,000. That's the best pace since April 2010, the last month that buyers could qualify for a federal home-buying tax credit.
Even with the gains, the annual sales pace is less than half the 700,000 that economists consider to be healthy.
Yet, the increase follows other signs that show the housing market is improving nearly five years after the bubble burst.
Builders are gaining confidence in the market and starting to build more homes. Mortgage rates have plunged to the lowest levels on record. Prices remain low and have started to stabilize. And sales of previously occupied homes are much higher than the same time last year.
Though new homes represent less than 20% of the market, they have an outsize impact on the economy. Each home built creates an average of three jobs, according to the National Association of Home Builders.
Meanwhile, the supply of new homes for sale remains extremely low. Just 145,000 new homes were for sale in May. That's not much higher than the 144,000 available in April, which was the lowest supply on records dating to 1963.
At the current sales pace, it would take 4.7 months to exhaust the May supply. A six-month supply is generally considered healthy by economists.
"With no excess inventory of unsold new homes, any sustained rebound in new home sales should quickly translate into firmer prices," said Steven Wood, chief economist at Insight Economics.
Builders are responding to the low supply. In May, they requested the most permits to construct homes and apartments in three-and-a-half years.
Sales surged 36.7% in the Northeast and 12.7% in the South. Sales fell 10.6% in the Midwest and were down 3.5% in the West.
Sales of previously occupied homes fell in May to a seasonally adjusted annual rate of 4.55 million after nearly touching a two-year high in April. Still, resales were up 9.6% from May 2011.
By Martin Crutsinger, The Associated Press
Saturday, June 30, 2012
Friday, June 29, 2012
Job Growth jump-starts Orange County Recovery
One of the county's biggest economic drivers, tourism employment, has rebounded while other sectors are improving.
The opening of Cars Land, the latest expansion for Disney's California Adventure theme park, made headlines in recent days. But the bigger news for Orange County is that tourism employment — one of its biggest economic drivers — has rebounded while other sectors are improving.
After shedding thousands of jobs in recent years, the leisure and hospitality sector has regained all positions lost during the economic downturn. Employment in hotels, restaurants, theme parks and other tourism-related businesses last month hit 181,500 jobs. That's the highest amount for May on record, and exceeds the previous peak of 181,400 jobs set in July 2008.
Healthcare is also proving to be a bright spot for Orange County, home to facilities including UC Irvine Medical Center and St. Jude Medical Center in Fullerton. The sector continued to expand through the recession and employment reached an all-time high of 137,500 jobs in April.
More hiring is ahead. Children's Hospital of Orange County in Orange is finishing a $562-million expansion that includes a new seven-story tower with a pediatric emergency center. It's looking to add 400 positions to staff that new facility, which when filled would equate to an 18% increase in its workforce, according to Rossedy Anderson, the hospital's director of employment and volunteer services.
"It's pretty significant," Anderson said. "We're hiring at all different levels, not just licensed clinical professionals."
Growth in these and other industries is why Orange County had one of the lowest unemployment rates in the state in May, at 7.5%, trailing only the high-tech hotbeds of Marin, San Mateo and San Francisco counties.
Meanwhile, businesses are more confident in their economic outlook. A survey of Orange County firms conducted by Cal State Fullerton had a jump in its index, rising to 90.7 for the second quarter; two quarters earlier the index was at 46.3. A reading above 50 indicates future growth in the economy.
Orange County "is getting back to a more normal state of affairs," said Anil Puri, dean of the university's Mihaylo College of Business and Economics. "We're not there yet, but making progress."
Indeed, not all is sunny in Orange County. The county has regained just 27% of the 184,000 jobs lost since employment peaked in October 2006, a good chunk of those in construction, finance and other activities linked to the housing market.
In the midst of the housing bubble, in May 2006, the county's unemployment rate was just 3.2%.
Economists say Orange County's recovery has been aided by the area's economic diversity.
Irvine is home to a cluster of technology, banking and other professional firms, while manufacturers line the 91 Freeway, which cuts through the central part of the county. The county's tourism sector is anchored by two Disney theme parks in Anaheim and Knott's Berry Farm in Buena Park, not to mention 42 miles of coastline.
As jobs trickle back, some sectors have made decidedly stronger gains than others. In particular, Orange County's professional and business services sector has added 12,300 jobs since May 2011, a 5% rise, compared with 1.8% overall job growth in the county over the same period.
An improved labor market has also boosted consumer spending in Orange County, experts said. In April, auto dealers sold 11,468 vehicles — a 12.8% jump compared with the same month last year, according to the most recent data available from the Orange County Automobile Assn.
"It's a great measure of consumer confidence. People out buying cars is a great sign," said John Sackrison, the association's executive director. "People are starting to see the storm's over and we're on the path to a good solid recovery."
At Costa Mesa's South Coast Plaza, retail sales last year reached $1.4 billion and are projected to increase 10% this year, said Debra Gunn Downing, the shopping center's executive director of marketing. She added that luxury goods sales have been particularly strong, with several high-end retailers set to open.
Government remains a weak spot, given California's and local municipalities' ongoing budget woes. Still, Orange County has shed fewer government jobs than other counties in Southern California.
Orange County has lost 5,800 government jobs since the beginning of 2009, a drop of 3.7%. By comparison, Los Angeles County lost 39,600 government jobs, a 6.5% decline, over the same period.
Economists attributed the discrepancy to a legacy of the county's crippling bankruptcy in the mid-1990s, as government emerged from that debacle operating more leanly.
"The management structure of the county improved," Puri said. "That has served the county well. The Board [of Supervisors] is a lot more vigilant about spending. Prudent management on a day-to-day basis has helped them make fewer drastic cuts than some counties have had to make."
County leaders and economists are still watching for a housing recovery. Data show that last month, 18.5% of the homes on the resale market were foreclosures, the lowest level since November 2007, according to DataQuick, signaling a possible bottom to median home prices.
And on Tuesday, luxury builder Toll Bros. Inc. announced it would build 2,000 new homes and apartments on a 386-acre site in Lake Forest.
The move signals that the builder is confident there will be demand for homes in the master-planned community, analysts said.
Despite the improved economic picture, some have been left out of the recovery. There still are almost 120,000 unemployed residents in Orange County.
Among them is Sherryl Wiseman, a 67-year-old Huntington Beach woman who has been unemployed since November.
A former architectural designer, she had been working part-time as a restaurant hostess in Westminster. Last week, she left a state One-Stop Career job center in Westminster feeling pessimistic about her job outlook.
"Getting a job like I had, I just don't think that's going to be possible," she said, adding that she thinks her age makes her less attractive to employers. "I just don't think the economy is turning around that quickly."
Payrolls need to swell considerably before Orange County can proclaim a recovery, said Wallace Walrod, chief economic advisor at the Orange County Business Council.
"There's nothing that I see that's specific to Orange County that troubles me," Walrod said. "I think the economy is on good footing.... We're definitely moving in the right direction."
