Economy Watch: Economic Worries a Drag on Housing
- Jun 10, 2014
Americans’ concerns about the direction of the economy and their household income appear to be weighing on housing growth, according to Fannie Mae’s May 2014 National Housing Survey, which was released on Monday. The share of respondents who believe the economy is headed in the “wrong direction” remained at 57 percent last month, while those who said their household income is “significantly higher” than it was at the same time last year decreased four percentage points to 21 percent.
Although respondents’ attitudes toward housing have been generally positive during the past few months, their reluctance to enter the market for buying or selling residential property has restrained activity below typical seasonal trends, the GSE notes. While recent housing activity suggests that the worst of the housing slump is probably over, caution among consumers this year will likely keep a damper on sales in 2014, perhaps reducing total sales compared with last year.
“Consumers’ lukewarm income expectations and reticence about the economy seem to be holding back housing demand,” Doug Duncan, senior vice president and chief economist at Fannie Mae, explains. “This year’s spring and summer home-buying season has gotten off to a slow start, even as mortgage rates have trended lower over the past two months.” Economic conditions continue to be the top concern among consumers who think it’s a bad time to buy or sell a home.
S&P affirms US rating, mulls raising it
Late last week the rating agency Standard & Poor affirmed its current AA+/A-1+ rating (long-term and short-term, respectively) for the U.S. sovereign debt, noting that the outlook for such debt is now “stable.” That’s a very high rating for sovereign debt, but not quite the highest, which is AAA for long-term debt.
The company said that it would consider restoring a AAA rating—the agency’s highest, to the United States—provided there Congress displays more bipartisan cooperation on fiscal policy, and there’s a further decrease in government debt. (As a percentage of GDP, federal debt has in fact contracted dramatically in recent years from the recessionary highs a few years ago.)
The United State had S&P’s highest rating for many years, but lost it in the summer of 2011 when some members of Congress brayed loudly about letting the government default—not pay the bills, essentially—by not raising the statutory debt ceiling. In the end, Congress did indeed raise the debt ceiling, but it was enough to agitate investors and rating agencies.
Wall Street had a mild up day on Monday, and set a few more nominal record highs, with the Dow Jones Industrial Average gaining 18.82 points, or 0.11 percent, while the S&P 500 was up 0.09 percent and the Nasdaq advanced 0.34 percent.