California Home Sales and Median Prices in March

The California Association of Realtors released their report on California existing home sales and median prices in March. The statewide median price rose over the 12 months ending in March by 7.2% to $468,550. Compared with February the median price jumped by 9.2% to reach the highest price level in seven months. The rate of increase also outpaced the long-run February-to-March average of 3.9%.

Statewide, the number of single-family homes that closed escrow in March increased by 7.3% over the year to 391,680 units (seasonally adjusted, annualized rate) and were up by 6.3% compared with February. With the first back-to-back year-over-year bump in sales since December 2012, California’s housing market appears to be picking up steam.

The stronger pace of sales in March had the effect of reducing inventories. Statewide, there was a 3.8-month supply of homes for sale in March versus 5.0 months in February and 4.0 months a year ago. In the Los Angeles metro area, the supply of homes for sale fell to 3.2 months in March, down from 4.3 in February and in the Inland Empire, the supply was 4.9 months compared with 6.7. The low inventory of homes for sale in California has created a shortage of housing relative to demand and that, coupled with low interest rates, continues to push home prices higher.

Mortgage interest rates moved up again in March. The average 30-year fixed rate was 3.77%, up from 3.71% in February but was still down from 4.34% a year ago.

Below is a year-over-year summary of sales and price activity in Southern California by county. Although the statewide sales figures are seasonally adjusted, regional and county figures are not.

§  Los Angeles County:  unit sales increased by 7.6% over the year in March, while the median price also rose by 7.6% to $425,860.

§  Orange County:  sales were up by 13.8% last month with the median price inching up by 3.0% to $696,060.

§  Riverside County:  sales of existing homes rose by 5.5% and the median price increased by 6.8% to $331,710.

§  San Bernardino County:  sales shot up by 16.5% in March with the median price rising by 14.4% to $215,640.

§  San Diego County:  unit sales were up by 5.7% and the median price rose by 8.2% to $530,650.

§  Ventura County:  Sales surged by 23.6% over the year while the median price moved up by 6.7% to $596,890.

Source: http://www.car.org/newsstand/newsreleases/2015releases/march2015sales?view=Standard

Employment Growth in America’s Largest Counties

Among the 50 largest counties in the U.S. based on number of employees, Sacramento had the highest rate of annual employment growth in 2013, rising by 5.5% over the  year to 428,475 jobs. Sacramento was followed by two Texas counties: Travis (up 4.9% to 514,749) and Harris (up 4.7% to 2.0 million). During that same period, employment in Los Angeles County rose by 3.8%. Los Angeles led all counties in the number of establishments (253,227) and employment (3.8 million). Altogether, four counties in California ranked in the top ten for employment growth in 2013.

By state, California had more establishments (874,243) and employees (13.4 million) and a larger annual payroll ($742.5 billion) than any other state in 2013. Texas followed in each of these measures with New York coming in third. 

  

Source: http://www.census.gov/econ/cbp/

SoCal Home Sales and Median Prices in March

Southern California home sales increased sharply over the year in March, rising by 11.1% to 19,603 units (new and resale houses and condominiums). This was only the third time in the last 12 months that home sales rose on a year-to-year basis. In spite of the increase, home sales were 18.2% below the average of 23,954 units for the month of March.

The median price across Southern California increased by 6.3% over the year to $425,000 and was the highest median price since it was also $425,000 in December 2007. On a year-over-year basis, the median price has risen for 36 consecutive months but was still 15.8% below the peak region-wide median price of $505,000 reached in mid-2007.

Sales of higher priced homes continue to drive market activity. Last month, the number of homes in the six-county region that sold for $500,000 or more, rose by 14.4% over the year and accounted for 38% of all home sales in March. Sales below $500,000 edged up by 2.0% and sales below $200,000 dropped by 17.8%.

It is normal to see a surge in home sales between February and March as buyers and sellers return to the market, but the big news in this report was the year-over-year sales gain. Sales have been held back by low inventory, especially in the lower price ranges, rising prices and credit hurdles. If higher prices encourage more people to put their homes on the market in the coming months, it would support more sales and help tame price increases. The median price in March was the highest in seven years and reflects both price appreciation from demand outpacing supply and a shift in higher-end transactions counting for a greater share of sales. 

