GDP Gets Revised, Existing-Home Sales and Housing Affordability Indicate Real Estate ImprovementNov 24 2009
November 24, 2009 - Mortgage rates slid further downward last week as October's economic data continued to point to a tepid recovery at best. While most economists have been expecting the recovery to have some ups and downs, over the last few weeks, many market players seemed to expect the recovery to come together faster. However, last week's data reaffirmed that we still have a long road ahead of us. Industrial Production nudged only 0.1% higher, while housing starts plummeted to 10.6%.The good news is that both the CPI and PPI continue to show that inflation is staying in control.
Despite a few hiccups, there are some positive economic indicators that point to an improvement in real estate. Existing-home sales, which were at 5.54 million units in September, have now risen to 6.10 million units and will likely be driven up further by the first-time homebuyer tax credit extension that was implemented earlier in the month.
Housing affordability, which heavily correlates with current home prices, should also continue to propel existing-home sales. As recently reported by the NAHB, 70% of all new and existing homes purchased throughout the third quarter were affordable to families with a median income of $64,000. This new figure is a substantial jump from the 56.1% that was documented in the third quarter of 2008.
This holiday-shortened week is unlikely to see any huge moves in mortgage rates, especially since the GDP was recently revised to 2.8%, a smaller increase than originally estimated. Although there is little risk of seeing the GDP revised to a negative number any time soon, the closer GDP gets to 2.0%, the further out expectations will be set for a recovery in both job and housing markets.