Monday Update
It's also important to note that the revised second Quarter Gross Domestic Product Report showed that the economy has now contracted for four consecutive quarters for the first time since the Great Depression. This is another area to watch in the coming months as we gauge the pace of recovery.
Real Estate News: Homes continue to be more affordable than they have been in nearly two decades. The typical American family, making the nation's median income of $64,000 a year, could afford to buy 72.3% of all homes sold in the United States during the second quarter, according to a quarterly report from the National Association of Home Builders (NAHB) and Wells Fargo. That's off just a tad from the record 72.5% reached during the first three months of 2009, but up substantially from the second quarter of 2008 when only 55% of homes sold were affordable. "The increase in affordability along with the $8,000 federal tax credit for home buyers is stimulating demand, particularly among young, first-time buyers," said NAHB Chairman Joe Robson, a homebuilder from Tulsa, Okla., in a prepared statement. The NAHB judges a home to be affordable if a family making the metro areas median income could devote no more than 28% of their take-home pay toward housing costs. Source: CNN/Money
A survey conducted for researchers at the University of Chicago and Northwestern University found that fewer Americans feel that home prices in their area will decrease in the next year than did at the end of last year. The findings were part of the Chicago Booth/Kellogg School Financial Trust Index. In December 2008, 47% of the respondents to the survey felt home prices in their local market would decline in the next year. By March 2008, that number fell to 37% and in the most recent survey, the number was 26%. Paola Sapienza of the Kellogg School of Management at Northwestern said, "In only six months we've seen marked improvement in confidence toward home values. In fact, 75% of the people who changed their opinion during this time period now think house prices will remain stable, while the remaining fourth think that house prices will rise." The Financial Trust Index increased from 19% in the first quarter to 21% for the second quarter as the researchers found an increase in the percentage of Americans who trust their banks and bankers, from 29% to 34% during that timeframe. Source: National Mortgage News
First-time homebuyers are forcing home builders to think frugal by penny-pinching on upgrades. Nearly 50 percent of new homes sold in the first six months of 2009 cost less than $200,000, the largest share for the first six months of a year in five years. The average size of new homes fell to 2,065 square feet, the smallest since 2000. The high end isn't moving, so builders have to dumb-down their designs and put in Formica kitchens and the bare-bones carpeting, says Brian Bethune, an economist at IHS Global Insight. The bare bones approach is helping builders that focus on first-time buyers improve their profits. Source: Bloomberg
Speaking of the job market, it will also be important to keep an eye on Thursday's weekly Initial Jobless Claims Report. The recent trend of higher than expected Claims is disappointing after what appeared to be a steady decline in Claims earlier this summer. We'll want to take notice on Wednesday of the Meeting Minutes from the latest Federal Open Market Committee meeting. Any comments regarding future inflation could move the markets.
Denelle Geibel
