Housing market IMPROVING!!!

Housing definitely seems to be on the upswing.  Although not all of the housing news is positive, we have been seeing month after month steady signs of improvement.

Housing starts slowed slightly in July after a strong June however permits for new construction showed a healthy gain.  Housing starts in July slipped 1.1 percent, following a 6.8 percent jump in the prior month.  July’s pace for new home construction is annualized at 746,000.  This figure is slightly lower than the market expectation of 750,000 however the current figures are up 21.5% from a year ago.  Additional data in the report shows considerable strength for the future of housing as permits filed for new construction jumped dramatically.

Home builders continue to report significant improvement in activity with the housing market index rising another 2 points this month.  This is the fourth straight month of significant improvement that puts the index at its best level since early 2007.  Home builders were excited to report that current sales and traffic continue to improve.

Mortgage applications were reported down slightly by 2.0% on purchases and down 5.0% for refinances.  Rising mortgage rates are the reason for the declines in both areas, especially in the refinance sector.  Mortgage rates this week have been steadily rising and I expect that next week’s report on refinances will show even more of a decline in applications.  It appears that the refinance boom may very well be coming to an end.  Mortgage rates remain very low and are still below 4.0%.  Many experts believe that 4% is the threshold that will stop the majority of homeowners from refinancing.  On the purchase side I believe that hitting the 4% mark will have a positive impact on buyer activity.  Purchasers that have been sitting on the sidelines may finally come to realize that if they don’t act now, they may miss out on the double benefit of very low home prices combined with very affordable mortgage rates.

There are many reports indicating that the economy is getting stronger.  This is one of the major reasons that mortgage rates have been rising.  In addition, many of the major lenders have been very slow to release their foreclosed properties into the market for sale.  It appears that the lenders are focusing more on stabilizing their balance sheets and by slowly releasing properties into the market, they are stabilizing home prices.  In fact it is being reported in more and more markets that homes are getting multiple offers and bidding wars are starting again because inventory is at the lowest point in more than 5 years.

My suggestion to anyone who has been thinking about purchasing a home…now is the time to act.  Home prices are heading up as well as mortgage rates and it makes sense to take advantage of the current conditions because no one really knows how quickly they will change.

The inflation report for the month of July continues to show that inflation remains under control.  Consumer prices in July came in softer than expected at both the headline and core levels. The concern is that inflation will begin to rise starting with next month’s report.  Prices on the wholesale lever have been increasing.  It is especially noticeable in the cost for food and energy.   

The stock market has been showing signs of life this week as the indices have been steadily rising.  Many investors remain cautiously on the sidelines and the market movement has been based upon light trading that is typical for the summer.

JJ Mack