Time to Exhale It appears a disaster was averted: The debt ceiling was raised and the federal government wont default on its debt. We cant say we were surprised at the outcome. We mentioned last week that we thought a default was unlikely. The money was always there to make interest payments and to pay off maturing debt. In addition, there are too many politically connected constituents – banks not the least of them – for politicians to allow a default. We also noted that “shutdown” was a misnomer. Over 80% of the federal government was still up and running. Unfortunately, the portion furloughed impacted the mortgage market. Applications for government-sponsored loans dropped by more than 7% last week. Conventional activity was similarly limited due to delays in verifying income with the tax collectors. With everyone back to work, mortgage lending should ramp up and loans should be approved in a more timely manner going forward. When the political imbroglio began a few weeks ago, we noted that we expected the rate on the conforming 30-year fixed-rate loan to hold within a 4.25%-to-4.50% range. Thats been the case. This week, Bankrates survey showed the rate on the 30-year loan averaged 4.42%, while Freddie Macs survey showed it averaged 4.28%. We expect rates to remains staid for the next week or so. Some of the government departments furloughed were responsible for producing economic data. Since the furlough, theres been a dearth of insight into the state of the economy. That will soon change over the next week, and we should begin receiving an influx of scheduled data in short order. In the meantime, the Federal Reserve offered some insight into the state of the economy this past week. Not surprising, nothing has really changed: Economic growth remains sluggish. In the Feds Beige Book, a report released every six weeks, worlds like “modest” and “moderate” peppered the text, as they have in previous releases for much of 2013. Of course, the private data providers continued to function. On that front, FNCs Residential Price Index shows housing prices moved higher by 0.6% in August to post the 18 th month of consecutive gains. Weve been warning over the past month that the strong price gains weve seen over the past two years will soon abate. Looking ahead, we expect price data providers CoreLogic, Case-Shiller, and Zillow to start reporting slower month-over-month gains. A point worth emphasizing is the hotter the market, the greater the likelihood of reduced price growth. Another point worth emphasizing – one weve emphasized previously – is that slowing price growth isnt bad. We want to get back to the way real estate has historically functioned in most markets – slow, steady, with low volatility.
Posted on: Mon, 21 Oct 2013 20:53:40 +0000
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