|Weighed Down By Dismal Economic News, Housing Showing Mixed Results|
Recent economic news has been dismal. The second estimate of growth in the gross domestic product for the second quarter was revised down from an already low level to 1.0%, following just 0.4% in the first quarter, well below where growth normally would be two years out from a recession. Consumer confidence has been plunging, falling to levels typical of the months leading to a recession.
In a recent speech at Jackson Hole, Wyo., Federal Reserve Board Chairman Ben Bernanke expressed disappointment that the recovery has been much less robust than he had hoped. He also voiced concern that housing has not been able to perform its traditional role of lifting the economy out of the recession, due to “tight credit conditions for buyers and builders, the impact of possible future housing price declines on macroeconomic growth and a vicious cycle of lower household net worth, leading to more cautious lending to households, which in turn reduces housing demand, lowers prices and reduces household net worth.”
Bernanke was optimistic, however, that “over the medium term, housing activity will stabilize and begin to grow again, if for no other reason than that ongoing population growth and household formation will ultimately demand it.”
The housing sector, weighed down by weak economic activity, has experienced mixed results:
- House prices are no longer falling, with both key indicators — the Case-Shiller and Federal Housing Finance Agency house price indexes — showing three consecutive month-over-month increases.
- The Housing Opportunity Index shows housing affordability hovering near record high levels over the past several quarters.
- The rate of foreclosures started continues to edge down, as has the stock of houses ready to enter foreclosure, i.e., mortgages with payments more than 90 days past due.
- New home sales remained steady in July, bouncing around at the same low level since the beginning of the year.
- NAHB’s Housing Market Index shows builders’ assessment of the single-family market was similarly unchanged in August.
- Existing home sales continued their downward trend with a modest decline in July
New research by NAHB presents geographic details to answer the questions “Who Claimed the Energy Efficient Improvement Tax Credit?” and “Where are the Nation’s Second Homes?”