Week of Contrasts – Reversing Consumer Debt, Sequester, Jubilant Economy and Marching Housing

get out of debt“The surge in demand for new homes this January is an excellent sign that the housing recovery is gaining steam and helping put more people back to work.” – Rick Judson, chairman of the National Association of Home Builders

ECONOMY:

Wuh! What a week! The market is full of contrasting news ranging from sequester, furlough, and budget cuts on one side to jubilant economy and housing on the other side.

The New York Fed just published its latest Quarterly Report On Household Debt And Credit. At $11.34 trillion in Q4 2012, total household debt is up from $11.31 trillion in Q3. This reversal trend implies that the consumer debt reduction experienced so far may have become history. Mortgage debts remained flat at 71 percent of the total debt.

Real GDP increased 2.2 percent in 2012 after increasing 1.8 percent in 2011. The Bureau of Economic Analysis attributed the growth to deceleration in imports, upturn in residential housing, upturn in inventory investment and small decrease in state and local government spending. Any offset in the growth was due to slow down in consumer spending.

Mortgage originations may be hit due to Fed’s budget cuts constraining Federal Housing Administration staffing to support originations.

Both federal and private agencies reported improved home prices and increased sales numbers indicating continued housing market’s contribution to the economy’s momentum.

PROPERTY MARKET

Freddie Mac posted earnings of $4.5 billion in the fourth quarter, up from $2.9 billion the prior quarter, and completed its first profitable year since 2007 showing the strength of housing recovery.

US house prices rose 5.5% from the fourth quarter 2011 to the fourth quarter of 2012, according to the FHFA Purchase only House Price Index.

The S&P Case Shiller 20-city index rose by 6.8%, and the 10-city index rose by 5.9% on a year-over-year basis.

Zillow’ January Real Estate Market Reports show that the Zillow Home Price Index increased by 6.2% on a year-over-year basis, and the Rent Value Index rose by 4.3% on YOY basis.

The National Association of Realtors reported that the Pending Home Sales Index was up by 4.5% compared to the December 2012 figure. US Census Bureau and HUD reported that the sales of new single family homes rose by 15.6% on a month-over-month basis.

INTEREST RATE

30-year rate drops. Freddie Mac’s 30-year fixed rate mortgage average dropped to 3.51%, and the 15-year FRM averaged 2.71%.

 

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