Tag Archives: Capital Economics

Are indices incorrectly misleading the market regarding the rise of house prices? "Yes" is what the market appears to be saying when it comes to rising house prices.

The Index of Consumer Sentiment, published by the University of Michigan and Thomson Reuters twice each month (one preliminary reading and one final reading), dropped to 83.9 from June's final value of 84.1. The median forecast among economists surveyed by Bloomberg was 84.7. Amna Asaf, economist at analytics firm Capital Economics, said the drop "was probably a reaction to the decline in equity prices in late-June and early-July. The expectations index, meanwhile, fell from 77.8 to a three-month low of 73.8.

Following a report from Truliathat foreign interest in U.S. housing is on the decline, Capital Economics reported foreign investment is peripheral to the housing market recovery.

According to data taken from the Mortgage Bankers Association (MBA) and compiled by Capital Economics, total application volume plummeted 22.5 percent in June.

While the current pace of price appreciation may not sustain itself for much longer, Capital Economics maintains a deceleration in price gains does not mean an end to the housing recovery.

While experts at Capital Economics don't believe the recent rise in mortgage rates will be enough to derail the recovery entirely, it does bring some difficulties with it.

According to this month's first reading, the Consumer Sentiment Index has a value of 82.7, a turnaround from the 84.5 reading in May. An analysis from economist Amna Asaf at Capital Economics pointed to the "modest rebound in gas prices and the latest wobble in equity prices" as cause for the dip. However, Asaf noted the drop "reversed only part of the sharp gain of May." The Current Economic Conditions Index also declined, falling to 92.1. Meanwhile, the Expectations Index climbed to 76.7, a seven-month high.

The pace at which home prices are rising should moderate later this year, according to an analysis from Capital Economics.

According to Capital Economics' data, total mortgage application volume fell 2.0 percent from April to May, the first monthly drop since February and the biggest decline since January.

In a recent "US Housing Market Update," Capital Economics points to Federal Reserve's latest Senior Loan Officer Survey (SLOS), which showed a net balance of 8 percent of banks loosening mortgage credit conditions in the three months to April. While that may seem a small share, Capital Economics notes conditions have now either loosened or held constant in eight of the past nine quarters. In addition, a net balance of 27 percent of banks intend to increase their residential mortgage assets over the next year.