Tag Archives: Capital Economics

Home prices in the U.S. continue to tumble as foreclosures claim a larger share of the market. Residential prices slipped 2.5 percent during the first quarter of this year when compared to the previous quarter, according to a national index calculated using sales prices from mortgages acquired by Fannie Mae and Freddie Mac. The index shows prices fell 5.5 percent between the first quarter of 2010 and the first quarter of 2011. It's the largest annual drop recorded since the second quarter of 2009.

Industry data released Thursday shows a sharp drop in the percentage of home loans 90 or more days past due or in foreclosure. The Mortgage Bankers Association (MBA) reports 90-plus day delinquencies have dropped for five straight quarters, while the nation's foreclosure inventory recorded its largest decline since the trade group began tracking the market. At least one economist says the combination is a sign of ""genuine improvement."" Remaining troubles appear to be concentrated in a handful of states. Five account for over half of the loans in foreclosure in the country.

Mortgage rates have fallen to their lowest mark in 2011 after declining for the fourth consecutive week, further reducing the costs associated with taking out a home loan. Freddie Mac says the 30-year fixed-rate is now averaging 4.63 percent, while the 15-year rate is at 3.82 percent. ARM rates also headed lower. Economists say the continued fall in home loan rates make a mortgage cheaper than renting.

Recent news has highlighted the severity of the renewed downturn in home prices, but Capital Economics says although condominiums will not escape altogether, over the next year or so condo prices are likely to fall by less than their single-family counterparts. The research firm notes that demand for condos is currently stronger than demand for single-family homes, due to cash buyers and investors seeking rental income. The condo market also boasts a lower delinquency rate, which suggests fewer foreclosed properties will support the supply of condos.

The national unemployment rate rose to 9.0 percent in April, up from 8.8 percent in March, according to figures released Friday by the U.S. Department of Labor. Employers added 244,000 new jobs to their payrolls last month, but the government agency says the number of unemployed was little changed at 13.7 million, as people who had previously given up looking for work resumed their search. Job creation in the private sector accounted for all of last month's gains.

With all the news of still-declining home prices, most buyers are keeping their feet firmly planted on the sidelines unless they're sure they're getting a bargain. At the same time agents and banks are battling (mis)perceptions in their local markets, where property values may not be on such a slippery slope. Add to the equation a distressed property, and finding an agreeable short sale price while still covering enough of the mortgage debt to win over the lender can be a challenge. It's a nasty tug-of-war, with neither buyers or sellers feeling like they're gaining any ground.

The National Association of Realtors reported Wednesday that sales of previously owned homes rose 3.7 percent last month, following the 9.6 drop recorded in February. The results were slightly better than forecast, but reaction was mixed after the release of the report. One economist says sales have now stabilized at a level no higher than that seen during the recession, and with so many forced foreclosed sales, a recovery is not even on the horizon. But another points out that it's distressed properties that are helping to elevate sales activity as investors line up for a bargain.

Employers added 216,000 jobs to their payrolls in March, according to figures released Friday morning by the U.S. Department of Labor. The national unemployment rate dropped to 8.8 percent, down from 8.9 percent in February. Analysts had been forecasting a smaller pool of new jobs and no change in the unemployment rate. Since November 2010, the jobless rate has declined by a full percentage point. The government agency's count shows there are currently 13.5 million people out of work, with 45 percent having been unemployed for 27 months or more.

The continuing depreciation of residential property values at the end of last year has made housing look more undervalued relative to income than ever before, according to analysts at the research firm Capital Economics. Based on industry home price data, the company says in the fourth quarter, housing was 15-21 percent undervalued as measured against individuals' disposable income. That gap has widened from just three months earlier, and the analysts say more forced sales of foreclosed properties will push prices even lower.

The national unemployment rate fell to 8.9 percent in February, as employers added 192,000 jobs to their payrolls, the Department of Labor reported Friday. The rate is down from 9.0 percent in January and 9.4 percent as recently as December. The Labor Department described the latest numbers as ""little changed,"" noting that 44 percent of the 13.7 million unemployed have been jobless for 27 weeks or more. However, the 192,000 jobs that were added in February represented the largest monthly net gain since mid-2010.