Source:  http://www.corelogic.com/solutions/configurable-real-estate-data-reports.aspx/

March State and Local Employment Report

The Employment Development Department (EDD) released the state and local employment reports for the month of March. Total California nonfarm employment increased by 39,800 jobs over the month in seasonally adjusted (SA) terms. This followed a gain of 22,400 jobs (revised) in February.

  

The year-over-year change showed an increase of 481,900 jobs (SA). This equated to a growth rate of 3.1%, outpacing the March national increase of 2.3%. California’s private sector added 450,600 jobs (an increase of 3.4%) over the year, while employment in the public sector rose by 1.3% (31,300 jobs).

Ten of the 11 super-sectors added jobs over the year to March: construction; manufacturing; trade, transportation and utilities; information; financial activities; professional and business services; educational and health services; leisure and hospitality; other services; and government for a gain of 482,800 jobs. Professional and business services posted the largest gain on a numerical basis, adding 123,900 jobs (up 5.2%), while construction posted the largest gain in percentage terms, increasing by 6.9% or 46,300 jobs.

The only sector to record a decline over the year was mining and logging, down 900 jobs, or 2.9%.

California’s unemployment rate fell to 6.5% in March, down from 6.7% in February and down from the year ago rate of 7.9%. The state’s civilian labor force was unchanged over the month, but was up by 1.1% over the year. The labor force participation rate in California was 62.3% in March versus the national rate of 62.7%.

County highlights:

(Note: With the exception of the Los Angeles unemployment rate, county level numbers are not seasonally adjusted, which means there can be large month-to-month fluctuations in jobs counts. A truer picture of how local labor markets are faring is revealed by focusing on the year-over-year numbers. Annual trends “correct” for the seasonal factors that influence certain industry sectors over the course of the year.)

§  In Los Angeles County, the seasonally adjusted unemployment rate was 7.6%, down from 7.8% in February and below the year ago rate of 8.6%. Total nonfarm employment rose by 28,400 jobs over the month and by 113,300 jobs over the year, an increase of 2.7%.

Educational and health services reported the largest year-over-year rise in employment in March with an increase of 31,000 jobs. Most of the increase was due to the addition of 22,400 health care jobs, over two-thirds of which were concentrated in social assistance. Educational and health services employment now stands at 776,400, an all time high.

Also posting significant gains was the leisure and hospitality sector, where payrolls expanded by 20,900 jobs. Employment in trade, transportation and utilities was up by 21,200 jobs with retail trade driving the industry advance by adding 10,200 jobs, the largest year-to-year surge since 2007.

Only two industries reported year-over-year declines in March: manufacturing (down by 1,700 jobs), and mining and logging (down by 100 jobs).

§  In March, the unemployment rate in Orange County was 4.4%, down from 4.6% in February and below the year-ago figure of 6.0%. Nonfarm payroll jobs increased by by 9,800 over the month and were up by 55,200 over the year (an increase of 3.7%).

§  In the Riverside-San Bernardino area, the unemployment rate in March was 6.5% compared with 6.8% in February and the year ago rate of 8.9%. The region gained 4,700 nonfarm payroll jobs over the month and 53,400 over the year. This represented an increase of 4.2% making the Inland Empire one of the fastest growing regions in the state.

§  In Ventura County, the unemployment rate was 5.4%, down from the year ago estimate of 7.1%. Last month, total nonfarm employment increased by 1,600 jobs. Over the year ending in March, the number of nonfarm jobs in Ventura County was up by 5,100 (up 1.7%).

The labor market in California performed well in the first quarter of 2015 with a 3.1% increase in jobs compared with the first quarter of last year. Industry job gains have been broad-based and the unemployment rate in March was the lowest since March 2008. Additionally, more pronounced wage gains should be forthcoming as the labor market continues to tighten. 

