Mae said today that the third quarter economy was better than expected with
inventory buildups that doubled from the second quarter, the fastest
accumulation since the first quarter of 1998.
This indicated optimism from business, but if demand doesn't live up to
expectations businesses will be forced to cut back on production and quarterly
GDP growth will slow.
Mae's economic forecast for December says some clarity is beginning to emerge
in Washington with the government shutdown ended but the company's economists
express concern about the possibility of another shutdown in January as well as
a battle over the debt ceiling in February.
Yesterday's adoption by the Senate of a FY 2014 budget ends the first
concern, but the debt ceiling imbroglio remains a threat. The report's prediction that, based on the
November jobs report the Federal Reserve would soon start tapering its asset
purchases was already borne out by the Fed's announcement to that effect yesterday.
momentum of the housing
market recovery has slowed since the spike in mortgage rates in May. After
posting 28 straight months of annual increases, pending home sales were lower
than the same month a year earlier in both September and October and October
was the straight month of monthly declines.
New home sales however rebounded sharply, surging more than 25 percent. Like pending sales, new home sales reflect
contract signings rather than closed transactions. Existing home sales, which are closed
transactions, declined in October for the second straight month.
Mae's economists, Doug Duncan, Orawin T. Velz, and Brian Hughes-Cromwick call
the performance of single-family homebuilding the "most disappointing" aspect
of the housing recovery this year. After
jumping to the recovery peak of 652,000 units in February, single-family housing
starts have been trending down. Data on
starts is not available after August because of the government shutdown but recent
housing permit data suggest that single-family starts "may remain lackluster in
the fourth quarter." However,
multifamily permits posted a double-digit increase in October for a second
straight month, sending total permitting numbers to a recovery high.
tight availability of acquisition, development, and construction (AD&C)
loans may be one thing holding back a stronger recovery in homebuilding. "Although lending conditions have been
improving gradually, according to the survey by the National Association of Home
Builders (NAHB), the current stock of residential AD&C loans still stood about
80 percent below its peak reached during the first quarter of 2008. The NAHB
survey also indicated that land development loans face tighter lending standards
than residential construction loans," the report says.
economist concluding that all housing activity has posted significant
year-to-date gains and they expect continued improvement in activity in 2014,
although at a varying pace. They also
call the performance of home price measures so far in 2013 impressive.
annual increase in the CoreLogic index was 12.5 percent through October (11.0 percent
excluding distressed sales), compared with 8.5 percent and 13.3 percent for the
FHFA purchase-only and the Case-Shiller 20-city composite indices, respectively,
three economists make the following predictions for the housing market over the
prices at the national level will move higher as the months' supply measures
have remained below historical norms.
The shadow supply has been improving which will reduce downward pressure
on home prices.
prices will go up, the pace of appreciation should moderate, partially because
of declining investor, especially institutional investor, demand.
mortgage originations will decline approximately 15 percent to $1.82 trillion
this year, with the refinance share dropping 10 percentage points from an
estimated 72 percent in 2012. Total mortgage originations should drop another
28 percent in 2014 to $1.32 trillion, with the refi share declining further to
39 percent- the lowest since 2000. For mortgage debt, the latest data from the
Fed showed that total single-family mortgage debt outstanding rose 0.5 percent
annualized in the third quarter. It should post a slight drop for all of 2013 before
rising modestly in 2014-the first rise in seven years.
rates continue to be forecast as rising to 4.9 percent by the end of 2014.
as a share of mortgage originations will decline below 50 percent this quarter,
signaling that the market has finally switched from a refi to a purchase market.