36 posts categorized "Housing"

The part-time blues: White collar versus blue collar jobs

Part-time work has seen a considerable swing since the recession (see earlier Roundup post). Different types of workers also saw varying fluctuations in part-time work. Take blue collar versus white collar workers, for example.

The Current Population Survey, conducted by the U.S. Census Bureau, categorizes 11 major occupations by the color of their collar: Two are white collar and nine are blue collar (see table, at bottom). As a result, blue collar jobs currently make up a little more than 70 percent of all part-time jobs (see Chart 1).

Part-time B&W collar CH1

Roughly one-quarter of all blue collar jobs are part time, a ratio that changed modestly during the recession, but has been declining (see Chart 2). Levels of “part-time jobs for economic reasons”—a category described by the CPS as “involuntary”—are also much higher as a share of the labor force compared with white collar positions (see Chart 3).

 The share of blue collar workers at part-time jobs involuntarily rose steeply during the recession and remained quite elevated until last year, when levels began to fall quite rapidly and are now near prerecession levels. A similar pattern exists for the share of white collar workers who are part time involuntarily, although this share is still somewhat elevated.

Look for future fedgazette Roundup blog posts on more part-time job trends in Ninth District states, as well as an in-depth look at Ninth District job growth since the recession in the July issue of the fedgazette.

Part-time B&W collar CH2-3
   Part-time B&W collar TABLE

 

Ninth District foreclosures declining, staying ahead of nation

While home sales in 2014 were not particularly strong, the housing market is showing continued strength in terms of foreclosures, which have ratcheted down from very high rates as recently as 2012, according to data from CoreLogic, a real estate and financial services analytics firm.

Over the 24-month period ending this past January, district states saw the number of completed foreclosures drop by between 34 percent (North Dakota) and 57 percent (Minnesota). This comes on top of the fact that the proportion of troubled mortgages in district states is lower than the national average.

The national rate of seriously delinquent loans currently stands at 4 percent—its lowest level since 2008, according to CoreLogic. But delinquency rates have also been falling in district states and are a fraction of the national rate, with North Dakota’s rate at just 1 percent.

Foreclosures -- 3-10-15



 

Ad hoc survey: Ninth District businesses plan to ramp up hiring, increase starting pay

The Ninth District economy is in growth mode and employment is expected to increase, based on a recent poll of 140 business contacts from around the district (see methodology below).

Businesses are expecting to expand, with 46 percent of respondents planning to increase employment at their firms and 58 percent of these firms citing anticipated high sales growth as the most important factor behind increased employment. Only 3 percent plan to decrease employment. In the same survey a year ago, 41 percent planned to increase employment and 9 percent planned to cut jobs (see chart).

Other important factors cited for new hiring were overworked staff, the need for additional skills and improved financial condition of firms. The vast majority of respondents plan to use current employee referrals, word of mouth and advertising to get new employees. Forty-eight percent plan to use a recruiting firm, which is up from 22 percent of respondents in last year’s poll. Twenty-seven percent of respondents also plan to raise starting pay compared with only 8 percent last year.

Feb ad hoc survey Ch1+meth -- 2-13-15

Methodology: On Dec. 1, 2014, the Minneapolis Fed emailed a web-based survey to about 600 Beige Book contacts from around the Ninth District. By Feb. 12, 140 contacts had filled out the survey. The respondents come from a variety of industries (see table).

Beige Book recap: Modest growth in Ninth District

Over the past two months, the Ninth District economy has seen modest growth, according to the latest Beige Book information released by the Federal Reserve Bank of Minneapolis. Increased activity was noted in consumer spending, professional services, manufacturing and non-energy mining. Activity was level in tourism and mixed in commercial construction, commercial real estate and agriculture. Energy, residential real estate and residential construction were down. Labor markets continued to tighten since the previous report. While overall wage increases remained modest, there were examples of steeper increases in some regions and industries.

