Wednesday, May 26, 2010
FOCUS ~ Behind the economic headlines that seem to change direction on a daily, if not an hourly, basis, several economic trends are asserting themselves. First, the manufacturing sector is gaining in health, and is very likely providing the greatest strength and promise now fueling the economic recovery. Second, the new home sector is surprising many in the market with its growing strength.
In April, the ISM (Institute of Supply Management) Manufacturing Index rose to 60.4 from the prior month’s 59.6. This took the index above 60 for the first time since 2004. The index results from an extensive survey of purchasing managers, measuring their optimism regarding present and short-term future levels of orders they expect to have to fill. Thus, any reading below 50 shows that less than half of the purchasing managers report an optimistic attitude. Above 50, on the other hand, suggests that the sector is strengthening. The current reading of 60, especially after years in the doldrums, is especially strong and very likely signals recovery.
The ISM reading was bolstered by a report that new orders for manufactured goods grew by 1.3% in March, and that manufacturing output rose by 1% according to the April Industrial Production report.
Construction spending, meantime, rose 0.2% above March’s level in April. Significantly, spending on building new single-family residences climbed 1.6% month-to-month, and 17.2% from April 2009 to April 2010. At the same time, April retail sales data showed sales soaring at building supply stores. And the latest NAHB (National Association of Home Builders) Market Index climbed 15.8% in May from 19 to 22. That’s 37.5% above the May 2009 figure. This index, based on a survey of construction firms, suggests that builder confidence is rising significantly.
Today’s low interest rates and improvement to both the manufacturing and new home sectors are important elements leading to the current opinion by many that our economy has edged into recovery.
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Saturday, May 22, 2010
Wednesday, May 19, 2010
FOCUS ~ Not only did the American economy add 290,000 new payroll jobs in April, revisions to the number of jobs added in February and March showed a further growth of 121,000. And there is little to detract from the economy’s achievement. The number of jobs wasn’t inflated by the hiring of temporary government census workers. Nearly all of the job growth in April resulted from private-sector hiring.
Professional and business service occupations accounted for about 80,000 new jobs; manufacturing was responsible for 44,000; there were even 14,000 new jobs for construction workers.
Why, then, did the unemployment rate climb from 9.7% to 9.9%?
The new payroll data is gathered through telephone surveys of American businesses. But the unemployment rate is tallied from an entirely different survey in which households are called and people are asked how many members of the household are working, how many are not working but are looking for work, and how many have given up looking for work (often temporarily). Those who are unemployed but not looking for work are not considered part of the civilian labor force and are not included in the computation of the unemployment rate.
Notice, though, that the number of Americans looking for work begins to grow as people regain confidence that there may be jobs available to them. Thus, 805,000 potential workers began again to look for a job in April, obviously far more than the number of available new jobs. The bad news, therefore, is that the economy still hasn’t recovered enough to provide all the jobs our workers need. Far from it. But the good news is that the job market seems finally to have entered a recovery. Thus, the employment report for April, despite the higher unemployment rate, is very good, on balance. It confirms the view that the economic recovery is advancing.
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Monday, May 17, 2010
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In response, the National Association of Realtors® issued a Call to Action, asking all Realtor members to call their personal Senator and Representative, and ask him or her to vote "no" on the proposed changes.
The first proposed change would require owners of rental properties to file IRS 1099 forms for all contractors paid $600 or more in any given year. This provision would apply to even the smallest landlord.
In addition, Congress is considering taxing "carried interest" at ordinary income rates instead of capital gains rates. Carried interest rules govern the way general partners in real estate investments pay taxes when the investment is sold.
"The real estate industry is still very fragile and likely to remain so," says Florida Realtors Vice President of Public Policy John Sebree. "Any new tax burdens on real estate owners will impair and delay further recovery. These proposals are ill advised, inopportune and potentially destructive. Please take action today."
PHOTO: CINDY REDDISH, TRAINER, PALM CITY, FLORIDA
PHOTO BY: LISA STOKES
Sunday, May 16, 2010
Wednesday, May 5, 2010
FOCUS ~ The Mortgage Applications Survey, assembled by the Mortgage Bankers Association (and detailed to the right), finally showed the kind of strength many analysts have been anticipating. For the week ending April 16, the overall index (including refinancing mortgage applications) climbed by 13.6%, with the applications for purchase money mortgages rising by 10%, and the refinancing index, inspired by slightly lower interest rates, increasing by 15.8%. However, the good news was received by many analysts with some skepticism. They attributed the higher numbers mainly to the end of the federal $8,000 and $6,500 tax credit program for homebuyers.
Based on higher mortgage application numbers, in any case, we can reasonably expect more completed sales in the near term. Meantime, the existing home sales index showed an increase of 6.8% in March over February’s sales. (Remember that this index tallies completed sales, and thus tells us very little about the future.)
Even more sales were computed in the new-home sales index, which rose by 26.9% in March over February’s sales volume. (This index, though, is based on a rather thin reading of builder sales, and is often revised in future months.) We end up with a portrait of what may possibly be an improving real estate market. But we need longer-term indicators if we are to gain a better sense of where the real estate market may be heading.
There are, thankfully, a few significant long-term indicators: According to the Wall Street Journal, finished lot prices are up about 20% nationally from the beginning of 2010, with prices rising by more than 60% in Phoenix and Southern California’s Inland Empire, for example, and by nearly 40% in Los Angeles in the same time period. Builders are buying up most of these lots and thus are betting on real estate’s future at this point. And investors are betting on the builders, with the Dow Jones U.S. Home Construction index, a measure of rising and falling builder stocks, up almost 30% this year. These are significant investments in real estate’s growth over the longer term.
Saturday, May 1, 2010
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