This week's economic data has shown a rising trend in the stock market, manufacturing and consumer confidence. As we have all witnessed, the stock market is hitting a new 18 month high and does not seem to be relenting on continuing to climb. The manufacturing index and consumer confidence have been showing small signs of steady improvement as well.
The questionable side of this week's economic report seems to be mostly real estate related. Depending on how you want to interpret the The Case-Shiller Housing Value Index report you can draw a conclusion that the news is either positive, or negative.
I consider myself reasonably astute in understanding the markets and economic reports, however I am at a loss with this latest report. For this reason I pasted the commentary from Bloomberg.com below so you can draw your own conclusion regarding house values.
From Bloomberg.com
Case-Shiller points to continued gains for home prices in January, gains that may be accelerating given more recent data on new and existing homes. Case-Shiller's adjusted reading for its composite 10 index shows a solid 0.4 percent gain in the month, the second straight 0.4 percent gain. The 20 index shows a second straight 0.3 percent gain. Note that home prices swing lower in the light demand months of the winter, a factor to keep in mind when looking at the unadjusted rates. Unadjusted data, which the news wires run prominently, show a third straight 0.2 percent monthly decline for the 10 index and a very deep 0.4 percent decline for the 20 index.
So, what do you think? Is it Positive or Negative? (I couldn't figure it out myself however when I drink a beer, or a few of them this weekend, I will revisit the report. Although by then it won't matter because it will be considered old news.)
Regardless of your interpretation of the above Bloomberg.com report, more and more concern is being expressed over the future of housing values. With the combination of the tax credit expiration only 30 days away, along with the end of the government's bond re-purchase program, housing is expected to be impacted. The end of the tax credit is expected to drive down already hurting housing demand. Additionally, if mortgage rates rise as is predicted, then that will be a double whammy impacting the housing market.
As much as the odds on housing being negatively affected in the coming months due to the above circumstances, the reality is that it will be more perception than financial. The reason is that lower house prices with higher interest rates have little impact on housing affordability as long as the changes are not extreme. Although a housing decline will not be favorable news to any existing homeowners, the news of lower housing prices will most likely bring more buyers into the market even if interest rates rise half to one percent.
Economic data to be released next week:
• Monday April 5th - Pending Home Sales
• Wednesday April 7th - 10 YR Note Auction
• Thursday April 8th - Weekly Jobless Claims
Your Mortgage Consultant,
JJ Mack
916-517-1800
916-390-2463
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