SoCal Home Sales and Median Prices in April

Southern California homes sales increased over the year in April, rising by 8.5% to 21,708 units (new and resale houses and condominiums). This was the second consecutive yearly increase. On a month-to-month basis, home sales in the region were up by 9.9%. The number of homes sold last month was the second highest for the month of April since 2006, just behind April 2013 when 21,795 homes were sold.

The median price across Southern California increased by 6.2% over the year to $429,000 making it the highest median price since it was $435,000 in November 2007. The median price has risen year-over-year every month since April 2012 but is still below peak levels reached prior to the housing crisis. The median price in Orange County climbed to just 7% below the record high reached eight years ago. Los Angeles and San Diego counties are within 12% of peak prices, while in Riverside and San Bernardino, median prices are still about 30% below their high point reached six years ago.

Sales of higher priced homes are still driving market activity. Last month, the number of homes in the six-county region that sold for $500,000 or more accounted for 39.1% of all home sales, up from 35.8% a year ago and was the highest since reaching 40% in November 2007.

Last month was one of the strongest for April since the housing bust, but sales remain below average. The housing market recovery is still unfolding, but progress continues to be impeded by credit and affordability hurdles, tight inventories of existing homes and low levels of new home construction.  

 

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

April State and Local Employment Report

The Employment Development Department (EDD) released the state and local employment reports for the month of April. Total California nonfarm employment increased by 29,500 jobs over the month in seasonally adjusted (SA) terms. Last month total nonfarm employment reached 16,012,200 jobs surpassing the 16 million mark for the first time ever.

The year-over-year change showed an increase of 457,300 jobs (SA). This equated to a growth rate of 2.9%, outpacing the April national increase of 2.2%. California’s private sector added 422,800 jobs (an increase of 3.2%) over the year, while employment in the public sector rose by 1.4% (34,500 jobs)

Ten of the 11 super-sectors added jobs over the year to April: 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 combined gain of 458,100 jobs. Professional and business services posted the largest gain on a numerical basis, adding 119,500 jobs (up 5.0%), while construction posted the largest gain in percentage terms, increasing by 6.4% or 42,600 jobs.

The only sector to record a decline over the year was mining and logging, down 800 jobs, or 2.6%.

California’s unemployment rate fell to 6.3% in April, down from 6.5% in March and down from the year ago rate of 7.8%. The April unemployment rate was the lowest in seven years. The state’s civilian labor force edged up by 0.1% over the month and by 1.1% over the year with the addition of 210,200 new entrants to the labor force. The labor force participation rate in California was 62.1% in April compared with the national rate of 62.8%.

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%, unchanged from March but below the year ago rate of 8.4%. Total nonfarm employment rose by 9,600 jobs over the month and by 109,600 jobs over the year, an increase of 2.6%.

Educational and health services reported the largest year-over-year gain in employment in April with an increase of 24,300 jobs, over two-thirds of which were concentrated in health care (15,900) and within health care, about half of the newly created jobs were in individual and family services.

Also posting a significant employment upswing was the trade, transportation and utilities sector with a total of 24,200 jobs added over the year; wholesale trade employment was up by 9,800 jobs, retail by 8,800 jobs and transportation, warehousing, and utilities increased by 5,600 jobs.

The remaining industries that posted job gains over the year were leisure and hospitality (up 19,700), government (11,800), professional and business services (10,400), construction (7,800), information (7,000), other services (3,500), and financial activities (1,500).

Only two industries reported year-over-year declines in April: manufacturing (down by 400 jobs), and mining and logging (down by 200 jobs).

§  In April, the unemployment rate in Orange County was 4.1%, down from 4.4% in March and below the year-ago figure of 5.1%. Nonfarm payroll jobs increased by by 3,800 over the month and were up by 50,500 over the year (an increase of 3.4%).

§  In the Riverside-San Bernardino area, the unemployment rate in April was 6.2% compared with 6.5% in March and the year ago rate of 7.7%. The region gained 4,200 nonfarm payroll jobs over the month and 52,200 over the year. This represented an increase of 4.1%.

