Housing Market Appears to be in Sustained Recovery

by Anirban Basu 19. July 2012
Despite Braking Economy, Housing Moves Ahead

After re-accelerating late last year and during the initial months of 2012, the pace of economic growth and job creation has slowed more recently. In June, national employment expanded by just 80,000 jobs according to the Bureau of Labor Statistics. June represented the third consecutive month during which national job creation was well below 100,000 jobs. During the first three months of the year, the nation's average monthly employment gain was 226,000 jobs. During last year's fourth quarter, the nation's output expanded at a 3 percent annualized pace, but during the first half of 2012, the nation's economy expanded at a less than 2 percent pace.

Maryland has not been immune to the slowdown. Unemployment in Maryland has increased for a third consecutive month in May (6.8%) and the state has been losing jobs. Whether Maryland's economy will continue to decelerate in unclear. Also unclear is whether or not recently observed housing market momentum can persist in the face of broader macroeconomic weakness.

A recent Wall Street Journal article simply proclaimed that the "housing market has turned." Nationally, nearly 10 percent more existing homes were sold in May than in the same month one year earlier. Builders began work on 26 percent more single-family homes in May 2012 than a year earlier and the stock of unsold newly built homes is back to 2005 levels. A recent survey of 47 forecasters found that 44 believed that the housing market has reached its bottom.

Maryland has been participating in housing's recent recovery, but there are indications that the pace of recovery has slowed. Home sales statewide increased 10.5 percent in May on a year-over-year basis. But in June, the year-over-year was just 1.7 percent, with 11 Maryland jurisdictions reporting year-over-year sales gains. Many of the observed gains in unit sales, though certainly not all, took place among core metropolitan area jurisdictions. This is likely a reflection of the influence of first-time buyers, who have been setting off cascading sales dynamics. By contrast, in counties with less dense job markets and first-time buyer influence, sales growth has been less consistent.

Price dynamics remain positive in Maryland. In June, average price was up 6.7 percent on an annual basis while median price was up 8.5 percent. Sixteen jurisdictions experienced year-over-year increases in average sales prices and 19 reported increases in median sales prices in June. Certain jurisdictions continue to experience falling home prices, however, including a number of Eastern Shore jurisdictions: Dorchester County (average price declined 55.8%; median price up 0.1%), Kent County (average price slipped 18.8%; median price fell 25.9%), Somerset County (average price dipped 9.4%; median price fell 18.9%), and Worcester County (average price slid 14.4%; median price decreased 17.2%).

Looking Ahead

Despite growing confidence among economists, there are reasons to remain nervous about the housing industry. Consumer confidence is declining again and job growth slowed dramatically during the second quarter relative to the first both nationally and in Maryland. The next several months should be months of progress, however. Pending sales in Maryland were up on a year-over-year basis in both May (+375 units) and June (+282 units). In June 2011, Maryland's supply of housing inventory stood at 7 months. A year later, inventory had declined to 5.1 months - a level consistent with rising home prices and greater urgency among prospective buyers.

 

Anirban Basu is Chairman & CEO of Sage Policy Group, Inc., an economic and policy consulting firm in Baltimore, Maryland. Basu is one of the Mid-Atlantic region's most recognizable economists, in part because of his consulting work on behalf of numerous clients, including prominent developers, bankers, brokerage houses, energy suppliers and law firms. On behalf of government agencies and non-profit organizations, Basu has written several high-profile economic development strategies, including co-authoring Baltimore City's economic growth strategy. His opinions do not necessarily reflect the opinions and beliefs of 1st Mariner Bank.

Maryland's Economy Outperforms Expectations

by Anirban Basu 13. April 2012
Anirban Basu
Anirban Basu, Chairman & CEO of Sage Policy Group, Inc.

 

Job creation has picked up in Maryland. After stumbling for much of the previous summer, recent months have been very positive from a job growth perspective.  The working hypothesis is that this represents economic multiplier effects related to base realignment activities at Fort George G. Meade in Anne Arundel County and at Aberdeen Proving Ground in Harford County.

