Tag Archives: Capital Economics

Strong demand, tight inventory, and positive signs among broader economic indicators led Capital Economics to revise its previous price gain forecast up to 8 percent.

February's increase in mortgage interest rates took some of the heat out of the refinancing boom, Capital Economics says in its latest US Housing Data Response. Capital Economics' report, which compiles application data from the Mortgage Bankers Association (MBA), shows application volume fell 0.3 percent month-over-month in February. That decline, however, is still an improvement over January, which saw a 2.5 percent drop in applications from December.

Capital Economics recently explored concerns that particular states are seeing "unsustainable, investor-fueled" increases.

While some take it as a good sign that housing starts are again on the rise and construction is making a small comeback, some might cautiously wonder if the market is ready to handle an increase in construction and if we aren't headed for a repeat of the overbuilding that contributed to the past housing boom and bust. The Census Bureau reports new home sales have risen 9 percent over the past year, while housing starts have risen by a much higher 37 percent. However, Capital Economics insists the imbalance is actually not unusual.

Capital Economics forecasts the S&P 500 equity price index will end 2013 close to the current level of 1,500 and expects home prices to rise in the neighborhood of 5 percent. In turn, the growth in household wealth, the firms says, could lift GDP by around 0.7 percent. The most recent Flow of Funds report for Q3 2012 showed net household wealth grew to about $64.7 trillion. Capital Economics says the Q4 report, due March 7, is likely to show an increase of household wealth to around $65.1 trillion.

Mortgage applications saw a slight bump in the recent holiday week, according to the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey. The survey's Market Composite Index, a measure of mortgage loan application volume, increased 3.4 percent on a seasonally adjusted basis for the week ending February 1. Capital Economics also issued its data for mortgage application activity throughout January, observing that application volume for purchase loans was the strongest it's been in a year and a half.

Realtors in December expected prices to rise by about 3.5 percent over the next year, while consumer estimates were more modest at 2.5 percent for the same time period, Capital Economics noted in its monthly housing report. The estimates show a growing optimism among those groups. But, with the low supply of inventory, Capital Economics anticipates much bigger gains.

While home prices are expected to increase by 5 percent on the national level, analysts at Capital Economics say some regions are more likely to see little to no growth at all.

Following S&P's calculation of a 0.1 percent decrease in prices in November, analysis on home price data remained positive.

The CFPB's long-awaited qualified mortgage standards have been unveiled, and Capital Economics says the new rules "will not hamper the housing recovery."