Last week we talked about the many varied predictions regarding the economy
for 2012. It makes sense that the next question will then be--what factor
will be most important with regard to which prediction turns out to be
correct? We can answer that question in one word--employment. There are many
factors helping the economy right now. Companies are sitting on cash, debt
levels of consumers have lessened in the past several years and consumer
confidence is rising. There are factors holding the economy back right now
as well. These include the debt crisis in Europe and the shadow inventory
hanging over the housing market. However, the one overriding factor that
could override these other factors is employment. Employment is improving,
but the unemployment rate remained a stubbornly high as we closed out 2011.
The economy added 200,000 jobs in December and 1.6 million jobs for all of
2011. Definitely this represents a much better performance than the 940,000
jobs added in 2010 and the improvement needs to continue in order to for the
unemployment rate to continue to fall from its current level of 8.5%. When
you look at the fact that the weekly first time claims for unemployment have
dropped from an average of approximately 650,000 per week in 2009 to under
375,000 at the end of December, this is an indication that there could be
more good news on the horizon. When people have jobs, they purchase homes
and other big ticket items such as cars. We must continue to build consumer
confidence and a better job market is the key to sustainable confidence.
Companies have cash, but they will not hire unless they know consumers will
stay confident. Any significant decrease in unemployment in 2012 will go a
long way toward supporting a stronger economic recovery than most have
predicted this year.
An improving job picture and prices stabilizing for non-distressed homes are
all signs that point to a housing recovery taking shape, Barclays Capital
analyst Stephen Kim told HousingWire. 'In the absence of a government home
buyer incentives, prices for non-distressed home sales have stabilized for
almost a year,' Kim said. 'This is the most important trend in the housing
industry right now, and we are amazed at how little attention it has been
getting from the media and the street. This stability on the part of
nondistressed prices has occurred despite a very high share of distressed
activity and continued declines in overall prices.' The key to when the
housing recovery will largely take off "depends primarily on when these
first-time buyers decide it is safe to buy a house,' Kim told HousingWire.
Source: HousingWire
The multifamily market continues to post gains. 'Rents are rising, vacancies
are falling, household formations are growing and rental supply is limited,'
according to a recent report, "2012: The Year of the Landlord," issued by
Morgan Stanley. 'We believe the demand for rental properties will continue
to grow.' Vacancies of rental properties dropped to 9.8 percent in the third
quarter of this year compared to 10.3 percent earlier this year. Led by
strong gains in multifamily housing, groundbreaking for new-housing market
soared 9.3 percent in November. Construction of multifamily homes of at
least two units increased 25.3 percent in November, the Commerce Department
reported last week. Starts for structures with five or more units have
increased more than 30 percent from October and is nearly double
year-over-year levels, Reuters reports. Rental costs are also on their way
up, increasing 2.4 percent over last year compared with an increase of 0.6
percent in 2010, Reuters reports. Source: Associated Press