Bernanke Says Fed Will Do What It Can to Support Housing

Hi everyone, this is Jeff Rutt. Since the election there has been increasing talk of a fiscal cliff and how the country will deal with the looming debt crisis.  For professionals in any industry, the economy is a central concern. This year, the housing market began to rebound as interest rates lowered and more people were able to afford homes. Although there is still a long way to go, the fed has promised to help push the recovery forward. It is difficult to say whether or not the fed’s actions will be beneficial.  As American’s let’s continued to pray that our government makes wise decisions in regards to our economy as they seek to tackle our fiscal problems.

Many Blessings,
Jeff Rutt

Bernanke Says Fed Will Do What It Can to Support Housing

Federal Reserve Chairman Ben S. Bernanke said the Fed will take action to speed growth and a rebound in a housing market facing obstacles ranging from too-tight lending rules to racial discrimination.

“We will continue to use the policy tools that we have to help support economic recovery,” Bernanke said today in a speech in Atlanta, Georgia.

Bernanke is pressing on with record easing including a plan to buy $40 billion a month of mortgage-backed securities, aiming to spur growth and reduce a 7.9 percent unemployment rate. He has resorted to unorthodox policies six years after home prices started a plunge that knocked the economy into the longest recession since the Great Depression.

Bernanke said while tighter credit standards after a collapse in the subprime mortgage market were appropriate, “it seems likely at this point that the pendulum has swung too far the other way, and that overly tight lending standards may now be preventing creditworthy borrowers from buying homes, thereby slowing the revival in housing and impeding the economic recovery.”

Some members of the Federal Open Market Committee said monthly mortgage bond purchases by the Fed are “likely to reinforce the nascent recovery in the housing market,”according to minutes of their Oct. 23-24 meeting released yesterday. FOMC members “generally agreed” that a housing recovery is at last under way.

Bernanke endorsed that view in today’s remarks at the Operation Hope Global Financial Dignity Summit, saying an industry that was holding the economy back has turned a corner.

Housing Weakness

“Continued weakness in housing -- reflected in falling prices, low rates of new construction, and historic levels of foreclosure -- has proved a powerful headwind to recovery,”Bernanke said. “It is encouraging, therefore, that we are seeing signs of improvement in the housing market in most parts of the country.”

Bernanke said housing-finance authorities have taken steps to “remove barriers to the flow of mortgage credit” and referred to efforts by the Federal Housing Finance Agency and by Fannie Mae and Freddie Mac to clarify rules surrounding mortgages that go into default.

These steps, the 58-year-old Fed chief said, should“increase the willingness of lenders to make new loans.”

Economic Recovery

While regulatory policy “will be important for restoring a fully functioning housing and mortgage market, the strength of the overall economic recovery is crucial as well,” Bernanke said.

The Standard & Poor’s 500 Index declined 0.2 percent to 1,352.52 at 3:01 p.m. in New York, after falling as much as 0.6 percent. The index closed yesterday at the lowest level since July.

A number of FOMC officials believe the central bank may need to expand its monthly purchases of bonds next year after the expiration of a program to extend the maturities of assets on its balance sheet known as Operation Twist, according to the minutes released yesterday.

The Fed’s actions have helped push mortgage rates to historic lows. The average fixed rate on a 30-year mortgage fell to 3.34 percent today, according to a Freddie Mac index, the lowest on record.

Those rates have increased affordability and helped bolster home price. The S&P/Case-Shiller index of property values in 20 cities rose 2 percent in the year beginning in August 2011, the biggest annual gain since July 2010.

Supporting Gains

Increasing home prices are rippling through the economy, supporting gains in consumer confidence and spending and benefitting companies such as Home Depot Inc. and Whirlpool Corp.

Home Depot, the largest U.S. home-improvement retailer, posted third-quarter profit this week that topped analysts’estimates as the recovering housing market prompted customers to spend more on home repairs.

“Homebuilder sentiment has improved considerably over the past year, and real estate agents report a substantial rise in homebuyer traffic,” Bernanke said.

The S&P Supercomposite Homebuilding Index, which consists of 11 home building companies, climbed 65 percent this year as of yesterday, compared to 7.7 percent for the S&P 500 Index.

Americans bought new homes in September at the fastest pace in two years, the Commerce Department reported last month, with demand up 27.1 percent from a year earlier.

Economy Grew

The economy grew 2 percent in the third quarter, propelled by gains in consumer spending, defense outlays and homebuilding. That was a quickening from the 1.3 percent pace the Commerce Department reported for the second quarter.

Equities reached a high for the year on Sept. 14 and have since tumbled 7.5 percent as lawmakers have yet to resolve the so-called fiscal cliff, a combined $607 billion in automatic spending cuts and tax increases. The Congressional Budget Office said that failure to address the cliff could nudge the economy into a recession.

President Barack Obama said in a press conference yesterday that voters sent a “very clear message” on election day this month that they want both parties to work together to cut the budget deficit with a mix of tax increases for the wealthy and cuts in spending.

Article posted on http://www.businessweek.com/news/2012-11-15/bernanke-says-fed-will-do-what-it-can-to-support-housing

Thanks again for reading, stay tuned for more articles and comments-Jeff Rutt

Jeff Rutt: Home Building Surges as Confidence Grows

Hi everyone, this is Jeff Rutt with some great news on the home front! This year has continued to be a landmark year for the housing market in terms of recovery. This week there is more good news that homebuilding has continued to remain strong and is even growing. The article below from the Wall Street Journal discusses how homebuilding has surged in the last month throughout the nation. One of the most encouraging side effects of the housing surge is the opportunity it creates not only for new homeowners but for unemployed individuals looking for work. Not only does the increase in homebuilding provide more jobs, it also helps to increase the amount of taxes being paid to local governments. Hopefully progress in the housing market will continue and become a major contributing factor to overall economic recovery.

