Tag Archives: Capital Economics

A report from Capital Economics states that housing values overall are undervalued by 20 percent, but Zillow says many metro price-to-income ratios are still above their historic averages. The current price-to-income ratio for the U.S. is 3.3 to 14 percent above the historical average, according to new research from Zillow. The company says more often than not, home values eventually come back in line with incomes. The most extreme over-corrections in home values have occurred in Detroit; Las Vegas; and Manchester, New Hampshire.

The Federal Reserve put a conditional timestamp on its interest rate policy Tuesday - a different voice from the ""extended period"" mantra heard from the U.S. central bank for the past two-and-a-half years. The Fed's board again voted to hold the target range for the rate at which banks lend to one another at 0 to 0.25 percent, but this time they included an advisory that the rate would remain at this level for the next two years. Officials cited the ""depressed"" state of the housing market as one of the economy's biggest hindrances.

Congress' last-minute accord to avert a default wasn't enough to save the United States' top rating from Standard & Poor's. The agency downgraded the long-term credit rating of the U.S. to AA+, a grade just below the AAA rating the U.S. had held for 70 years. Analysts were expecting a temporary spike in Treasury yields, which are closely tied to mortgage rate trajectories, but investors responded with a rush on Treasuries, pushing yields down 13 basis points. Fannie Mae, Freddie Mac, and the Federal Home Loan Banks also had their S&P ratings lowered to AA+ on Monday.

The combination of declines in home prices and in the value of the dollar is making U.S. homes very affordable for some foreign buyers, according to Capital Economics. The 33-percent drop in housing values since the beginning of 2006 translates to an even greater decline when the dollar value is compared with Canadian, Chinese, and European currencies. While international investors likely won't bring recovery to the American housing market in the near-term, the research firm says they may provide a boost to a handful of states.

The nation's housing crisis has forced unprecedented numbers of homeowners out of their homes, made for a difficult homebuying environment, and tainted many Americans' ideal of owning a home. These factors are taking their toll on homeownership in this country. The Census Bureau says homeownership in the United States has fallen to its lowest level in more than 13 years, slipping to 65.9 percent in the second quarter. The increase in the homeownership rate seen during the housing boom has been more than completely wiped out by the bust.

Home prices in the U.S. rose in May, marking the second straight month of gains, according to CoreLogic. The company says national home prices, including distressed sales, increased 0.8 percent. CoreLogic asserts that the spring buying season has brought with it more demand for non-distressed properties, which has contributed to the short-term gains in prices. Some are holding out hope that the consistent upticks are evidence the five-year long decline in prices may be drawing to a close.

The closely watched S&P/Case-Shiller index showed its strongest positive movement since last summer with the release of Tuesday's report. The analysts at Standard & Poor's described the news as a ""welcome shift from recent months."" While it may fuel cautious optimism that at least a short-range upward trend is already in the making, industry experts and market analysts put the latest numbers into context and share their views on what to expect in the months ahead.

Tight credit conditions for first-time buyers and a foreclosure pipeline full of homes bought with subprime loans mean that house prices at the low end of the market will continue to fall at a faster rate than prices at the middle and high end, according to Capital Economics. The bulk of these low-end homes consists of distressed properties, which already carry steep discounts as lenders and investors try to capture a piece of the limited demand out there to get these homes off their books and back into the hands of responsible homeowners.

Markets across the country are in full-fledged correction mode. That combined with the prevalence of foreclosures has analysts at the research firm Capital Economics convinced that the double dip in home prices will continue throughout this year. In fact, they say the structural factors that are constraining demand, such as higher down payment requirements, probably mean that prices won't rise consistently until 2014. Capital Economics expects up to three million foreclosed homes to make their way to the market over the next few years.

The S&P/Case-Shiller home price index confirmed a double-dip in home prices across much of the country as Standard & Poor's national reading fell another 4.2 percent during the first quarter. One economist notes that prices have now fallen by more than they did during the Great Depression. On that occasion, the peak in home prices was not regained for 19 years. The widespread view is that with over a quarter of all mortgages underwater and 6.3 million homeowners either delinquent or in foreclosure, home prices have not yet hit bottom.