The May numbers from the California Association of Realtors (CAR) were quite interesting, and contained a few bits of positive news for a change. Unit sales increased by 18.1% over the year to 423,700 homes. This was the highest level since early 2007. However, the statewide median price declined by -35.3% to $384,840. This was a record for year-to-year declines in the median price, which the CAR attributed to the large number of short sales and foreclosures in the market. Another interesting statistic was the Unsold Inventory Index (the number of months needed to deplete the supply of homes on the market at current sales rates). In May it was 8.4 months compared with 10.7 months a year ago.
Around Southern California, there were mixed trends in the resale market during May. In Los Angeles County, unit sales rose by 9.9% over the year, while the median price dropped by -29.2% to $422,160. The latter was -31.5% below the peak price reached back in February of 2007. In Orange County, unit sales rose by a rather sturdy 24.5% over the year, while the median price declined by -26.6% to $523,890. The latter was -29.9% below the peak reached in April 2007.
In the Riverside-San Bernardino area, there was a stunning 78.9% jump in unit sales over the year to May (lots of foreclosures to pick from). However, the median price declined by -34.9% to $257,660. This was -37.9% below the peak price hit back in January 2007.
San Diego County’s unit sales during May were down by -22.3% in May, while the median price fell by -27.1% to $446,610. This was -28.2% below the peak price reached back in May 2006. Rounding out the resale housing news was Ventura County, where unit sales dropped by -12.7% over the year to May, while the median price moved down by -30.3% to $487,790. The latter was -31.4% below the peak reached in August 2006.
To the north, in the San Francisco Bay Area, unit sales in May fell by -8.6% over the year, while the median price declined by -19.5% to $686,610. This was down by a comparatively modest -19.6% from the peak of May 2007. In the San Jose area, unit sales fell by -13.3%, while the median price was down by just -10.0% to $769,650. The latter was down by only -11.4% from the peak reached April 2007. (Jack Kyser)
The May housing permit numbers from the Construction Industry Research Board continued to move lower. Statewide, the number of permits issued during the month was down by -36.6% over the year. The five-month total permit count for the state, at 29,673 units, was -45.9% below the comparable 2007 total. The single family sector continued to be quite weak, with the five-month total -57.7% below the comparable 2007 period.
Los Angeles County’s May permit total was -21.1% below last year. The County’s five-month permit total, at 6,106 units, trailed last year by -37.1%. However, this led all metro areas in the state. Again, the single family sector was the weak link, trailing last year’s five-month total by -52.9%. Orange County’s May permit count was -47.1% lower than last year, with almost equal weakness in both the single-family and multi-family sectors.
The beleaguered Riverside-San Bernardino area saw its May permit count decline by -48.0% over the year. The area’s five-month total trailed last year by -61.6%, but at 4,262 units ranked second in the state in this measure. The number of housing permits issued in San Diego County in May was up by 3.3% over the year. However, the five-month total was -45.3% below the comparable 2007 period. Ventura County saw its May permit total decline by -60.0% over the year. Its five-month total lagged last year by -48.8%.
Looking at the 9-county Bay Area through May, the total number of housing permits issued was -29.2% below the 2007 period. However, multi-family permits in 2008 were up by 3.3%, thanks to some major projects in San Francisco County. (Jack Kyser)
The May nonresidential building permit value data from the Construction Industry was another mixed bag of news. In Los Angeles County through five months, industrial permits were up by 63.0% over the 2007 period, and retail was up by 20.4%. Hotel permits increased by a huge amount ($148 million this year versus nearly $14 million last year). However, office permit values were down by -57.6%. In Orange County through May, permit values for all four major nonresidential building types were down: industrial (-68.8%), office (-68.0%), retail (-79.1%), and hotels (-86.7%).
For Riverside County, the five-month permit values were mixed. Retail was on the upside (+3.8%), while $10.7 million in hotel permits had been issued compared with none last year. Industrial permit values were down by -51.9% and office was behind by -13.8%. In San Bernardino County, hotel permit values were up by 2.2%, but all the other sectors were down from last year: industrial (-37.6%), office (-56.5%), and retail (-27.2%).
The San Diego County picture was really mixed through the first five months of 2008. Industrial permit values were down by -52.7% from last year, while office was off by -2.8%. Retail permits were up by 93.0% over the comparable 2007 period, while hotel permits were up by a thumping 461.4%. Things remained slow in Ventura County through May. Office permit values through five-months were down by -75.6% over the year, while retail permits trailed by -9.0%.
