Sunday, April 29, 2007

London Home Prices on Fire

Despite recent interest rate increases in the UK, home escalation continues proving that the fundamentals of income growth and supply and demand are the key factors..........

London Homeowners Reap $150,000 as U.K. Prices Jump (Update3)

"April 16 (Bloomberg) -- London homeowners gained an average 76,000 pounds ($150,000) on the value of their property in the past year, triple the median salary, as U.K. house prices rose the most since 2004, the country's biggest property Web site said.

Asking prices for a home in the British capital reached an average 379,846 pounds in the four weeks through April 7, up 25 percent from a year earlier, Rightmove Plc said today. The cost of an average house in the U.K. rose 3.6 percent on the month and 15 percent from the previous year, the most in almost three years.

Three interest-rate increases since the start of August have failed to contain a housing boom that has driven up the price of a parking space in the London borough of Kensington and Chelsea to equal that of a home in the Midlands. Soaring property values are stretching mortgages to six times salary and prompting young people to live at home with their parents for longer.

By Jennifer Ryan - Bloomberg

Story Link Here

Tuesday, April 24, 2007

California High Tech Hot

Don't look now, but the hot Silicon Valley job market is gaining more and more recognition.....

"As might be expected in the state that houses the Silicon Valley, California employs more technology workers that anywhere else in the country and pays them the most.

A report released Tuesday by AeA, formerly the
American Electronics Association, said California leads the country in the number of high-tech jobs (919,322), the most tech jobs added (14,402) and the highest average annual wage for a position in the technology industry ($95,294).

In 2006, the report says, the high-tech industry added nearly 150,000 jobs for a total of 5.8 million in the United States. This growth is faster than the 87,400 jobs added in 2005, and the two years of growth represent an increase of four percent. ......

.....The leading states by high-tech employment in 2005 were California (919,300), Texas (445,800), New York (299,900), Florida (276,400), and Virginia (261,000). 2005 data are the most recent available at the state level. "

Silicon Valley / San Jose Business Journal - 12:37 PM PDT Tuesday, April 24, 2007

Story Link Here

Monday, April 23, 2007

Growth Mode Again in Silicon Valley

It's been 6 years in the making but Silicon Valley has rebounded and is firmly in growth mode again. As it did in the last cycle, this economic prosperity will work it's way through the rest of northern California and the central valley........

In growth mode, Cisco to lease Milpitas campus

"Following in the footsteps of several valley high-tech leaders, Cisco Systems is acquiring more space to house its growing workforce......

...."It's fair to say we've been hiring since 2004," said Blum, who said part of the growth is due to the company's acquisitions.

In January, Cisco reported that it employs almost 55,000 people worldwide, 15,000 of whom work in the valley. The total represents a net increase of 2,700 from the previous quarter......

.....Cisco's new lease is another sign of the valley's economic resurgence, already illustrated by land and building acquisitions by Apple, Google and Yahoo. Last April, Apple announced plans to buy 50 acres in Cupertino for more than $160 million and just acquired another site earlier this month. In June, Google bought $319 million worth of real estate in Mountain View's Shoreline Technology Park.

And in July, Yahoo worked under the radar to buy 46 acres in Santa Clara for about $50 million....."

Link Here

By Katherine Conrad
Mercury News

Saturday, April 21, 2007

CA Job Growth Trumps Bearish Forecasts

Excerpts from the Sacramento Bee

State economy weathers storm
Unemployment rate is steady; jobs increase in capital area

"In the face of a housing market downturn, California's economy is holding its own. Sacramento's seems to be doing better than that.

Statewide unemployment held steady at 4.8 percent last month, as employers added 18,500 jobs, the Employment Development Department reported Friday. It was a good but not great month for job creation and was slightly behind the pace of a year ago, said Howard Roth, the state's chief economist.

Sacramento's unemployment, meanwhile, dipped four-tenths of a percent to 4.9 percent. More important, the region's payrolls increased by 5,400 jobs.

.....The construction sector added 1,700 jobs......Commercial and industrial construction are doing very well, said EDD labor market consultant David Lyons.....

......Overall, payrolls have increased by 2.2 percent in the past year, another indication of the economy picking up some steam. Over the past few months, year-over-year job growth had fallen below 2 percent....."

By Dale Kasler - Sacramento Bee

Link To Story Here

Tuesday, April 17, 2007

Sheep and Foreclosures - A Sign of Good Things to Come

Warren Buffett didn't make billions by betting on the obvious. Most of the wealthiest Americans made their great wealth by taking risk as contrarians against the sheep and herd mentality of their time. You can't beat the market unless you are a step ahead of it............
From 4/17/07
"The number of California homeowners getting default notices last quarter reached its highest level in almost 10 years.........Last quarter's default level was the highest since 47,912 default notices were recorded statewide in the second quarter of 1997. Defaults peaked in first quarter 1996 at 61,541."
Ok, now let's get a little perspective by looking at headlines and analysis from 1997.........

