10/09/2013
October 8, 2013
How Much Damage?
Now that the shutdown has lasted at least a work week--we have to ask the most important question. How much damage was done to the economy because of the actions or inactions of Congress? And it was not just the government shutdown. What we are talking about here is also the threat of the shutdown which hovered over the markets and our populace for weeks. How much confidence do businesses and consumers lose when they are reminded that we have a government which is largely ineffective? While certain members of Congress were playing games, we had a military that was threatened with a withholding of their paychecks and homebuyers thinking that they would not get to close on the homes that they had contracted to purchase. We ask, how could these actions even be on the table?
The big news this week should have been the release in the employment numbers. But any release was likely to be less accurate anyway -- something which did not help the psyche of the stock market. It is now clearer why the Federal Reserve Board kept their stimulus plan in place for at least a while longer. This economic recovery is all about confidence and we must have confidence that our government will do what is right without playing games so that one sector of Congress can get their way or make political points. Don't get us wrong--not all the news is bad. The fight over the budget may bring a resolution to the upcoming mid-October issue of raising the debt limit to a head more quickly as we don't foresee Congress playing this game a week or so after they resolve the first issue. And as we pointed out last week, the threat of the shutdown also has caused some positive news. Interest rates are the lowest they have been in several months. Oil prices have eased back as well. We know we have said this before, but this may literally be the last chance in a very long time to purchase real estate or refinance at rates which are this low. And again, we can thank Congress for this opportunity.
The housing recovery goes deeper than just an improvement in home prices, with single-family home construction contributing approximately 500,000 jobs to the economy year-over-year, Regional Economic Models Inc. said in a press release. Additionally, the net gain in jobs accounts for a quarter of the approximately 2 million jobs added to the economy from July 2012 to July 2013. Furthermore, the biggest net growth occurred in Texas, with 59,600 jobs, and Florida, with 54,000 jobs, and California, with 30,200 jobs. âConstruction of new homes is a major driver of our economy at the national and state levels,â said Frederick Treyz, CEO and Chief Economist of REMI. âWe estimate that for every new house constructed, between four and five new jobs on average are created,â he added. Source: HousingWire
The number of new foreclosure filings in August hit its lowest level in nearly eight years, according to RealtyTrac, an online marketer of foreclosed properties. Soaring home prices and a big decline in underwater borrowers -- those who owe more on their home loans than their homes are worth -- have helped drive the trend. August initial foreclosure filings fell 44% to 55,575, just below the 56,063 that were recorded in October 2005. The foreclosure crunch began in summer 2006, at about the same time that housing prices hit their peak. "This is a strong indicator that the crisis is over," said Daren Blomquist, vice president at RealtyTrac. "The foreclosure floodwaters have receded in most parts of the country, although lenders and communities continue to clean up the damage lef! t behind ," he added. The mopping-up process continues, however. In August, for example, the number of homes repossessed by lenders rose 6%, compared with July, to 39,277. But that still represents a drop of 25% year-over-year, and is more than 60% below the peak of repossessions in September, 2010. Source: CNN/Money
The proportion of investors involved in the housing market has fallen in the last few months. As their numbers dwindle, it may allow other buyers to step in, according to housing experts. Investors have gone from accounting for 23 percent of home purchases in February to about 20 percent in Juneâthe lowest level since September 2012, according to data from Campbell/Inside Mortgage Finance survey. Their numbers will likely decrease even more in the coming year. About 48 percent of investors recently surveyed say they plan to lessen their home purchases over the next year, according to a recent survey by ORC International. Only 20 percent of the investors surveyed say they plan to buy more homes in the next year, a drop from 39 percent 10 months earlier. "Investors helped stabilize a housing market that was in free-fall and they did so by taking advantage of fire-sale home prices," says Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. "Now you see fewer bargain prices in the market and that's a reason investor demand is coming off its peak." In recent years, many buyersâparticularly first-time home buyersâmay have lost out to investorsâ all-cash offers on homes. Banks and sellers may have been lured by the idea of a quick deal that cash offers typically provide over offers from buyers who require financing. But with less competition from investors, some housing experts say this may allow an opportunity for other potential buyers to get into the market. Source: Reuters
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