Today’s employment report, and the markets reaction to it are a perfect example of the upside down world in which we live.

There are two main numbers in the report:  One, the number of jobs either created or lost; Two, the unemployment rate.

Today’s report had a number of 345,000 jobs lost in the month of May.  The “experts” had expected job loss in excess of 500,000 jobs.  So, this figure was much stronger (in reality less weak) than expected.   It is noteworthy that in January there were in excess of 700,000 jobs lost.  This report puts upwards pressure on rates – the idea being that if job loss is slowing the economy is beginning to recover.

The unemployment rate on the other hand climbed to 9.4%, up from last months 8.9% and below the expectation of 9.2%.  This is the worst report for Jobless rates since 1983.  This report should put downward pressure on rates, because a high rate of unemployment would indicate the economy is NOT recovering.

Somehow due to how they figure things it is possible for the number of jobs lost to come down, and the unemployment rate to go up.  They use a different set of statistics for each calculation is the best explanation I can come up with.

What does this mean to the rate market?

Investors took the first report to heart, taking it to mean that the job loss numbers indicate we are beginning the recovery.

At the same time, they appear to have completely ignored the unemployment rate number, which in my opinion makes no sense, but hey, they didn’t ask me.

Is this another market “head fake” or a new trend you ask?  I just don’t know.  What I do know is that it is the 2nd week in a row where rates have ended the week higher.  The more times that happens, the harder it will be for rates to come down.

Regards,

Doug Smith – Stratis Financial
Your Conventional, Jumbo, and FHA/VA expert since 1993

3625 Del Amo Blvd #220, Torrance CA 90503
Direct 310 697-7033     Cell 310 508-5832     Fax 310 371-7469

After being in this new market for a while some surprising trends are starting to happen.  One of which is the inventory of new construction homes is almost completely gone!  This was something I was anxious to watch as over the past year the market turned for the worst, construction financing was gone and new construction came to a halt.   There will be almost no new homes for sale in 2010 and 2011.  Here we are in June 2009 and it looks like the last of the new construction inventory is almost gone.

The “tree section” of Manhattan Beach has always been one of the most popular neighborhoods in Manhattan and as the turn in the market came it got stuck with a ton of new construction inventory which inherently drove prices down.  Mainly because these were all built by local builders that could not sit on these properties and hold them, so they had to drop the price to get them off the books.  At the peak prices were approaching $3,000,000 for your a brand new house in a great location, others would sell in the mid $2,000,000′s. Now-a-days some new construction can be bought for  $1,600,000-$1,800,000!

Another popular area in Manhattan beach is the “Mira Costa” section of east Manhattan which also has a lot of new construction inventory.  In comparison to the tree section, east Manhattan had less speculative homes being built which seems to have really saved their values.  In my opinion  the values of the new construction in east M.B. have done better than the tree section, which I think many people watching this market would not have guessed would happen.

SOME NUMBERS TO CHEW ON:

19 tree section “new” homes have sold in the last 12 months.  Of those 18, three have closed this year(2009).

In east Manhattan: 11 homes have sold in the last 12 months, one was this year (2009).

Examples of east Manhattan doing well; 

1560 Gates sold in December 2008, it was a large 5,300sft home with 5 bedrooms on a standard full lot for $2,475,000.

1520 Gates is in escrow set to close this month in the price range of $2,600,000-$2,800,000!  This house is very similar in size but also had a pool.  But it makes a great argument that values have not dropped very much for these houses in east Manhattan this year.

Example of the Tree Section:

2509 Walnut sold almost a full year ago (July 2008) for $2,025,000. This was a standard new construction in the tree section built with average quality in a decent location.

The exact same house built by the same builder was bought from the bank for $1,550,000.  This house was 2509 Palm Dr. which is back on the market at $1,699,000, its never been lived in but was bought off the bank as an investment and they were trying to flip it to make a quick buck.

These examples of east Manhattan and the tree section are not to show you that homes in east Manhattan are selling for more money; well it is partly, but the point of my two examples is that east Manhattan has dropped a lot less than the tree section

here is a list of what is currently in escrow:

Tree Section:
2504 Poinsettia $1,659,000
560 36th st.       $1,799,000
3109 Oak           $1,899,000
2103 Elm           $2,099,000

East Manhattan:
1751 Nelson    $1,850,000
1629 9th st.    $2,389,000
1520 Gates     $2,899,000

These neighborhoods have almost the same amount in escrow but the inventory has been much greater in the tree section, which is another reason that prices have not dropped as much in the east.

All in all the tree section got swamped with builders trying their hand at spec houses and they got caught in the down turn and some of them got burned and others got out ok.  Overall it really brought down the whole neighborhood which is suprising because it is such a popular place to live.