Economy Watch: Real Estate Sounds off on State of Union
NMHC and AGC respond to the State of the Union address and the Fed continues tapering. In addition, CoreLogic reports a 24 percent decrease in foreclosures for 2013.
By Dees Stribling, Contributing Writer
Following President Obama’s State of the Union address this week, the National Multi Housing Council said it applauded president’s support of housing in his speech, but also noted that a growing number of American households are renting, either for lifestyle or financial reasons. The number of renter households grew by almost 5 million from 2007 to 2012, the NMHC pointed out.
Thus, the organization said in a statement, “housing finance reform must avoid a ‘one-size-fits-all’ approach. The multifamily market uses commercial mortgage debt products, and imposing single-family reforms would jeopardize our ability to meet the nation’s need for millions of new rental homes over the next decade.”
The CEO of the Associated General Contractors of America, Stephen E. Sandherr, also commented on the State of Union. Among other things, he said, “We also look forward to learning more about President Obama’s proposals regarding workforce development and their potential impact on helping train the next generation of construction workers. With private sector demand rebounding and the industry’s graying workforce retiring rapidly, many of our members are concerned about where they will find qualified new workers in the near future.
Fed Continues Tapering
As expected, the Federal Open Market Committee said on Wednesday that the Federal Reserve was tapering its bond-buying by $10 billion in February, for a total of $65 billion for the month. The purchasing next month will include $35 billion in U.S. Treasuries and $30 billion in mortgage-backed securities, each down $5 billion from this month.
The FOMC reasons that economic growth has picked up in recent quarters. “Labor market indicators were mixed but on balance showed further improvement,” the committee said in its statement. “The unemployment rate declined but remains elevated. Household spending and business fixed investment advanced more quickly in recent months, while the recovery in the housing sector slowed somewhat.”
The committee also says that it’s keeping an eye out for deflation: “[The FOMC] recognizes that inflation persistently below its 2 percent objective could pose risks to economic performance, and it is monitoring inflation developments carefully for evidence that inflation will move back toward its objective over the medium term.” Despite predictions that QE3 would ignite inflation, that particular economic metric has been well below 2 percent for some time now.
Foreclosures Drop in ’13
CoreLogic reported on Wednesday that there were 620,111 completed foreclosures nationwide in 2013, compared to 820,498 in 2012, which represents a decrease of 24 percent for the year. For the month of December 2013, there were 45,000 completed foreclosures, down from 52,000 in December 2012, a year-over-year drop of 14 percent. Month-over-month, completed foreclosures declined 4.1 percent in December 2013, compared with November.
As a basis of comparison, completed foreclosures averaged 21,000 per month across the country between 2000 and 2006, before the housing bubble burst.
Since the financial crisis began over five years ago, there have been about 4.8 million completed foreclosures nationwide, according to CoreLogic.
As of December 2013, about 837,000 U.S. residential properties were in some stage of foreclosure, which is known as the foreclosure inventory, compared to 1.2 million in December 2012, representing a decline of 31 percent. The foreclosure inventory as of December 2013 was 2.1 percent of all homes with a mortgage, compared to 3 percent a year ago. “The decline indicates that the distressed foreclosure inventory is healing at an accelerating rate heading into 2014,” noted Mark Fleming, chief economist for CoreLogic, in a statement.
Residential Delinquencies Down Too
Freddie Mac reported that its single-family mortgage serious delinquency rate declined in December to 2.39 percent from 2.43 percent in November, and is now at its lowest level since early 2009. Back in December 2012, Freddie’s rate was 3.25 percent, having peaked in February 2010 at 4.2 percent. According to the GSE’s definition, a delinquent mortgage is three or months or more past due, or in foreclosure.
Wall Street started on a downward track again on Wednesday, especially after the FOMC announcement, with the Dow Jones Industrial Average losing 189.77 points, or 1.19 percent. The S&P 500 was down 1.02 percent and the Nasdaq declined 1.14 percent.