I had a land economics professor at Texas A&M (Dr. Ivan Schemedemann) whose primary axiom was that, if you made more money, you were simply broke at a higher level. There’s a lot of truth there. Ditto my Dad, a sheep rancher in the Texas Hill Country. His primary axiom is that if you own a four-wheel drive pickup you will get stuck 400 yards further from the road than if you owned a two-wheel drive pickup. We unfortunately proved that one more than once. Think deep snow, mud…..

I personally have axioms relating to real estate and economics. The first is that jobs are everything. Period. There are only three types of people that purchase homes without a job. They have grey hair, blue hair or no hair—they are retirees. Almost everyone else needs a job to buy a house. My second axiom is that wherever the numbers of sales of homes goes, property values will generally follow in the next 12 to 24 months. We are seeing that today as prices are rising, just as we saw home values decline after existing home sales peaked in 2005 while home prices peaked in 2006. Another axiom I invoke frequently is the TINSTAANREM clause — There Is No Such Thing As A National Real Estate Market. Each real estate market is different. Ditto the economy.

The last two axioms are clearly seen in an analysis just reported by 24/7 Wall Street. This analysis was based on data provided by Zillow and Fiserv, among others. The markets are ranked by the greatest increase in home values from Q1 2012 to Q1 2013. Not every market in the country is included in this study. Several states, such as Texas, do not have mechanisms for sales price disclosure, and in some markets Zillow may not have been able to license such data.

Keep in mind also that In many circumstances the respective buyers are investors rather than homeowners.

That said, the table shows the markets with the largest price increase from Q1 2012 to Q1 2013 along with Zillow’s forecast of house values in the next 12 months.

 
To read the complete article, including added information on each of the markets and a more extensive discussion of methodology, click here.

Both the sales volume as an indicator of future prices and the TINSTAANREM clause axioms are once again verified.

The best news, however, is that consumer and investor confidence has returned, and that is reflected in increasing number of transactions, rising home values and shrinking foreclosures and defaults.

Ted

An excellent proxy of where things are happening are the number of one-way truck rentals. U-Haul tallied 1.6 million one-way rentals in 2012.
One-way truck rentals are indicative of people relocating, most often for jobs.

And the top one-way truck rental destinations in 2012?

 
I also added the corresponding job growth numbers and percentages for 2012 for each Metropolitan Statistical Area (MSA). Not surprisingly, each of these markets gained more than 10,000 net new jobs during the year. To read U-Hauls’ complete top-50 one-way truck rental destination list for 2012, click here.

Larger cities will naturally have a greater number of relocations assuming equal economic activity. To compensate for that, U-Haul also reports the top growth markets. To be considered for the top growth markets list, there had to be a minimum 5,000 one-way moves in the prior 12 months. “Growth cities were then determined by calculating the percentage of inbound moves vs. outbound moves for each area,” according to U-Haul.

To read the press release and view the top 30 growth cities, click here.

Jobs are everything. Just imagine the economic activity generated by a relocation. Rental trucks, hotels, meals, hotels, apartment rentals, home sales, new purchases……and the list goes on.

Ted

To answer that, RealtyTrac, which offers a wealth of data in housing and mortgage markets, dug deep into housing sales across the country. Rising home prices continue to support flipping, when properties often resell in as little as three months after some rehabbing and refurbishment.

RealtyTrac examined more than 600 markets across the U.S. that had flip activity in 2012. They defined flips as properties reselling within six months. To be included in the list, the market had to meet the following minimums:

• minimum of 500 flipped transactions
• minimum 9 percent price in local home values from Q1 2012 to Q1 2013

RealtyTrac then narrowed down the list based on the greatest gross profit based on the difference from the resale price compared to the original purchase price.

While they report the top 25 markets on their site (which you can examine here) below are the top-10 markets and related statistics. I have added these markets job growth change in the past 12 months in addition to the RealtyTrac data. Not surprisingly, each and every one of these markets are seeing job growth. Jobs are everything. Period.

To look at the wide range of information available from RealtryTrac, including a free trial, click here.

The bottom line is that jobs are everything, and both the economy and housing market continues to improve.

The glass is finally more than half-full, and improving each month.

Ted

And that posting for me was not pretty. Economists ranked 120 out of 200. Behind morticians, fork lift drivers—even accountants.

Dang.

So what are the best jobs?

Again let’s go to CareerCast.com’s annual jobs report which analyzed specific jobs based on what they called core criteria. They included the work environment, stress, income and the hiring outlook. Data sources included U.S. Department of Labor and the Census Bureau. They ranked 200 jobs from top to bottom.

And the winner? And I am not surprised. An actuary. For decades when I testified on title insurance rate hearings, actuaries were the core of the information presented. I have encouraged dozens of students to do the applied math major to become an actuary. Applied math is an amazing major, which in addition to theory of mathematics, the focus is answering questions based on data. And you will make lots of money.

