Economic Focus

HOUSING AND THE RECOVERY

Last week John Williams, Pres & CEO of the SF Fed delivered a speech titled The Outlook for the Economy and Monetary Policy. Here are some excerpts on housing: One of the most important currents holding back recovery has been housing. The collapse of the housing market touched off the financial crisis and recession. In most recessions, housing construction falls sharply, but then leads the economy back when growth resumes. As you well know, that snapback hasnt occurred this time. Before the crisis, residential investment as a share of the economy was at its highest level since the Korean War. Today, housing construction remains moribund and residential investment as a share of the economy has fallen to its lowest level since World War II. On one level, thats not surprising. We simply built too manyin fact, millions too manyhouses during the boom and we are still feeling the effects of this overhang. Consider housing prices. From their peak in 2006 until early 2009, home prices nationwide fell by nearly a third. When you exclude distressed sales, prices appeared to bottom out in 2009 and early 2010. New housing starts also appeared to stabilize in 2009, after plummeting some 75 percent during the housing crash. Im happy to report that Utah has done better than the nation as a whole, and certainly the housing market here is not as depressed as in such neighboring states as Arizona and Nevada. Prices here are down only about 20 percent from their peak, and foreclosure and delinquency rates are also lower. The $64,000 question is when will the housing market finally recover? One daunting challenge for such a recovery is the huge number of homes in foreclosure. Almost 7 million homes have entered into foreclosure since the first quarter of 2008 and some 2 million are still in the foreclosure process. In addition, there is a shadow inventory of homes currently owned by delinquent borrowers. When you add up unsold new
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for the week of August 01, 2011 Volume 15, Issue 29

Key Economic Reports Released This Week
ECONOMIC INDICATORS RELEASED BY National Association of Purchasing Mgt. Bureau of the Census Dept. of Commerce Bur. of Econ. Analysis Dept. of Commerce Automobile Manufacturers Mortgage Bankers Association of America Automatic Data Proc & Macroeconomic Advisors Bureau of the Census Dept. of Commerce National Association of Purchasing Mgt. Bur. of Labor Statistics Department of Labor Bur. of Labor Statistics Department of Labor Federal Reserve Board CONSENSUS SURVEY1 55.0% 0.0% Income 0.2% Outlays 0.1% Vehicles 11.8M N/A 100k -1.1% 52.5% 400k Payrolls 100k Unemp 9.2% $5.0B Wt. ** ** *** ** * **** * ** * **** * INFLUENCE ON INTEREST RATES

ISM (NAPM) Mfg Index for July 11 Construction Spending for June 11 Personal Income & Outlays for June 11 Motor Vehicle Sales for July 11 MBA Mtg Apps Survey for week ending 07/29 ADP Natl Employment Report for July 11 Factory Orders for June 11 ISM (NAPM) Non-Mfg Index for July 11 Jobless Claims for week ending 07/30 Employment Situation for July 11 Consumer Credit for June 11

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Undetermined

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Survey courtesy of Insight Economics, LLC

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houses left over from the boom, homes for sale by owners, foreclosed residences for sale by lenders, and the shadow inventory of houses at risk of distressed sale, you come up with a massive supply overhang. Over time, more reasonable prices and an improving economy ought to bring buyers off the sidelines and set the stage for recovery. But high unemployment and anemic wage gains are leaving people worried about their income prospects and cautious about buying homes. Also, the dramatic plunge in home valuations since 2006 has made some first-time homebuyers wary about entering the market because of worries that prices might fall further. For the compete speech: http://www.frbsf.org/news/
Jessica Lombardo Loan Officer Hi-Tech Mortgage 2184 McCulloch Boulevard, # A Lake Havasu City, AZ 86403 jessica@hi-techmortgage.com Office: 866.768.5626 Cell: 916.548.8533 Fax: 916.372.2518