By Ricardo Lopez, Los Angeles Times
The opening of Cars Land, the latest expansion for Disney's California Adventure theme park, made headlines in recent days. But the bigger news for Orange County is that tourism employment — one of its biggest economic drivers — has rebounded while other sectors are improving.
After shedding thousands of jobs in recent years, the leisure and hospitality sector has regained all positions lost during the economic downturn. Employment in hotels, restaurants, theme parks and other tourism-related businesses last month hit 181,500 jobs. That's the highest amount for May on record, and exceeds the previous peak of 181,400 jobs set in July 2008.
Healthcare is also proving to be a bright spot for Orange County, home to facilities including UC Irvine Medical Center and St. Jude Medical Center in Fullerton. The sector continued to expand through the recession and employment reached an all-time high of 137,500 jobs in April.
More hiring is ahead. Children's Hospital of Orange County in Orange is finishing a $562-million expansion that includes a new seven-story tower with a pediatric emergency center. It's looking to add 400 positions to staff that new facility, which when filled would equate to an 18% increase in its workforce, according to Rossedy Anderson, the hospital's director of employment and volunteer services.
"It's pretty significant," Anderson said. "We're hiring at all different levels, not just licensed clinical professionals."
Growth in these and other industries is why Orange County had one of the lowest unemployment rates in the state in May, at 7.5%, trailing only the high-tech hotbeds of Marin, San Mateo and San Francisco counties.
Meanwhile, businesses are more confident in their economic outlook. A survey of Orange County firms conducted by Cal State Fullerton had a jump in its index, rising to 90.7 for the second quarter; two quarters earlier the index was at 46.3. A reading above 50 indicates future growth in the economy.
Orange County "is getting back to a more normal state of affairs," said Anil Puri, dean of the university's Mihaylo College of Business and Economics. "We're not there yet, but making progress."
Indeed, not all is sunny in Orange County. The county has regained just 27% of the 184,000 jobs lost since employment peaked in October 2006, a good chunk of those in construction, finance and other activities linked to the housing market.
In the midst of the housing bubble, in May 2006, the county's unemployment rate was just 3.2%.
Economists say Orange County's recovery has been aided by the area's economic diversity.
Irvine is home to a cluster of technology, banking and other professional firms, while manufacturers line the 91 Freeway, which cuts through the central part of the county. The county's tourism sector is anchored by two Disney theme parks in Anaheim and Knott's Berry Farm in Buena Park, not to mention 42 miles of coastline.
As jobs trickle back, some sectors have made decidedly stronger gains than others. In particular, Orange County's professional and business services sector has added 12,300 jobs since May 2011, a 5% rise, compared with 1.8% overall job growth in the county over the same period.
An improved labor market has also boosted consumer spending in Orange County, experts said. In April, auto dealers sold 11,468 vehicles — a 12.8% jump compared with the same month last year, according to the most recent data available from the Orange County Automobile Assn.
"It's a great measure of consumer confidence. People out buying cars is a great sign," said John Sackrison, the association's executive director. "People are starting to see the storm's over and we're on the path to a good solid recovery."
At Costa Mesa's South Coast Plaza, retail sales last year reached $1.4 billion and are projected to increase 10% this year, said Debra Gunn Downing, the shopping center's executive director of marketing. She added that luxury goods sales have been particularly strong, with several high-end retailers set to open.
Government remains a weak spot, given California's and local municipalities' ongoing budget woes. Still, Orange County has shed fewer government jobs than other counties in Southern California.
Orange County has lost 5,800 government jobs since the beginning of 2009, a drop of 3.7%. By comparison, Los Angeles County lost 39,600 government jobs, a 6.5% decline, over the same period.
Economists attributed the discrepancy to a legacy of the county's crippling bankruptcy in the mid-1990s, as government emerged from that debacle operating more leanly.
"The management structure of the county improved," Puri said. "That has served the county well. The Board [of Supervisors] is a lot more vigilant about spending. Prudent management on a day-to-day basis has helped them make fewer drastic cuts than some counties have had to make."
County leaders and economists are still watching for a housing recovery. Data show that last month, 18.5% of the homes on the resale market were foreclosures, the lowest level since November 2007, according to DataQuick, signaling a possible bottom to median home prices.
And on Tuesday, luxury builder Toll Bros. Inc. announced it would build 2,000 new homes and apartments on a 386-acre site in Lake Forest.
The move signals that the builder is confident there will be demand for homes in the master-planned community, analysts said.
Despite the improved economic picture, some have been left out of the recovery. There still are almost 120,000 unemployed residents in Orange County.
Among them is Sherryl Wiseman, a 67-year-old Huntington Beach woman who has been unemployed since November.
A former architectural designer, she had been working part-time as a restaurant hostess in Westminster. Last week, she left a state One-Stop Career job center in Westminster feeling pessimistic about her job outlook.
"Getting a job like I had, I just don't think that's going to be possible," she said, adding that she thinks her age makes her less attractive to employers. "I just don't think the economy is turning around that quickly."
Payrolls need to swell considerably before Orange County can proclaim a recovery, said Wallace Walrod, chief economic advisor at the Orange County Business Council.
"There's nothing that I see that's specific to Orange County that troubles me," Walrod said. "I think the economy is on good footing.... We're definitely moving in the right direction."
By Ricardo Lopez, Los Angeles Times
Thursday, June 28, 2012
Wednesday, June 27, 2012
Home Prices Rebound in April
Case-Shiller numbers may indicate more than expected spring surge
Home prices rebounded in April following seven months of declines in nearly all of the major market tracked by the S&P Case-Shiller 20-City Composite Index.
From March to April, 19 out of 20 markets tracked by the index posted price gains, ranging from an almost imperceptible 0.1 percent in New York to a 3.4 percent monthly gain in San Francisco. Detroit saw prices fall 3.6 percent from March, making the only market tracked by the index not to see a monthly gain.
Looking back a year, prices were down from a year ago in half of the markets in the 20-City Composite, led by Atlanta (-17 percent), Las Vegas (-5.8 percent) and Chicago (-3.6 percent). In the Phoenix metro area -- a market hit hard early in the downturn that's now seeing tight inventory -- prices were up 8.6 percent.
The 20-City Composite Index was up 1.3 percent from March to April, but down 1.9 percent from a year ago.
Those figures aren't seasonally adjusted, and changes in home prices "are very seasonal, with the spring and early summer being the most active buying months," said David Blitzer, chairman of the Index Committee at S&P Indices in a statement. But the seasonally adjusted data "were also largely positive, a possible sign that the increase in prices may be due to more than just the expected surge in spring sales."
Looking at the seasonally adjusted numbers, Bill McBride of the blog Calculated Risk thinks "it is likely that prices have bottomed, although I expect prices to be choppy going forward -- and I expect any nominal price increase over the next year or two to be small."
BY INMAN NEWS, TUESDAY, JUNE 26, 2012.
From March to April, 19 out of 20 markets tracked by the index posted price gains, ranging from an almost imperceptible 0.1 percent in New York to a 3.4 percent monthly gain in San Francisco. Detroit saw prices fall 3.6 percent from March, making the only market tracked by the index not to see a monthly gain.
