Latest Unemployment Report: Great News…for the Most Part

Latest Unemployment Report: Great News…for the Most Part | MyKCM

The Bureau of Labor Statistics (BLS) released their latest Employment Situation Summary last Thursday, and it again beat analysts’ expectations in a big way. The consensus was for 3,074,000 jobs to be added in June. The report revealed that 4,800,000 jobs were added. The unemployment rate fell to 11.1% from 13.3% last month. Again, excellent news as the unemployment rate fell for the second consecutive month. However, there’s still a long way to go before the economy fully recovers as 17.8 million Americans remain unemployed.

Here are two interesting insights on the report:

What about a supposed misclassification?

The BLS addressed this at length in a blog post last week, and concluded by saying:

“Regardless of the assumptions we might make about misclassification, the trend in the unemployment rate over the period in question is the same; the rate increased in March & April and eased in May.”

They specifically noted the issue in the latest report by explaining that if they adjusted the rate for the potential miscalculation, it would increase from 11.1% to 12.1% (which is lower than the adjusted rate of 16.4% last month). They went on to say:

“However, this represents the upper bound of our estimate of misclassification and probably overstates the size of the misclassification error.”

Does the shutdown of parts of the economy skew the unemployment numbers?

Because the uniqueness of 2020 impacts the employment situation in so many ways, each jobs report is now examined with a microscope to make sure the headlines generated by the report accurately convey what’s happening in the job market.

One such analysis is done by Jed Kolko, Chief Economist at Indeed. He believes the extraordinary number of people in the “temporary” unemployed category confuses the broader issue of how many people have permanently lost their job. He adjusts for this when calculating his “core unemployment rate” (which subtracts temporary layoffs and adds unemployed who didn’t search for a job recently).

The bad news is that his analysis reveals that the number of permanently unemployed is still rising (from 4.6% in April to 5.9% last month). The good news, however, is when you use his methodology to look back at the Great Recession, today’s “core unemployment rate” is significantly lower (5.9% versus 10.5% in April 2010).

Bottom Line

Last week’s jobs report was much better than most expected. However, we should remain cautious in our optimism. As the Wall Street Journal explained in their analysis of the jobs report:

“U.S. job growth surged last month, underscoring the economy’s capacity for a quick rebound if businesses continue to reopen and consumers regain confidence. A recent coronavirus spike, however, could undermine trends captured in the latest jobs report.”

Posted on July 6, 2020 at 10:35 am
Desiree Stanley | Category: Economy, Unemployment | Tagged , , , , , , ,

Real Estate Tops Best Investment Poll for 7th Year Running

Real Estate Tops Best Investment Poll for 7th Year Running | MyKCM

Every year, Gallup conducts a survey of Americans to determine their choice for the best long-term investment. Respondents are asked to select real estate, stocks/mutual funds, gold, savings accounts/CDs, or bonds.

For the seventh year in a row, real estate has come out on top as the best long-term investment. Gallup explained:

“Real estate remains the most favored investment to Americans, as has been the case since 2013, when the housing market was on the rebound. More than a third of Americans have named real estate as the top investment since 2016.”

This year’s results indicated 35% of Americans chose real estate, followed by stocks at 21%. The full results covering the last decade are shown in the chart below:Real Estate Tops Best Investment Poll for 7th Year Running | MyKCM

Bottom Line

The belief of the American people in the stability of housing as a long-term investment remains strong, even through the many challenges our economy faces today.

Posted on June 15, 2020 at 9:05 am
Desiree Stanley | Category: Economy, Real Estate | Tagged , , , , , , , , , , , , , , , , , , , , , , ,

Is a Recession Here? Yes. Does that Mean a Housing Crash? No.

Is a Recession Here? Yes. Does that Mean a Housing Crash? No. | MyKCM

On Monday, the National Bureau of Economic Research (NBER) announced that the U.S. economy is officially in a recession. This did not come as a surprise to many, as the Bureau defines a recession this way:

“A recession is a significant decline in economic activity spread across the economy, normally visible in production, employment, and other indicators. A recession begins when the economy reaches a peak of economic activity and ends when the economy reaches its trough. Between trough and peak, the economy is in an expansion.”

