Employers unexpectedly cut 23,000 jobs last month as economists had predicted a job growth of some 40,000 positions.
Speaking of the unexpected, the good news is that more insured overdue mortgage holders got back on track last month than fell into default for the first time in over three years.
More good news is that factory orders rose in February, bolstered by strong demand in aircraft and machinery from overseas orders and increased business spending on capital equipment; continuing the recovery in the manufacturing sector, which had shed orders by some 25% during the recession.
Consumer spending rose for the fifth month in a row. Does this mean that the recession is over and that consumer confidence is back? Who knows? Jobs will be the key to recovery and as pointed out, the news is not good here; though less bad (if that can be considered good) than in the past. The increase in consumer spending may b e explained in part due to the growth in wealth as consumers have recouped (net worth of households) over $5.5T, reversing the trend that took away almost $17.5T since the zenith of net worth some three years ago.
Though nationally the real estate market continues to decline, most recently by .7% last month, locally, median sales prices rose by 8.4%; making this the third month in a row that prices have increased while sales volume also increased above what was seen during the same period in the prior year. However, don’t be alarmed at the dramatic rise in prices as this was a reflection of a particularly strong upper end of the market. Continued strength can be attributed to both pent up demand and more affordability as prices have come down nationwide by some 30% and 16%+ locally.
Single family home construction nationwide has fallen to just over 300,000 units, the lowest point in recent history. Homeowners continue to keep product off the market in the hopes of a recovery. These two facts have shrunk the pool of available housing and as we can remember from our freshman economics class on supply and demand if. …
While talking about single family homes an interesting factoid is that the national average size of newly built homes continues to migrate south as home sizes have fallen from just over 2,500 square feet in 2007 to about 2,350 square feet in 2009. One might surmise that this is due to cost containment, availability of conforming mortgages and being conscious of the environmentally impact of living large.
The question on everyone’s lips is whether the single family home market will continue to gain momentum. Home buyer credits are currently set to expire soon, and the federal government is pulling its support of housing through the purchase of mortgage-backed securities. So, can the housing market rebound without these two underpinnings? The government has just ended its program that purchased $1.25T (as in trillion) of mortgage-backed securities as well as about $175B of housing agency debt, a total of some $1.4T.
Mortgage rates continue to be at historic lows, but there is uncertainty in the market due to the looming removal of the buyer credit and government pullout (the underlying point here is that the private market will begin to function on its own again versus having the forced presence of government funds artificially manipulating market supply and demand forces). Because of this uncertainty I believe that mortgage rates will begin to drift upward over the coming months.
Keith Munsell 
