Not Out of the Woods Yet
The economy is not out of the woods yet. In order for the economy to stabilize further the housing market has to get stronger.
A just released S&P Case Shiller report is headlined, “2012 Home Prices Off to a Rocky Start.” In a comparison of January 2012 with January 2011 of major metropolitan areas, only Washington, D.C. , Miami and Phoenix showed price increases. Merrill-Lynch pointed out that only Washington, D.C., and Miami had increases in unadjusted data. The worst performing metropolitan area was Atlanta, Ga., which posted a one -year change of -14.8 percent. Even major metropolitan areas including New York, Chicago and Los Angeles posted declines.
Federal Reserve Chairman Ben Bernanke spoke at George Washington University, and he highlighted the same cautious tone he has been stating for months. He was noted as saying that that it is too early to declare victory on the latest economic recovery. The Fed will continue its accommodative monetary policy.
Bernanke said that the depression of the late 1920s and '30s was much more disruptive and severe than the recent Great Recession. He stated that without the forceful response by the Fed the outcome would have been much more severe.
Bernanke spoke to a likely slowdown in the second half of the year and did not rule out future monetary easing by the Fed. Speaking on employment, he noted that the numbers were “significantly below pre-crisis levels” and that unemployment is well above sustainable levels.
The chairman said the Fed is not paying attention to the election calendar and will not allow the election to influence its actions. If the Fed enacts more simulative actions in the fall, it will be in reaction to economic conditions -- and not because of the pending election.
Pending home sales for February showed a decline of 0.5 percent month-over-month in February. January had posted an increase of 2 percent. The consensus was for an increase of 1 percent. This was another sign of the fragility of the economic recovery.
The Washington area seems to be one of the more stable economic areas and housing is doing better here than in most areas.
Mortgage rates continue to be near-historic lows. Rates remain in a narrow range in the next several months. With the Feds cautious tone, the fear of a spike in interest rates seems remote at best.
Bill Starrels is a mortgage loan officer who lives in Georgetown. Starrels specializes in refinance and purchase mortgages. He can be reached at 703-625-7355; firstname.lastname@example.org