§  In Ventura County, the unemployment rate was 5.1%, down from the year ago estimate of 6.1%. Total nonfarm employment fell by 1,000 jobs compared to March but the number of nonfarm jobs rose by 3,600 (up 1.2%) over the year ending in April.

April was another good month for California’s labor markets. The state continues to outpace the nation in terms of job gains with employment growth occurring across a broad spectrum of industries. The local labor markets are also seeing ongoing improvement in terms of year-over-year jobs gains and declining unemployment rates. Throughout the Los Angeles five-county region unemployment rates are now well below the average rate going back to 2000. 

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

U.S. Light Vehicle Sales Disappoint in April

Light vehicle sales in April were up by 3.1% over the year to 16.9 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, 1.45 million light vehicles were sold, an increase of 4.7% compared with the same period last year. On a month-to-month basis, sales were down by 3.5%.

Total passenger car sales, including foreign and domestic models, were down by 2.6% over the year to 7.2 million units.

• Sales of domestic autos were nearly flat over the year, edging up by just 0.5% to 5.2 million units
• Foreign auto sales plunged by 10.0% to 1.9 million units
• Compared with March, total passenger car sales fell by 4.5%. This was the third monthly decline for passenger vehicles

Light trucks, SUVs and crossover utility vehicles continue to dominate the market. Sales increased by 7.9% over the year to 9.3 million units and accounted for 56.5% of the light vehicle sales mix.

·        Sales of domestic trucks increased by 5.1% over the year to 7.7 million units

·        Foreign light truck sales, which comprise only about 20% of the light truck market, were up by 23.4% to 1.6 million units

·        Compared with March, sales of light trucks were down by 2.7%

Sales of medium-heavy trucks, used primarily by businesses to haul freight and make deliveries slowed down last month, rising by just 3.9% over the year in April to 430,000 vehicles.

Light vehicle production remains strong. The industry finished April with a 64-day supply of vehicles compared with 58 days in March but down from 68 days in April 2014. Dealer incentives and fleet sales have been stable, but individual demand is exhibiting some volatility. Still, light vehicle sales are projected to reach 16.9 million units this year matching prerecession volumes. 

Source:  www.bea.gov

Consumer Credit: $20.5 Billion Gain in March

Exceeding expectations for the second month in a row, total consumer credit outstanding increased by 7.4% ($20.5 billion) over the month in March to $3.36 trillion (seasonally adjusted annualized rate. February consumer credit was revised down from a gain of $15.5 billion to $14.8 billion. Over the 12 months ending in March, total consumer debt was up by 6.9%.

 

Non-revolving debt, composed primarily of credit for new automobiles and student loans, increased by 7.9% in March or by $16.2 billion. Over the 12 months ending in March, non-revolving debt was up by 8.2%. Non-revolving debt makes up nearly 75% of total consumer borrowing and during the first quarter, student loans were responsible for most of the growth in non-revolving credit.

It appears American consumers shook off winter’s chill and went shopping in March. Revolving debt (mainly credit cards), rose by 5.9% ($4.3 billion) after contracting by 3.3% in February. Over the year, credit card debt has risen by just 3.3% and is still 13.0% below the peak level reached in July 2008.

Overall, trend growth for consumer credit remains strong.  An expected pickup in consumer spending on discretionary purchases, new vehicles and education through 2015 should fuel additional credit growth. The share of outstanding credit relative to disposable income has risen steadily over the past two years and now stands at 25.3%. The long run average ratio is 22.9%. The increase in consumer borrowing relative to income could be due to consumers feeling more comfortable with taking on additional debt or it may be that low wage growth has pressured some consumers to borrow more to maintain their accustomed level of consumption. 

Source:  http://www.federalreserve.gov/releases/g19/current/default.htm

Lending Standards Little Changed Over Last Quarter

The Federal Reserve recently released results for the April 2015 Senior Loan Officer Survey on Bank Lending Practices. This survey addresses changes in the supply of, and demand for, bank loans to businesses and households during the past three months.