And the 10 Best jobs based on CareerCast.com?

I believe the relevant statistic here is the growth rate—with the least of this group at 22 percent. Wow. Bazinga. Amazing.

Evidently this list talks reality also. I ordered a new pair of glasses last December from my optometrist, and after several wrong solutions, they have yet to deliver. But they are a growth industry and growth can often be painful. Not a happy customer though. Feeling the pain……

To read the entire list of ranking of the 200 jobs click here.

Ted

Worst Jobs findings from CareerCast.com included:

While I am certain that we will never get universal agreement on the same worst jobs, there are many others that we all would include and some on CareerCast.com’s list that we might have excluded.

What would your worst job inclusion be on the list? I have several. While I have the greatest respect and admiration for U.S. military personnel and all law enforcement, I do not want their jobs. I figure I get enough combat duty each day on Houston’s freeways—just imagine being a soldier or a law enforcement person. Having been an appraiser in the past, and having appraised some very diverse real estate and going concerns, one job that comes to mind that I would not like to do is being a mortician. Decades ago I appraised several mortuaries and cemeteries. That’s a dead business. People are dying to get into it. You hope you do not get stiffed by the bill. But when I read in CareerCast.com’s 200 list, funeral directors ranked 116th while economists ranked 120th perhaps I should rethink my chosen profession.

Fork lift drivers scored a 112 ranking. I also was a university professor, and they ranked the 14th best job in the country. Meteorologists ranked 29th (and their predictive capabilities are on par to economists), while accountants were given a 47 ranking. But I have been told people become economists because they do not have enough personality to be accountants. Even a tax collector is ranked higher than an economist—at 85. Technical writers (and you may not call this technical writing , but it is to me) ranked twice better than economists at 60. I agree with the job ranking of dairy farmers as the 6th worst in the country. 365 days a year of milking cows at least twice per pay has no attraction to me (and some dairies milk three times a day). And imagine being a roofer. In Houston. Where you perspire profusely just with a glass of iced-tea in your hand sitting in a chair outside in the summer, much less being up on a breezeless hot roof working long days.

Ditto being a taxi driver. Long hours, low pay and sometimes challenging and difficult customers. That job ranked 146th by CareerCast.com.

And what I believe the worst of all jobs? It probably would be airline gate agents. They do their job well, but have no control over weather, mechanical or, as we have experienced this past week, flight controllers. Yet they are the point of contact for the wrath of travelers with delayed or canceled flights. Some travelers should be ashamed of themselves. My second choice for worst job would be flight attendants. Same reasons as the gate agent, but they are captive in a round aluminum tube for hours at a time with sometimes less-than reasonable customers. I never will forget the passenger that was in the restroom and rang the flight attendant call button because she had run out of reading materials and needed some more. No kidding. I do not want that job either.

To read the entire list and comments from CareerCast.com click here.

Please reply back what you believe to be the worst job in the country.

This should be some interesting reading.

Ted

Jobs are everything to an economy. Period. I have often said that there are only three groups of people that buy homes that do not have jobs: they have gray hair, blue hair or no hair—they are retirees. As job growth has returned, albeit tepid at best, investors and owners have absorbed the excesses and that inventory has not been replaced.

In the latest 12 months ending February 2013, the U.S. added 1.91 million net new jobs, but issued permits for just 790,935 new dwelling units. That equates to 2.41 net new jobs per each new dwelling unit. I have long contended that we really need 1.25 to 1.5 net new jobs per new dwelling unit. Hence we have just under-built the housing market by 38 to 48 percent, as shown in the following table.

First, take a look at the snail pace increase in the 12-month moving average of the seasonally-adjusted annualized rate of new home sales, based on the latest March 2013 data released yesterday.

The net impact of this systematic under-building is rising prices. Earlier this week I wrote about the 12-month moving average median U.S. existing home price jumping 9.2 percent when compared to the 12 month period a year earlier. The next graph shows the 12-month moving average of median new home sales price, as reported by the U.S. Census Bureau—with prices up 9.3 percent in the past 12 months. While existing home prices are still 19.8 percent down from the peak price recorded in July 2006, new home prices are now within $500 of the all time high notched in August 2007. The interaction of supply and demand still rules supreme.

Finally, the constraint in supply is well illustrated in the following graph. And given the tight supply of developed residential lots and time-requirements to get new inventory to the market, this is not going to improve much in the coming 12 months.

The bottom line is that housing continues to recover, and as it does, it drags the slumbering economy up with rising prices, rents and sales.