Consumer spending and tourism: Consumer spending increased moderately. Mall and retail representatives across district states reported solid traffic and sales. Overall tourism was about level with a year ago, according to a variety of sources. Construction and real estate: Construction activity was mixed in the district’s larger cities. In Sioux Falls, S.D., the value of November commercial permits increased from a year ago, but fell in Billings, Mont.

Residential construction: Activity was mostly lower. In the Minneapolis-St. Paul area, the value of December residential permits decreased 9 percent from a year earlier and also dropped in the Bismarck, N.D. area (November data). Residential activity was stronger in Billings and Sioux Falls, however. Home sales were generally lower from a year earlier (in November). In the Sioux Falls area, home sales were down 12 percent, inventory increased 1 percent and the median sales price increased 6 percent relative to a year earlier. Sales were also down in northwestern Wisconsin, and the median sales price was 6 percent lower. Minnesota home sales were down 13 percent, inventories of homes for sale increased 5 percent and the median sales price rose 3 percent. Home sales in the Bismarck area were about level with last year.

Manufacturing: Activity increased slightly. A manufacturing index increased in December from the previous month in Minnesota and South Dakota, but fell slightly in North Dakota. However, the index pointed to continued expansion in all three states. Through October, manufactured exports in district states were up 1 percent compared with the same period a year earlier.

Energy and mining: The energy sector slowed slightly in response to lower output prices. Oil and gas exploration activity decreased in late December compared with a month earlier in Montana and North Dakota. Mining activity increased slightly. District iron ore mines were operating at or near capacity, with November production slightly higher than a year earlier.

Agriculture: Conditions remained mixed, with livestock and dairy producers faring better than crop farmers. A Minneapolis Fed third-quarter survey found that a majority of farm incomes had fallen from a year earlier and that capital spending also decreased. The fourth quarter outlook was also weaker, according to the survey. Prices received by farmers in December decreased from a year earlier for corn, soybeans, wheat, hay and milk; prices increased for cattle, hogs, eggs and poultry.

Employment and wages: Labor markets continued to tighten since the previous report. Overall wage increases remained modest, but there were examples of steeper increases in some regions and industries. Some construction firms in the Minneapolis-St. Paul area noted that labor costs have increased recently. In addition, some managers at Minneapolis-St. Paul area restaurants indicated that they were increasing wages to attract employees.

See the full Beige Book report for more details on the national and Ninth District performance.

A summer of steady growth in the Ninth District

The Ninth District economy continued to show signs of steady growth through the summer months, characterized by job growth, decreases in unemployment rates and gains in home building.

As of August, nonfarm employment in district states was up 1.8 percent relative to a year ago, posting a net increase of about 122,000 jobs. North Dakota reported the strongest employment growth among district states, accounting for about one in every six jobs added in the Ninth District over the past 12 months despite the state’s workforce comprising only 7 percent of the district total. Employment growth in other district states was largely in line with the national trend (up 1.8 percent), except in South Dakota, where nonfarm employment growth was 0.7 percent.

The district unemployment rate dropped to 4.7 percent over the same period, down 0.8 percentage points from a year ago. The spread in unemployment rates among district states has narrowed over the past 12 months. Regions with relatively high unemployment rates, such as the Upper Peninsula of Michigan, Wisconsin and Montana, posted larger year-over-year declines than Minnesota and the Dakotas, where unemployment rates started out much lower last year.

Manufacturing wage growth in the district slowed to 1.4 percent during the three-month period ending in August, compared with a growth rate of 2.5 percent during the same period a year earlier. With the exception of North Dakota and Wisconsin, growth in manufacturing wages in district states was below the national average of 1.6 percent. Montana’s manufacturing workers reported the lowest year-over-year growth rate in hourly earnings among district states, which barely reversed the flat or declining trend in manufacturing wages in the state for much of 2013 and early 2014.

During second quarter 2014, personal income growth (adjusted for inflation) across district states was positive, posting a 2.2 percent overall increase relative to a year ago for the district. Except for North Dakota, all district states posted lower personal income growth rates relative to the national average of 2.4 percent, while South Dakota’s state ranking in growth was near the bottom.

