Optimistic expectations from many experts that we might be nearing a recovery took a hit on Thursday when reports on unemployment and housing sales came in at worse than expected numbers. Some analysts expect the housing crisis to persist until at least the second half of 2009. While layoffs are peaking now, unemployment, which is already higher than at any time in the last 25 years, will continue to rise through the middle of next year. According to the Labor Dept., initial unemployment claims rose lat week, to a seasonally adjusted 640k, compared to the revised number from the week before of 613k. Analysts had predicted the number to be about 635k.
The NAR reported sales of existing home in March fell 3% to an annually adjusted rate of 4.6 million, with Februarys sales revised at 4.7 million. Some analysts are optimistic that the rate of falling sales seen at the end of 2008 is slowing. A key indicator for layoffs, the weekly total of new unemployment applications is said to be leveling off. Unemployment will continue to rise, however, because it measures not only layoffs, but the ability of new workers to find jobs. Top analysts predict the downward trends in construction, sales, and property values to continue for several more months. Home sales are expected to hit bottom later this year, due in large part to improved affordability.
Thanks to both the lower property values and more favorable interest rates, housing has become significantly more affordable. But sales should remain low for another year as demand is kept in check by rising unemployment. Unemployment, at its highest point in 25 years, is expected to peak in the spring or summer of 2010 at about 10.3%. April unemployment numbers, which will be released on the 8th of May, are expected to rise to almost 9% as another 625k jobs are cut. In March, unemployment reached 8.4% with 6663k jobs slashed. Continued unemployment claims also rose, to 6.12 million, the 12th week in a row to set a new record. The percentage of the total workforce receiving unemployment is at its highest since January of 1983 and more than 5 million jobs have been cut since December 2007 when the recession began.
A report from the NRA indicated the national median price for existing homes in March fell to $175k, down significantly from last years median of $200k in March. With the mortgage dilemma still an issue, and unemployment rising, foreclosures are a significant portion of the market. This is especially true in the states of Florida, California, and Nevada. Nationally, the NRA estimates that distressed properties accounted for a little more than half of all sales. In an attempt to ease concerns, a top banking regulator said last week that the banking and housing sectors have already passed the worst of their freefall. The FDIC is developing a program to buy up the troubled loans from banks so that they will loosen their lending policies. To that end they have tentatively scheduled a test sale of distressed loans in June to help develop the broader program.