Ted

The same can be true about the housing market. Yesterday I wrote a summary on the National Association of Realtors® latest monthly existing home sales report. But just like reported company earnings on Wall Street, they are now history, and people want to know what’s coming in the future. Even though March housing sales were up 10.3 percent over the same a month a year ago, and median prices were up 11.8 percent, a sequential decline in sales from February 2013 of a miniscule 6/10ths of 1 percent is now evidentially responsible for the declining equity markets, as stated in a press release “The positive atmosphere in European markets has fizzled as the day has gone on, with markets turning sour thanks to a bout of poor US housing figures. With existing home sales dropping instead of rising, evidence seems to be building that we are in for yet another difficult period for equity markets.”

How does a 6/10ths of a 1 percent preliminary number top a double-digit year-over-year gain? You can answer that by simply asking the question “What are you going to do for me tomorrow?” It is the anticipation factor that stock prices and housing consumers focus on, not historical performance.

So let’s take a look at “tomorrow.” We are fortunate that, when it comes to housing sales, several major entities provide updated monthly forecasts to future sales levels and lending volumes. Fannie Mae and the Mortgage Bankers Association (MBA) both supply separate forecasts for new and existing home sales and lending volumes monthly, while Freddie Mac forecasts total housing sales—both new and existing, as a combined single number. The following table commences from 2009 with historical data and picks up forecasts for 2013 and 2014. They see existing home sales increasing an average 6.8 percent in 2013 and another 5 percent in 2014. These forecasts can and often do change as time progresses, but are based on best estimates as of today. Both parties see the greatest number of existing home sales in 2014 since prior to 2009.

What has always amazed me about new home sales is the attention the press gives to them, when they are but a fraction of the total housing sales count.   Generally speaking, in typical times in the U.S. in a normal market, there is usually one new home sale for each five or six existing home sales.   Focusing on new home sales as the leading indicator is akin to looking at the wagging tail rather the rest of the dog.  No doubt, more economic activity is generated by new construction (think materials and labor here), but the dynamics of the market are likely better reflected in existing home sales numbers and prices.  Add to that the dearth of developed residential lots today – the country has literally done no new significant subdivision development since 2006 – and realize that new home construction is constricted for the next 12 to 24 months waiting for lots to become available.  If you can’t build them you can’t sell them.  That is reflected in the forecasts for new home sales from both Fannie Mae and MBA for 2013 and 2014.   While the MBA and Fannie Mae are very close in projections for existing home sales in 2013 and 2014, they diverge by more than 100,000 new home sales in 2014.   I would speculate that is not a function of market demand, but rather differing assumptions of developed residential lot delivery and availability.

Total housing sales forecasts for new and existing homes are included in the following table.

 
Are the 2014 estimates the new normal? I do not think so. Given the megatrend towards many younger Americans being perhaps at a decade long renter, and those former homeowners that were involved in foreclosures or short sales that, for a few years, are iced out of homeownership, I fully expect existing home sales to return to the 5.5 million level seen in the last normal market in 2002, prior to massive subprime lending, where if you had a pulse and breathed you qualified for a mortgage loan.

And new construction? I defer to a blog I posted in 2010 that deduced we needed to eventually build 1 million new dwelling units per year. Assuming a 65 percent homeownership rate, then we are looking at 650,000 new home sales per year. That would make the new normal level of housing sales 5.5 million existing homes per year plus 650,000 new homes per year, for a total of 6.15 million new and existing home sales per year. That is still a 6.8 percent upside for the average forecast seen in 2014. So we are likely 24 to 30 months off from getting back to normal, so-to-speak.

Ok, so now I am going to gloat a little. In the aforementioned 2010 blog, I stated that “In the short run (read that as the next 18 to 36 months) we will see restricted new housing construction—and double down on that bet if job growth continues to be close to zero. In the long run, however, we need to add 1 million dwelling units per year to inventory.”

Wow—that still sounds correct. And we are just now seeing the expanding construction.

Contrary to Fannie Mae’s and the MBA’s forecasts for 2013, it would not at all surprise me to see the 5 million existing home sales mark reached this year.

Ted

For those of you that have followed my housing analyses over time, I have a greater preference of examining and comparing a 12-month moving average which removes the noise that occurs from month-to-month, such as in the number of business days, weather, other distractions and so forth. In that light, the latest 12-month moving average of housing sales is up 10.1 percent to 4.77 million sales on a SAAR basis, and median price ballooned 9.2 percent to $179,870.

The following graph shows a continuing recovery in housing regarding sales volumes. Recognize this is based on 12-month moving average of the number of sales. The real story here is that, when examined from a 12-month moving average, home sales have risen now for 21 consecutive months. That means that the latest month of data is pulling up the prior 11 months. Without question, the U.S. market is recovering.

