Tag Archives: Capital Economics

Home sales declined in March, but demand for mortgage credit increased, according to the US Housing Market Monthly from Capital Economics. Recently, the Fed reported an increase in home purchase applications in April, and credit "loosened a touch," the report stated. The firm maintains an overall positive outlook on the market despite the small decline in March sales and quashes any concerns of another bubble forming. In fact, Capital Economics calculated it could take "until 2017 for housing to return to fair value."

After examining mortgage application data throughout April, Capital Economics sees "mounting evidence that mortgage-dependent buyers are starting to play a fuller role in the housing market recovery." Compiling information provided by the Mortgage Bankers Association (MBA), Capital Economics found that total application volume was up 3.5 percent from March to April. In its latest Weekly Mortgage Applications Survey (for the week ending May 3), MBA reported a 7.0 percent increase in applications.

In an analysis released in response to the Census Bureau's report that homeownership hit an 18-year low in the first quarter, Capital Economics warns that we may not have seen the bottom yet. The firm predicted last year that the homeownership rate would decline to a low of 64 percent--a forecast it insists will come sometime within the next year. One factor contributing to the downward trend in homeownership is tight lending standards, Capital Economics says.

Despite some obstacles in the homebuilding recovery and three consecutive monthly declines in the National Association of Home Builder's homebuilder confidence index, Capital Economics remains largely optimistic about the homebuilding rebound. The analytics firm is sticking with its previous prediction that housing starts will reach about 1 million this year and 1.3 million next year as rising home prices help to mitigate increases in construction costs.

While rapid price gains have some analysts issuing warnings about a housing bubble in the making, newly released reports argue that a repeat of the 2008 crash is unlikely.

While the refinance boom "is coming off the boil," mortgage application data for March has Capital Economics confident that home purchase application volume is in the early stages of a sustainable comeback. Applications for purchase loans rose 4.5 percent from February to March and 11.4 percent over the past year--indicating an upward trend, even if volume is still low by historical standards. March's final week saw a 1 percent bump in the Mortgage Bankers Association's measure of purchase application volume.

In its latest US Housing Market Update, Capital Economics addresses the uneven gains seen between home purchase prices and rent costs over the last year. (The report cites January data from CoreLogic, which shows prices rising 9.8 percent year-over-year with rents rising only 2.7 percent in the same period.) The disparity is weighing on rental yields, threatening to drive out investors in a market still heavily reliant on them. However, property economist Paul Diggle sees no reason to worry just yet.

While the economy has already seen a slight bump from homebuilding, researchers from Capital Economics contend the burgeoning recovery may provide even greater lift to gross domestic product (GDP). In the firm's latest U.S. Economic Update, senior U.S. economist Paul Dales says the recovery in residential building contributed 0.3 percentage points to last year's 2.2 percent rise in GDP. In addition, recent developments have further highlighted the impact of the recovery on the larger economy.

Following Elizabeth Duke's comments on the impact capacity constraints are having on the housing market, Capital Economics released an update with a similar focus.

House prices increased 9.7 percent year-over-year in January, continuing a recent trend, and prices show "no signs of an imminent slowdown," according to Capital Economics.