The US Commerce Department reported Wednesday that construction spending slipped last month, reaching its lowest level in seven months and prompting some economists to lower their estimates for first-quarter economic growth in the world's largest economy. The March slip in spending by builders is the biggest such decline since 2006, when the housing market began a downturn that triggered the worst US recession since the 1930s. According to the report, spending fell 1.7 percent from February's spending to just under $857 billion. The decline came after a previously reported 1.5 percent jump in spending in February. The decline also caught Wall Street by surprise, as a group of economists in a recent Bloomberg survey expected the report to show a 0.7 percent increase, on average.
An Appeals Court judge in New York ruled Friday that a lawsuit against Swedish bank UBS over Fannie Mae and Freddie Mac mortgage-related losses may proceed. Filed by the Federal Housing Finance Agency, the agency that oversees the two mortgage behemoths, the claim is but one of more than a dozen suits brought against banks over massive losses suffered by the mortgage insurers when the housing market collapsed in 2007. According to the FHFA, the two companies lost close to $200 billion on bad mortgages during the recession. UBS asked the judge, presiding over the 2nd US Circuit Court of Appeals, to dismiss the suit, but the judge ruled that the FHFA did not wait too long after taking control of Fannie and Freddie and that it had a basis to bring a case.
The National Association of Realtors on Wednesday released its report on pending home sales for February. The report hinted at a gradual slowdown is the sales of previously owned homes across the country, tempering excitement generated by recent trends that show an improving housing sector, something most economists agree is pivotal to the overall economic recovery. According to the report, the number of contracts signed to buy existing homes fell 0.4 percent last month. Of course, the slip came on the heels of January's numbers, which were revised upward 3.8 percent. Both readings were higher than in any month since April 2010, showing the underlying trend is still positive. On a year-over-year basis, the pending home sales index was up 5 percent from February a year ago.
The National Association of Home Builders reported Monday that its index of builder sentiment, compiled jointly with Wells Fargo, fell for the third straight month in March, following eight straight months of gains. While home prices are up, and many builders are seeing elevated demand, builders are being hindered by legislative delays in developing lots as well as rising costs for labor and building materials. In addition, many potential buyers are unable to qualify for credit to buy new homes because of lenders' demands for high credit scores or down payments.
Since the onset of America's worst economic downturn since the 1930s, the economy has been in a state of constant recovery. Manufacturing, consumer spending and other parts of the economy have shown signs of solid growth at times, but a couple of US economic sectors have lagged behind: housing and the labor market. Based on recent reports, however, it seems as if both sectors are finally gaining some momentum. To put an even more positive spin on things, the housing recovery actually drives improvement in the labor market, as new homes require workers to build them, so the trend is likely to gain even more steam.
The Mortgage Bankers Association reported Friday that applications for home loans surged a whopping 14.8 percent for the week ended March 1st following three straight weeks of declining applications. The report showed significant gains in demand for not only home purchase loans, but also refinance mortgages, as both categories rose about 15 percent. The report underscores the building momentum in the recovery of the housing market, which has essentially held back the broader economy for better than four years. The reported gain in mortgage application levels brought the MBA's index to its highest level since the middle of January.
It is only the second drop in construction over the last six months.
Applications for building permits, a major indicator of future construction activity, were up 1.8%, to an annual rate of 925,000 - beating analyst expectations of a 1% gain.
Year-over-year, housing starts are up 24%.
San Diego-based housing data provider RealtyTrac reported Thursday that the pace of foreclosures in the US reached a six-year low last month. According to the report, foreclosure starts totaled 64,770 in January, representing a 28 percent decline from last January and a drop of 11 percent from December. It was the lowest total of starts since June 2006. The decline resulted largely from the dropoff in California home seizures. Major new regulations went into effect on January 1st in the Golden State, forcing lenders to slow their roll on evicting past due borrowers. In fact, if California's stats were taken out of the equation, US starts would have actually gained less than 1 percent from December.
Government-run home loan insurer Freddie Mac reported Thursday that mortgage rates were unchanged this week, with the average 30-year rate hovering at 3.53 percent and the average rate for a 15-year loan holding steady at 2.77 percent. Both rates are near record lows as the 30-year reached its lowest level on records dating back to 1971 last November and the 15-year hitting its lowest point of 2.63 percent last year, as well. The average rates for adjustable-rate mortgages rose this week, however, as the 5-year ARM averaged 2.64 percent, up from 2.63 percent a week ago, and the 1-year ARM averaged 2.61 percent, up from 2.53 percent last week.
Real estate data tracker CoreLogic reported Tuesday that home prices rose the most in six years in December, marking the 10th month in a row that prices rose on a year-to-year basis. The firm's home price index rose 0.4 percent from November levels and a whopping 8.3 percent from December 2011, according to the report. The year-over-year improvement was the biggest since May 2006. Making the news even better, the impact of distressed home sales was not significant, as prices of non-distressed properties rose 7.5 percent on a yearly basis and 0.9 percent from the previous month. Housing insiders applauded the report, saying that it shows that the housing sector is finally starting to contribute to overall economic growth.