MARKETNEWS by OTTEAU.com

March 31, 2016

Inside This Issue...

EconomicTRENDS
For-Sale HousingTRENDS
For-Rent HousingTRENDS
MortgageTRENDS
ForeclosureTRAC
Recommended Reading
EventTRAC
MarketTRAC
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EconomicTRENDS

Pace of National Job Growth Remains Slower in 2016

After a year end revision, the US economy realized a gain of 2,744,000 non-farm jobs in 2015, reflecting a 9% decline from the 'Best in a Decade' gain of 3.1-Million in 2014. Based upon preliminary figures, the pace of job growth is off to a slower start in 2016 with 414,000 jobs added in January-February, or 15% less than in the same period last year. Since the national economy 'technically' achieved full recovery of the jobs that were lost during the recession more than a year ago, it has gained an additional 5.1-Million non-farm jobs, and 5.4-Million private sector jobs. All of this is a bit exaggerated however because part-time and temporary contract workers are counted equally to full-time employment by the BLS. Taking this into account, the US Economy still needs to create an additional 3-Million jobs to achieve the same employment situation that existed prior to the start of the recession in December 2007. Still, the national economy continues to make progress with more workers being employed with each passing month.

NJ Jobs Decline after 'Best in a Decade' Year of Job Growth

After a record-breaking year of growth, jobs have declined for the past two months totaling a loss of 24,300 jobs YTD. Still, there is cause for optimism concerning the future however, as the pace of New Jersey's economic recovery accelerated in 2015, representing a 76% increase over 2014, and the recent declines are only based upon two months of data, which are subject to revision. Supporting this assessment is a recent analysis published by the Federal Reserve Bank of Philadelphia indicating that the projected growth of the New Jersey's economy will outpace most other states over the next 6 months. Also positive is that New Jersey's unemployment rate fell to 4.3%, which is its lowest level since August 2007.

NYC Jobs Decline after Strong 2015

Due to a combination of factors, New York City's economic downturn resulting from the recession began later, declined less, and began recovering sooner than the rest of the country. As a result of these factors New York City achieved full recovery of the jobs that were lost during the recession in May 2011, which was 3 years earlier than for the US overall. Since then, NYC has gone on to add an additional 600,300 jobs, which is nearly triple (286%) the total jobs that were lost during the recession.

NYC's economy gained 87,100 jobs in 2015 signaling a modest slowdown compared to the past five years. While the 2015 pace still signals strong job growth, the trend over the past 3 years suggests slower economic growth ahead. Also concerning is that NYC has lost 64,800 YTD, however this is only based upon two months of data which are subject to revision. Either way, this bears close watching as the viability of planned construction projects in Manhattan, the Outer Boroughs and Hudson County are largely dependent on continued economic growth in the Manhattan employment center. Adding to this concern is the potential for an economic recession in the next few years which has historically been a disruptive force for new construction projects.

For-Sale HousingTRENDS

NJ Purchase Contracts Record an Impressive Gain in February

Home purchase demand in New Jersey increased for the 18^th consecutive month in February rising to more than 8,000 home-purchase contracts. This was the highest number of purchase contracts recorded in the month of February since 2005, reflecting an impressive 26% increase compared to the same month one year ago.

On a year-to-date basis (January-February) home purchase demand in New Jersey continues to expand, increasing by 22%. The majority of this year's increase has been concentrated in homes priced below $600,000, as first-time 'Millennial' buyers begin to transition from rentership to homeownership.

While home purchase demand continues to rise, the inventory of available homes remains constrained in New Jersey. The number of homes being offered for sale in the month of February increased slightly by 1,400 homes (3%) compared to one year ago. Still, this is about 26,000 (-35%) fewer homes on the market compared to the cyclical high in 2011. Today's unsold inventory equates to 5.9 months of sales (non-seasonally adjusted), which is less than one year ago when it was 7.2 months.

Currently, more than three-fourths of New Jersey's 21 counties have less than 8.0 months of supply, which is a balance point for home prices. Hudson is presently experiencing the strongest market conditions in the state with fewer than 4 months of supply, followed by Union, Essex, Somerset and Morris Counties, which all have fewer than 5 months of supply. All of the counties with an unsold inventory level equivalent to a supply of 12 months or greater are concentrated in the southern portion of the state including Atlantic (13.6) and Salem (14.3).

For-Rent HousingTRENDS

Demand for rental apartments continues to expand in NJ with statewide occupancy rates being amongst the highest in the US. Statewide vacancy increased slightly to 3.4% (20 basis points). Nationally, the average vacancy rate increased by 10 basis points to 4.4%. Still, the statewide and national vacancy rates remain well below their 2010 peak with vacancy rates having fallen by 180 bp and 360 bp, respectively.

Central NJ currently has the lowest vacancy rate in the state (2.4%), followed by Southern NJ (3.4%). Northern NJ continues to have the highest vacancy rate in the state due to the accelerating pace of new construction deliveries, which are occurring at a rapid pace in locations with direct rail access to Manhattan. Focusing specifically on Hudson County, the vacancy rate stood at 6.5% in 2015.Q4, which is considerably higher than what exists at the state level. This increase is attributable to the continuing absorption of more than 6,000 new apartments that have been built over the past 5 years.

MortgageTRENDS

As predicted, mortgage rates slowly inched their way up during the month of March, peaking at 3.73% during the week of March 17^th. The average commitment rate for the 30-year fixed rate loan is 3.71% nationally. During the same week last year, mortgage rates were averaging 3.69%, or about the same as they are currently.

According to Freddie Mac, the Federal Reserve's decision last week to maintain the current level of the Federal funds rate combined with the reduction in their forecast for growth triggered a 3-basis point drop in the 10-year Treasury yield. As a consequence, the 30-year mortgage rate declined 2 basis points to 3.71%. However, comments this week by several members of the Fed, indicated that a June rate hike is still on the table.

ForeclosureTRAC

The percentage of delinquent mortgage loans in New Jersey that are 90+ days past due remained at 7.5%, which is unchanged from the prior month down from a peak of 11.4% in September 2012. New Jersey continues to have the highest rate in the nation followed by 6.2% in New York. Rounding out the list of states with the highest delinquency rates are Florida (5.2%), Mississippi (4.9%), Maine (4.7%), Rhode Island (4.5%) and Maryland (4.5%). Nationally, the percentage of 90+ delinquent mortgage loans also remained unchanged from the prior month at 3.2%.

Due to New Jersey's high rate of mortgage delinquency, the pace of foreclosure filings in the state remains elevated at a time when other states are experiencing decreasing activity. New Jersey foreclosure filings in 2015 recorded a 14% increase over the prior year, rising from 67,350 to 76,800. However, based upon YTD figures, foreclosures are on pace for a decline in 2016 with filings estimated to be 68,100. Still, the accelerated pace of foreclosure filings in New Jersey will create additional constraints on home prices in those places where they are most concentrated which are in the state's urban and rural fringes, as well as in Atlantic County which currently has the highest foreclosure rate in the nation.

Recommended Reading

These N.J. counties experienced the highest population growth

NJBIZ / njbiz.com

Thursday, March 31, 2016

Fwd: MarketNEWS March 31, 2016 Edition

Pace of National Job Growth Remains Slower in 2016

NJ Jobs Decline after 'Best in a Decade' Year of Job Growth

NJ Purchase Contracts Record an Impressive Gain in February

Myths vs facts