Sources:  http://www.labormarketinfo.edd.ca.gov/

The Declining Labor Force Participation Rate

The labor force participation rate (LFPR) in the United States has been declining since the late 1990s – so this is a trend that predates the recession by several years.

You might ask why economists keep close tabs on this number. The answer is labor force growth is an important indicator of future economic growth – a decline in the labor force creates a labor supply constraint. Over the next several years the Bureau of Labor Statistics projects  that labor force growth will be due entirely to population growth and that the labor force participation rate will continue to decline.

During the 1970s and 1980s, the labor force in the U.S. took off as the baby-boom generation, particularly women, entered the labor market. However, the demographic, economic and social forces that shaped the growth and composition of the labor force have changed since the turn of the century. The LFPR of women, which peaked in 1999 has been on a trend decline. On top of that, baby boomers are now retiring in large numbers and exiting the workforce.  Also, accelerating technological change has caused further distortion in the labor markets. Workers who have seen their jobs disappear as a result of technological change may lack the will or ability to retrain and subsequently drop out of the labor force rather than take a low-skill low-wage job.

I separated young Millennials (aged 16-24) because they show an even steeper decline in labor force participation. Lately, this is generally attributed to younger people delaying entry into the workforce in favor of more education as a result of high unemployment among younger people in the aftermath of the recession. But, again this trend predates the recession, so there seems to be something else going on there as well.

Last month 96,000 individuals left the labor force causing the participation rate to tick down another 0.1 percentage point to 62.7%. Having peaked at 67.1% in the late 1990s, BLS projections show the LFPR falling to 61.6% by 2022. 

Median Weekly Earnings by Sex, Race/Ethnicity and Educational Attainment

This chart shows median weekly earnings in 2014 broken down by gender, ethnicity and educational attainment. 

Looking at earnings by sex, in spite of the decline in men’s real wages over the last decade and an increase in women's earnings, in 2014 men still out earned women across all educational levels.

And, the gap between male and female earnings increases with education. At less than a high school diploma, women earned $0.79 on the dollar compared with men, up to a bachelors degree the ratio is about $0.77, but with an advanced degree, the ratio fell to $0.73.

There is also a disparity in earnings across ethnicity with whites and Asians out earning Hispanics and African Americans across all levels of education.

U.S. Light Vehicle Sales Slow in March

Light vehicle sales in March were up by 3.8% over the year to 17.1 million units (seasonally adjusted annualized rate), the slowest rate of growth since February 2014 when sales fell by 0.4%. On a per unit volume level, 1.54 million light vehicle were sold, an increase of slightly less than 1.0% compared with the same period last year. Still, the pace of sales in March was much better than the 16.2 million unit rate recorded in February.

Total passenger car sales, including foreign and domestic models, edged down by 1.0% to 7.5 million units. Sales of foreign models continued their downward trend. Since July of last year, declining sales of foreign made cars have partially or completely offset increases in sales of domestic models.

• Sales of domestic autos were flat over the year at 5.4 million units
• Foreign auto sales fell by 3.4% to 2.1 million units
• Compared with February, total passenger car sales rose by 6.9%, reversing three consecutive month-to-month declines.

Sales of light trucks, SUVs and crossover utility vehicles continue to dominate the market for light vehicles and, in spite of higher gasoline prices in March, the pace of sales is running ahead of  prerecession rates. Sales were up by 8.0% over the year to 9.6 million units and accounted for over 56% of the sale mix. 

• Sales of domestic trucks increased by 7.8% over the year to 8.0 million units 
• Foreign light truck sales, a much smaller segment of the U.S. truck and SUV market, rose by 8.6% over the year to 1.6 million units
• Compared with January, sales of light trucks were up by 4.5%

Sales of medium-heavy trucks, used primarily by businesses to haul freight and make deliveries, continue to be robust, rising by 15.0% over the year in March to 430,000 vehicles.

Part of the reason for the slowing pace of sales are regional weather effects – snow in some sections of the country lingered into March -- but the market may also be approaching a natural peak. Car and truck sales have grown at a blistering pace since the end of the recession and are now bumping up against prerecession levels. Growth rates are expected to level off this year as pent up demand from the recession is depleted. 

