Story URL: http://news.medill.northwestern.edu/chicago/news.aspx?id=198717
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Reports suggest US housing market may be looking up
by Elizabeth Dexheimer
Jan 18, 2012
National Association of Home Builders/Wells Fargo/Elizabeth Dexheimer/MEDILL
The Housing Market Index rose in January as builders grew more confident about single-family homes, according to NAHB/Wells Fargo. Figures rose for the fourth consecutive month.
The number of mortgage applications filed last week surged 23 percent from one week earlier, according to the Mortgage Bankers Association. The MBA’s seasonally adjusted data also showed that fully 82 percent of the applications filed were not home buyers, but people looking to refinance their home at the current extremely low interest rates.
In a separate report, home builders surveyed earlier this month showed more confidence about the sales prospects for new, single-family homes. The National Association of Home Builders/Wells Fargo report’s monthly Housing Market Index jumped 4 points in January to 25. The index, which is calculated on a scale of 0-100, rose for the fourth consecutive month. In the Midwest, the index moved up a more modest one point, to 24.
“The housing market may now be beginning to improve,” said Steven A Wood, Chief Economist at Insight Economics, in an online analysis of the MBA report. Because seasonal factors can skew data at this time of year, Wood said ”this conclusion must remain tentative. Nevertheless, there are hopeful signs.”
Other economists cautioned that it could be a long time before the housing market fully recuperates.
“You can only go up, but we don’t envision strong acceleration,” said Adolfo Laurenti, Deputy Chief Economist at Mesirow Financial. The market will “continue to creep up,” he said, but the trend will be “nothing exceptional.”
Laurenti added that the U.S. housing market’s levels are still very depressed and an HMI of 25 is considered low. Home “prices are fairly low and they are not going up,” he said. “There’s still a high unemployment rate and banks are still reluctant to extend mortgages.”
According to the MBA, average interest rates for conforming 30-year fixed-rate mortgages dropped last week to 4.06 percent, the lowest rate seen in the history of MBA’s survey on this category of loans. Mesirow’s Laurenti pointed out that an increase in refinancing because of low interest rates does not necessarily mean that more people are buying homes.
“When you see people refinancing, that’s not saying much about housing market,” said Laurenti. “People may just be looking to improve their monthly cash flow…The longer people expect interest rates to stay low, the less pressure they have to take advantage of them right away. That makes for gradual recovery.”
After a lengthy bubble, the U.S. housing market began to decline in 2007, and eventually went into a steep fall that drove home prices lower.
The MBA’s four week moving average for the seasonally adjusted Market Index -- a figure designed to smooth out short-term fluctuations in the weekly data --was up 5.99 percent.
