Blog

Volume 18, Issue 28 For the week of July 14, 2014


U.S. Housing Outlook – Part II


One of the foremost economists covering the housing market is Celia Chen with Economy.com. Over the next three issues we will be covering her latest U.S. Housing Outlook, just released. In Part I we summarized her key projections and what conditions have brought the market to today’s conditions. This issue we cover the roll of young adults and first-time buyers.
Young adults hit hard

The Great Recession constrained household growth, and the subsequent weak job expansion has kept household growth below normal. Young adults have been hit particularly hard, with the number of people in their 20s who are unemployed or out of the labor force and living with their parents growing by around 1.5 million since the recession. Household formation will likely be stronger than typical over the next few years. Once they find jobs, these young adults will quickly form households, helping to boost new housing demand.
Ahead: The launching of young adults will benefit multifamily units in particular, but better job prospects will also help those ready to take the step to homeownership.
First-time homebuyers are key to the housing rebound

The typical first-time homebuyer is about 30 years old, and income gains for younger households have been weaker than average. Median household income was flat from 2008 to 2012 for households aged 25 to 34 years. Growth in the median income for all households was weak but did advance by 0.8% per year. Job and income growth will accelerate and help first-time homebuyers overcome rising house prices and enter the market.
Moreover, access to mortgage credit will improve, making it easier to finance a home purchase. Credit remains tight, but mortgage lenders are expected to ease lending standards in coming months. With refinancing activity dormant given the increase in mortgage rates, lenders are eager to originate more home purchase loans. Better mortgage credit quality should also encourage more aggressive lending, as should the decline in lenders’ battles with Fannie and Freddie over representations and warranties. Lenders should also soon feel more comfortable with the recently implemented qualified mortgage rule.
Ahead: Conditions will improve for first-time buyers and their presence is necessary to compensate for waning investor demand.
The next issue of Economic Focus will feature Part III, covering Supply issues and price growth.


Key Economic Reports Released This Week 

RELEASE
DATE		 ECONOMIC
INDICATORS		 RELEASED
BY		 CONSENSUS Wt. INFLUENCE ON
INTEREST RATES
Mon 07/14
8:30 am et		 Retail Sales
for June ’14		 Bureau of the Census
Dept. of Commerce

0.6%
x-auto 0.6%

 ****  If above consensus
 If below consensus
Mon 07/14
10:00 am et		 Import & Export Prices
for June ’14		 Bur. of Labor Statistics
Department of Labor

ImPrices 0.1%
ExPrices 0.4%

 *  If above consensus
 If below consensus
Mon 07/14
1:00 pm et		 Weekly Bill Auction
 Dept. of the Treasury

N/A
offering

 **  If strong demand
 If weak demand
Tue 07/15
8:30 am et		 Empire State Mfg Survey
for July ’14		 Dept. of the Treasury

17.8

 **  If strong demand
 If weak demand
Tue 07/15
10:00 am et		 Business Inventories
for May ’14		 Bureau of the Census
Dept. of Commerce

0.6%

 *  If above consensus
 If below consensus
Wed 07/16
7:00 am et		 MBA Mtg Apps Survey
for week ending 07/16		 Mortgage Bankers Association of America

N/A

 * Undetermined
Wed 07/16
8:30 am et		 Producer Price Index
for June ’14		 Bur. of Labor Statistics
Department of Labor

0.3%
core 0.2%

 ***  If above consensus
 If below consensus
Wed 07/16
9:15 am et		 Industrial Production/Cap
for June ’14		 Federal Reserve Board

IP 0.4%
CU 79.2%

 ***  If above consensus
 If below consensus
Wed 07/16
10:00 am et		 NAHB Housing Index
for July ’14		 National Association
of Home Builders

50

 ** Undetermined
Wed 07/16
2:00 pm et		 Beige Book
 Federal Reserve Board

N/A

 ** Undetermined
Thu 07/17
8:30 am et		 Jobless Claims
for week ending 07/12		 Bur. of Labor Statistics
Department of Labor

310k

 *  If above consensus
 If below consensus
Thu 07/17
8:30 am et		 Housing Starts/Permits
for June ’14		 Bureau of the Census
Dept. of Commerce

HS 1.026M
BP 1.038M

 ***  If above consensus
 If below consensus
Thu 07/17
10:00 am et		 Philadelphia Fed Survey
for July ’14		 Federal Reserve Board

15.5%

 ** Undetermined
Fri 07/18
9:55 am et		 Consumer Sentiment
for July ’14		 Reuter’s/
University of Michigan

83.0%

 *  If above consensus
 If below consensus
Fri 07/18
10:00 am et		 Leading Economic Indicators
for June ‘ 14		 Bur. of Econ. Analysis
Dept. of Commerce

0.5%

 ***  If above consensus
 If below consensus
* Low Importance ** Moderate Importance *** Important **** Very Important
Visit Us On FacebookVisit Us On TwitterVisit Us On LinkedinVisit Us On YoutubeVisit Us On Instagram