New housing authorizations for the three-month period ending in August were up 8.2 percent in district states; however, rates varied widely among district states. Montana and South Dakota posted year-over-year declines of over 20 percent in new housing authorizations, while North Dakota showed a 42 percent increase over the same period. Housing authorizations in Minnesota and Wisconsin were up 5 percent and 10 percent, respectively, closer to the national average of 7.7 percent.

Home prices continued to show increases in several district cities. During the second quarter of 2014, home prices were 7.4 percent higher than a year ago in Bismarck, N.D., 6.7 percent higher in Minneapolis-St. Paul, 3.2 percent higher in Fargo, N.D., and 2.6 percent higher in Sioux Falls, S.D. Nationally, home prices increased by 4.4 percent during the same period.

For current and historical data on the economic indicators referenced here, see the “Monthly Summary” spreadsheet, along with other Ninth District data that are updated regularly.

Business survey: Ninth District should continue to grow

Results from a Federal Reserve Bank of Minneapolis ad hoc survey of 603 Ninth District firms (see methodology) reveals that economic activity at firms across industry sectors increased over the past four quarters and should continue over the next four quarters (see table).

Looking back: Firms across industries reported increased sales revenue, profits, productivity and employment. The availability of labor decreased, especially in the construction sector, where the majority of respondents reported a lack of available labor. Respondents from most sectors reported increases in selling prices and input costs. Wage and benefit increases were moderate. They also noted an uptick in availability of financing.

Looking forward: Respondents are more optimistic for the next four quarters, as a higher proportion of respondents reported expectations for increased sales revenue, profits, productivity and employment. The availability of labor is expected to continue to decrease. Respondents expect to raise prices and pay more for inputs. However, wage and benefit increases are expected to be moderate.

State economic outlook: Respondents expect their state economies to grow as well. Employment, consumer spending and profits are all expected to increase. However, the vast majority of respondents across industries expect inflation to increase.

August ad hoc table -- 8-21-14

Ad hoc survey methodology: On Monday, August 18, an email was sent to 5,000 contacts (not a random sample) from various sectors around the Ninth District. By 12 noon Wednesday, August 20, 603 responses were received, representing a 12 percent response rate. The largest number of responses came from finance (24 percent), professional services (20 percent), manufacturing (15 percent), real estate (13 percent), construction (8 percent) and nonprofits (7 percent).

Homeownership rates continue to dip

Several years after the biggest housing bust in memory, and with several years of renewed (if modest) growth, many believe the housing market is on the path to recovery. Homeownership rates, however, have yet to reverse their downward trend.

Since 2005, homeownership rates have seen a steady and comparatively steep decline, from 69 percent to less than 65 percent in the second quarter of this year. The annual trend has been more volatile in Ninth District states, but is generally following the same downward pattern, especially in Minnesota and Wisconsin (see charts). Only South Dakota is anywhere near its peak in homeownership rate over the past decade.

Homeownership -- 8-4-14

All fall down: Rising mortgage rates and the refi crunch of 2013

The mortgage refinance business headed into 2013 on the upswing, but the pendulum swung swiftly in the other direction by year’s end. And this reversal included borrowers across the credit-score spectrum.

According to figures from Black Knight Financial Services (BKFS), which typically represent 60 percent to 70 percent of the mortgage market, the number and dollar volume of refis in the United States and Ninth District trended up in the second half of 2012, reaching a two-year high in the fourth quarter of 2012. Activity remained high in January 2013, when BKFS reported over 7,800 new refis worth almost $1.4 billion in the Ninth District.

But then refi activity began a steep slide (see Figure 1). Between January 2013 and January 2014, activity reported by BKFS fell by almost 80 percent, to about 1,600 new Ninth District refis worth less than $285 million. Most of the decline occurred after May, when mortgage interest rates began moving up from about 3.5 percent to a range of 4.2 percent to 4.5 percent in the second half of the year. By January 2014, Ninth District refi activity was at its lowest level in the past 10 years of BKFS data, even weaker than during the refinance bust of 2008 at the height of the Great Recession.

