Market Studies

First time claims for unemployment insurance fell to 387,000 for the week ended June 16, from the prior week's 389,000, (revised from the originally reported 387,000) the Labor Department reported Thursday. Economists had expected the report would show 386,000 initial claims.

The recent softening of economic activity will not stop the country's housing market recovery, Capital Economics said in a report Wednesday. The US Housing Market Analyst for Q2 2012 speculated that modest recovery in the housing market will not only continue for the rest of the year, it will spread and cause an increase in house prices. With the modest upturn in home sales going on, Capital Economics revised its house price forecast to show gains of 2 percent in 2012 and 5 percent in 2013.

Optimism is good for the recovery, but too much optimism can lead us back on the path to the next housing bubble, said Trulia Chief Economist Jed Kolko during a conference call Wednesday. Although home prices are rising, renters might be overconfident, with 58 percent of respondents expecting home prices to return to peak in the next 10 years. In this case, Kolko said optimism is outpacing reality, and it is very unlikely that prices in those hardest hit markets will return to the peaks in the next 10 years. As for the rental market, Kolko said there is no danger of a bubble and if anything, we are in danger of the rental market becoming extremely tight in some markets.

With a lone dissent, the Federal Open Market Committee Wednesday voted no change in the target federal funds rate but agreed to expand its program to stimulate the economy by purchasing Treasury securities. While voting no change in the target Fed Funds rate, the FOMC said it would purchase Treasury securities with remaining maturities of 6 years to 30 years at the current pace and to sell or redeem an equal amount of Treasury securities with remaining maturities of approximately 3 years or less. The action is expected to keep mortgage rates at record lows.

The Enterprise's report, released Tuesday, showed that newly formed households seem more interested in renting over owning as the economy struggles to get back on its feet. The report showed that over the year ending March 2012, an additional 1.5 million households moved into rental housing, a 4 percent increase in a year. The Census Bureau has also reported that rental vacancy rates in buildings with at least five apartments have dropped more than two percentage points over the past two years. In addition, both Reis and Axiometrics have reported increases in occupancy rates during the two years through the first quarter of 2012.

Lender Processing Services, Inc. (LPS) offered a peak into mortgage performance in May 2012 and revealed a slight increase in the delinquency rate. The total delinquency rate, which includes all loans 30 days or more past due but not yet in foreclosure, was 7.20 percent, a 1.1 percent increase from the month before in April. Compared to May 2011, the delinquency rate is still down significantly by 9.6 percent. In April 2012, the delinquency rate increased slightly by 0.4 percent from the month before after 9 months of declines.

Home values rose in May month-over-month, marking the third consecutive month of increases, but fell on a yearly basis, according to Zillow's Real Estate Market Reports. Prices moved upwards by 0.5 percent from the month before in April to $148,100, but home values continued their downward fall on a yearly basis, dropping 0.9 percent from May 2011. The upside to the yearly decline is it's the smallest year-over-year drop since October 2007, according to the Zillow's Home Value Index. Rent prices also hiked up month-over-month in May by 1.8 percent and year-over-year by 4.6 percent.

Analysts said Tuesday that a reduction in homicide rates by 10 percent would likely lead to a 0.83 percent increase in housing values and a 2.1 percent increase in housing prices in residential and metropolitan areas around the nation. The Center for American Progress surveyed 8 major metropolitan areas to tally up the costs of violent crime - including homicide, rape, and aggravated robbery - for residents, cities, and state and municipal governments. According to the study, the results weigh heavily on residential property values and home prices.

While other experts and analysts have concluded home prices are on the rise and the recovery is under way, Radar Logic released a report challenging the upbeat viewpoint. The analytics firm stated in a report that it believes the oversupply of homes relative to demand will prevent sustained home price gains for some time. The argument made is that as buyers absorb the supply of homes for sale in certain markets and prices start to stabilize as a result, home owners who have been waiting on the sidelines to sell will do so once price start to improve. This will increase supply once again, and home prices will stop appreciating as supply exceeds demand.

The revised figures for economic growth in the year's first quarter were disappointing, but Fannie Mae's Economic & Strategic Research Group is still forecasting moderate growth for the remainder of 2012. A report released by the group Tuesday projected 2.2 percent growth for all of 2012. Several factors presented risks to the economic outlook, including a slowing trend in job growth, potential contagion in the euro zone from Greece's financial issues, the slowing Chinese economy, and the potential of a fiscal drag in the United States. Consumer attitudes also influence the economic outlook.