Everyone realizes that the pandemic shut down the country earlier this year, causing a “significant decline in economic activity.”

Though not surprising, headlines announcing the country is in a recession will cause consumers to remember the devastating impact the last recession had on the housing market just over a decade ago.

The real estate market, however, is in a totally different position than it was then. As Mark Fleming, Chief Economist at First Americanexplained:

“Many still bear scars from the Great Recession and may expect the housing market to follow a similar trajectory in response to the coronavirus outbreak. But, there are distinct differences that indicate the housing market may follow a much different path. While housing led the recession in 2008-2009, this time it may be poised to bring us out of it.”

Four major differences in today’s real estate market are:

  1. Families have large sums of equity in their homes
  2. We have a shortage of housing inventory, not an overabundance
  3. Irresponsible lending no longer exists
  4. Home price appreciation is not out of control

We must also realize that a recession does not mean a housing crash will follow.  In three of the four previous recessions prior to 2008, home values increased. In the other one, home prices depreciated by only 1.9%.

Bottom Line

Yes, we are now officially in a recession. However, unlike 2008, this time the housing industry is in much better shape to weather the storm.

Posted on June 11, 2020 at 9:04 am
Desiree Stanley | Category: Economy, Real Estate | Tagged , , , , , , , , , , , , , , , , , , ,

Real Estate Will Lead the Economic Recovery

Real Estate Will Lead the Economic Recovery | MyKCM

With more U.S. states reopening for business this summer, and as people start to return to work, we can expect the economy to begin improving. Most expert forecasts indicate this economic recovery will start to happen in the second half of this year. As we get back to work and the financial landscape of the country begins to turn around, many experts also agree that real estate has the potential to lead the way in the recovery process.

According to Ivy Zelman of Zelman & Associates:

 “Housing will fare better than expected during this severe downturn.”

In addition, CNBC notes:

“Mortgage demand from home buyers shows unexpectedly strong and quick recovery…The quick recovery has surprised most forecasters.”

Robert Dietz, Chief Economist and Senior Vice President for Economics and Housing Policy of the National Association of Home Builders (NAHB) says:

“Overall, the data lend evidence to the NAHB forecast that housing will be a leading sector in an eventual economic recovery.”

One of the big reasons why housing has the potential to be such a driving force is the significant impact it has on the local economy. This impact is particularly strong when a newly constructed home is built and sold. According to a recent study by the National Association of Realtors (NAR), the average new home sale has a total economic impact of $88,416. As outlined in the graphic below, this is a combination of income generated from real estate industries, expenditures, and new home construction.Real Estate Will Lead the Economic Recovery | MyKCM With so many unknowns today, especially in the wake of a worldwide pandemic, one known factor is the bright spark the housing market can play in local and national recovery. Buying and selling a home goes well beyond personal growth and satisfaction – it supports our economy as a whole.

Bottom Line

According to experts, the economy will begin to recover in the second half of this year. With real estate as a driver, that recovery may start sooner than we think.

Posted on June 10, 2020 at 8:52 am
Desiree Stanley | Category: Economy, Real Estate | Tagged , , , , , , , , , , , , , , , , , , , , , , , ,

The Shocking News in the Unemployment Report

Last Friday, the U.S. Bureau of Labor Statistics released their May Employment Situation SummaryLeading up to the release, most experts predicted the unemployment rate would jump up to approximately 20% from the 14.7% rate announced last month.

The experts were shocked.

The Wall Street Journal put it this way:

“The May U.S. jobless rate fell to 13.3% and employers added 2.5 million jobs, blowing Wall Street expectations out of the water: Economists had forecast a loss of 8.3 million jobs and a 19.5% unemployment rate.”

In addition, CNBC revealed:

“The May gain was by far the biggest one-month jobs surge in U.S. history since at least 1939.”

