Housing Price Chart From “Central Standard”

Below is the chart I referenced today on KCUR’s “Central Standard” program. The data comes from the Federal Housing Finance Agency. The chart shows how the housing values in these 6 metros all increased at relatively the same rate until about 2003. Then the housing bubble began to grow, especially in hot growth markets like Las Vegas and Miami and, to a lesser extent in Denver and Minneapolis-St. Paul. Kansas City, however maintained a stable rate of growth until the housing bubble burst in late 2007. During the recession in 2008 and early 2009 housing prices fell precipitously in those markets that saw huge increases in values just a few years earlier. In Kansas City, we did not experience the large increase, so consequently we did not experience a great home value collapse.
To close on a positive not, across all of these metros, it appears that the worst may be over. All are showing signs over the past few quarters that their home prices are stabilizing.

Area Unemployment Rate Remains Stubborn

The unemployment rate for August, released today, sits at 8.8 percent for the second consecutive month. One year ago the rate was 8.9 percent. Although the economy is now officially in recovery mode (the National Bureau of Economic Research declared the recession over as of June 2008) we have yet to see a surge in employment. There remains a great deal of uncertainty in the economy. Businesses are not going to start hiring again until they are confident the economy is on solid ground. While economic figures like GDP were encouraging earlier in the year, the third quarter numbers are not expected to be as strong. This will likely forestall many employers’ hiring plans even further. Unfortunately, this is looking more and more like a very slow recovery.

Competition for Open Jobs Remains High

For every job posting in the Kansas City area there are three unemployed persons, according to the job search site Indeed.com. Out of the top 50 metro areas, Kansas City ranks right in the middle at 25th. The best place to be looking for work according to the site was Washington, D.C., with one job posting for every one unemployed person. At the bottom of the list are Metro Detroit and the Miami area with eight unemployed persons for every job posting.

June Employment Numbers Released

Kansas City’s unemployment rate edged up from 8.3 percent to 8.5 percent in between May and June. This is still better than the 8.9 percent rate we had one year ago.
We typically see a boost in employment and labor force during the summer months as students are looking for work. This is clearly the case this summer, as the labor force (the number of people who are employed or are actively looking for work) increased by nearly 11,500. Employment also increased, but by less than 9,000, thus leading to a higher unemployment rate.
Historically, June is the high point of the year for employment rates because of seasonal summer jobs. Hopefully that will not be the case this year. If the economic recovery gains some traction and we begin to see some real employment increases we can look forward to higher employment levels in the months to come.

May Unemployment Rates Released

As much as we want the recession to be over and to be on a solid road to recovery, the sad fact is we are still a ways away from a strong economy, at least in terms of employment. Sure, April gave us reason to hope when the regional unemployment rate dropped from 9.3 percent to 8.3 percent. The number of people who were unemployed dropped by nearly 10,000 and actual number of people working climbed by nearly 12,000.
May’s numbers were released this week, and they were not bad, but they were not particularly good either. All variables (Labor Force, Employment, Unemployment and Unemployment Rate) leveled off instead of showing continued signs of improvement. The labor force increased by 213, unemployment decreased by 714, while employment grew by just 927. The unemployment rate remained unchanged at 8.3 percent.
Adding to this lackluster news is today’s release of the national employment numbers for June (remember the state and local figures will lag the national) indicating a net loss of 125,000 jobs. The loss of 225,000 temporary census jobs is largely to blame for the net decline. Were it not for the loss of these census jobs, the country would have added roughly 100,000 jobs. The bulk of these jobs (83,000) were in the private sector, but economy-wide, this increase barely makes a dent.

April Home Sales Figures are Strong

The Kansas City Regional Association of Realtors released its April home sales figures this week, and there is reason for cautious optimism. April saw 2,644 home sales, an increase of 672 from April 2009. Even more encouraging is the fact that these homes’ average selling price was up by more than $5,000 from one year ago.
Additional good news is that the overall housing inventory has leveled off at around 16,500 homes. There were actually fewer homes for sale in April 2010 than April 2009. On average, it takes 7.4 months for a home to sell in the Kansas City area, down from eight months one year ago.
Overall, this is all good news so why the cautious optimism? Undoubtedly the ending of the Housing Tax Credit in April spurred much of the activity last month. It is likely that many potential homebuyers made their purchases in April to beat the deadline, so we might see that sales are down in May and June because so many buyers already jumped into the market. May’s figures will be very telling. If sales plummet, we can assume April was an anomaly caused by the tax credit. However, if sales remain strong, we might be seeing the beginnings of the housing market recovery that the economy has been yearning for since 2008.

Random Economic News

There are a couple of positive economic notes in today’s news. RealtyTrac reports that nationwide foreclosures dropped 9 percent in March and an additional 2 percent in April compared to the previous month. Now that we are a good three years into the housing crisis, it would appear that foreclosures may have finally reached their peak and we will see foreclosure numbers continue to decline.
The negative effect of foreclosed properties on all surrounding properties is well documented. While this negative impact should begin to slowly mitigate as foreclosure numbers drop, it is still far too early to declare victory over the housing crisis. An estimated 25 percent of all homeowners still owe more on their homes than they are worth. It will likely take years before the housing market gets back to some semblance of normalcy — and before homeowners can once again feel their home is a valuable asset and not a net negative to their financial well being.
On the employment side, first time unemployment filings declined again for the fourth straight week. This news comes on the heels of a solid April job growth number of 290,000.
These are not giant leaps ahead for the economy, but they can be looked at as baby steps in the right direction.

http://money.cnn.com/2010/05/13/real_estate/april_foreclosures/index.htm?hpt=T2
http://money.cnn.com/2010/05/13/news/economy/initial_claims/index.htm