Looking back a year, prices were down from a year ago in half of the markets in the 20-City Composite, led by Atlanta (-17 percent), Las Vegas (-5.8 percent) and Chicago (-3.6 percent). In the Phoenix metro area -- a market hit hard early in the downturn that's now seeing tight inventory -- prices were up 8.6 percent.
The 20-City Composite Index was up 1.3 percent from March to April, but down 1.9 percent from a year ago.
Those figures aren't seasonally adjusted, and changes in home prices "are very seasonal, with the spring and early summer being the most active buying months," said David Blitzer, chairman of the Index Committee at S&P Indices in a statement. But the seasonally adjusted data "were also largely positive, a possible sign that the increase in prices may be due to more than just the expected surge in spring sales."
Looking at the seasonally adjusted numbers, Bill McBride of the blog Calculated Risk thinks "it is likely that prices have bottomed, although I expect prices to be choppy going forward -- and I expect any nominal price increase over the next year or two to be small."
Friday, June 22, 2012
Cash-Only Home Purchases In County At Record 33.3%
Consumers who bought homes with cash had another record showing in San Diego County in May, the latest DataQuick numbers say.
The share of cash deals rose to 33.3 percent, topping the previous peak of 33 percent set in April. They made up 26.5 percent of all sales a year ago. May’s percentage of cash buyers surpassed that of the Southern California region, which was 31.3 percent.
Those who buy homes with cash are mainly investors, said DataQuick analyst Andrew LePage, but there are other groups, too.
“It’s people who retire or are near retirement who want to sell big houses and buy smaller houses,” LePage said. “Or parents buying houses near universities, paying with cash... and then you’ve got wealthy people buying luxury properties in cash.”
Throughout Southern California, cash buyers paid a median of $232,500 in May, up from $225,000 in April and $220,000 in May 2011. The median price for all types of homes combined in San Diego County in May was $335,000.
Here’s a breakdown of other important numbers to track:
Foreclosure resales
These are homes that were foreclosed upon in the last year and were resold. DataQuick says 21.3 percent of total resales fit into this category in May, the lowest it’s been since October 2007, when it was 20.8 percent. A year ago, the share of resales that were foreclosures was 30.9 percent.
Short sales
An estimated 19.8 percent of resales in May were short sales, down from 20.7 percent in April but up from 18.4 percent a year ago.
When comparing May 2012 with May 2011, sales of San Diego homes:
• Below $200,000 were up 5.6 percent.
• Below $300,000 were up 10.3 percent.
• Below $400,000 were up 16.4 percent.
• Between $300,000 and $800,000 were up 28.8 percent.
LePage, of DataQuick, says those numbers signal “strong evidence of move-up buyers,” likely folks with home equity who have been on the sidelines for some time and are now taking the homebuying plunge.
Written by
Lily Leung
The share of cash deals rose to 33.3 percent, topping the previous peak of 33 percent set in April. They made up 26.5 percent of all sales a year ago. May’s percentage of cash buyers surpassed that of the Southern California region, which was 31.3 percent.
Those who buy homes with cash are mainly investors, said DataQuick analyst Andrew LePage, but there are other groups, too.
“It’s people who retire or are near retirement who want to sell big houses and buy smaller houses,” LePage said. “Or parents buying houses near universities, paying with cash... and then you’ve got wealthy people buying luxury properties in cash.”
Throughout Southern California, cash buyers paid a median of $232,500 in May, up from $225,000 in April and $220,000 in May 2011. The median price for all types of homes combined in San Diego County in May was $335,000.
Here’s a breakdown of other important numbers to track:
Foreclosure resales
These are homes that were foreclosed upon in the last year and were resold. DataQuick says 21.3 percent of total resales fit into this category in May, the lowest it’s been since October 2007, when it was 20.8 percent. A year ago, the share of resales that were foreclosures was 30.9 percent.
Short sales
An estimated 19.8 percent of resales in May were short sales, down from 20.7 percent in April but up from 18.4 percent a year ago.
When comparing May 2012 with May 2011, sales of San Diego homes:
• Below $200,000 were up 5.6 percent.
• Below $300,000 were up 10.3 percent.
• Below $400,000 were up 16.4 percent.
• Between $300,000 and $800,000 were up 28.8 percent.
LePage, of DataQuick, says those numbers signal “strong evidence of move-up buyers,” likely folks with home equity who have been on the sidelines for some time and are now taking the homebuying plunge.
Written by
Lily Leung
Thursday, June 21, 2012
Orange County Equity Sellers
Equity Sellers: Sellers with equity made up 63% of all sales in May.
Everybody is always talking about foreclosure and short sales. It is time to divert the focus and take a much closer look at the “equity seller.” Sellers that have equity in their homes are typically not distressed properties, so they of course receive much less fanfare. This segment of the Orange County housing market represents 63% of sales in May 2012 and 62% of all home sales in 2011. 58% of current demand, new pending sales over the prior month, and 82% of the active inventory are equity sellers. Granted, foreclosures and short sales are hot, with expected market times of less than a month. But, the expected market time for equity sellers is a little over two months. Compared to the distressed market, it sounds a little sluggish. That simply is not the case. Last year in June, the expected market time was just under five months. This is simply the best time since 2005 for homeowners with equity in their home to sell. This is a seller’s market, below five months. The lower the expected market time, the hotter the market. At about two months, homes that are priced right, at or near their fair market values, will fly off the market like popcorn at a movie theatre.
HOWEVER, sellers should not get ahead of themselves. The market has the look and feel of a seller’s market with multiple offers and selling prices near their asking prices, but homes must be priced accurately. As I have discussed before, the market is experiencing slight appreciation. Homes that are priced appropriately and receive multiple offers are often going for a few thousand dollars more than prior closed sales. The trouble is most homeowners overvalue their own home and originally place it at an unrealistic, overpriced level. It is human nature, part of our DNA. Unfortunately, homes that are overpriced tend to sit on the market collecting dust. Thus, most successful closed sales are a result of reducing the asking price prior to obtaining an offer. Many simply try out an initial overzealous price and are willing to reduce after a certain time. This is not a wise approach to the market. When homes first hit the market they garner the most interest and showings. However, after reducing, there is not as much activity compared to the original list date. It is smarter to hit the market realistically priced to take advantage of the absolute best activity. Initially, overpricing means a longer period of time to keep a home spotless and in model home condition. With a little bit less activity down the road after reducing, a homeowner runs the risk of obtaining a little bit less in the ultimate sales values. This is precisely why it is so important to carefully arrive at the initial asking price, pouring over all of the recent pending and closed sales data. Active listings carry much less weight, other than homes that are aggressively priced. The bottom line, the equity seller market is a very strong market, but pricing is crucial.
