Thursday, March 18, 2010

Macro / Commentary Economic & Market Analysis $SRS $URE

  •  While it’s hard to believe after a multi-year plunge to low levels, housing has remained a weaker link in the nascent economic upturn. Whether the recent home sales weakness is related to variation in tax policy, bad weather, or bad fundamentals is uncertain.
  •  Single-family residential construction is lean and low, and poses a minute risk to economic recovery. Non-residential construction activity remains a bigger overhang with less adjustment behind it.
  •  The supply of mortgage credit is a bit of an enigma. The yield curve is steep and government guarantees run deep. Yet further tightening on prime conforming mortgages by banks was evident in the past few quarters. Increased fees and performance requirements for mortgages securitized by the housing GSEs seems to explain some of the reluctance. But severe delinquency rates more generally are the most obvious problem.
  •  The high level of current delinquencies, meanwhile, is also a reflection of forbearance. A low level of actualized foreclosures amid high delinquencies helps stabilize housing in the short term, but limits the long-term scope for future gains.

Housing Update: A Long, Jagged Bottom

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