This week, we’re serving up some timely snapshots on unemployment and one sector that’s never been more affordable. Are you brave enough to step up and buy, buy, buy?
The latest news out of the Labor Department on the unemployment front hardly has anyone singing.
Initial jobless claims have risen for three out of the last four weeks.
And the latest reading of 377,000 claims is still higher than desired. Before economists consider the job front healthy, we’ll need to get back below 350,000 claims.
I know that level might seem unattainable. But it’s not, after you see these two charts related to seasonality and intermediate-term trends…
For the last two years, initial claims ran hot in the front half of the year, but then cooled off in the back half. And it looks like 2012 could be following the same script.
In other words, if the seasonal trends hold, expect stronger employment data heading into the election.
And if we consider intermediate trends, instead of focusing on short-term negativity, it’s clear the employment situation isn’t moving from bad to worse. It’s moving from bad to less bad.
Even after the latest blip higher to 389,000 claims, we’re nowhere near the dreadful levels above 500,000 claims from just two years ago. So maybe the key threshold of 350,000 claims is attainable after all.
Quit Your HARP-ing… Housing’s Cheap!
I’m tired of taking punches for suggesting the residential real estate market hit rock bottom. So let me attack this topic from a different angle: affordability.
It’s NEVER been cheaper to finance a home!
Last Thursday, Freddie Mac reported that 30-year mortgage rates fell to an all-time record low for the sixth consecutive week. Last year, the average rate for a 30-year fixed-rate mortgage was 4.49%. Now it’s 3.67%.
I know, I know. You can’t buy another house if you’re stuck in a house that’s underwater. But you know what? You can refinance thanks to the government’s Home Affordable Refinance Program (HARP). And people are doing just that.
The Federal Housing Finance Agency reports that negative equity refinancing activity doubled to 180,000 loans in the first quarter, compared to the previous quarter.
What’s more, there’s a legion of people that don’t own houses yet. They’re called first-time homebuyers. And they’re jumping into the market.
In April, they made up 35% of sales, up from 32% in March.
“First-time homebuyers are slowly making their way back,” said Jennifer Lee, an economist at BMO Capital Markets. “That’s still below the 40% to 45% range during healthy times, but the highest in almost half a year.”
In the end, instead of a calling another bottom in the real estate market and getting brutalized, I’m going to say this: When assets get super cheap, people tend to buy. Real estate promises to be no exception.
Courtesy Louis Basenese at Wall Street Daily (EconMatters author archive here)
The views and opinions expressed herein are the author's own, and do not necessarily reflect those of EconMatters.
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