Sorry, Obama. Despite making the push for more manufacturing jobs in his State of the Union address, a new employment projections report is betting on service and construction industries.
In last week’s State of the Union speech, President Obama gushed about manufacturing. He envisioned “an economy built on American manufacturing” and told us of the “huge opportunity at this moment to bring manufacturing back.”
But before unemployed machine operators and homeowners in factory towns get their hopes up, hear this: Obama’s speechwriters didn’t check with Obama’s experts. This morning, the Bureau of Labor Statistics released the official employment projections for the next ten years. What do the numbers say? Manufacturing will look more like the caboose than the engine of the economy. These projections deliver hard truths about manufacturing that the government, job-seekers and house hunters need to keep in mind:
What does all this mean for housing? Over the long run, housing demand, sales, and home values go up in cities where there’s job growth. And local job growth depends a lot on which industries happen to be there: when high-tech booms, Silicon Valley and Austin grow; when the car industry melts down, Detroit suffers. The continued decline of manufacturing in America means rough times for housing markets in manufacturing cities.
Where are the manufacturing jobs? Manufacturing is relatively big in Midwest metros like Grand Rapids, MI, Gary, IN, and Milwaukee, WI, and also in southern spots like Greensboro, NC, Greenville, SC, and Louisville, KY. At the other extreme, there are almost no manufacturing jobs in south Florida or in the big east coast centers of New York, Washington and Boston. But the overall picture for long-term job growth and housing demand is not just about where manufacturing is – it depends on how fast all local industries are growing. I’ll do a deeper dive on longer-term growth soon. Stay tuned.
Trulia's Chief Economist shares his thoughts on what President Obama did and didn't say about housing in his State of the Union address
You might have missed it among the long, long to-do list Obama gave tonight, but the President announced two new housing proposals: more refinancing, and more investigations of banks. Neither is a breakthrough: they fill in some of the missing pieces in the messy jigsaw puzzle of Obama’s housing policy. Here’s what he proposed:
1) Letting more borrowers refinance. Obama proposed that “every responsible homeowner” be able to refinance. The existing refinancing program (HARP) lets borrowers who are current on their mortgages refinance even if they’re way underwater – but only if their loans are guaranteed by Fannie Mae or Freddie Mac. Obama’s proposal would extend refinancing to borrowers who are current but whose loans AREN’T guaranteed by Fannie or Freddie – which the New York Times reports could be two or three million borrowers. It sounds like Obama will ask Congress to let the Federal Housing Administration (FHA) guarantee refinancings by underwater borrowers and charge big banks a fee to cover the costs. If Congress is involved and banks are asked to pay … well, let’s just say it’s not a done deal. Obama doesn’t always get his way with Congress or with the banks.
And if this happens? It won’t save the housing market. Letting borrowers refinance only if they’re current on payments won’t help people on the verge of losing their homes. And, refinancing won’t reduce principal, so underwater borrowers stay underwater. Refinancing is economic stimulus: it gives homeowners with mortgages more spending money. (I said the same thing last October about the expansion of HARP.)
2) Investigating mortgage lending and securitization. Again, this proposal fills in missing pieces. That big robo-signing settlement – which Obama didn’t mention tonight but could come soon – would punish banks only for their foreclosure practices. The new, proposed investigation would have those same states’ attorneys-general plus the feds go after risky lending and securitization practices. It’s great politics to punish banks, and maybe they deserve it. But remember, the robo-signing controversy has gummed up the foreclosure process as banks wait for the settlement to set clear rules on foreclosures. What if this new investigation gums up lending and securitization? That could make mortgages scarcer and more expensive.
The only real housing fireworks were the swipe Obama took at Republican candidate Mitt Romney. The President said “responsible homeowners shouldn’t have to sit and wait for the housing market to hit bottom,” a direct hit at Romney’s comments in Nevada last October that the foreclosure process should “run its course and hit the bottom.” If Romney gets to face Obama in the presidential election, you can bet Obama will be tossing that quote back in Romney’s face again and again. Here’s to 2012!
Leading up to the 2012 elections, here are 4 hot topics that matter most to the state of housing in America.
President Obama will deliver his annual State of the Union address to the nation tonight. It will tell us where Obama thinks he’s succeeded and fallen short. It will also set the tone for how he will fight in the election. I’ll be watching to see what he does (and doesn’t!) say about housing.
Specifically, here’s what I’m looking for:
1) Will Obama be upbeat or downbeat about the market? On the plus side, sales and construction are rising and inventory is falling. On the minus side, prices keep slipping and a foreclosure wave is coming. Which story will Obama tell?
2) Which policies – planned, coming or surprises — will Obama talk about? Will we hear about:
–The robo-signing settlement
–Expanded refinancing through HARP
–Sale or rental of government-owned homes (REO-to-rental)
–Changes to the mortgage interest deduction
–Changes to conforming loan limits for Fannie/Freddie/FHA
–The future of Fannie and Freddie
–Or something else?
3) How will Obama sell his housing ideas to the public? Will he tackle the tough questions about:
–Who pays for housing policies – Taxpayers? Banks? Investors?
–The “heads I win, tails you lose” problem: how will he sell policies that reward bad choices that some homeowners, banks and agencies made?
4) Will Obama make housing a partisan issue? Housing is a bipartisan issue. Trulia’s survey of consumers shows that most Democrats AND most Republicans want the government to support homeownership and want to see more action on housing (full survey results here). But the Republican presidential candidates have shied away from housing policy. Will Obama use housing to attack the Republican candidates?
Stayed tuned – I’ll be giving my take on his speech tomorrow.