Economy Watch: Residential Delinquencies Jump in September
- Oct 25, 2012
The Census Bureau reported on Wednesday that sales of new single-family houses were at an annualized rate of 389,000 in September 2012, which is 5.7 percent above the revised August rate of 368,000 and 27.1 percent above September 2011’s rate of 306,000. In fact, it’s the highest level since early 2010, when the market was artificially jazzed up by the new homebuyer tax credit.
So far 2012 is on track to be an exceedingly modest year in terms of new home sales, but at least it’s going to be better than 2011. A rate approaching 400,000 new home sales per year is on par with the recessionary lows of previous decades, especially the early 1970s and the early ’80s. A more normal sales rate (historically speaking) is between 600,000 and 800,000 units sold per year.
At least the new home market has worked its way through the excess supply of the darkest days of the recession, such as during early 2009, when supply shot up to over 12 months’ worth of unsold homes, mainly because people suddenly stopped buying them. The bureau reported that new houses for sale at the end of September totaled 145,000, representing a supply of 4.5 months at the current sales rate.
Separately, the Federal Housing Finance Agency noted on Wednesday that its U.S. home price index was up 0.7 percent month-over-month in August. Compared with the same month in 2011, the index rose 4.7 percent, but it’s still well (15.9 percent) below the 2007 peak. The FHFA’s index is based on based on single-family houses with mortgages backed or owned by Fannie Mae or Freddie Mac.
FOMC calls growth “moderate” again
The Federal Open Market Committee, which met this week, said in a statement on Wednesday that “that economic activity has continued to expand at a moderate pace in recent months,” which is pretty much what the committee has been saying for months. It added that “growth in employment has been slow, and the unemployment rate remains elevated. Household spending has advanced a bit more quickly, but growth in business fixed investment has slowed.”
The FOMC also confirmed that QE3—or perhaps it should be the Ongoing QE—will in fact be ongoing. “The committee will continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month,” the press statement noted. The policy of reinvesting principal payments from the Fed’s holdings of agency debt and agency MBS back into agency MBS will continue. Moreover, interest rates will continue to be ultra-low till mid-2015, the central bank asserted.
Nearly all of FOMC’s members voted aye on the current policies, but Jeffrey M. Lacker was the odd man out, as he often is. He voted no since he’s “opposed additional asset purchases and disagreed with the description of the time period over which a highly accommodative stance of monetary policy will remain appropriate,” the statement explained. Lacker is president of the Federal Reserve Bank of Richmond.
Wall Street went nowhere fast on Wednesday, with the Dow Jones Industrial Average losing 25.19 points, or 0.19 percent. The S&P 500 was down 0.31 percent and the Nasdaq declined 0.29 percent.