Between February 2011 and February 2012, employment in the Free State increased 1.9 percent or by 47,000 jobs according to establishment survey data provided by the Bureau of Labor Statistics.  That ranks the state seventh in the nation with respect to year-over-year percentage job growth, a significant improvement from a particular period last year when Maryland ranked dead last (May 2010 v. May 2011).  Leading growth sectors include construction (+5.0%), education and health services (+4.2%), professional and business services (+3.1%) and leisure and hospitality (+2.9%).  Base realignment has helped to support job growth in a number of key business segments, including professional services and construction.

State-by-State Job Growth

Maryland's January 2012 unemployment rate represented the lowest rate in three years.  The state's jobless rate dropped to 6.5 percent in January, almost 2 full percentage points below the national average of 8.3 percent for that month (now 8.2 percent; March 2012).

Other sources of information are similarly sanguine.  A recent Maryland Survey of Business Activity conducted by the Federal Reserve Bank of Richmond indicates that business activity increased at a solid pace in March with the general business activity index jumping to 26 from 8 – the highest reading since April 2011.  Roughly 50 percent of respondents in the March survey expect business conditions and sales revenue to improve over the next six months.

Despite the emergence of optimism, headwinds remain.  As of this writing, U.S. equity markets are in retreat and long-term interest rates are falling, an indication of ongoing concern regarding the economic outlook.  The consensus forecast is for roughly 2 percent growth in America in 2012, with the implication being that the economic recovery remains fragile.

Anirban Basu is Chairman & CEO of Sage Policy Group, Inc., an economic and policy consulting firm in Baltimore, Maryland. Mr. Basu is one of the Mid-Atlantic region’s most recognizable economists, in part because of his consulting work on behalf of numerous clients, including prominent developers, bankers, brokerage houses, energy suppliers and law firms. On behalf of government agencies and non-profit organizations, Mr. Basu has written several high-profile economic development strategies, including co-authoring Baltimore City’s economic growth strategy. His opinions do not necessarily reflect the opinions and beliefs of 1st Mariner Bank.

 

Maryland's 2012 Economic Outlook with Anirban Basu

by Anirban Basu 18. January 2012

Anirban Basu

Anirban Basu Chairman & CEO of Sage Policy Group, Inc

Maryland Gained Momentum Late Last Year

For much of last year, Maryland’s economic performance was among the worst in the nation. For instance, year-over-year job growth in the state was in negative territory or close to zero for most of the summer. But like the balance of the nation, economic performance began to materially improve toward the tail end of the year. For the 12 months ending in November 2011, employment in the Free State expanded 0.7 percent (+18,300 jobs), ranking the state 33rd along this dimension. That may not sound like anything to crow about, but just a few months prior, Maryland ranked dead last. Maryland’s subpar performance mid-year appears to have been closely linked to the nation’s debt ceiling debacle and the impact of that episode on federal agency spending, including upon procurement.

Exhibit 1. State-by-state Job Growth, 12-month Percent Change, November 2011

1st Mariner Blog - State-by-state Job Growth, November 2011

Through it all, Maryland has managed to sustain one of the nation’s lowest unemployment rates. Statewide unemployment declined to 6.9 percent in November, the lowest level since June 2011. That is the 15th lowest unemployment rate in the country.

Other data is also largely encouraging. The most recent Maryland Survey of Business Activity conducted by the Federal Reserve Bank of Richmond indicates that business activity in Maryland increased moderately in December. The general business activity index registered a reading of 7, a meaningful increase from -3 the previous month and the first positive reading since September. The expectations index, which declined 9 points to 22, indicated that while broadly positive expectations of general business conditions six months from now have moderated slightly, survey respondents continue to predict economic growth in the near term.

All of this is consistent with the notion that some of the factors that restrained growth in 2011, including federal government gridlock, sagging home prices and issues emerging from Europe, are likely to continue to shape economic performance during the first half of 2012. However, despite these and other headwinds, the state’s economy is anticipated to continue to grind ahead for now.

Anirban Basu is Chairman & CEO of Sage Policy Group, Inc., an economic and policy consulting firm in Baltimore, Maryland. Mr. Basu is one of the Mid-Atlantic region’s most recognizable economists, in part because of his consulting work on behalf of numerous clients, including prominent developers, bankers, brokerage houses, energy suppliers and law firms. On behalf of government agencies and non-profit organizations, Mr. Basu has written several high-profile economic development strategies, including co-authoring Baltimore City’s economic growth strategy. His opinions do not necessarily reflect the opinions and beliefs of 1st Mariner Bank.



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