Mixed Messages

We've been getting economic news that at times conflicts, just last week the news came in that initial jobless claims declined by 15,000 to 366,000 which is the lowest its been in almost four years, though at face value the news is good we must take into account the seasonality affect. During the holiday season its not unusual to see more hiring only to see more firings after, lets hope most of these jobs stick once the holidays pass.

Other factors that would help us to believe things are getting better is that with jobless claims falling you would like to see both homes sales rising and mortgage applications as confirmation that workers are feeling more confident. But what we have is mortgages applications decreasing by about 8% last week which wiped out the gains of the prior week, so in the past few weeks there was no gains in mortgage applications. What we would like to see is the trend growing not stalling out so we need to see what happens over the next few weeks. Year over year according to the mortgage bankers association we are just about where we 1.5 yrs ago with mortgage applications. Like I said, we need to see steady growth every month, as it stands right now its just not happening.

Though mortgage applications appeared to have stalled, housing seems to be doing some what better. According to Housing Tracker, the median asking price for homes in 54 metropolitan areas was positive three weeks in a row, growing on average 1.1% year over year. With almost half of these areas now posting positive gains in housing prices, that is very encouraging news. These stats confirm my previous posts the homes prices are bottoming and in some cases even rising.

That was the good news, now here is some of the bad news. When you look at the number of sales that the market used to handle in any given year we are still down about 50% from the peak years running from 2000 through 2006. So while we are making headway we still have a long way to go to the good old days of homes sales. In 2000 existing home sales were about 4.5 million and reached a peak of 6.34 million the end of 2005, existing home sales now are about 4.4 million, which is close to the average of the prior two years. So its does appear that both housing sales and prices have found a bottom.

If housing is to turn around the economy needs to not only grow but grow enough so that employers will feel comfortable enough to hire again. Before consumers will venture out and back into the housing market they need to feel confident with their jobs, the economy and the future, unfortunately right now thats not how most feel.

So while certain segments of the real estate market (distress sales, retirement, second home, luxury) have and will continue to show improvement the vast majority of the market will just thread water until the unemployment level starts to drop in earnest and consistently every month.