Source:  www.bea.gov

Personal Income Growth Outpaces Consumer Spending

Total personal income increased by 0.4% in February after rising by the same amount in January, while personal consumption expenditures inched up by just 0.1%.

Personal income includes interest and dividends received by individuals; rental income; proprietors’ income; employer contributions  to employee pension and insurance funds as well as employer payroll contributions for government social insurance; government transfers to individuals; and of course, wages and salaries, the largest component of personal income for most Americans.

Total wages and salaries were up by 0.3% (or by $23.9 billion) in February, about half of the gain posted in January. Wages in private goods producing industries edged up by just 0.1% ($800 million), while wages in the much larger service sector increased by 0.4% ($21.0 billion). Wages in the public sector grew by 0.2%  to $2.1 billion.

Government transfers (social security, Medicare, Medicaid, unemployment insurance, veterans’ benefits) also provided a boost to personal income, rising by 0.6% over the month to $15.7 billion.

Real disposable income (adjusted for taxes and inflation) increased by 0.2% in February following a 0.9% jump in January. Real personal consumption expenditures declined by 0.1% after rising by 0.2% in January. Real consumer spending on durable goods dropped by 1.1%, while spending on nondurable goods was flat. Spending on services ticked up by 0.1%. With income growth outpacing spending for the second month in a row, American households increased their saving rate to 5.8%, the highest since late 2012.

On a year-to-year basis:

•        Real disposable income was up by 3.9%
•        Real personal consumption expenditures increased by 3.0%
•        Growth in real spending on goods (3.9%) outpaced spending on services (2.6%)

The current low inflation environment is helping lift consumer purchasing power although higher gasoline prices in February eroded some of that edge. Consumer prices were up by just 0.2% in February after falling by 0.4% during the previous month. Factoring out food and energy prices to arrive at core inflation, prices rose by just 0.1%. Food prices were up marginally (0.1%), while the index for energy goods increased by 1.0%, a sharp change in course after a long string of monthly declines. Over the year, consumer price inflation was just 0.3%, considerably below the Federal Reserve’s target range of 2.0%.

Consumer spending was weaker than expected last month, adding to a number of other indicators that point to a lower rate of GDP growth in the first quarter of 2015. On the other hand, personal income growth and real disposable income have been strong and increases in the saving rate over the last few months may support high consumption expenditures going forward. 

Source:  http://www.bea.gov/newsreleases/national/pi/pinewsrelease.htm

California Home Sales and Median Prices in February

The California Association of Realtors released their report on California existing home sales and median prices in February. The statewide median price rose over the 12 months ending in February by 5.5% to $428,970. Although median prices have been on the rise for more than two years (on a year-to-year basis), the gains have moderated significantly from a year ago. Compared with January, the median price edge up by 0.5%, halting the month-to-month decline recorded in four of the previous five months. (The statewide median typically experiences a 1.4% month-to-month decline from January to February, based on data going back to 1990).

Statewide, the number of single-family homes that closed escrow in February bumped up by 2.4% over the year to 368,160 units (seasonally adjusted, annualized rate) and rose by 4.7% compared with January, a moderate improvement but a hopeful sign nonetheless as the market transitions to the spring/summer home-buying season.

Inventories are improving throughout much of California. Statewide, there was a 5.0-month supply of homes for sale in February versus 4.7 months a year ago. In the Los Angeles metro area, there was a 5.8-month supply and in the Inland Empire the supply was 6.7 months, both up from a year ago. In the San Francisco Bay Area inventories are still far more constrained -- 3.2 months in February, down from 3.3 months last year.

Mortgage interest rates reversed course and edged up in February. The average 30-year fixed rate was 3.71%, up from 3.67% in January but were still down from 4.30% a year ago.

Below is a year-over-year summary of sales and price activity in Southern California by county. Although the statewide sales figures are seasonally adjusted, regional and county figures are not. Sales that are not adjusted for seasonality are usually quite a bit lower from November through February compared with the rest of the year. Meanwhile, the median price typically goes sideways or edges down from late summer through February as the market moves past its typical spring-summer peak.

