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Theoretical Seeds of A Housing Bottom- Professional Edition

Purchase mortgage applications fell back to near their recent lows last week, reversing the surge from the previous week. That was caused by the FHA’s new, tougher requirements on credit scores and down payments. The week before last was the deadline for deadbeats to get in under the old easy money game rules. That blip has now gone away. Those buyers probably won’t qualify anyway. So housing sales continue to bump along at historic lows. The NAR’s lagging existing home sales and contracts data over the next couple of months should make new lows.

The Department of Labor released its new quarterly number for covered workers under the Unemployment Insurance Compensation program this morning. It showed a drop to 125,845,577 covered workers as of October 2 versus the previous quarterly number of 126,763,245.

I did some digging into how the Labor Department calculates this number. It is based on the actual state totals of persons employed under UIC and therefore is more accurate than the BLS payrolls data, which is based on small survey samples. However, the UIC program count is only complete through March, and then they smooth the result with by reporting it as a one year average. The data I had used as a basis for my chart was therefore badly lagged and not representative of the current employment situation. Therefore I am discontinuing that chart. It would have been even uglier this month, but that could be misleading.

The best data we may have for the purpose of estimating whether total employment is picking up enough to boost housing may be the Federal Withholding tax data that I feature in the Treasury Report, and secondly the BLS non-farm payrolls data, which we know has problems. Both tax collections and total employment are running about 5% ahead of last year at this time. So far the evidence suggests that that has not been sufficient to help absorb the housing oversupply or boost prices in a substantive way. There are still 9 million fewer people working now than there were 3 years ago. However, if the recent uptick continues, it should help to put a bottom in on housing prices over time. Those are two conditions that probably can’t be met, but I can’t dismiss them completely.

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