Economists' Outlook

Housing stats and analysis from NAR's research experts.

CoreLogic Price Data, Construction Spending, ISM Index

In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses CoreLogic price data, construction spending,  and the ISM Index.

  • Encouraging housing data out today from CoreLogic, which showed home prices rising by 3.8 percent from one year ago. This upward movement in median and average home price is consistent with many other home price metrics including Case-Shiller, NAR's median price, and the government’s FHFA price index.
  • The rising prices are one reason for exceptional loan performance on recently originated mortgages. Simply put, those people who bought homes in the past 3 years are one of best generations in terms of loan performance. The much higher credit scores of the borrowers are also a factor. But at the margin there appears to be room for further lending to increase bank profits. The question then is why are the banks so stringent with loans while sitting on piles of cash deposits?
  • Separately, total construction spending (the value of newly completed homes and buildings) rose by 9 percent.  Private residential construction was the big gainer with a 19 percent jump, while private commercial construction notched up 11 percent. Office construction is on the mend, but the latest rise is tiny in relation to the very deep cuts of the past few years. Public construction declined as state and local governments are trying to balance their budgets.
  • Finally, the Federal Reserve is more likely than not to announce sometime this month to buying mortgage-backed securities in the hopes of lowering interest rates. That’s because the manufacturing sector index (ISM) was uninspiring, at below 50 for the third straight month. Therefore the Fed will try to pump more money into the economy. But the impact will be barely noticeable. It is no longer interest rates that matter, but rather underwriting and credit score requirements that are holding back a potentially much more powerful housing market recovery and subsequent economic recovery. Homebuyers are already happy to get mortgage rates at 3.7%, but would not care all that much if rates fell to 3.5%. In fact there are many potential homebuyers who would be happy to get a mortgage at 4.5% or even 5%. Unfortunately, these sidelined homebuyers who may have a credit score of 720 have been turned away. The current Fannie- and Freddie-backed mortgages have an average credit score of 760, historic highs.

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