Many Blessings,

Jeff Rutt

Home Building Surges as Confidence Grows

Residential construction picked up momentum in September and now is running at its highest level in four years, a turn that could have a positive effect on the jobs market and the broader U.S. economy.

Builders started work on new houses and apartments at a seasonally adjusted annual rate of 872,000 units last month, the Commerce Department said Wednesday, up 15% from August and 34.8% from September a year ago, far exceeding economists' expectations. The level of starts was the highest since July 2008.

Many economists contend that the rise in construction, if sustained, could boost job creation and economic growth. The National Association of Home Builders, a trade group, estimates that each home built generates three full-time jobs and $90,000 in new tax revenue.

"The path between here and when we get to a sustainable pace of home building, should add, cumulatively, up to two percentage points" to the nation's gross domestic product, said Michael Feroli, chief U.S. economist at J.P. Morgan Chase & Co. "It could take three or four years, but at the pace we're going at now, we might get there sooner rather than later."

The government report showed new building was up in three of four U.S. regions. Building rose 20.1% in the West, 19.9% in the South and 6.7% in the Midwest. New construction fell 5.1% in the Northeast.

Some economists say a continued rise in construction could further drive down the unemployment rate, which fell to 7.8% in September from 8.1% in August. Between 2007 and 2011, more than 2.1 million construction workers lost their jobs, according to the Bureau of Labor Statistics, and since then, only 273,000 have been hired back.

The recent growth in residential building "gives some hope in the coming months for more construction jobs," said Anika Khan, a senior economist with Wells Fargo WFC +0.29%. "A lot of construction workers are the ones who have been discouraged and underemployed, on the sidelines. If these particular workers find work, it will have a big overall economic impact, because it will boost wage and salary growth and income growth."

In September, the number of new building permits, an indication of future construction, rose 11.6% to an annualized level of 894,000, also the highest level since July 2008.

Starts on single-family homes, which made up 69% of housing starts last month, rose 11% in September to a rate of 603,000 units, a 43% improvement from a year earlier.

The pop in home building also suggests a divide between consumers and industry in the economic recovery.

While businesses continue to hold back on big investments because of uncertainty surrounding the coming elections and changes to the tax code, consumers' attitudes are brightening, pushing up spending on goods such as new homes.

"Consumption indicators seem to be pretty strong, while investment indicators seem to be pretty weak," said Paul Ashworth, chief U.S. economist for Capital Economics. "The fiscal cliff and what's happening in Europe should be driving consumption and industrial numbers in the same direction. But in this case, consumers don't seem to be as aware as businesses are."

Craig Perry, president of Centerline Homes, a Coral Springs, Fla., builder, said in the past six months he has started construction at three developments in Orlando and Broward County in South Florida, and nearly all 136 homes in the communities are under contract.

"We're seeing a much better attitude among buyers," Mr. Perry said. "People feel like home prices are rising, and mortgage rates are very low. So before prices rise too high, people want to get in on it."

Another reason for the jump in new-home construction is that inventories of previously owned homes and foreclosed homes have declined, spurring some buyers to begin looking at new properties.

The National Association of Realtors reported last month that at the current pace of sales, it would take 6.1 months to sell the listed supply of homes, down from 8.2 months of supply a year ago.

This month, CoreLogic Inc., CLGX -2.29%a real-estate data company, said the "shadow inventory," or the pending supply of homes that are delinquent or in foreclosure and could ultimately be listed for sale, fell to 2.3 million units in July, or a supply of 6.0 months, down 10.2% from a year earlier.

Ilin Misaras, who coordinates international programs for students at North Carolina State University, and her husband recently paid $500 to a builder in Raleigh, N.C., to reserve a piece of land for a four-bedroom house to be built next year. The couple plans to pay about $245,000 for the home and aims to move in next August.

Ms. Misaras, who is 30 years old, said she and her husband are watching their spending. They canceled a trip to England, France and Italy to put the money toward their new home—but they aren't worried about the economy.

"We are looking at the economy, especially in our area, the Triangle, as skyrocketing right now," Ms. Misaras said.

Once she gets a pending pay raise and her husband finishes his studies to become a registered nurse, she expects their household income will go up. "The stars are just kind of aligned for us right now," she said.

While this year's housing starts are up from a low of 478,000 in April 2009, they are still below the historical average. Builders have started construction on about 1.5 million new homes a year since 1959, to keep up with household formation which has run at an average of 1.27 million new homes a year, according to Census data analyzed by Moody's MCO +1.44%Analytics. 

U.S. households, many of which doubled up during the economic downturn in order to save money, have been growing by just over one million a year since 2008.

"My gut tells me it's the demographics kicking in," said Patrick Newport, an economist with IHS Global Insight. "At some point, builders are going to have to ramp up at a very steep rate. That's what's kicking in here. Construction has just been depressed for too long."

Article posted on http://online.wsj.com/article/SB10000872396390444868204578062310255566972.html

Thanks again for reading, stay tuned for more articles and comments-Jeff Rutt