Forecast Update: Case-Shiller/S&P, Mortgage Rates, Jobless Claims, GDP

A weekly analysis of the economic data released during the past week, and how current economic conditions are affecting the real estate market.

Palm Coast, FL – February 25, 2011 – The National Association of Realtors® Research staff now gives you a weekly analysis of the economic data released during the past week, and how current economic conditions are affecting the real estate market. For daily economic forecasts, visit NAR Research’s Facebook page.

Every week the National Association of Realtors® Research staff  analyzes key data releases and explain what they mean for you and your business.  In this update, we give the highlights of the most important data releases for the week of February 22-25, 2011 along with graphs that show the latest movement and overall trends.  

At a glance, this table shows the forecast for some of the most pertinent weekly data for REALTORS® to keep in mind. This changes from week to week as new data becomes available. The directional shift notes the trend from last week’s numbers. For the full forecast from the latest Pending Home Sales release, click here.

Highlights for Tuesday, February 22, 2011:

• The Case-Shiller/S&P home price index was released this morning. It shows a widespread deterioration in home prices as the 20-city index fell 1.0% from its November level.
• Consumer confidence surged to 70.4 this morning, nearly a 7-point jump from the 64.8 level reported in January. The index for the current situation rose, but the bulk of the movement came in the index for expectations, which rose from 87.3 to 95.1.
• Today’s news is a mixed bag. The decline in home prices was not a surprise, but that makes it no less grim. Falling home prices puts pressure on underwater owners and can cause potential buyers to second guess the market. The downward trend in prices could result in an increase in delinquencies and foreclosures in the spring. Consumer confidence, though, could ameliorate this trend if home owners and buyers feel more confident in their ability to make payments.

Highlights for Wednesday, February 23, 2011:

• Mortgage purchase applications were up 5.1 percent for the week ending February 18th. Purchase applications are a leading indicator of home sales.
• Purchase applications do not take into consideration cash buyers who, according to the January 2011 REALTORS® Confidence Index, make up as much as 32 percent of transactions. In Las Vegas and Miami, the cash purchases have said to approach 50 percent.
• Consumers took advantage of a decline in mortgage rates, as they fell to 5.0 percent on a 30-year fixed mortgage.

Highlights for Thursday, February 24, 2011:

• The report on new jobless claims shows another week of significant improvement in the labor market, with new claims falling 22,000 to 391,000. This brings the 4 week average to 402,000 and is a 30,000 claims improvement over levels of a month ago.
• Assuming that the jobless claims continue to trend down, NAR expects about 1.5 to 2 million net new jobs in the next 12 months.
• Sales of new single-family houses in January 2011 were at a seasonally adjusted annual rate of 284,000. This is a 12.6 percent decrease from December and 18.6 percent decrease from January of last year. There were 188,000 new homes available for sale which represents 7.9 months supply at the current sales rate.
• The NAR existing-home sales data released yesterday showed increase in activity with first time in seven months that sales activity was higher than a year earlier. However, this was largely due to purchases of distressed properties.
• Separately, The FHFA purchase-only house price index declined 0.3 percent in December, and 0.8 percent in the fourth quarter 2010.

Highlights for Friday, February 25, 2011:

• Revised GDP estimates released today show that the economy grew by 2.8 percent in the 4th quarter of 2010, revised from 3.2 percent.  A healthy growth rate after a recession should be 4 percent or higher.   There was no adjustment to the growth in prices which grew 2.1 percent.  On an annual basis, the economy grew 2.8 percent in 2010 and priced advanced 1.3 percent.  This price growth is within the bounds of what is typical and should not push up mortgage rates.
• NAR expects GDP to grow by 2.7 percent in 2011.
• While economic growth is near its long-term trend, recessions are typically followed by greater growth that helps to get more people back to work and digs the economy out of the recessionary hole.  Without a sharper upturn in growth, it will take time for the economy to return to a level of output that feels normal and supports the number of jobs that it supported before the recession.
• Fortunately, GDP growth has generated enough jobs to improve consumers’ assessment of the present and outlook for the future.  The Index of Consumer Sentiment rose to 77.5, its highest level since January 2008 mostly on improved job conditions and prospects.  Consumers are realistic and recognize that the improvement is from a low level.

  

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