Here are some of the job gains by sector:

  • Food Service and Bartenders – 1,400,000
  • Construction – 464,000
  • Education and Health Services – 424,000
  • Retail – 368,000
  • Other Services – 272,000
  • Manufacturing – 225,000
  • Professional Services – 127,000

There’s still a long way to go before the economy fully recovers, as 21 million Americans remain unemployed. That number is down, however, from 23 million just last month. And, of the 21 million in the current report, 73% feel their layoff is temporary. This aligns with a recent Federal Reserve Bank report that showed employers felt 75% of the job losses are temporary layoffs and furloughs.

The Employment Situation Summary was definitely a pleasant surprise, and evidence that the country’s economic turnaround is underway. The data also offers a labor-market snapshot from mid-May, when the government conducted its monthly survey of households and businesses. Many states did not open for business until the second half of May. This bodes well for next month’s jobs report.

Bottom Line

We cannot rejoice over a report that reveals millions of American families are still without work. We can, however, feel relieved that we are headed in the right direction, and much more quickly than most anticipated.

Note: In its original report, the BLS explained that a misclassification error could have occurred over the last 3 months, starting in March of 2020. Readjusting for this error, the unemployment rate would actually show a drop from 19.7% in April to 16.3% in May. Nobody would say the original report of 13.3% unemployment was a good number, nor is the revised 16.3%. What is a positive move for our country and the economy is the significant drop in the rate from April to May, meaning more people are getting jobs than losing them. That’s the key takeaway.

Posted on June 9, 2020 at 8:56 am
Desiree Stanley | Category: Economy, Real Estate, Unemployment | Tagged , , , , , , , , , , , , , ,

Home Prices: It’s All About Supply and Demand

Home Prices: It’s All About Supply and Demand | MyKCM

As we enter the summer months and work through the challenges associated with the current health crisis, many are wondering what impact the economic slowdown will have on home prices. Looking at the big picture, supply and demand will give us the clearest idea of what’s to come.

Making our way through the month of June and entering the second half of the year, we face an undersupply of homes on the market. Keep in mind, this undersupply is going to vary by location and by price point. According to the National Association of Realtors (NAR), across the country, we currently have a 4.1 months supply of homes on the market. Historically, 6 months of supply is considered a balanced market. Anything over 6 months is a buyer’s market, meaning prices will depreciate. Anything below 6 months is a seller’s market, where prices appreciate. The graph below shows inventory across the country since 2010 in months supply of homes for sale.Home Prices: It’s All About Supply and Demand | MyKCM Robert Dietz, Chief Economist for the National Home Builders Association (NAHB) says:

“As the economy begins a recovery later in 2020, we expect housing to play a leading role. Housing enters this recession underbuilt, not overbuilt. Estimates vary, but based on demographics and current vacancy rates, the U.S. may have a housing deficit of up to one million units.”

Given the undersupply of homes on the market today, there is upward pressure on prices. Looking at simple economics, when there is less of an item for sale and the demand is high, consumers are willing to pay more for that item. The undersupply is also prompting bidding wars, which can drive price points higher in the home sale process. According to a recent MarketWatch article:

 “As buyers return to the market as the country rebounds from the pandemic, a limited inventory of homes for sale could fuel bidding wars and push prices higher.”

In addition, experts forecasting home prices have updated their projections given the impact of the pandemic. The major institutions expect home prices to appreciate through 2022. The chart below, updated as of earlier this week, notes these forecasts. As the year progresses, we may see these projections revised in a continued upward trend, given the lack of homes on the market. This could drive home prices even higher.Home Prices: It’s All About Supply and Demand | MyKCM

Bottom Line

Many may think home prices will depreciate due to the economic slowdown from the coronavirus, but experts disagree. As we approach the second half of this year, we may actually see home prices rise even higher given the lack of homes for sale.