Everybody is always talking about foreclosure and short sales. It is time to divert the focus and take a much closer look at the “equity seller.” Sellers that have equity in their homes are typically not distressed properties, so they of course receive much less fanfare. This segment of the Orange County housing market represents 63% of sales in May 2012 and 62% of all home sales in 2011. 58% of current demand, new pending sales over the prior month, and 82% of the active inventory are equity sellers. Granted, foreclosures and short sales are hot, with expected market times of less than a month. But, the expected market time for equity sellers is a little over two months. Compared to the distressed market, it sounds a little sluggish. That simply is not the case. Last year in June, the expected market time was just under five months. This is simply the best time since 2005 for homeowners with equity in their home to sell. This is a seller’s market, below five months. The lower the expected market time, the hotter the market. At about two months, homes that are priced right, at or near their fair market values, will fly off the market like popcorn at a movie theatre.
HOWEVER, sellers should not get ahead of themselves. The market has the look and feel of a seller’s market with multiple offers and selling prices near their asking prices, but homes must be priced accurately. As I have discussed before, the market is experiencing slight appreciation. Homes that are priced appropriately and receive multiple offers are often going for a few thousand dollars more than prior closed sales. The trouble is most homeowners overvalue their own home and originally place it at an unrealistic, overpriced level. It is human nature, part of our DNA. Unfortunately, homes that are overpriced tend to sit on the market collecting dust. Thus, most successful closed sales are a result of reducing the asking price prior to obtaining an offer. Many simply try out an initial overzealous price and are willing to reduce after a certain time. This is not a wise approach to the market. When homes first hit the market they garner the most interest and showings. However, after reducing, there is not as much activity compared to the original list date. It is smarter to hit the market realistically priced to take advantage of the absolute best activity. Initially, overpricing means a longer period of time to keep a home spotless and in model home condition. With a little bit less activity down the road after reducing, a homeowner runs the risk of obtaining a little bit less in the ultimate sales values. This is precisely why it is so important to carefully arrive at the initial asking price, pouring over all of the recent pending and closed sales data. Active listings carry much less weight, other than homes that are aggressively priced. The bottom line, the equity seller market is a very strong market, but pricing is crucial.
Wednesday, June 20, 2012
Overpriced 'Setup' Homes Help Sell Other Properties
Real estate agents are using overpriced properties as negative examples to sell similar homes with lower asking prices.
WASHINGTON — In the real estate brokerage field they're often known as "setups" or "pinball" homes, and this spring's improving conditions in some markets could be stimulating more of them.
A setup or pinball property is a house listed with an unrealistically high asking price that pulls in lots of visits by agents and shoppers, but no offers. The problem is this: Real estate agents, including even the listing agent, are using the overpriced house as a negative example to sell similar homes in the area that carry lower asking prices.
"It's like a pinball machine," said Debbie Cook, an agent with Long & Foster Real Estate in Silver Spring, Md. The "setup" is the foil — the house that agents show clients to make other, more realistically priced listings look better. Maybe the sellers — encouraged by reports of rising sales and low mortgage rates — insisted on the aggressive asking price and wouldn't list for anything less. Or maybe the sellers' agent, not wanting to lose the listing, didn't fully brief them about what the house could command in today's conditions.
Whatever the specifics, such houses tend to see heavy foot traffic but go nowhere until the sellers drop the asking prices, usually by significant amounts. Before then, however, they may be used without the sellers' knowledge to market other houses. Since no one seriously expects them to sell at their original asking price, agents are happy to exploit the overpricing to facilitate other sales.
"We're definitely seeing it," said Sandy Nichols Acevedo, an agent at Prudential California Realty in Oxnard. "Some people think they can go higher now because the market seems to be doing better."
Joe Manausa, owner-broker at Century 21 First Realty in Tallahassee, Fla., who wrote about the phenomenon on Active Rain, a Seattle-based industry blog with more than 220,000 members, offers this hypothetical example: "If two very similar homes are near each other, with one priced at $250,000, and the other at $280,000, the higher-priced home is often shown first. Then the real estate agent says, 'If you like this home at $280,000, you are going to love the home down the street at $250,000!'"
Bill Gillhespy, an agent in Fort Myers Beach, Fla., has a real-life example: He has a listing on the 14th floor of a luxury condominium project overlooking the Gulf of Mexico. The asking price is $450,000. There's a unit on the same floor with similar views, similar square footage and layout, but with a more updated decor, that is listed for nearly $150,000 more. When Gillhespy is asked by another agent or a prospective buyer to see his unit, he often says, "Let me first show you a unit just down the hall. It's one of the nicest in the entire building." The higher-priced model shows well, but shoppers immediately remark on the $150,000 difference "and they can't see how it's justified."
Perrin Cornell, a broker at Century 21 Exclusively in Wenatchee, Wash., says some sellers in the mid-to-upper price brackets in his area "are exuberant" that we're finally out of the recession and are tempted to disregard agents' more sobering recommendations on pricing.
What happens to such listings? "Unless we're using it for a setup," Cornell said, "we stop showing it" until the seller agrees to lower the price to a sensible number.
But as a matter of principle and ethics, should realty agents accept listings from homeowners who refuse to listen to reason? Manausa is adamant that they should not.
"If you list a property at a price you know will not sell," he said, "you are misleading the seller. Effectively you are saying, 'I don't think it will sell, but I'll put my name on anything hoping to get paid."
Acevedo agrees that agents have a fiduciary duty to educate even the most headstrong owners about sobering market realities, but has a compromise solution: Take the listing but require the seller to sign a contractual agreement requiring an automatic price reduction to a specified level if the house doesn't sell in the first two to three weeks.
Bottom line here for owners thinking about selling in modestly improving markets: Get as much information as you can about sale prices of comparable houses in your area. Talk to multiple realty agents before listing. Sure, you can try pushing a little on price, but if you go overboard, you risk becoming the unwitting setup, the pinball, the out-of-touch competition everybody else loves to visit.
By Kenneth R. Harney
Distributed by Washington Post Writers Group.
WASHINGTON — In the real estate brokerage field they're often known as "setups" or "pinball" homes, and this spring's improving conditions in some markets could be stimulating more of them.
A setup or pinball property is a house listed with an unrealistically high asking price that pulls in lots of visits by agents and shoppers, but no offers. The problem is this: Real estate agents, including even the listing agent, are using the overpriced house as a negative example to sell similar homes in the area that carry lower asking prices.
"It's like a pinball machine," said Debbie Cook, an agent with Long & Foster Real Estate in Silver Spring, Md. The "setup" is the foil — the house that agents show clients to make other, more realistically priced listings look better. Maybe the sellers — encouraged by reports of rising sales and low mortgage rates — insisted on the aggressive asking price and wouldn't list for anything less. Or maybe the sellers' agent, not wanting to lose the listing, didn't fully brief them about what the house could command in today's conditions.
Whatever the specifics, such houses tend to see heavy foot traffic but go nowhere until the sellers drop the asking prices, usually by significant amounts. Before then, however, they may be used without the sellers' knowledge to market other houses. Since no one seriously expects them to sell at their original asking price, agents are happy to exploit the overpricing to facilitate other sales.
