With the release of our Market Snapshots covering the first quarter of the year, three southern metro areas rise to the top of the ranks in different categories.  McAllen, TX leads our top 75 markets in job growth, rising at an annual rate of 3.4%.  Cross-border commerce with Mexico, tourism, and the health care industry continue to drive the expansion in McAllen.  In terms of permit activity, Port St. Lucie, FL saw permit issuances nearly quadruple over the last year, rising from very low levels in 2009 and early 2010 when construction activity all but halted.  The resumption of expansion in permit issuance is welcome news for the local construction industry.  Finally, Huntsville, AL leads our top 75 markets when it comes to our Housing Growth Ratio, which measures the number of permits issued per 1,000 residents.  This expression of supply is a good indicator of how quickly a market is expanding relative to the number of people living there.  In Huntsville’s case, they’ve issued 5.77 permits per 1,000 residents over the last year, a pace not matched by any other metro area in our list of top 75 markets for which we publish Market Snapshots.

While these three areas are seeing improvements in various ways, conditions in the broader U.S. labor market have deteriorated substantially in recent weeks.  Weak job growth has the po tential to stall both a recovery in the housing market and the overall economy.  Job growth in May was the weakest it has been since September.  Weekly jobless claims figures have remained above 400,000 for eight straight weeks.  Whether May’s employment numbers are a bump in the road or a sustained slowdown in hiring is not entirely clear, but further weakness will surely lead to much slower economic growth.

Reports on the housing market also came in weaker than expected like most of the economic data this past week.  Home prices continued to fall and by some estimates have now experienced a steeper decline peak-to-trough than they did during the Great Depression.  The abundance of homes “underwater” and expectations for record all-time highs in foreclosure activity continue to weigh down home prices.  Declining price levels have kept buyers on the sidelines.  The National Association of Realtors’ Pending Home Sales Index showed that sales contracts were down in April despite affordability levels at near record highs.

In broader market news, equity prices continued to falter in the first week of June due to weaker economic data.  The weakness from May has carried over into the new month as talks of QE3 and the U.S. debt situation have come into the spotlight.  The S&P 500 index is on pace to close trading at its lowest levels since April 18.  The sell-off on Wall St. and weak economic data has helped push bond prices higher this past week resulting in lower mortgage rates.  Average mortgage rates have now declined for 7 straight weeks and are at their lowest levels since the beginning of December 2010.

The Economy
Total non-farm employment in the U.S. increased by a mere 54,000 jobs on a seasonally-adjusted basis in May.  While this marks the eighth consecutive month that the economy has added jobs, it is the slowest pace of hiring since September.  Payroll gains for the previous two months were also revised lower by 39,000.  Inside the numbers, private sector employment continued to grow albeit at a much slower rate than the last three months.  The government continued to shed jobs for the seventh consecutive month due to budget constraints on all levels.

Weaker hiring caused the unemployment rate to increase slightly last month.  The U.S. unemployment rate increased to 9.1% in May from 9.0% in April.  This is the second straight month that the unemployment rate has increased and the highest it has been since December.

Personal incomes in April increased to $13,029.4 billion compared to a downwardly revised figure of $12,983.3 billion in March.  This is the seventh consecutive monthly increase for personal incomes.  Personal incomes are up 4.4% from $12,478.5 billion in April of last year.  Personal incomes have now recorded 17 straight months of year-over-year gains.

Personal consumption expenditures, PCE, increased 0.38% from last month to $10,773.0 billion.  The PCE price index, which is a leading gauge for inflation, increased 0.3% from the previous month.  This is the fifth consecutive month that the PCE price index has recorded a monthly gain of 0.3% of more.  The PCE price index excluding food and energy increased 0.2% from last month.

First-time unemployment claims declined by 6,000 to a seasonally-adjusted 422,000 in the week ended May 28th from an upwardly revised figure of 428,000 last week.  This is the eighth straight week that initial jobless claims have remained above the 400,000 level. 

These elevated levels in first-time jobless claims will make it difficult for continued improvement in the U.S. labor market.
 

Housing Market
The National Association of Realtors’ Pending Home Sales Index declined in April following two consecutive months of gains in February and March.   The index fell to a reading of 81.9 compared to a downwardly revised March figure of 92.6.  The drop in April is especially worrisome as activity typically picks up this time of year as spring home-buying season begins. 

National average mortgage declined from the previous week to 4.55% in the latest Primary Mortgage Market Survey released weekly by Freddie Mac on June 2nd.  This is the seventh consecutive week that rates have declined.  Rates are at their lowest levels since the first week of December.  The 30-year fixed-rate mortgage has averaged below 5.0% for 15 consecutive weeks.

In the week ending May 27th, the MBA’s seasonally-adjusted purchase index remained unchanged from the previous week but increased 7.53% compared to this same time last year.  This is the second straight week that purchase mortgage applications have recorded a year-over-year increase.

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