In the nine-county Bay Area through five-months of 2008, office building permits were down by -3.0% over the comparable 2007 period, while retail was -10.5% behind, and hotels were down by -73.8%. However, industrial building permits were 59.6% ahead of last year, due to large projects in Alameda and Solano counties. (Jack Kyser)
The U.S. Bureau of Economic Analysis (BEA) reported last week that U.S. personal income rose by +1.9% in May, following increases of +0.3% in April and March. Rising wages and salaries—usually the primary contributor to income growth—rose by just 0.3% in May. Instead, “government social benefits to persons” played the starring role, jumping by 10.4% over the month. That performance reflects tax rebates paid to individuals with no or very low tax bills. The other rebates (paid to people whose annual tax liabilities were bigger than their rebates) were the reason that “personal current taxes” plunged by -24.7% in May. The bottom line: after rebates and taxes, disposable personal income (DPI) leapt by +5.7% in May. Without the rebates, DPI would have risen by +0.4%, the same as in April and a bit better than the +0.3% rise in March.
Consumer inflation continued uncomfortably high in May. The BEA’s price index for personal consumption expenditures (called the PCE deflator) rose by +0.4% last month, following increases of +0.2% in April and +0.3% in March. Rising food and energy prices were the primary culprits. Compared to May 2007, the PCE deflator has increased by +3.1% while the core PCE deflator (which excludes food and energy) was up by just +2.1%.
With more going to pay for energy and groceries, consumer spending rose by +0.8% in May. Real personal consumption expenditures (after adjusting for inflation) increased by +0.4%, compared with previous increases of +0.2% in April and +0.3% in March. Looking at the real spending detail, consumers reduced spending for consumer durable goods last month by -0.3%, due to lower vehicle purchases. This cutback was more than offset by higher spending for consumer nondurable goods (+0.8%) and services (+0.3%).
The tax rebates were well-timed as consumer spending was flagging earlier in the year due to soaring energy and food prices and falling employment, among other concerns. Another batch of rebates was paid out in June, and the remainder will go out in early July. Despite all this money flooding into their bank accounts, consumers—and the economy—are not necessarily out of the woods. A number of observers expect consumer spending to relapse after the rebate-induced spending surge has ended. (Nancy D. Sidhu)
Oil and gas drilling activity has been increasing since mid-2004 and even more so beginning last fall, due to the persistent rise in energy prices. Baker Hughes Inc. reported there were 1,913 rigs actively drilling in the U.S. during the week ending June 27th, 2008. The count was up by +7 rigs over the previous week and up by +138 rigs from the same period a year ago. This was the third consecutive week that rig count was over 1,900; the last time was during the first week of January 1986 at 1,915 active rigs.
In California there were 43 rigs working (all land), unchanged from the previous week, but up from 39 rigs the same period last year.
Businesses in the past year have increased their investment in mining and energy drilling structures, with more than $47.7 billion (not including machinery, SAAR) spent during the first quarter of 2008, compared to $40.9 billion during the same quarter in 2007.
Most (80%) drilling activity was for natural gas. The average price of natural gas in June 2008 was above $12.60/MMBtu, up from $7.35 in June 2007. The last time the price of natural gas was this high was in December 2005, right after the bad hurricane season of that year. The East and Southwest regions experienced very hot weather starting early June, increasing the use of air conditioning. Drilling activity for oil totaled 375 active rigs, up by +94 rigs from a year ago. Crude oil prices continue to soar, reaching over $140/barrel in the past week. (Candice Flor Hynek)
Baker Hughes: http://investor.shareholder.com/bhi/rig_counts/rc_index.cfm
Energy Information Administration: http://tonto.eia.doe.gov/oog/info/ngw/historical/2008/06_26/ngupdate.asp
Wednesday, July 16: 2008 Mid-year Economic Forecast
In addition to the Mid-year Economic Forecast updates, the LAEDC and its subsidiary, the World Trade Center Association Los Angeles - Long Beach, will also unveil the final report of the LAEDC's Foreign Direct Investment Study, highlighting the economic impact to the regional economy. 2 panels of experts to include: James Dibbo, BT Americas; John Burns, John Burns Real Estate Consulting; Richard A. Weiss, City National Bank; Vance Baugham, WTCA LA-LB; and Jack Kyser, LAEDC.
The Economic Data Global Express (e-EDGE) is a free service of the Los Angeles County Economic Development Corporation (LAEDC). Permission to quote any proprietary part of this release is granted given proper credit. Distribution is allowed provided that no modifications are made to the original content. Sponsors of this service do not necessarily endorse all opinions stated herein. For more information, please e-mail to email@example.com. To contact LAEDC, please call 213-622-4300.
Subscribe to e-EDGE and receive current economic news and major developments. Your e-mail address will not be disclosed to any outside party (including e-EDGE sponsors) under any circumstances.
To send us comments regarding e-EDGE, please e-mail to firstname.lastname@example.org.