"We're definitely seeing it," said Sandy Nichols Acevedo, an agent at Prudential California Realty in Oxnard. "Some people think they can go higher now because the market seems to be doing better."
Joe Manausa, owner-broker at Century 21 First Realty in Tallahassee, Fla., who wrote about the phenomenon on Active Rain, a Seattle-based industry blog with more than 220,000 members, offers this hypothetical example: "If two very similar homes are near each other, with one priced at $250,000, and the other at $280,000, the higher-priced home is often shown first. Then the real estate agent says, 'If you like this home at $280,000, you are going to love the home down the street at $250,000!'"
Bill Gillhespy, an agent in Fort Myers Beach, Fla., has a real-life example: He has a listing on the 14th floor of a luxury condominium project overlooking the Gulf of Mexico. The asking price is $450,000. There's a unit on the same floor with similar views, similar square footage and layout, but with a more updated decor, that is listed for nearly $150,000 more. When Gillhespy is asked by another agent or a prospective buyer to see his unit, he often says, "Let me first show you a unit just down the hall. It's one of the nicest in the entire building." The higher-priced model shows well, but shoppers immediately remark on the $150,000 difference "and they can't see how it's justified."
Perrin Cornell, a broker at Century 21 Exclusively in Wenatchee, Wash., says some sellers in the mid-to-upper price brackets in his area "are exuberant" that we're finally out of the recession and are tempted to disregard agents' more sobering recommendations on pricing.
What happens to such listings? "Unless we're using it for a setup," Cornell said, "we stop showing it" until the seller agrees to lower the price to a sensible number.
But as a matter of principle and ethics, should realty agents accept listings from homeowners who refuse to listen to reason? Manausa is adamant that they should not.
"If you list a property at a price you know will not sell," he said, "you are misleading the seller. Effectively you are saying, 'I don't think it will sell, but I'll put my name on anything hoping to get paid."
Acevedo agrees that agents have a fiduciary duty to educate even the most headstrong owners about sobering market realities, but has a compromise solution: Take the listing but require the seller to sign a contractual agreement requiring an automatic price reduction to a specified level if the house doesn't sell in the first two to three weeks.
Bottom line here for owners thinking about selling in modestly improving markets: Get as much information as you can about sale prices of comparable houses in your area. Talk to multiple realty agents before listing. Sure, you can try pushing a little on price, but if you go overboard, you risk becoming the unwitting setup, the pinball, the out-of-touch competition everybody else loves to visit.
By Kenneth R. Harney
Distributed by Washington Post Writers Group.
Tuesday, June 19, 2012
S.D. Job Growth Nearly Triples in May
San Diego County employers nearly tripled the number of jobs added from April to May, but the county’s unemployment rate remained unchanged, the state Employment Development Department announced Friday.
Employers in the region added 6,400 nonfarm jobs in May, up from 2,400 in April, according to the unadjusted data. It’s the most jobs the county has added since last November, when payrolls expanded by 7,200.
“This is a better unemployment report than we’ve had. It’s not great, but at least it’s better than what we’ve seen earlier in the year,” said Alan Gin, an economist at the University of San Diego.
Gin said he found a 13,400 job gain over the past 12 months as the most encouraging sign. In the past it had been below 10,000.
In order to make a significant dent in the unemployment rate, Gin said 20,000 to 25,000 jobs over a year are needed. However, Point Loma Nazarene University, in an updated projection, says the county will likely add between 14,000 and 15,000 jobs year over year through 2012.
“Overall the San Diego economy continues to gradually heal in the recession, but we could do a little better,” said Lynn Reaser, PLNU’s chief economist.
Still, the county’s unemployment rate is at 8.8 percent, the same as it was from April, which was revised up from 8.7 percent.
“There are a lot of people that have given up looking for work and I can understand why because it’s been very discouraging,” said Norman Zix, 49, who lives near San Diego State and has been looking for a job since December after 14 years in financial services. “I’m optimistic because I’m getting better at the interviewing process so I’m gaining more confidence.”
The unemployment rate is at its lowest in more than three years. It didn’t fall despite the job growth partly because about 1,400 people entered the labor force, not all getting jobs.
“Part of that is with job growth people that were sitting on the sidelines and not being counted in the civilian labor force are jumping back in,” said Kelly Cunningham, an economist at the National University System Institute for Policy Research.
Reaser, the economist at PLNU, said hiring would remain slow as companies hesitate to invest in full-time workers given concern over issues such as health-care form, the presidential election and the European debt crisis.
“It remains a very uncertain time,” she said. “It spans the whole gamut, from health-care providers, insurance companies, financial institutions with changing regulations, aerospace and defense contractors, and ship builders.”
The construction field grew the most in the county in May, adding a net of 1,500 jobs. More than 90 percent of the job growth came in specialty trade contracting. Construction of buildings gained 300 jobs, but the heavy and civil engineering construction sector dropped by 200 jobs.
Seven other sectors grew, including financial activities, which added 1,400, and trade, transportation, utilities, which grew by 1,000.
Only the government sector lost jobs last month, shrinking by 100 employees. Statewide, California’s unemployment rate dipped slightly in May to 10.8 percent, down from 10.9 percent the previous month, in what state officials said was a sign of continued economic recovery.
California employers added more than 33,900 nonfarm payroll jobs in May, the largest month-over-month increase nationwide. The largest job gain was in the leisure and hospitality sector, which added 13,200 jobs.
Since the recovery began in September 2009, officials say 425,000 jobs have been created in the state.
The rate in May was more than a full percentage point better than the 11.9 percent unemployment rate at the same time a year ago.
California’s figures contrast with the national trend. The nationwide jobless rate rose to 8.2 percent last month from 8.1 percent in April, its first rise in nearly a year.
California’s unemployment rate is the nation’s third highest, behind Nevada, with 11.6 percent and Rhode Island with 11 percent.
The Associated Press contributed to this report.
Written by
Jonathan Horn
Employers in the region added 6,400 nonfarm jobs in May, up from 2,400 in April, according to the unadjusted data. It’s the most jobs the county has added since last November, when payrolls expanded by 7,200.
“This is a better unemployment report than we’ve had. It’s not great, but at least it’s better than what we’ve seen earlier in the year,” said Alan Gin, an economist at the University of San Diego.
Gin said he found a 13,400 job gain over the past 12 months as the most encouraging sign. In the past it had been below 10,000.
In order to make a significant dent in the unemployment rate, Gin said 20,000 to 25,000 jobs over a year are needed. However, Point Loma Nazarene University, in an updated projection, says the county will likely add between 14,000 and 15,000 jobs year over year through 2012.
“Overall the San Diego economy continues to gradually heal in the recession, but we could do a little better,” said Lynn Reaser, PLNU’s chief economist.
Still, the county’s unemployment rate is at 8.8 percent, the same as it was from April, which was revised up from 8.7 percent.
“There are a lot of people that have given up looking for work and I can understand why because it’s been very discouraging,” said Norman Zix, 49, who lives near San Diego State and has been looking for a job since December after 14 years in financial services. “I’m optimistic because I’m getting better at the interviewing process so I’m gaining more confidence.”
