The latest news for real estate, housing and the economy including Yellen talking to Congress, home builder confidence, home prices, foreclosures and much more…
This week’s Looking Forward Looking Back is a day late due to yesterday being President’s Day. Despite the fact I am pretty hard on all politicians, we do need to respect the office. Even if the person holding the office does not mirror your political beliefs.
Who is your favorite President?
As usual, there is plenty of real estate, housing and economic news to talk about so let’s dive in!
Yellen and Congress
Last week’s biggest news was when the new Fed chairperson, Janet Yellen spoke to the House Financial Services Committee. Everyone is watching Yellen for clues as to what she may due about Quantitative Easing.
Yellen admitted that unemployment is still a big problem. She said that the unemployment rate is still well above levels that Federal Open Market Committee thinks is “consistent with maximum sustainable employment”. She also pointed out that an unusually large fraction of the unemployed is made up by people unemployed for more than six months.
Yellen said she expected “a great deal of continuity” in terms of Federal Open Market Committee (FOMC) monetary policy direction. Which means she isn’t pulling the plug on QE right away. In an effort to keep Wall Street from freaking out, she also said that markets should expect the FOMC to continue its support of low interest rates.
If Not Now When?
Yellen did not really say anything definite about QE. Or about how quickly the FOMC’s will taper quantitative easing. I guess they are keeping their cards close to their chests and playing it by ear since for now. Yellen said that she and the FOMC expect economic activity and employment will improve at a moderate pace this year.
If things get worse or better, the Fed will adjust monetary policy as necessary. One thing that has concerned me and plenty of others lately is the recent turmoil in emerging markets. Yellen said “at this stage these developments do not pose a substantial risk to the U.S. economic outlook”.
As far as housing, Yellen seems to think things are much better. She pointed out that now, only 1 in 8 home owners is underwater compared to 1 in 4 just 2 years ago. However, I am not convinced things are as healthy as Yellen think…
NAHB/Wells Fargo Housing Market Index
Someone else that also is feeling uneasy about the housing market are home builders. Earlier today, we found out the latest National Association of Home Builders/Wells Fargo Housing Market Index dropped sharply in February 2014 to 46. Any number below 50 indicates that more builders view sales conditions as poor than good. This is the largest monthly drop in the 30 years of the index.
NAHB Chairman Kevin Kelly said:
Significant weather conditions across most of the country led to a decline in buyer traffic last month. Builders also have additional concerns about meeting ongoing and future demand due to a shortage of lots and labor.
I am not too sure about these concerns. If unemployment is still high, then there should NOT be a problem with labor. The future demand issue is something I think has much more credibility. Especially since real median household income sucks, unemployment is still super high and fewer people are able to get mortgages.
As far as the weather being the cause for a weak housing market…
Blame It On The Weather
I have heard the weather being used lately for any negative news about real estate or the economy. But the truth is the weather should only cause a 1-2% drop in construction and home sales according to a recent Trulia article.
Speaking of Optimism
Despite me and the home builders feeling a little less confident, the NFIB Small Business Optimism Index for January 2014 increased to 94.1 from 93.9. The NFIB reported that business owners are more positive about their own sales and plan more hiring (with the strongest job creation plans since 2007).
While the Small Business Optimism Index is still way below where it was before the Great Recession, it is good news to see more hiring and optimism with small business owners.
Also Feeling Optimistic
A recent Lending Tree survey showed that current and potential homeowners have a generally optimistic outlook on the US economy and housing market. Check out some of the highlights:
- 69% have a positive outlook on the housing market
- 63% expect the US economy to continue to improve in 2014
- 71% of current homeowners are considering selling their home in the next 12 months
The fact that more home owners are considering selling is good news since tight inventory has been hurting home sales.
Related news came from the University of Michigan’s Consumer Sentiment Index last week. It was better than expectations and February’s reading was unchanged from January.
FNC on Home Prices
FNC released their latest Residential Price Index and it showed that US home prices are still rising. As of December 2013, the RPI indicates the fastest year-over-year growth since the recovery began in early 2012.
The FNC index, which does not include distressed properties, was up 0.3% in December 2013. Most other home price indices include distressed sales (foreclosure and short sales) so FNC shows what is happening from a unique perspective. Because FNC excludes distressed properties that often sell with a discount, this is a different way of tracking home prices.
The most interesting thing FNC said was that home prices have been increasing 0.3-0.5% per month.
As usual I posted the latest average mortgage rates on Friday. To recap, some rates decreased, some were unchanged and some rates increased. The fact that we saw some of the mortgage rates I track increase could be a sign the predictions of higher rates in 2014 will be true.
As I said, it isn’t time to freak out but it also is not a wise to drag your feet if you are serious about buying a home. Rates are still super low.
TransUnion just reported that the mortgage delinquency rate (the rate of borrowers 60 days or more delinquent on their mortgages) dropped below 4% for the first time since 2008, ending Q4 2013 at 3.85%. This is the 8th consecutive quarter that the mortgage delinquency rate declined.
Sounds great right? Not so fast as Steve Chaouki, head of financial services for TransUnion points out:
It’s encouraging to see the mortgage delinquency rate drop for two consecutive years, but at the same time, mortgage delinquencies continue to be twice as high as levels observed prior to the housing bubble. The housing market also still shows some volatility, with both housing prices and originations dropping in the latter part of 2013 after experiencing improvements in the first part of the year.
I would say to Mr. Chaouki to never look a gift horse in the mouth. The fact that mortgage delinquencies have fallen for 2 consecutive years is a very positive sign for housing and the economy. However…
Despite the decrease in mortgage delinquencies, RealtyTrac just reported that monthly foreclosure filings (including default notices, scheduled auctions and bank repossessions) increased 8% in January 2014 from the December 2013 level. However this is 18% lower than the level back in January 2013. This is also the 40th consecutive month of US foreclosure activity decreasing on an annual basis.
In other news, Weekly Jobless Claims were higher last week at 339,000 against a forecast of 330,000 new jobless claims and the prior week’s reading of 331,000 new jobless claims. Also we learned from last Tuesday’s Jobs Openings report for December 2013 was unchanged from November’s reading of 4.0 million jobs available.
This information was taken from a gauge of competition for available jobs; in December, competition for job openings fell to its lowest level in five years.
The stuff to keep an eye on this week includes:
- Housing Starts
- Mortgage Rate Reports from Freddie and the MBA
- The minutes from January’s FOMC meeting
- Weekly Jobless Claims
- Consumer Price Index (CPI) and Core CPI
- Leading Economic Indicators (LEI) for January
- Existing Home Sales Numbers from NAR
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