Posted on June 2, 2020 at 8:40 am
Desiree Stanley | Category: Real Estate | Tagged , , , , , , , , , , , , , , , , , , , , , , , , , ,

Economists Forecast Recovery to Begin in the Second Half of 2020

Economists Forecast Recovery to Begin in the Second Half of 2020 | MyKCM

With the U.S. economy on everyone’s minds right now, questions about the country’s financial outlook continue to come up daily. The one that seems to keep rising to the top is: when will the economy begin to recoverWhile no one knows exactly how a rebound will play out, expert economists around the country are becoming more aligned on when the recovery will begin.

According to the latest Wall Street Journal Economic Forecasting Survey, which polls more than 60 economists on a monthly basis, 85.3% believe a recovery will begin in the second half of 2020 (see graph below):Economists Forecast Recovery to Begin in the Second Half of 2020 | MyKCM There seems to be a growing consensus among these experts that the second half of this year will be the start of a turnaround in this country.

Chris Hyzy, Chief Investment Officer for Merrill notes:

“We fully expect the economy could begin to pick up in late June and July with a strong recovery in the fourth quarter.” 

In addition, five of the major financial institutions are also forecasting positive GDP in the second half of the year. Today, four of the five expect a recovery to begin in the third quarter of 2020, and all five agree a recovery should start by the fourth quarter (see graph below):Economists Forecast Recovery to Begin in the Second Half of 2020 | MyKCM

Bottom Line

The vast majority of economists, analysts, and financial institutions are in unison, indicating an economic recovery should begin in the second half of 2020. Agreement among these leading experts is stronger than ever.

Posted on May 28, 2020 at 8:23 am
Desiree Stanley | Category: Economy | Tagged , , , , , ,

Buying or Selling a Home? You Need an Expert Kind of Guide

Buying or Selling a Home? You Need an Expert Kind of Guide | MyKCM

In a normal housing market, whether you’re buying or selling a home, you need an experienced guide to help you navigate through the process. You need someone you can turn to who will tell you how to price your home correctly right from the start. You need someone who can help you determine what to offer on your dream home without paying too much or offending the seller with a low-ball offer.

We are, however, in anything but a normal market right now. We are amid one of the greatest health crises our nation has ever seen. The pandemic has had a dramatic impact on the journey consumers take to purchase or sell a home. To successfully navigate the landscape today, you need more than an experienced guide. You need a ‘Real Estate Sherpa.’

According to Lexico, a Sherpa is a “member of a Himalayan people living on the borders of Nepal and Tibet, renowned for their skill in mountaineering.” Sherpas are skilled in leading their parties through the extreme altitudes of the peaks and passes in the region – some of the most treacherous trails in the world. They take pride in their hardiness, expertise, and experience at very high altitudes.

They are much more than just guides.

This is much more than a normal real estate market.

Today, the average guide just won’t do. You need a Sherpa. You need an expert who understands how COVID-19 is impacting the thoughts and actions of the consumer (ex: virtual showings, proper safety protocols, e-signing documents). You need someone who can simply and effectively explain the changes in today’s process to you and your family. You need an expert who will guarantee you make the right decision, especially in these challenging times.

Bottom Line

Hiring an agent who understands how the pandemic is reshaping the real estate processes is crucial right now. Let’s connect today to guarantee your journey is a safe and successful one.

Posted on May 26, 2020 at 11:25 am
Desiree Stanley | Category: Real Estate | Tagged , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Unemployment Report: No Need to Be Terrified

Unemployment Report: No Need to Be Terrified | MyKCM

Last Friday, the Bureau of Labor Statistics (BLS) released its latest jobs report. It revealed that the economic shutdown made necessary by COVID-19 caused the unemployment rate to jump to 14.7%. Many anticipate that next month the percentage could be even higher. These numbers represent the extreme hardship so many families are experiencing right now. That pain should not be understated.

However, the long-term toll the pandemic will cause should not be overstated either. There have been numerous headlines claiming the current disruption in the economy is akin to the Great Depression, and many of those articles are calling for total Armageddon. Some experts are stepping up to refute those claims.

In a Wall Street Journal (WSJ) article this past weekend, Josh Zumbrun, a national economics correspondent for the Journal explained:

“News stories often describe the coronavirus-induced global economic downturn as the worst since the Great Depression…the comparison does more to terrify than clarify.”