The unemployment rate is at its lowest in more than three years. It didn’t fall despite the job growth partly because about 1,400 people entered the labor force, not all getting jobs.
“Part of that is with job growth people that were sitting on the sidelines and not being counted in the civilian labor force are jumping back in,” said Kelly Cunningham, an economist at the National University System Institute for Policy Research.
Reaser, the economist at PLNU, said hiring would remain slow as companies hesitate to invest in full-time workers given concern over issues such as health-care form, the presidential election and the European debt crisis.
“It remains a very uncertain time,” she said. “It spans the whole gamut, from health-care providers, insurance companies, financial institutions with changing regulations, aerospace and defense contractors, and ship builders.”
The construction field grew the most in the county in May, adding a net of 1,500 jobs. More than 90 percent of the job growth came in specialty trade contracting. Construction of buildings gained 300 jobs, but the heavy and civil engineering construction sector dropped by 200 jobs.
Seven other sectors grew, including financial activities, which added 1,400, and trade, transportation, utilities, which grew by 1,000.
Only the government sector lost jobs last month, shrinking by 100 employees. Statewide, California’s unemployment rate dipped slightly in May to 10.8 percent, down from 10.9 percent the previous month, in what state officials said was a sign of continued economic recovery.
California employers added more than 33,900 nonfarm payroll jobs in May, the largest month-over-month increase nationwide. The largest job gain was in the leisure and hospitality sector, which added 13,200 jobs.
Since the recovery began in September 2009, officials say 425,000 jobs have been created in the state.
The rate in May was more than a full percentage point better than the 11.9 percent unemployment rate at the same time a year ago.
California’s figures contrast with the national trend. The nationwide jobless rate rose to 8.2 percent last month from 8.1 percent in April, its first rise in nearly a year.
California’s unemployment rate is the nation’s third highest, behind Nevada, with 11.6 percent and Rhode Island with 11 percent.
The Associated Press contributed to this report.
Written by
Jonathan Horn
Monday, June 18, 2012
Single-Family Home Resales at 7-Year High
Local real estate closed out a blockbuster month in May with single-family resales hitting the highest mark in nearly seven years, housing tracker DataQuick said Wednesday. Combine that faster sales pace with an increase in home prices, and some housing insiders say they believe a recovery is within the county’s grasp.
“We’re starting to see some people come out of the woodwork,” said Michael Lea, a San Diego State real estate professor. “A lot of people held off selling for a long time, and at some point, for a variety of reasons, people are now selling.”
San Diego County recorded a total of 3,750 sales last month, a 21.5 percent increase from a year ago and a 5.4 percent increase from April, said DataQuick, a La Jolla-based real estate information company.
The overall median price in May rose 3.2 percent from a year ago to $335,000, the highest it’s been in 18 months, when the median value also was $335,000.
Sales saw the most strength in the single-family resale slice, which makes up about two-thirds of total home sales. In this segment, buyers closed on 2,488 homes in May. That’s the highest figure for this category since September 2005, when 2,671 were sold, DataQuick numbers show. Those sales peaked at 3,307 in June 2005, when analyzing the current housing cycle of 2005 to present.
All of the county’s major regions showed increases in single-family resales compared to a year ago. The North County inland area, including neighborhoods like Escondido and western Rancho Bernardo, saw the most growth in this segment. More than 700 single-family homes were resold in that area last month, up 33.3 percent from a year ago.
San Diego real estate agent Michael Wolf said he has seen an increase in interest across the board, from residents who are tired of renting, to investors trying to find limited steals.
Wolf pointed to historically low mortgage rates as one of the biggest reasons potential buyers are starting to look. The 30-year fixed rate is at 3.67 percent, while the 15-year fixed rate is at 2.94 percent, according to Freddie Mac.
Another factor, Wolf said, is inventory. A recent snapshot taken by the San Diego Association of Realtors showed that the number of homes listed for sale in San Diego County has fallen to its lowest level in nearly three years. He said this has resulted in more competition, and at times, multiple bids for a single home.
Home sales also picked up across Southern California, especially in coastal regions, “where move-up markets have picked up steam,” DataQuick reported.
More than 22 percent of Southern California sales in May were $500,000 and up. That share is up from 21 percent the previous month and a year ago, DataQuick analysts found.
“May’s share of sales above $500,000 was the highest since July 2010, when they also made up 22.4 percent of the market,” the report added. The low point was 13.8 percent in January 2009.
DataQuick analysts added two more factors that could explain May’s increase in sales and prices:
• An extra business day this May.
• Fewer foreclosure resales and short sales. Their share of the market in SoCal fell to 44.8 percent, the lowest level in more than four years.
Do May’s numbers indicate that the market is bottoming out?
“The market is being slowly nursed back to health by low interest rates, a modestly improved economy and, we suspect, a widening sense that the housing sector is at or near bottom,” said DataQuick President John Walsh, in a statement.
“There’s still plenty of uncertainty swirling around out there,” he added. “But it looks like more move-up buyers are concluding it makes sense in the long run to sell their homes now, even when it’s hard to swallow the price. The upside for many is a good deal on the next house, and the ability to lock in both a killer mortgage rate and a relatively low property tax base.”
Written by
Lily Leung
“We’re starting to see some people come out of the woodwork,” said Michael Lea, a San Diego State real estate professor. “A lot of people held off selling for a long time, and at some point, for a variety of reasons, people are now selling.”
San Diego County recorded a total of 3,750 sales last month, a 21.5 percent increase from a year ago and a 5.4 percent increase from April, said DataQuick, a La Jolla-based real estate information company.
The overall median price in May rose 3.2 percent from a year ago to $335,000, the highest it’s been in 18 months, when the median value also was $335,000.
Sales saw the most strength in the single-family resale slice, which makes up about two-thirds of total home sales. In this segment, buyers closed on 2,488 homes in May. That’s the highest figure for this category since September 2005, when 2,671 were sold, DataQuick numbers show. Those sales peaked at 3,307 in June 2005, when analyzing the current housing cycle of 2005 to present.
All of the county’s major regions showed increases in single-family resales compared to a year ago. The North County inland area, including neighborhoods like Escondido and western Rancho Bernardo, saw the most growth in this segment. More than 700 single-family homes were resold in that area last month, up 33.3 percent from a year ago.
San Diego real estate agent Michael Wolf said he has seen an increase in interest across the board, from residents who are tired of renting, to investors trying to find limited steals.
Wolf pointed to historically low mortgage rates as one of the biggest reasons potential buyers are starting to look. The 30-year fixed rate is at 3.67 percent, while the 15-year fixed rate is at 2.94 percent, according to Freddie Mac.
Another factor, Wolf said, is inventory. A recent snapshot taken by the San Diego Association of Realtors showed that the number of homes listed for sale in San Diego County has fallen to its lowest level in nearly three years. He said this has resulted in more competition, and at times, multiple bids for a single home.
