Economy Isn't as Bad As Might be Believed

HOT NEWS FLASH:

Then again, maybe the economy isn't as bad as many economists believe. Housing has always been a key component in economic growth, and the outlook for housing is pretty darn good these days. In fact, Fannie Mae's Economic & Strategic Research Group believes that increases in residential construction will add 0.2 percentage points to gross domestic product this year. Housing construction and home sales have a cascading effect, producing additional demand for home furnishings and many other retail products and services.

You will find this quote in Jim's Belote's Mortgage Matters below.  It underlies building momentum in the housing market...instead of decreasing the GDP as it has for the last 2 years, housing will add to it once again.

Historically, the Housing Market is a key component of the economic engine that moves the broader U.S. Economy.
Confident home buyers enter the market, increasing the demands for appliances, windows, HVAC systems, furnitures, home decor, bedding and the list goes on.  So suddenly, contractors, salesmen at Home Depot, new Target and Bed Bath & Beyond stores (and their competiton) are needed to supply this growing demand.

As noted, the disappearing "shadow" over the market of the "shadow foreclosure inventory" will eliminate uncertainty from the housing market.  This will boost the housing market.  

Jim's article addresses the real possibility that the "uncertain budget" sequestering still on the table may be resolved via higher taxes and reduced government expenses to curb the high government debt.   Though this may slow the economy a bit, it could cause interest rates, rising recently, to retreat. Won't that be a silver lining to buyers???

Read and respond!!!  Love to chat about it!!

Keeping you updated on the market! For the week of  August 27, 2012 MARKET RECAP Existing home sales gained traction in July, moving up 2.3 percent to 4.47 million units annualized, to partially reverse a 5.4-percent decline in June. The monthly existing home sales trend has been choppy for most of 2012, but going back to July 2011, the trend is mostly higher. Price concessions appeared to be occurring in more existing home markets (or perhaps fewer markets experienced sharper concessions) in July; the national median price for an existing home declined 0.8 percent to $187,300. When viewed from a longer-term perspective, though, the median price looks encouraging – up 9.4 percent year over year. Supply is one frequently mentioned factor for the choppy sales trend. Supply relative to the current sales rate is at 6.4 months, down from 6.5 months in June and 9.3 months in July 2011. Inventory levels remain far below the peak set in 2004. That's good news for prices, but maybe not so good news for sustaining an upward sales trajectory. New home sales, on the other hand, continually make gains. July sales increased 3.6 percent to an annualized rate of 372,000 units, which beat the consensus estimate by 2,000 units. If we go back to June 2011, the trend in new home sales has been mostly up, and mostly unbroken. As with existing home sales, new-home sales experienced a few more price concessions, though mostly in the lower-priced sectors. The national median price dropped 2.1 percent, to $224,200, for July. The dearth of inventory should keep future discounting in check. Inventory is a mere 4.6 months at the current sales pace, a 31-percent decline over the 6.7 months in July 2011. The positive trends in pricing and sales are welcomed news, to be sure. But that doesn't mean everyone is content. Sluggish job growth continues to weigh on the economy, while articles on shadow inventory continue to capture headlines. We are more sanguine than most on the housing recovery. The Wall Street Journal appears to share our sentiment. A recent WJS article reiterated a number of the more salient points we've been hitting on for the past year: namely that shadow inventory is a well-vetted issue, many of the homes in the inventory will never hit market because they are uninhabitable, many of the homes have been converted to rentals, and many of them have been disposed through orderly short sales. The most important takeaway is that shadow inventory is well vetted. It's never the known issues that sink a recovery, it's always the unknown issues – those lurking in the shadows. That said, shadow inventory has long ceased to lurk in the shadows, which is why it really is no longer shadow inventory. Economic Indicator Release Date and Time Consensus Estimate Analysis Consumer Confidence Index (August) Tues., Aug. 28, 10:00 am, et 66.2 Index Important. Recent improvements in retail and new-home sales point to rising confidence. Mortgage Applications Wed., Aug. 29, 7:00 am, et None Important. Purchase activity has stabilized; cash transactions continue to power sales gains. Gross Domestic Product (2nd Quarter 2012) Wed., Aug. 29, 8:30 am, et 1.8% (Annualized Growth) Important. GDP is being revised upward, which suggests economic growth is gaining pace. Pending Home Sales Index (July) Wed., Aug. 29, 10:00 am, et 100 Index Important.Increased contract signings point to future sales gains. Is This Trend Sustainable? Speaking of trends, we'd be remiss not to mention the trend in mortgage rates, which has been rising over the past month. Indeed, the rates on some mortgage products are up over 25 basis points. So the obvious question is, will the trend continue? Opinions are mixed, but they tend to lean toward the trend reversing. Some analysts believe that impending government spending cuts and tax increases, which could occur in 2013, will further slow economic growth. That means money will leave riskier investments like stocks and head for haven investments like U.S. Treasury securities. The demand for these securities, in turn, will lead to lower mortgage rates. Then again, maybe the economy isn't as bad as many economists believe. Housing has always been a key component in economic growth, and the outlook for housing is pretty darn good these days. In fact, Fannie Mae's Economic & Strategic Research Group believes that increases in residential construction will add 0.2 percentage points to gross domestic product this year. Housing construction and home sales have a cascading effect, producing additional demand for home furnishings and many other retail products and services. The rising trend in mortgage rates might be unsustainable, but even if rates reverse course, recent history suggests they aren't going to reverse much lower. Therefore, it's important to remind our home-purchase clients that rates have risen, but any savings achieved by waiting for a reversal could be offset by a higher purchase price. If you wish to unsubscribe, click on the link below and send the email.