Realty Times Outlook – Housing Starts, Interest Rates Cool
by Blanche Evans
Is real estate poised for another boom? The economy appears to be expanding, but not so quickly that inflation is a problem. That could mean steady-to-even-lower interest rates, that could impact housing favorably in the spring.
According to the Conference Board, a research group, leading economic indicators fell 0.2 percent in February, which ended four months of increases which suggests that although the economy is growing, it’s taking a breather along with housing.
Among the decliners were consumer sentiment (as researched by the University of Michigan) and jobless claims.
But the forecast for new construction hit a minuscule trifecta of gloom, making home builders less confident going into March:
Housing starts (the beginning construction of new homes) fell 7.9 percent in February to a seasonally adjusted annual rate of 2.12 million housing starts, after reaching a 12-year high in January.
Building permits, (the forward-looking indicator for the new home construction) also fell 3.2 percent to a seasonally adjusted annualized rate of 2.15 million.
Permits for single-family homes fell 3 percent to a 1.64 million annual rate.
The National Association of Home Builders’ NAHB-Wells Fargo housing market index, an index of home builder sentiment, fell to 55 in March from a downwardly revised 56 in February.
With changes in the numbers in the fractional fractions, there’s some suggestion that new home market conditions are still very favorable.
For one, the NAHB regards any index reading over 50 to be good — that housing demand and sales are continuing at a sustainable pace.
The wild card right now is what mortgage interest rates are going to do — and that could be the reason homebuyers are sitting on the sidelines and inventories are rising in both new and existing homes in some areas.
After hitting two-and-a-half year highs in late February, mortgage interest rates have drifted downward on news that inflation may be contained for now and that the Federal Reserve is at the end or may be nearing the end of raising short-term interest rates.
If mortgage interest rates hover at around 6.30 percent for benchmarket fixed rate 30-year mortgages, the spring could see another record-setting housing boom.
Classic example of a naive reporter. I really don’t know where to begin with this. She’s simply regurgitating a bunch of figures and putting a little spin on it. She is right on one thing though, we are going to see a record for housing this spring. It won’t be in existing sales and price appreciation, it will be in a record level of “For Sale” inventory on the market!
It’s too bad that Blanche Evans seems to be drinking some of the same kool-aid that the other Realtors are. She’s actually a very respected journalist in the Real Estate field and is usually more objective than this. It seems she is bowing to her constituents now however.
I wonder if she saw the news where economist have just raised the chance of a 1/4 point interest increase and another 1/4 point increase after that to (about) 84% after a recent Fed meeting? I don’t see the inflation free expansion she’s talking about. I don’t think anyone (other than the guy in OC) is really recognizing the impact of zero savings at a time when all these Baby Boomers should be maximizing their savings due to the cash-out equity effect. Once that ends (which will be very shortly), this “expansion” will be thrown in reverse before anyone even knows what’s going on.
Will there be a complete real estate “bust” this spring. I kind of doubt it, but ask me about spring 2007 and I’d have a much darker prediction.
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