 
The 12-month moving average of sales is the leading indicator of where prices are heading, though lagged 12 to 24 months. The following graph of the 12-month moving average of median U.S. homes prices now shows increasing home prices (again based on the 12-month moving average) for 13 consecutive month. In the prior 12 months, median prices rose 9.2 percent, and are now off 19.8 percent from the peak reached in July 2006 – a peak which was unsustainable given the reliance on subprime lending, minimal down payments, dramatically relaxed lending standards, and accelerant-pushed housing values.

 
Highlights of the NAR March sales statistics included:

• Cash sales made up 30 percent of all closings in March 2013
• Investors were 19 percent of all buyers, off from 22 percent in the prior month and 21 percent in March 2012
• 30 percent of all purchases were first-time buyers
• Homes were on the market in March 2013 a median 62 days contrasted to 91 days a year ago
• Tightening supply is illustrated by the decline from a median 74 days on the market in February of this year to 62 in March
• More than one-third (37 percent) of homes sold in March 2013 were on the market for less than one month
• Foreclosures made up 13 percent of March 2013 sales which sold at an average discount of 15 percent when compared to non-distressed sales
• Short sales represented 8 percent of all closings in March 2013, with an average discount versus non-distressed sales of 13 percent
• Distressed sales in March, a combined 21 percent of all closings, retracted significantly from the 29 percent rate just one year ago

To read the entire NAR March 2013 housing sales press release, along with associated data links, click here.

The bottom line is that housing continues the path of recovery. But just like an airplane, occasional turbulence takes place—and I believe that is what we saw when comparing February 2013 to March 2013 regarding the number of sales.

I doubt that very few individuals, a year or two from today, will regret having purchased a home in March 2013. But they had better have obtained a fixed-rate loan.

Ted

The same house of cards  is not true today, however, in many markets across the U.S.  Residential rents economically support ownership of residential dwellings as investments.    Earlier this month, RealtyTrac released a top-10 list of the best places for investors to acquire dwellings to rent.  Their top-10 list was based on the greatest returns in renting single family residences.   In addition to their information, I added year-over-year job growth rates. 

 
If you want even more information, these 10 markets are just one-half of the 20 reported in an article by the Wall Street Journal earlier this month. Included in that analysis were calculations of cash flows, mortgage payments and capitalization rates.    For all 20 of these markets, capitalization rates were a minimum 8.44 percent — a very attractive yield in today’s investing environment.

This topic also addresses a recurring question at my economic forecasts presentations regarding a concern of what will happen when these dwellings purchased by investors are placed back on the market. In each of these 10 respective markets, monthly rents are greater than 1 percent of the market value of the property.  See my blog discussing the megatrend towards younger people being renters rather than owners.

By the way, last Friday (April 19th), the five-year U.S. Treasury closed yielding 72/100ths of 1 percent per year while the 10-year Treasury yield was a massive 1.73 percent.  For daily U.S. Treasury yields click here.  That makes the minimum 8.44 percent capitalization rate in these residential markets look stellar.

Ted

While most Americans either file their taxes or an extension on or before April 15th,  their income tax obligation did not necessarily end with the IRS.  All but seven states also have state-level income taxes.  Once again I reference the Tax Foundation, which is truly the go-to source for comparative tax information for the United States.   The Tax Foundation, a non-profit research group located in Washington, D.C. and is dedicated to educate taxpayers about sound tax policy and the size of tax burdens borne by Americans at all levels of government.

The following map (used with permission of the Tax Foundation), details each state’s top marginal income tax rate.

 
Granted, the state income tax is one of several revenue generators for governments, so there may be tradeoffs.  Texas, for example, has no state income tax, but property taxes are steep.

The following tables lists the top-10 states with the greatest marginal income tax rate for 2013, and also those 10 states with the lowest (or no) state income taxes—plus all states in between.

How important are state income tax revenues to each state?  The following table, again a Tax Foundation source, lists the top and bottom 10 state’s income tax revenue as a percent of all state and local tax revenues for fiscal year 2010.  The seven states that have zero income taxes do not necessarily have the same rankings on other taxes such as property taxes, franchise taxes, unemployment taxes, real estate transfer taxes….  To see a complete ranking the major taxes by state refer to an earlier blog this year (again based on the bountiful tax studies by the Tax Foundation).

To see the entire country, click here.

While taxes due are not necessarily the only criterion on where businesses will locate or depart, they no doubt enter into that decision process.

OK, so I promised no more tax comparison this week.  But if you wondered about differences in spirit excise taxes per state, and yes, you guessed it, a Tax Foundation Report, click here.

Talk about a MAJOR difference from lowest to highest, compare the Colorado’s $2.28 tax per gallon of spirits (Colorado ranks 46th) to
Washington State’s tax of $35.22 per gallon (which ranks number 1—but that may not necessarily be a good rank to hold).

Enjoy your weekend now loaded with all this important tax information.

Ted