A Good Start for Housing and Mortgages
The stock market is ending the first month of 2013 with levels not seen since December 2007. The economy is on a rebound partially driven by strength in the housing market. The housing markets have gone into a growth mode.
New home sales released by the Department of Housing and Urban Development showed an estimated 367,000 new homes were sold in 2012 compared to 306,000 in all of 2011. This represents an increase of 19 percent.
The median price of new houses sold in November was $248,900 compared to $218,600 December 2012.
The Northeast region showed new home sales were up around 20 percent year over year. The South showed a 15.6 percent for the same period.
Fannie Mae released its first economic prediction for 2013 on housing. The forecast calls for continued slow growth in the overall economy and a “new normal” growth rate for housing. They except growth in housing be steady and moderate. Fannie Mae’s outlook for interest rates is for a “gradual” rise in long-term rates over the next few years. The Federal Reserve Bank has stated that they will not raise rates until the unemployment rate hits 6.5 percent. Currently, the unemployment rate is 7.8 percent.
Fannie Mae’s economists do not expect the Fed to raise rates until later in 2015. Other economists that are using a slower growth model for the economy think the Fed will not act until 2016.
Much of the good news and optimism is based on an economic optimism after the fiscal cliff and debt crisis were averted in recent weeks. One has to keep in mind that there will be another round with House Speaker John Boehner squaring off with the president on the same fiscal issues. This will happen in the spring. There is only so long that they can “kick the can” down the road.
Mortgage interest rates have bumped up in recent days. This is not exceptional when the stock market has a strong run. Money tends to come out of the bond market and into stocks, which pushes rates higher. When the next round of economic jostling starts to happen, stocks are likely to take a pause. Money will then reenter the bond markets.
The economy will continue its slow momentum. Home sales should continue to move higher. Inventory will remain tight. Even if mortgage rates moderate, they are still at very attractive levels.