Refi Figure 1

The sensitivity of refi activity to interest rates is easy to understand, since obtaining a lower rate is one of the main motives for refinancing. Big surges in refi activity have long tended to follow drops in mortgage rates, and just the reverse when mortgage rates rise.

However, grouping borrowers into low, medium and high credit score categories suggests that movements in housing prices have also influenced refi activity over the past 10 years (see Figure 2). For example, borrowers with low credit scores (below 660) have accounted for less than 10 percent of BKFS’s Ninth District refi dollar volume since the housing bust, but represented as much as a third of market volume during the housing boom (2004-06). Rising home prices at the time boosted borrowers’ home equity and made refinancing low-score borrowers seem safe to lenders and attractive to these borrowers, for whom cash-out refinancing (i.e., borrowing more than the former mortgage balance) was a cheap and accessible form of liquidity. When home prices fell and credit standards tightened after 2006, refi activity by low-credit-score borrowers crashed and has generally remained much lower.

Refi Figure 2

By contrast, borrowers with high credit scores (780 or more) appear to refinance mostly to obtain lower mortgage rates. Since 2009, refi activity by these borrowers has accounted for about one-third to one-half of the value of Ninth District refinancings, a marked increase compared to the group’s share during the housing boom (less than 16 percent ), when the rate on 30-year conventional mortgages was trending up. As mortgage rates trended down over the next six years, and especially when they dipped abruptly, high-score mortgagors took advantage of these opportunities to lower their financing costs by elevating their refi activity.

Borrowers in the middle, with credit scores between 660 and 779, dominate the refi market, accounting for half to two-thirds of the value of Ninth District refinancings reported by BKFS since 2009 (compared to 65 percent to 70 percent a decade ago). These borrowers seem to have been sensitive to both interest rates and home prices. Like the low-score borrowers, their refi activity was on average higher during the housing boom than afterward. But, like the high-score borrowers, middle-score borrowers have refinanced fairly aggressively in response to post-boom interest rate dips.

Despite their varying refinance motives over the past decade, Ninth District mortgagors in all three credit score categories cut back sharply on refinancing in 2013. By January of 2014, the dollar volume of refi activity was down from January 2013 by 68 percent among low-score borrowers, 77 percent among middle-score borrowers and 85 percent among high-score borrowers. For all three groups, this represents the steepest 12-month fall over the past decade. The large scale and relative uniformity of the decline across credit score categories suggests that last year’s big rise in mortgage interest rates was indeed the main factor behind the refi crunch of late 2013.

Stop being so negative: Rising prices help underwater mortgages

Last year is generally regarded as a strong year for housing, with improved activity in starts for new single-family units, higher sales of existing homes and rising prices. Those rising prices are good not only for sellers, but for existing homeowners with a mortgage, because rising prices mean more equity.

Last year saw a dramatic drop in the percentage of mortgages with negative and near-negative equity, according to CoreLogic, a property information, analytics and services company. Negative equity is when the balance of the mortgage is more than the value of the home; near-negative equity has a loan-to-value ratio of between 95 percent and 100 percent. Nevada, for example, saw a 41 percent decline in negative and near-negative equity in 2013. The bad news for Nevada is that its final rate of 33.5 percent was still the highest in the country (see chart).

Ninth District states fare comparatively well on mortgage equity measures. North Dakota not only has the lowest rate of mortgages with negative and near-negative equity, it has held the top spot for two consecutive years. Montana holds the fourth-best ranking, and both states saw small improvements in 2013. Minnesota ranks 21st in the country and saw the percentage of underwater and nearly underwater mortgages drop from 21.5 percent to 13.2 percent. Wisconsin’s 2013 rate is still comparatively high and saw only modest improvement over 2012. While Michigan continues to have one of the highest rates in the country, it saw the fourth-best improvement of any state in 2013. No data were available on South Dakota.

