Housing Market Hasn’t Bottomed Out Yet

Economy watchers have been keeping a close eye on housing statistics lately. It is no secret that the troubles in the housing market have contributed greatly to the overall economic woes we are now feeling. Real estate experts have been waiting (so far in vain) for the housing market to bottom out so the recovery — for housing and for the economy in general — can begin.
Nationally, seasonally adjusted sales figures for existing homes dropped 2 percent between February and March. Locally, existing home sales rose for the second consecutive month, but we normally expect that kind of increase at this time of year as housing activity usually picks up in the spring and summer months. In order to evaluate our local market more realistically, we applied the seasonal adjustments from the national data to our local data. This assumes that the Kansas City market experiences seasonal changes similar to the national housing market.

Using the seasonal adjustment, we see that existing home sales dropped 9 percent between February and March. So it would appear that the housing market (both nationally and locally) is still struggling to gain momentum.
The March numbers were not without some good news, however. Local housing supply (current inventory divided by number of sales) for new homes continued dropping to 12.8 months. It was 20.9 months in January. Existing home supply also declined slightly to 7.9 months. A good rule of thumb says a five-to-six month supply indicates a balanced market (below five is a seller’s market and above six is a buyer’s market).
Also, the average home sales price increased in March to $168,384. It had been decreasing over the past three months.
So with housing supply declining and average homes sale prices increasing, the stage is set for buyers who are trying to time the market to go ahead and buy homes. If enough buyers do that, hopefully the logjam will be broken. Families looking to move will be able to sell their existing homes and make their moves. Such a domino effect could see home values recover rather quickly, making homeowners more confident that their investment is sound. This renewed confidence is just what the general economy needs to start its recovery.

Local February Employment Figures Don’t Show Much Change

The Bureau of Labor Statistics released local employment figures for February today. Overall, the numbers for Kansas City were fairly flat. Employment did decline by 1,812, but so did the number of unemployed, by 926. These equaled a total labor force decline of 2,738. The unemployment rate also declined slightly, from 5.4 percent in January to 5.3 percent in February.

Our local trends mirrored the national (CPS) figures from February in that employment, unemployment, unemployment rate and labor force all declined slightly.

For more information on the current employment picture, be sure to check out our employment section.

February Employment Numbers Add to Economic Concerns

The national economy lost 63,000 jobs in February, the biggest loss in employment since March 2003. This dismal figure comes on the heels of a January job loss of 22,000 and adds more fuel to the fire for those who think that the economy has entered a recession.

We are still awaiting the local employment numbers for January (due out next week) and February (due in early April), but we can begin to speculate what our numbers might look like. Nationally, the greatest level of national job losses occurred in construction (39,000 losses), manufacturing (down by 52,000) and retail (34,000 losses), while health care (up by 37,000) and government (up by 38,000) added jobs to help soften the blow.

We expect that the same industries will see job losses locally as well, but proportionately, they won’t be as dramatic here as nationwide at least not in construction and manufacturing.

Why? First of all, nationwide construction losses can largely be blamed on the well documented housing crisis. In Kansas City, however the housing market did not experience the same kind bubble as elsewhere, so the local residential market, while slow, will not come to a complete standstill. (For more information on Kansas City and the current housing crisis see our special report). Also, non-residential construction activity has increased in recent years and has been able to absorb some of the losses from residential construction.

Second, as discussed in our January 17th entry, our two local auto manufacturers have received good news recently that should keep them producing cars well into the foreseeable future. Moreover, if we examine manufacturing employment trends in recent years, while manufactures have lost significant numbers of jobs nationally, locally the trend has been virtually flat. So in terms of construction and manufacturing, Kansas City should not see the same level of job losses.

Kansas City felt the full force of the 2001 recession because two industries where we were particularly vulnerable, transportation and information, were most impacted. If this 2008 downturn ends up being a recession, it is likely that this time, Kansas City will fare better than the rest of the nation.

KC Foreclosures Increased in 07

The Kansas City Metro Area saw an 83.7% increase in the foreclosure rate between 2006 and 2007. According to RealtyTrac, 1.177% of all housing units in the region were in some stage of foreclosure throughout the past year. Kansas City’s 1.177% was less than the average for the 100 largest metro areas in the country (1.382%) but was higher than the nation as a whole (1.033%).
Out of the top 100 metro areas, Kansas City ranked 40th. The Detroit, MI area had the highest foreclosure rate at 4.918% followed by Stockton, CA (4.866%), Las Vegas, NV (4,228%), Riverside/San Bernardino, CA (3.826%) and Sacramento, CA (3.189%).
The metros with the highest foreclosure rates tended to be in one of 2 areas. The areas most impacted by the bursting housing bubble like Florida or the Southwest. Here, people purchased homes speculatively thinking that the values would continue to skyrocket. When the bubble burst, many people found themselves over extended in their monthly payments and owing more on their mortgages than their home is worth.
The second area of high foreclosure rates was in the rust belt area, where economic troubles have made it difficult for some homeowners to make ends meet.
Kansas City managed to avoid the housing bubble for the most part, and the local economy has proven itself diverse enough to weather economic storms. While we don’t yet know the full impact of the housing foreclosure crisis, these factors should keep Kansas City’s foreclosure rates close to the national average.

Local Employment Figures Not Encouraging

December’s employment figures released by the Bureau of Labor Statistics (BLS) showed a weakening local employment picture. Overall employment dropped by 6,377 while the number of unemployed rose 4,619. The unemployment rate rose only slightly (from 4.8% to 5.1%) because the labor force also shrank.
It is difficult to draw conclusions from one month’s data. But after the call of recession was sounded with the release of the weak national employment figures last month, it is noteworthy that the local figures were equally disappointing.

Spate of Major Employer News Mostly Good

This week has seen big news from several of the Kansas City areas top employers, and most of it was good news. We'll start with the bad news and we will work our way up.
Sprint Nextel Corp., the region's largest private employer, is considering job cuts according to the Wall Street Journal. Sprint has not officially commented on the cuts, so it uncertain how many of the region's 13,000 Sprint employees might be affected. On the positive side of the Sprint story, The Wall Street Journal also speculates that the executive headquarters in Reston, VA. might move back to the Sprint Campus in Overland Park. Such a move would not likely result in a lot of new jobs however.
Certainly job cutbacks are never welcome news, but they are necessary as Sprint tries to remain a player in a very competitive industry. Regaining a fortune 500 Headquarters would be a boost to the local economy's psyche. This and a leaner, more competitive Sprint could translate into better economic news for the region in the future.
Elsewhere, the future continues to look bright for the region's 2 auto manufacturers. The Ford plant in Claycomo is preparing to produce the redesigned F-150 pickup truck. This is certainly a plus for the local plant since the F-150 has been the top selling US vehicle for the past 26 years.
Across the state line at the General Motors plant in Fairfax, demand for the locally manufactured Chevy Malibu will translate in to 300 new jobs.
This good news in manufacturing is worth emphasizing. While manufacturing jobs have been in a steady decline nationally, Kansas City has held it's own in manufacturing employment. In fact MARC's economic forecast calls for thousands of new manufacturing jobs to be created locally in the next 2 years. The fact that Kansas City's strong manufacturing heritage persists despite national decline says a lot about the region's productive workforce and should be a source of pride for the local economy.

Introducing the new KC Economy Blog

We are pleased to announce the addition of a blog to KCEconomy.com. Check back regularly to read about the state of Kansas City's economy and links to other relevant articles.