Zumbrun goes on to explain:

“From 1929 to 1933, the economy shrank for 43 consecutive months, according to contemporaneous estimates. Unemployment climbed to nearly 25% before slowly beginning its descent, but it remained above 10% for an entire decade…This time, many economists believe a rebound could begin this year or early next year.”

Here is a graph comparing current unemployment numbers (actual and projected) to those during the Great Depression:Unemployment Report: No Need to Be Terrified | MyKCM Clearly, the two unemployment situations do not compare.

What makes this time so different?

This was not a structural collapse of the economy, but instead a planned shutdown to help mitigate the virus. Once the virus is contained, the economy will immediately begin to recover. This is nothing like what happened in the 1930s. In the same WSJ article mentioned above, former Federal Reserve Chairman Ben Bernanke, who has done extensive research on the depression in the 1930s, explained:

“The breakdown of the financial system was a major reason for both the Great Depression and the 2007-09 recession.” He went on to say that today – “the banks are stronger and much better capitalized.”

What about the families and small businesses that are suffering right now?

The nation’s collective heart goes out to all. The BLS report, however, showed that ninety percent of the job losses are temporary. In addition, many are getting help surviving this pause in their employment status. During the Great Depression, there were no government-sponsored unemployment insurance or large government subsidies as there are this time.

Today, many families are receiving unemployment benefits and an additional $600 a week. The stimulus package is helping many companies weather the storm. Is there still pain? Of course. The assistance, however, is providing much relief until most can go back to work.

Bottom Line

We should look at the current situation for what it is – a predetermined pause placed on the economy. The country will recover once the pandemic ends. Comparisons to any other downturn make little sense. Bernanke put it best:

“I don’t find comparing the current downturn with the Great Depression to be very helpful. The expected duration is much less, and the causes are very different.”

Posted on May 13, 2020 at 9:28 am
Desiree Stanley | Category: Real Estate, Unemployment | Tagged , , , , , , , , , , , , ,

Why Home Equity Is a Bright Spark in the Housing Market

Why Home Equity is a Bright Spark in the Housing Market | MyKCM

Given how we have seen more unemployment claims than ever before over the past several weeks, fear is spreading widely. Some good news, however, shows that more than 4 million initial unemployment filers have likely already found a new job, especially as industries such as health care, food, and grocery stores, retail, delivery, and more increase their employment opportunities. Breaking down what unemployment means for homeownership, and understanding the significant equity Americans hold today, are important parts of seeing the picture clearly when sorting through this uncertainty.

One of the biggest questions right now is whether this historic unemployment rate will initiate a new surge of foreclosures in the market. It’s a very real fear. Despite the staggering number of claims, there are actually many reasons why we won’t see a significant number of foreclosures as we did during the housing crash twelve years ago. The amount of equity homeowners have today is a leading differentiator in the current market.

Today, according to John Burns Consulting58.7% of homes in the U.S. have at least 60% equity. That number is drastically different than it was in 2008 when the housing bubble burst. The last recession was painful, and when prices dipped, many found themselves owing more on their mortgage than what their homes were worth. Homeowners simply walked away at that point. Now, 42.1% of all homes in this country are mortgage-free, meaning they’re owned free and clear. Those homes are not at risk for foreclosure (see graph below):Why Home Equity is a Bright Spark in the Housing Market | MyKCM In addition, CoreLogic notes the average equity mortgaged homes have today is $177,000. That’s a significant amount that homeowners won’t be stepping away from, even in today’s economy (see chart below):Why Home Equity is a Bright Spark in the Housing Market | MyKCM In essence, the amount of equity homeowners have today positions them to be in a much better place than they were in 2008.

Bottom Line 

The fear and uncertainty we feel right now are very real, and this is not going to be easy. We can, however, see strength in our current market through homeowner equity that has not been there in the past. That may be a bright spark to help us make it through.

Posted on May 7, 2020 at 8:32 am
Desiree Stanley | Category: Real Estate | Tagged , , , , , , , , , , , , , , , , , , , ,