Business spending continues to grow, as shown by the chart below. The monthly survey of Purchasing Managers at major corporations shows that, despite a slight slowdown in the last few months, purchasing activity remains well above the benchmark index of 50.

Our grading system of the economy and the housing market is a “bell curve” model, with statistics at an all-time high receiving an “A,” statistics near the long-term average receiving a “C,” and the worst times ever receiving an “F.” In this grading system, it is OK to be a “C” student. Here is our current report card:

Economic Growth: C

Economic growth continues to be “average.” We added 150,000 jobs in August, bringing the 1-year growth to 1.7 million, or 1.3 percent. This is the strongest job growth rate in three and a half years. Despite persistently high oil prices that threaten to dent growth, the manufacturing sector has been reporting stronger numbers and may support the Fed’s view that the economy is growing strongly enough to lift interest rates at a “measured” pace.

Leading Indicators: C

The leading indicators haven’t changed much lately. Whether it is the upcoming election, continued uncertainty regarding gasoline prices and the Middle East, or other issues, the outlook remains very “average.”

Mortgage Rates: A

After dipping to the lowest levels in six months, fixed mortgage rates began to edge higher late in September, while the one-year adjustable-rate mortgages bucked the upward trend, falling slightly.

Consumer Behavior: C+

Consumer confidence dropped slightly in September to 96.8 from 98.2 in August, with business purchasing activity falling and consumers borrowing less on their credit cards.

Existing-Home Market: B+

The existing-home market remains robust amidst daily newspaper reports that the severe scrutiny of Fannie Mae and Freddie Mac will reduce the ability of many households to afford homes. While there may be some house-cleaning at these institutions, and their promises to shore up their balance sheet may inhibit their growth somewhat, we haven’t read anything that would convince us that a future government bailout will be necessary.

New-Home Market: B+

The U.S. Commerce Department said August single-family home sales rose 9.4 percent – the largest one-month gain since December 2000 – to a 1.18-million-unit annual rate. Housing starts were on the rise in each U.S. region, except for the West, where there was a decline of 4.7 percent and building permits fell 5.5 percent. New-home sales surged 12.6 percent in the South, the region with the biggest volume. Sales rose 19.5 percent in the West and 6.1 percent in the Northeast, but slid 8.3 percent in the Midwest.

Pulte caused a stir in the market yesterday with its announcement that it will be dropping prices in Las Vegas after raising them almost 50 percent. Since most stock analysts had no idea Pulte had been so aggressive, I find it amusing that they seemed to ignore the rest of the press release, which was very positive.

Housing Supply: C

While single-family construction remains near an all-time high, the multifamily market remains in the doldrums. We recently attended a national multifamily conference where apartment owners were lamenting falling rents and rising vacancies in most markets around the country. Interestingly, the savior for apartment owners has been the condo conversion market, where owners are either converting condos or selling them at sub-5 percent cap rates to investors.

John Burns is the founder of Real Estate Consulting in Irvine, Calif., which monitors changes in real estate market conditions and provides consulting services, including strategic planning, market research and financial analysis.

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