Home sales also picked up across Southern California, especially in coastal regions, “where move-up markets have picked up steam,” DataQuick reported.
More than 22 percent of Southern California sales in May were $500,000 and up. That share is up from 21 percent the previous month and a year ago, DataQuick analysts found.
“May’s share of sales above $500,000 was the highest since July 2010, when they also made up 22.4 percent of the market,” the report added. The low point was 13.8 percent in January 2009.
DataQuick analysts added two more factors that could explain May’s increase in sales and prices:
• An extra business day this May.
• Fewer foreclosure resales and short sales. Their share of the market in SoCal fell to 44.8 percent, the lowest level in more than four years.
Do May’s numbers indicate that the market is bottoming out?
“The market is being slowly nursed back to health by low interest rates, a modestly improved economy and, we suspect, a widening sense that the housing sector is at or near bottom,” said DataQuick President John Walsh, in a statement.
“There’s still plenty of uncertainty swirling around out there,” he added. “But it looks like more move-up buyers are concluding it makes sense in the long run to sell their homes now, even when it’s hard to swallow the price. The upside for many is a good deal on the next house, and the ability to lock in both a killer mortgage rate and a relatively low property tax base.”
Written by
Lily Leung
Thursday, June 14, 2012
Shadow inventory drops to lowest level in nearly 3 years
CoreLogic: Serious delinquencies fall in Arizona, California, Nevada
Paralleling a decline in for-sale inventory, shadow inventory looming over the U.S. housing market hit its lowest level in nearly three years in April, according to a report from real estate data aggregator CoreLogic.
Shadow inventory was down 14.8 percent year over year in April to 1.5 million units. That's a four-month supply, down from six months in April 2011 and about the same level as in October 2008.
Meanwhile, unsold inventory of nondistressed active listings fell to 6.5 months in April -- a more than five-year low.
"Since peaking at 2.1 million units in January 2010, the shadow inventory has fallen by 28 percent. The decline in the shadow inventory is a positive development because it removes some of the downward pressure on house prices," said Mark Fleming, CoreLogic's chief economist, in a statement.
"This is one of the reasons why some markets that were formerly identified as deeply distressed, like Arizona, California and Nevada, are now experiencing price increases."
CoreLogic defines shadow inventory as properties seriously delinquent by 90 days or more, in the foreclosure process, and those that have finished the foreclosure process and become REO (real estate owned) but have not yet been listed for sale.
The dollar volume of shadow inventory fell about 9 percent in April, to $246 billion -- a three-year low. Of the 1.5 million units comprising the nation's shadow inventory, 720,000 are seriously delinquent, 410,000 are in some stage of foreclosure, and 390,000 are unlisted REOs, CoreLogic said.
Serious delinquencies fell most in Arizona (-37 percent), California (-28 percent), Nevada (-27.4 percent), Michigan (-23.7 percent) and Minnesota (-18.1 percent), CoreLogic said.
Paralleling a decline in for-sale inventory, shadow inventory looming over the U.S. housing market hit its lowest level in nearly three years in April, according to a report from real estate data aggregator CoreLogic.
Shadow inventory was down 14.8 percent year over year in April to 1.5 million units. That's a four-month supply, down from six months in April 2011 and about the same level as in October 2008.
Meanwhile, unsold inventory of nondistressed active listings fell to 6.5 months in April -- a more than five-year low.
"Since peaking at 2.1 million units in January 2010, the shadow inventory has fallen by 28 percent. The decline in the shadow inventory is a positive development because it removes some of the downward pressure on house prices," said Mark Fleming, CoreLogic's chief economist, in a statement.
"This is one of the reasons why some markets that were formerly identified as deeply distressed, like Arizona, California and Nevada, are now experiencing price increases."
CoreLogic defines shadow inventory as properties seriously delinquent by 90 days or more, in the foreclosure process, and those that have finished the foreclosure process and become REO (real estate owned) but have not yet been listed for sale.
The dollar volume of shadow inventory fell about 9 percent in April, to $246 billion -- a three-year low. Of the 1.5 million units comprising the nation's shadow inventory, 720,000 are seriously delinquent, 410,000 are in some stage of foreclosure, and 390,000 are unlisted REOs, CoreLogic said.
Serious delinquencies fell most in Arizona (-37 percent), California (-28 percent), Nevada (-27.4 percent), Michigan (-23.7 percent) and Minnesota (-18.1 percent), CoreLogic said.
Thursday, June 7, 2012
DEFAULTS HIT LOWEST POINT IN SIX YEARS
Downward trend continues for foreclosures, too
Mortgage defaults, the first sign of a foreclosure, have fallen to their lowest level for an April in six years, based on the latest data for San Diego County from housing tracker DataQuick. Meanwhile, the number of completed foreclosures in the county has dropped to a five-year low for a given April.
Ever since defaults and foreclosures hit record highs between 2008 and 2009, their numbers have fluctuated dramatically without any visible pattern. So far this year, both figures appear to be less erratic and are continuing a downward trend.
Notices of default, which homeowners get at the start of the foreclosure process, fell 9 percent from a year ago to 1,323. That’s the lowest April count for defaults since 2006, when there were 554, DataQuick numbers say. Defaults fell 12 percent month-to-month.
Descanso, Bonsall, northeast Chula Vista, Ramona and Logan Heights had the highest number of defaults per 1,000 homes last month.
April foreclosures rose 5 percent from March to 528 but were down 44 percent from a year ago. Last month, Campo, Imperial Beach, Bonsall, Mission Valley and Alpine had the most foreclosures per 1,000 homes.
What could be pushing distress sales downward?
• Short sales remain steady. In April, an estimated 21 percent of total resales were short sales, down from 22 percent in March but up from 19.3 percent a year ago.
• Mortgage delinquencies that have not resulted in foreclosure fell almost 11 percent nationwide, according to LPS, which provides monthly mortgage data.
• States, including California, reached settlements with the nation’s biggest banks over past foreclosure abuses. Banks promised to ramp up different forms of homeowner aid, including principal reductions, loan refinances, restitution and the chance at short sales.
• Keep Your Home California, a $2 billion statewide effort to help troubled homeowners, has been in place for more than a year. More than 11,000 residents in San Diego County were helped or in the process of being helped at the start of this year.
Written by
Lily Leung
Mortgage defaults, the first sign of a foreclosure, have fallen to their lowest level for an April in six years, based on the latest data for San Diego County from housing tracker DataQuick. Meanwhile, the number of completed foreclosures in the county has dropped to a five-year low for a given April.
Ever since defaults and foreclosures hit record highs between 2008 and 2009, their numbers have fluctuated dramatically without any visible pattern. So far this year, both figures appear to be less erratic and are continuing a downward trend.
Notices of default, which homeowners get at the start of the foreclosure process, fell 9 percent from a year ago to 1,323. That’s the lowest April count for defaults since 2006, when there were 554, DataQuick numbers say. Defaults fell 12 percent month-to-month.
Descanso, Bonsall, northeast Chula Vista, Ramona and Logan Heights had the highest number of defaults per 1,000 homes last month.