From Dataquick News January 1997
"Lenders started foreclosure proceedings on 39,495 California homeowners during last year's fourth quarter. That was up 1.0 percent from 39,106 for the third quarter and up 4.9 percent from 37,648 for 1995's fourth quarter (see chart), according to DataQuick Information Systems.
The quarterly numbers peaked at 44,686 during last year's first quarter (Q1-06) when lending institutions implemented stricter policies in their handling of mortgage delinquencies.

So then, what did California prices do when mortgage defaults peaked in 1996? Well let's take a look......
1996 $177,270 -0.5%
1997 $186,490 5.2%
1998 $200,100 7.3%
1999 $217,510 8.7%
2000 $241,350 11.0%
2001 $262,350 8.7%
2002 $316,130 20.5%

Just like condo conversions signaled the peak of the housing market in 2005, it appears notices of default and foreclosure activity coincide with the bottoming of the market within a year or so. Mind you, California also suffered significant job losses in the early to mid 1990's, not the case now, where a quarter of a million jobs were created in last year. So this correction and snap back will be quicker than in the mid 90's. So are you a sheep or? See below to see how quick the headlines turn..............

Bay Area home prices jump May, 1997
The median price paid for a resale house in the nine-county Bay Area was $260,000 in April. That was up 8.8 percent from $239,000 in March and up 11.6 percent from $233,000 for April last year (see chart), according to DataQuick Information Systems.

SoCal Home Sales and Prices Surge August, 1997
The median price paid for a Southern California home was $169,000 last month, up 4.3 percent from $162,000 a year ago. The year-over-year price jump was the strongest since July 1991 when prices jumped 4.5 percent during a post-Gulf War wave of optimism about the economy.

SoCal Home Prices Surge December, 1997
The median price paid for a Southland home was $172,000 in November. That was up 0.6 percent from $171,000 for October and up 6.8 percent from $161,000 for November last year.

Quotes and Headlines courtesy of DQ News Archive

Inflation still not a threat - Again

Sorry for the intermittent recent posts, been crazy busy at work, but more importantly let's talk about inflation, or the lack thereof. The core CPI rate increased only 0.061% in March, much less than expected and a great deal less than last months .02% gain. To cut to the chase there is basically no core inflation except for some lagging data derived from the owner's equivilant rent calculation from housing. Without all the fancy analysis just look at two things the TIPS spread (retreating) and the 10 year treasury (retreated to 4.68% today). The markets aren't seeing any inflation. So Chairman Bernanke, please lower the Fed Funds rate to match the market and keep prosperity rolling - 4.5% sounds good for now.

Some excerpts from leading ecnomists courtesty of the WSJ -

"There is no genuine inflation 'problem.' As we have argued on numerous occasions, we have been witnessing a reasonably sharp cycle in shelter costs particularly owners equivalent rents [an estimate of how much homeowners would charge to rent their residence] (which account for a huge 30% of core CPI). When OER inflation was low in 2003-2005 as residential house prices boomed, core CPI was flattened. When OER accelerated through 2006 even as residential house prices flattened out, all of a sudden a 'core' inflation problem emerged… If this economy has an inflation 'problem,' it is only coming from one source -- rents i.e. the imputed cost of housing." - Richard Iley, BNP Paribas

"Excluding the gain in OER, the core CPI was flat, suggesting a flat reading or possibly a 0.1% gain for the Fed's preferred inflation reading, the core PCE deflator. Gains in OER appear to have peaked in November of last year, and today's data suggests a deceleration from housing related-effects is underway. The core CPI itself appears to be decelerating, bucking a seasonal bias upwards in March, and is up 2.45% over the past year. Today's core inflation news is comforting. " - Steven Wieting, Citigroup Global Markets

For WSJ subsribers link to the full analysis and story here

Friday, April 06, 2007

Jobs Stronger Than Expected

Job Growth for March came in better than expected. In addition, January and February job numbers were revised up again.......

Jobless Rate Dips to 4.4 PercentFriday
Unemployment Rate Drops in March As Companies Add 180,000 Jobs

WASHINGTON (AP) -- Employers ramped up hiring in March, driving the unemployment rate down to 4.4 percent, matching a five-year low. It was a surprisingly strong performance in an economy that has otherwise shown signs of sluggishness recently.

The new snapshot, released by the Labor Department on Friday, also showed that employers boosted their payrolls by a strong 180,000 in March, the most since December. Workers' also saw their paychecks get bigger. The fresh figures suggested that companies are not feeling a need to dramatically clamp down on hiring in the face of the slower overall economic activity and the deep housing slump.......

.......The report was stronger than economists were expecting. They were calling for the economy to add around 135,000 new jobs in March, and for the unemployment rate to actually edge up to 4.6 percent.

The 4.4 percent unemployment rate, which dropped down a notch from 4.5 percent in February, matched the rate in October, which was the lowest in five years.

Friday April 6, 10:02 am ET By Jeannine Aversa
Associated Press Economics Writer

For Story Link Here