October 2009

President Barack Obama said Saturday that reports the economy is growing again and that more than 1 million jobs were saved or created by his stimulus plan show “we are moving in the right direction.” But he tempered his upbeat message with a cautious word about further job losses and progress yet to be made. The government reported this week that the economy grew 3.5 percent from July through September, the first signs of growth in a year and unofficial confirmation that the economic slide that began in December 2007 is over. Obama’s assessment came a day after an independent federal board reported that nearly 650,000 direct jobs have been saved or created because of stimulus program money provided to businesses, contractors, state and local governments, nonprofit groups and universities. [Read this article]

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The Obama administration endorsed plans to extend an $8,000 tax credit for first-time homebuyers, saying it is helping stabilize the nation’s housing market. The tax break, enacted earlier this year as part of an economic stimulus package, has “brought new families into the housing market and contributed to three consecutive months of rising home prices,” Treasury Secretary Timothy Geithner said today in a statement. The tax break will expire Nov. 30 unless Congress intervenes. [Read this article]

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Some positive housing statistics have come out recently. The Case-Shiller index, which tracks changes in the values of residences in 20 metropolitan areas in the U.S., is up 2.9% in the second quarter. The previous quarter it was down 7.9%. The consumer confidence index was 54.5 in August, up from 47.4 in July. But does this data mean the market is turning around? Housing experts say in certain areas yes, while in others not so much. As many real estate market watchers note, real estate markets need to be analyzed locally as each market functions differently. Nationally speaking, Mickey Cargile, managing partner of Cargile Investments, says that the bottom is in place for housing prices and they will start to go up in a year to 18 months. [Read this article]

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A deal struck among key senators last night to extend the homebuyer tax credit will broaden the benefit to include existing homeowners who are buying a new home as well as first-time homebuyers. Tax credit for move-up buyers will be less than for first-time buyers, but still significant. They will qualify for a credit of up to $6,500 and must have owned their current homes at least five years. Under the current program and the new one for 2010, first-time buyers qualify for up to $8,000 and cannot have owned a home for the past three years. Under the compromise worked out last night, the homebuyer tax credit would be extended seven months. Homebuyers will have to sign contracts by the end of April in order to qualify and they would have until the end of June to close. The credit will reach the floor as soon as Democrats and Republications reach agreement on several related issues, possibly today or tomorrow. [Read this article]

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The U.S. economy grew at a 3.5% annual rate in the third quarter, ending a string of declines over four quarters that resulted in the most severe slide since the Great Depression. The growth, reported by the government Thursday morning, was slightly stronger than expectations. Economists surveyed by Briefing.com had forecast 3.2% growth in gross domestic product, the broadest measure of the nation’s economic activity. The economy shrank at a 0.7% rate in the second quarter. The positive GDP report is one more sign that the economy has likely pulled out of the deep recession that started in December 2007. The reading by itself doesn’t mark an end to the recession; the economy actually grew in the second quarter of 2008. But the stronger-than-expected growth is likely to lead more economists to declare that the economy hit bottom earlier this year and turned higher at some point in the summer. [Read this article]

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Senate negotiators reached a tentative deal to extend a tax credit for first-time home buyers, but its passage remains uncertain. The agreement would extend the existing credit for first-time home buyers, worth up to $8,000, while offering a new credit of up to $6,500 for some existing homeowners, Senate aides said. The reduced credit would be available to all home buyers who have been in their current residence for a consecutive five-year period in the past eight years. The new provisions are aimed at broadening availability of the credit beyond first-time buyers and giving the weakened real-estate market a bigger boost while preventing real-estate investors from benefiting. [Read this article]

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Senate leaders have reached a tentative deal to extend the first-time homebuyers’ tax credit that was originally passed earlier this year as part of the stimulus bill, Republican and Democratic sources told CNN on Wednesday. The agreement would extend and expand the credit to include current homeowners who want to move, according to the sources. The original credit in the stimulus bill is set to expire at the end of November and offers a tax credit of $8,000 to first-time homebuyers. Senate sources told CNN they have tentatively agreed to extend that $8,000 credit for first-time buyers until the end of April. In addition, they are adding a $6,500 credit for some current homeowners who buy a new residence by then. [Read this article]

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No one seems quite prepared yet to proclaim that we’ve seen the bottom in housing, but from the looks of this chart the bottom occurred quite awhile ago. After adjusting for inflation (I’m using the PCE deflator here), real home prices have risen four months in a row, at a 12% annualized pace. Since the Case Shiller data involve a lag of several months (i.e., the August figure is the average of prices for the April-June period), it would appear that the bottom in housing prices happened last March. At that point, prices in real terms had fallen by about one-third relative to their all-time high in mid-2006. Once again we see evidence that markets can solve apparently intractable problems. All it took to fix the housing bubble was lower prices and lower interest rates. Demand is now outpacing supply. It seems to me that there has been a sea-change in the dynamics of the housing market. [Read this article]

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The S&P/Case-Shiller 20-city home-price index, a closely watched gauge of U.S. home prices, rose 1.2% in August from July in the fourth straight monthly increase, but prices remain below year-earlier levels. For the 17th straight month, no area in the 20-city index posted a year-over-year price gain. That put nationwide prices at levels seen in 2003. The index isn’t seasonally adjusted, and home prices are benefiting from the traditional increase seen in the spring and summer months. But even taking the usual bump into account, the numbers indicate some stability in the market. “The activity in this spring is far greater than what we’ve seen in recent years,” said Dan Greenhaus of Miller Tabak & Co. [Read this article]

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