April foreclosures rose 5 percent from March to 528 but were down 44 percent from a year ago. Last month, Campo, Imperial Beach, Bonsall, Mission Valley and Alpine had the most foreclosures per 1,000 homes.
What could be pushing distress sales downward?
• Short sales remain steady. In April, an estimated 21 percent of total resales were short sales, down from 22 percent in March but up from 19.3 percent a year ago.
• Mortgage delinquencies that have not resulted in foreclosure fell almost 11 percent nationwide, according to LPS, which provides monthly mortgage data.
• States, including California, reached settlements with the nation’s biggest banks over past foreclosure abuses. Banks promised to ramp up different forms of homeowner aid, including principal reductions, loan refinances, restitution and the chance at short sales.
• Keep Your Home California, a $2 billion statewide effort to help troubled homeowners, has been in place for more than a year. More than 11,000 residents in San Diego County were helped or in the process of being helped at the start of this year.
Written by
Lily Leung
Friday, June 1, 2012
Consume Confidence at Highest Since 2007
Index credits better jobs outlook, housing market
Consumer confidence rose in May to the highest level since October 2007 as Americans became more upbeat about the prospects for employment.
The Thomson Reuters/University of Michigan final index of sentiment climbed to 79.3, the ninth straight increase, from 76.4 the prior month. The gauge was projected to hold at the preliminary reading of 77.8, according to the median forecast of economists surveyed by Bloomberg News.
A record number of households said they’d heard better news on the jobs outlook, which combined with cheaper gasoline and an improving housing market may help sustain consumer spending and shield the economy from Europe’s debt crisis. The figures also showed 63 percent of Americans, the most in more than a year, had a favorable view of buying conditions for big-ticket items.
“This is telling us the consumer is feeling OK,” said Robert Brusca, president of Fact & Opinion Economics in New York, who projected a final reading of 78.5 in May. “There seems to be enough real improvement in the job market for confidence to be increasing. When confidence readings increase, you can be pretty sure consumer spending numbers will go up.”
Estimates for the confidence measure ranged from 76 to 79, according to the Bloomberg survey of 60 economists. The index averaged 64.2 during the last recession and 89 in the five years before the 18-month economic slump that ended in June 2009.
Stocks fell as concern about Spain’s finances tempered optimism with the Michigan figures. The Standard & Poor’s 500 Index dropped 0.2 percent to 1,317.82 at the close in New York. The yield on the benchmark 10-year Treasury note decreased to 1.74 percent from 1.78 percent Thursday.
Michigan’s reading for May contrasts with the Bloomberg Consumer Comfort Index, which has lost ground after reaching a four-year high a month ago.
Friday’s figures also indicated Europe’s financial crisis was not high on the list of Americans’ concerns. Reports showed it’s also having limited impact on sentiment in Europe.
The Michigan survey’s index of current conditions, which reflects Americans’ perceptions of their financial situation and whether they consider it a good time to buy big-ticket items like cars, rose to 87.2, the strongest since January 2008, from 82.9 the prior month.
The index of consumer expectations six months from now, which more closely projects the direction of consumer spending, increased to 74.3, the highest since July 2007, from 72.3 in April.
The unemployment rate slid to 8.1 percent in April, the lowest level since January 2009, Labor Department figures showed this month. Employers added 115,000 workers to payrolls, the fewest since October, according to the data.
“The most likely prospect is that job growth resumes at a modest pace and that confidence remains largely unchanged until after the November election and decisions about tax policy are made,” Richard Curtin, head of the University of Michigan’s consumer survey, said in a statement.
Economists project payroll growth expanded by about 150,000 this month, according to the median estimate in a Bloomberg survey. The Labor Department will issue its May employment report Friday.
“This is a good report,” Yinbin Lei, an economist at IHS Global Insight, said in a note to clients. “Consumer mood is slowly coming out of the ditch.”
Still, consumers face plenty of challenges, Lei noted, such as weak wage growth, rising student loan debt, and a poor housing market.
Consumer confidence rose in May to the highest level since October 2007 as Americans became more upbeat about the prospects for employment.
The Thomson Reuters/University of Michigan final index of sentiment climbed to 79.3, the ninth straight increase, from 76.4 the prior month. The gauge was projected to hold at the preliminary reading of 77.8, according to the median forecast of economists surveyed by Bloomberg News.
A record number of households said they’d heard better news on the jobs outlook, which combined with cheaper gasoline and an improving housing market may help sustain consumer spending and shield the economy from Europe’s debt crisis. The figures also showed 63 percent of Americans, the most in more than a year, had a favorable view of buying conditions for big-ticket items.
“This is telling us the consumer is feeling OK,” said Robert Brusca, president of Fact & Opinion Economics in New York, who projected a final reading of 78.5 in May. “There seems to be enough real improvement in the job market for confidence to be increasing. When confidence readings increase, you can be pretty sure consumer spending numbers will go up.”
Estimates for the confidence measure ranged from 76 to 79, according to the Bloomberg survey of 60 economists. The index averaged 64.2 during the last recession and 89 in the five years before the 18-month economic slump that ended in June 2009.
Stocks fell as concern about Spain’s finances tempered optimism with the Michigan figures. The Standard & Poor’s 500 Index dropped 0.2 percent to 1,317.82 at the close in New York. The yield on the benchmark 10-year Treasury note decreased to 1.74 percent from 1.78 percent Thursday.
Michigan’s reading for May contrasts with the Bloomberg Consumer Comfort Index, which has lost ground after reaching a four-year high a month ago.
Friday’s figures also indicated Europe’s financial crisis was not high on the list of Americans’ concerns. Reports showed it’s also having limited impact on sentiment in Europe.
The Michigan survey’s index of current conditions, which reflects Americans’ perceptions of their financial situation and whether they consider it a good time to buy big-ticket items like cars, rose to 87.2, the strongest since January 2008, from 82.9 the prior month.
The index of consumer expectations six months from now, which more closely projects the direction of consumer spending, increased to 74.3, the highest since July 2007, from 72.3 in April.
The unemployment rate slid to 8.1 percent in April, the lowest level since January 2009, Labor Department figures showed this month. Employers added 115,000 workers to payrolls, the fewest since October, according to the data.
“The most likely prospect is that job growth resumes at a modest pace and that confidence remains largely unchanged until after the November election and decisions about tax policy are made,” Richard Curtin, head of the University of Michigan’s consumer survey, said in a statement.
Economists project payroll growth expanded by about 150,000 this month, according to the median estimate in a Bloomberg survey. The Labor Department will issue its May employment report Friday.
“This is a good report,” Yinbin Lei, an economist at IHS Global Insight, said in a note to clients. “Consumer mood is slowly coming out of the ditch.”
Still, consumers face plenty of challenges, Lei noted, such as weak wage growth, rising student loan debt, and a poor housing market.
By Alex Kowalski
BLOOMBERG NEWS
The Associated Press contributed to this report.
The Associated Press contributed to this report.
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