§  Los Angeles County:  unit sales declined by 3.2% over the year in February while the median price rose by 7.8% to $419,260.

§  Orange County:  sales increased by 6.3% last month but the median price barely budged, inching up by 0.4% to $680,290.

§  Riverside County:  sales of existing homes fell by 7.7%, while the median price increased last month by 6.9% to $323,220.

§  San Bernardino County:  sales edged down by 0.6% in February but the median price rose by 14.7% to $213,930.

§  San Diego County:  unit sales were up by 5.7% and the median price rose by 4.7% to $499,000.

§  Ventura County:  Sales increased by 6.4% the year while the median price moved up by 1.9% to $568,840

Source: http://www.car.org/newsstand/newsreleases/2015releases/feb2015sales

March U.S. Employment Report Disappoints

The U.S. Labor Market Report covering the national employment situation in March showed weaker than expected job gains but a stronger than anticipated increase in wages. The labor market added 126,000 jobs last month, while the unemployment rate held steady at 5.5%. Average hourly earnings increased by $0.07 in March to $24.86. Over the year, average hourly earnings were up by 2.1%, well ahead of inflation.

The employer payroll survey reported that total nonfarm employment in the United States increased by 126,000 jobs in March, ending a 12 month streak of jobs gains north of 200,000.  Accompanying last month’s weak job growth figure, were downward revisions to prior months. The January employment number was revised from 239,000 jobs added to 201,000 and the change for February was revised from a gain of 295,000 to 264,000.

On a year-to-year (YTY) basis, U.S. employment expanded by over 3.1 million jobs, an increase of 2.4%. Every major industry sector added jobs over the year. The fastest growing sectors in percentage terms were construction (4.7% or 282,000 jobs); professional and technical services (3.7%, 307,500 jobs); administrative and waste services (3.6%, 305,500 jobs); transportation and warehousing (3.6%, 163,600 jobs); and leisure and hospitality (3.4%, 490,000 jobs). The manufacturing sector also continued to add jobs on a YTY basis. Jobs in durable goods were up by 2.2% (171,000 jobs), while employment in nondurable goods inched up by 0.4% adding 17,000 jobs.

The unemployment rate was unchanged over the month at 5.5%. The year ago rate was 6.6% and the monthly rate has averaged 6.1% since January 1990. Last month 96,000 individuals left the labor force causing the labor force participation rate to tick down 0.1 percentage point to 62.7%. Labor force growth is an important indicator of future economic growth – a decline in labor force creates a labor supply constraint. Over the next several years the BLS projects labor force growth will be due entirely to population growth and that the labor force participation rate will continue to decline.

Other labor market indicators in the March report showed improvement. The more comprehensive U-6 unemployment rate, which counts part-time workers who would prefer full-time work and persons who would like to work but have given up looking for a job fell to 10.9% from 12.6% a year ago.

In another encouraging development, someone who was out of work in March would have needed a little over 12 weeks on average to find a new job compared with nearly 16 weeks in March of last year. Improvements in the labor market have also helped bring down the share of workers who have been jobless for 27 weeks or more. In March, that share was 29.8% versus 35.4% in March 2014.  Over the year, the number of long-term unemployed persons (not counting individuals who have given up looking for work) has fallen by over 1.1 million. Since 1990, the percentage of long-term unemployed has averaged 25%, reaching as high as 45% in 2010. The share of part-time workers is also approaching normal levels, coming in at 18.7% in March compared with the long-run average share of 18.0%

Summary: Job growth slowed in March and the two previous months were revised downward. Job gains over the past three months slowed to an average 197,000 – a more modest pace compared with the second half of 2014. Weather likely played a role in the slowdown, similar to what occurred last year.  Still, at 5.5%, the unemployment rate is at its lowest since May 2008 and a broad set of industry sectors posted job gains. Moreover, industries that have been the biggest source of job gains locally continued to trend upward nationally in March. 

Source:  http://www.bls.gov/news.release/pdf/empsit.pdf