The April Senior Loan Officer survey showed that lending standards for commercial and industrial (C&I) loans were little changed over the past three months. Banks who did report easing standards on C&I loans cited more aggressive competition from other banks or nonbank lenders as their reason for doing so. The small number of banks that tightened either standards or terms on C&I loans did so due to industry specific problems or increased concerns regarding legislative changes, supervisory actions or changes in accounting standards.

With respect to commercial real estate (CRE) lending, banks reported easing standards on construction and land development loans, and some banks reported that they had eased standards on loans secured by multi-family properties. Survey respondents also reported having ease terms on some CRE loans over the past year.

On the demand side, survey respondents indicated having experienced little change in demand for C&I loans, while also reporting that demand for all three categories of CRE (construction and land development; nonfarm nonresidential properties; multi-family residential properties) loans was stronger.

The April survey also asked a special set of questions about lending to firms in the oil and natural gas drilling or extraction sector. Of the banks that made loans to such firms, more than half expected loan quality to deteriorate somewhat this year. Banks also indicated they were taking a variety of actions to mitigate loan losses including restructuring outstanding loans, reducing the size of existing credit lines, requiring additional collateral and tightening underwriting standards for new loans among others.

Asked about loans to households, banks reported having eased lending standards for several categories of residential mortgage loans over the past three months. Most banks reported no change in standards and terms on consumer loans. Demand, on the other hand, increased for residential mortgages, auto loans and credit cards.

Changes in borrowing by businesses and consumers to finance investment and consumption are an indication of confidence levels and the relative strength of the economy. Banks in general have been slowly easing lending standards for several years and demand has mostly trended upward since the end of the recession. 

Source:  http://www.federalreserve.gov/boarddocs/SnLoanSurvey/201208/default.htm

U.S. Labor Market Rebounds in April

The U.S. Labor Market Report covering the national employment situation in April showed a rebound in employment growth with a gain of 223,000 jobs. The unemployment rate fell to 5.4%, the lowest since May 2008. Average hourly earnings increased by $0.03 in April to $24.87. Over the year, average hourly earnings were up by 2.2%, showing little upward momentum but outpacing inflation.

The employer payroll survey reported that total nonfarm employment in the United States increased by 223,000 jobs in April, returning to trend growth after an extremely weak showing in March. Accompanying last month’s job gain were revisions to the February figure (revised up from 264,000 jobs to 266,000) and the March number, which was revised down from a gain of 126,000 jobs to just 85,000. With these revisions, the gains in February and March combined were 39,000 lower than previously reported. Over the past three months, job gains have averaged 191,000 per month.

On a year-to-year (YTY) basis, U.S. employment expanded by nearly 3.0 million jobs, an increase of 2.2%. Every major industry sector added jobs over the year and over the month with the exception of mining and logging. The fastest growing sectors in YTY percentage terms were construction (4.6% or 280,000 jobs); professional and business services (3.5%, 654,000 jobs); and leisure and hospitality (3.0%, 434,000 jobs). Reaching new employment peaks were trade, transportation and utilities; professional and business services; education and health care; leisure and hospitality; and other services.

The unemployment rate ticked down to 5.4%; the year ago rate was 6.2%. The April unemployment rate was also well below the average rate (since 1990) of 6.1%. According to data from the Federal Reserve, the unemployment rate that would signal full employment currently stands at 5.16%. Last month, 166,000 individuals entered the labor force bringing the labor force participation rate up to 62.8%, up from 62.7% in March and the same as a year ago.

Other labor market indicators in the April report showed improvement as well. 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 10.8% from 12.3% a year ago.

Also encouraging, individuals out of work are spending less time on the unemployment rolls. The median duration of unemployment in April fell to 11.7 weeks from 15.6 weeks a year ago. Improvements in the labor market have also helped bring down the share of workers who have been jobless for 27 weeks or more. In April, that share was 29.0% versus 35.1% in April 2014. During the recession, the share of long-term unemployed climbed past 45%. Over the past year, the number of long-term unemployed persons (not counting individuals who have given up looking for work) has fallen by 888,000. The share of full-time workers relative to part-time workers is also approaching normal levels, coming in at 81.3%. The long-run figure is 82.0%.

