April 15 Real Estate Market Update
April 15th, 2008Steve Peterson, Branch Manager
Chase Home Finance
Office: (800) 894-5440 Ext. 214
Cell: (775) 219-7151
A few more tea leaves telling us that recovery is gradually beginning…but leaving us totally in the dark as to how the recovery will look. One thing seems clear: It will look different from what most of us expect (which is, I suppose, the re-emergence of a market like the one we experienced about two years ago. Not going to happen.)
Warm regards,
Steve
Weekly Commentary
Thumbnail Sketch: The optimistic signs are rather weak tea at the moment, but they may prove significant nonetheless, especially as regards the very slow recovery builders are beginning to predict.
How are they predicting a recovery? As we said—it’s weak tea, but it’s there. The National Association of Home Builders Index, which results from a survey of major builders, is no longer declining. In fact, it has stalled at a reading of 20 for three months now. That’s a low reading, of course, but the significant part is that it appears unlikely to fall lower again. As Aaron Smith suggested in Moody’s Economy.com, “Homebuilder confidence may have bottomed.”
The good signs in the latest NAHB survey are reports from builders that, though current sales are still very slow, potential buyer traffic is improving. Further, the “expectations index”—a measure of optimism among builders regarding how sales volume will look in a few months—rose by four points, the largest monthly increase in a year.
At the same time, there are signs that our nation’s manufacturing sector is doing slightly better than expected, and even the unemployment insurance claims (see Weekly Jobless Claims to the left) seem to be declining again.
One major bugaboo is the mounting worry over inflation, both in our nation and in the world. We are reaching the point where so-called “core inflation”—the numbers resulting when you remove food and energy data because they are so volatile—no longer seems as relevant, because food and energy prices continue to climb at a very fast pace. The effects of higher food and energy prices are by now working their way into all the other prices in our economy. With India and China becoming greater consumers of food (notably, for example, grains and beef) and energy (notably crude oil), higher prices for these staples are likely to remain with us for many years to come.
The overall economy, therefore, is somewhat precarious. Our financial systems, as discussed recently, need regulatory structures. Our commodity prices remain very high. But the tendency seems to be to edge toward greater economic health.
All of which raises an increasingly salient question: If health is returning to the real estate sector, what exactly will it look like? We will need to be on our toes for changes, for new opportunities, as well as for new potential problems. Watch, in particular, for new mortgage programs—and old (e.g., FHA)—to become very important to a recovering market.
KEY INDICATORS Gold $932.00/ounce [up]Crude Oil (Brent) $111.58/brl [up]U.S. Dollar to… Euro .6336 [slightly down] Japanese Yen 101.75 [down]6-mo Treasury Bill Yield 1.44%10-yr Treasury Note Yield 3.59% [6-mo down 12 bps, 10-yr up 4 bps]11th Dist Cost of Funds: 3.560%30-yr Fixed-rate Mortgage 6.36%15-yr Fixed-rate Mortgage 5.88%1-yr ARM 6.37% [HSH averages rates: 30-yr down 16 bps, 15-yr down 11 bps; 1-yr ARM up 13 bps]
Mortgage Bankers Association Mortgage Applications Index week ending 4/4 Overall 725.6 (up 5.4%; down 28.7% the week prior) Purchase Money Loans 384.7 (up 8.1%; down 11.8% the week prior) Refinancing Loans 2724.7 (up 3.4%; down 38.1% the week prior) Weekly Jobless Claims 4/5357,000 first computation – 410,000 prior week (with upward revision of 3,000)
Producer Price Index (PPI) Mar Up 1.1% - core (w/ food &energy prices removed) rose 0.2% NAHB Housing Market Index Apr
Flat at 20 for third month in a row
