Specially Prepared for the National Association of Realtors Midyear Legislative Meetings and Trade Expo Prepared by: LaVaughn M. Henry, Ph.D. VP & Sr. Regional Officer FRBC, Cincinnati Branch May 16, 2013 The Current Status and Outlook for the Housing Market Recovery and Mortgage Finance
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The Current Status and Outlook for the Housing Market Recovery and Mortgage Finance
Prepared by: LaVaughn M. Henry, Ph.D. VP & Sr. Regional Officer FRBC, Cincinnati Branch May 16, 2013
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Specially Prepared for the
National Association of RealtorsMidyear Legislative Meetings and
The Current Status and Outlook for the Housing Market Recovery and
Mortgage Finance
What are the Economic Realities that are Driving the Current Housing Recovery?· The alignment in the housing market of supply and demand fundamentals appears to
substantiate the position that a sustained recovery is under way.
· House prices, as measured by a variety of national indexes have risen since the beginning of 2012.
· The recovery of house prices has been broad based geographically, with 90 percent of local markets having experienced price gains over the year ending in February.
· Since the beginning of 2012, housing starts and permits have risen by nearly 30 percent, while new and existing home sales have also seen double-digit growth rates.
· Homebuilder sentiment has improved notably, and real estate agents report stronger traffic of people shopping for homes. In national surveys, households report that low interest rates and house prices make it a good time to buy a home; they also appear more certain that house price gains will continue.
· While lending for residential real estate is increasing, underwriting standards remain tight, thus slowing the rate of recovery in the market.
· Reductions in mortgage originations has been most pronounced among borrowers with lower credit scores.
THE FUNDAMENTALS OF THE HOUSING MARKET
The Current Status and Outlook for:
3
House Prices a recovering strongly at the national level…
Janu
ary
2001
Janu
ary
2002
Janu
ary
2003
Janu
ary
2004
Janu
ary
2005
Janu
ary
2006
Janu
ary
2007
Janu
ary
2008
Janu
ary
2009
Janu
ary
2010
Janu
ary
2011
Janu
ary
2012
Janu
ary
2013
-25.0%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
12
-mo
nth
Gro
wth
Ra
te
Source: Standard & Poor's/Case-Shiller 20-metro Composite Index4
additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month.”
· “The Committee will continue its purchases of Treasury and agency mortgage-backed securities… until the outlook for the labor market has improved substantially in a context of price stability.”
The majority of the FOMC do not to anticipate rate tightening until 2015…
Source: Federal Reserve Board of Governors, March 2013 Projections
…with an increasing majority in agreement as time passes.