As almost everyone knows, there was a time that mortgage rates soared into the high teens. I remember it well.
With interest rates as low as they are, I’ve been wondering why buyers in Manhattan aren’t eager to snap up properties with funds borrowed at record lows. Taking into account government subsidies in the form of tax deductions, how could this fourth quarter’s activity be so relatively sluggish? (It is, though the Q3 reports may lead you to believe otherwise.)
The latest statistics indicate growing signs of a housing recovery, but mark any recovery as tentative.
Increasing strength could be undercut in a number of ways. Among the uncertainties are unemployment, mortgage rates, the condition of both the U.S. and global economies, and consumer confidence. Also to be considered is the so-called “shadow inventory.”
Still, new information suggests that perhaps we are not only seeing the proverbial light at the end of the tunnel, but possibly our journey through the tunnel has ended.
The news in the last day or two is, of course, conflicting. There is evidence that the supply of housing has dropped dramatically (in the chart above); builder confidence is inching up; home construction of new homes jumped in January; the Conference Board said today that its index of leading indicators ticked up by 0.3 percent; today’s inflation measure shows an unexpected rise; it could take up to 33 more months to dispose of the supply of homes facing foreclosures; and some economists foresee another dip in the housing market.
In today’s New York Times, reporter David Streitfeld discovers that a number of others, including me, have been saying for months: Home prices and sales could continue to decline. The way the article is written would lead–and doubtless will lead–readers to believe that the sky is falling.
Yes, it’s undeniable that many variables could change the anemically recovering housing market. Among them are consumer confidence, unemployment rate, inflation, mortgage rates and a rise in the rate of foreclosures. Continue reading