Negative equity -- 3-13-14

Census says: Bakken growth floating a lot of boats

It’s official: Williston and Dickinson, N.D., registered two of the nation’s highest rates of growth in both population and aggregate income for population centers with at least 10,000 people.

That’s according to new American Community Survey (ACS) five-year estimates, released in December by the U.S. Census Bureau. The latest estimates, which are derived from surveys conducted over a five-year period spanning 2008 to 2012, confirm that population and income growth in the Bakken region of North Dakota and Montana is rapid and widespread.

Williston’s rates were, by far, the highest of all 955 of the metropolitan and micropolitan areas tracked by the Census Bureau, with a 6 percent increase in total population and a 20 percent increase in aggregate income from the 2007-2011 to the 2008-2012 estimates.

And these growth rates, while topping the list, likely understate growth in more recent years as Bakken activity accelerates, and do not include changes after 2012. For instance, in a separate data release, the Census Bureau estimated Williston’s population changed by 25.3 percent from April 1, 2010, to July 1, 2012.

The ACS five-year estimates, while not as timely as other data sources, report a wealth of demographic and economic information at the Census tract level. These tracts generally have a population size between 1,200 and 8,000 people. The 13-county Bakken region has 36 Census tracts, all of which are considered non-metropolitan because they do not overlap with a Census designated major metropolitan area. An analysis of median family incomes reveals that Williston and Dickinson have registered large gains, but so too have the more rural regions of the Bakken (see Figure 1).

In 2006-2010, only three Bakken tracts had a median income of 120 percent or more of the statewide (non-metro) median. However, just two years later, 10 additional Bakken tracts surpassed this 120 percent threshold to be classified as upper-income. Over this period, all but one of the Bakken Census tracts improved their median income position (in other words, shifted right in their distribution in Figure 1 into higher income ratios).

 Bakken income Fig 1 -- 3-6-14

 The distribution of growing income can also be seen geographically, as more Census tracts shift into the darker blue upper-income category (see map).

But not all Census tracts improved their income position. In fact, one Census tract, on the northwestern edge of the Fort Berthold Indian Reservation, remained low-income, or less than 50 percent of the statewide non-metropolitan median (see red-shaded tract). The median family income reported in this tract was the only one in the Bakken region whose five-year average dropped from 2007-2011 to 2008-2012, and it has fallen in each of the last three ACS five-year averages. However, for the Fort Berthold reservation as a whole, incomes have been rising at rates similar to the rest of the region.

Bakken income Fig 2 -- 3-6-14

Broadly speaking, ACS data also imply that incomes are keeping up with rising rents. As noted above, Williston was at the top of the national list for population and income growth, with Dickinson not far off the pace. However, neither city was in the top 10 nationally for growth in median rent (despite robust rent increases of 9 percent and 8 percent, respectively, in Williston and Dickinson). As a result, ACS estimates imply that the percentage of renter households considered highly burdened (housing costs greater than 30 percent of income) in the Bakken actually declined from an average of 34 percent of renters in 2006-2010 to an average of 31 percent in 2008-2012. Over that same period, the proportion of highly burdened renters increased from 45 percent to 46 percent in the non-Bakken portion of Montana and decreased from 42 percent to 40 percent in the non-Bakken portion of North Dakota.

However, other evidence points to rising housing burdens in the Bakken. Median rent for all renter-occupied housing units averaged $534 in Williston during the five-year period 2008-2012, according to ACS estimates. But much higher rents were recently reported for at least one segment of the Williston rental market.

According to a recent Apartment Guide blog post, Williston had the highest average entry-level rent in the nation, at $2,394. Entry-level rents for each city were estimated by averaging the rents of the least expensive rental units of each apartment community listed on apartmentguide.com. While the Apartment Guide numbers are not representative of the entire rental market, they are more current than those reported in the ACS. To the extent that Apartment Guide’s estimates reasonably reflect current price pressures in the broader rental market, future ACS rental figures will likely show significant increases in rents and rental burdens in Williston and the Bakken.