Cautious Signs

Lord knows I'm not one to be ahead of the bandwagon. I never install 1.0 software and never buy a car in the first year of manufacture. And maybe we're looking a little too hard for signs of improvement in the economy.

So, with those disclaimers out of the way, consider these two items:

• 
  
  The Conference Board Employment Trends Index (ETI)™ saw a small uptick in May. The index now stands at 89.9, increasing 0.2 percent from the revised April figure of 89.7, and down 20 percent from a year ago.
  "While it is too early to say that the ETI has bottomed, the moderation of the last two months is certainly a sign that the decline in job losses is real and signals that the worst is over," said Gad Levanon, Senior Economist at The Conference Board. "However, as the economic recovery over the coming months is likely to be very slow, we still expect the unemployment rate to continue to increase to double digits by the end of this year and into 2010."

• The U.S. unemployment rate was the highest in 26 years, but the loss of 345,000 jobs in May, fewer than expected, was seen as a sign that the job market was no longer in free fall.

Sales of Multi-Unit Buildings are Way Down

All aspects of the housing market have been hit hard in one way or another. In San Francisco, an area that hasn't been much talked about are small, multi-unit properties (2-4 units). The average sales price of all 2-4 unit buildings which sold this May is down 30% compared to where it was a year ago. That's more than double the decline in average sales prices for single family homes and condos.

What's worse is the decline in the number of sales. A year ago in May 47 buildings sold. Compare that to just 25 last month. In February this year, no (as in zero, none, nada) 3-unit buildings sold. In March no 4-unit buildings sold. Granted, these months are historically slow but this was no statistical glitch. In the past three months we've averaged only 3 sales of 3-unit buildings. There are 84 on the market! That's more than a 2-year supply!!

The situation is just as bad for 4-unit buildings. There are 40 on the market and we're only averaging 2 or 3 sales a month.

This is not a healthy situation for owners or, ultimately, their tenants.

A large part of the problem is the difficulty in obtaining financing. If you think it's tough to qualify for a single family home or condo mortgage, try arranging for a mortgage on an investment property.

Some Tax Credits Running Out

The $100 million allocated by the state of California to cover $10,000 tax credits for buyers of new construction (never lived in) homes has received applications for more than 80% of the fund total. Applications had been averaging about 600/week but last week more than 1,000 were received. At that rate the $100 million will be exhausted in a couple of weeks.

Since applications can only be submitted after you've closed escrow, if you're not already in contract you're probably out of luck. If you are in contract, do everything you can to close before the well runs dry.

The state provides a web site where you can check the most recent statistics.

As of today, it looks like this: