Every week the Research staff analyzes key data releases and explain what they mean for you and your business. In this update, we give the highlights of the most important data releases for the week of June 6-June 10, 2011, along with graphs that show the latest movement and overall trends.
Highlights for Monday, June 6, 2011:
- If the interest rates were to rise by few percentage points, then the deficit problem could quickly spiral out of control. Mortgage rates would also rise, as the 30-year fixed mortgage rates are priced on average at about 2 percentage points above the 10-year Treasury rates. NAR expects the 10-year borrowing rate to reach 3.7 percent by the end of the year.
Highlights for Tuesday, June 7, 2011:
- A new regulation, part of last year’s Dodd-Frank bill, to possibly mandate a minimum 20 percent down payment to obtain a mortgage is getting postponed a bit.
- Before any new rules are imposed, there is a comment period which permits people to submit how and why the rules will harm or help the country. NAR has provided comments of a significant negative impact to the housing market and homeowners. See the video here.
- Because of strong communication efforts related to this matter by many groups, the comment period was extended yesterday. This extension is now until August 1, and nonetheless is quite a rare happenstance in Washington policymaking. It could also be an admission by regulators that the original rule of requiring a 20 percent down payment may have serious unintended consequences. However, after the August comment period, the regulators will come up with precise rules on down payment requirements that will go into effect in one year.
Highlights for Wednesday, June 8, 2011:
- There has been general economic and housing market sluggishness in the second quarter of this year. The likely trigger was gas prices peaking in April, which then led to a fall in the consumer confidence index.
- Note that the mortgage applications do not include all-cash transactions. All-cash buys have been about one-third of all sales in recent months, an unprecedented high figure.
Highlights for Thursday, June 9, 2011:
- NAR Research produces similar reports called the Surveys of REALTOR® Sentiment/Regional Vice-Presidential Reports. These reports focus on performance in the real estate market as reported by NAR Regional Vice Presidents.
- The trade deficit shrank by $3 billion in April to $43.7 billion driven by increasing exports and a slight reduction in imports. By definition, an improved trade balance contributes to economic growth, but many factors contribute to a country’s trade balance.
Friday, June 10, 2011:
- Some good news: prices for petroleum imports declined 0.4 percent, the first decrease in 9 months. Still, fuel prices are 42.3 percent higher than the same time last year.
- Excluding fuel, consumer goods inched up 0.3 percent, and a much smaller 4.4 percent over the year. Prices of exports also showed some easing, with a 0.2 percent increase, also the lowest in 10 months. Since May 2010, all export prices are 9 percent higher.
- The largest drive came from agricultural exports, which jumped 30.1 percent, though showing some easing since April with a 0.2 percent decline. This is the first decline in 10 months.
- Generally, high inflation has translated into higher long-term borrowing rate like on the 30-year fixed mortgage. However, this has not been the case – yet.
- Separately, the Fed yesterday released their quarterly Flow of Funds report which showed a decline in household debt at annual rate of 2 percent in the first quarter. Household debt has been contracting continually since the beginning of 2008 mostly driven by falls in home mortgage debt. Home mortgage debt again fell at an annual rate of 3.5 percent in the first quarter, 75 basis points decline from the same time last year. Unfortunately, this is mostly due to foreclosure sales. Household net worth which accounts for the difference between the value of assets and liabilities for households was up $943 billion from the quarter before, to end at $58.1 trillion in the first quarter.