Summary: The weakness in the labor markets demonstrated in March appears to have been transitory. The pace of job growth picked up in April and with continued job creation and more people entering the labor force, the unemployment rate fell to 5.4%, the lowest since May 2008. Industries that have been the biggest source of job gains locally (transportation and warehousing, motion picture and sound recording) continued to trend upward nationally in April. The biggest area of concern is currently the slow rate of wage growth, but as the labor markets continue to tighten through the balance of 2015, the pace of wage growth is expected to pick up.

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

Spending Improves but Real Incomes Decline

Total personal income was flat in March after rising by 0.5% in February. Income from wages and salaries, rental income and government transfers edged up slightly, but those small gains were offset by declines in proprietors’ income, and income from interest and dividends. Personal income receipts from interest and dividends fell by $33.1 billion in March after increasing by $29.7 in February.

Real disposable income (adjusted for taxes and inflation) decreased by 0.2% in March following an increase of 0.3% in February. Real personal consumption expenditures rose by 0.3% after remaining flat during the previous month. Real consumer spending on durable goods jumped by 2.0% after declining by 1.1% in February. Spending on nondurable goods was muted at 0.2%, while spending on services was unchanged over the month. The strong increase in consumption relative to income led to a large drop in the saving rate from 5.7% in February to 5.3% in March.

Growth on a year-to-year basis slowed in March compared to February:

• Real disposable income in March was up by 3.3% compared with 3.9% in February
• Real personal consumption expenditures increased by 2.7% versus 3.0%
• Growth in real spending on goods (3.0%) continued to outpace spending on services (2.5%)

Consumer prices were up by 0.2% over the month in March. Food prices declined by 0.3%, while prices for energy goods and services rose by 1.5%. Factoring out food and energy prices to arrive at core inflation, prices were up by 0.1%. Over the year, consumer price inflation was just 0.3%.

Personal spending recovered somewhat in March and although it was a little lower than expected, it was still the strongest reading since last November. Looking over the first quarter, real personal spending was up by a meager 1.9% even though real disposable income grew by 6.2%. That divergence is an indication that consumer spending has some catching up to do. In spite of a lackluster performance in the first quarter, if employment continues to rise as expected, the outlook for personal consumption expenditures remains solid for the rest of the year.

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

First Quarter Growth Disappoints

The Bureau of Economic Analysis (BEA) released its advance estimate for first quarter GDP growth. The U.S. economy expanded at an annualized rate of 0.2% during the first quarter of 2015. Based on early indicators, expectations for first quarter growth were low but this reading was exceptionally weak. Bad weather certainly had an influence on the bottom line number, but weakness in the manufacturing sector was evident early in the quarter. Disruptions in the oil markets and to trade flows also played a role in muting first quarter growth.

Net exports (exports minus imports) subtracted 1.3 percentage points from first quarter growth. Most of the contraction can be traced a decline in exports, although with the resolution of the West Coast dock disruptions, both export and import volumes are expected to rebound in the second quarter.

Business fixed investment declined by 2.5% mostly due to a sharp contraction in structures (-23.1%), which was only partially offset by a slight uptick in spending on equipment (0.1%) and a stronger increase for intellectual property products (7.8%). Private inventories increased, adding 0.74 percentage points to first quarter growth, while residential construction added just 0.04 percentage point.

Government spending and investment was another source of weakness. Total government spending fell by 0.8%. At the federal level, spending increased by 0.3% with nondefense spending rising by 1.9% to counter a 0.7% decline in defense spending. At the state and local government levels expenditures contracted by 1.5%.

Against these declines, consumer spending grew by a modest 1.9%, contributing 1.3 percentage points to first quarter growth. During the fourth quarter of 2014, consumer spending expanded by 4.4%. Gasoline prices largely stabilized during the first quarter and so failed to provide an avenue for increased consumer spending. Additionally, poor weather in many parts of the country kept consumers from shopping or traveling.

The economy is expected to rebound in the second quarter, but the surprising weakness of the first quarter is causing many forecasters to rethink their estimates for the strength of the bounce back. The BEA emphasized that this is only the first advanced estimate for economic growth in the first quarter and that it is based on incomplete data so patience is called for as we await the first set of revisions. 

Source: http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm