Next Move for Housing…

The wide-spread belief the housing recovery enjoyed only a few weeks ago is being tested by recent economic news.  First quarter GDP at 2.5% growth was lower than consensus forecasts for about 3% while most other recent releases were weaker than expected.   Closer to housing, Gillian Tett writes in the Financial Times that the key to the mortgage market is Uncle Sam snd that without government support home prices would be sliding rather than climbing up.  Looking beyond the Fed’s continuing support of low interest rates by buying mortgage backed securities, some 90% of all mortgage backed securities are federally guaranteed, far more than what was typical before the financial crisis.   It suggests that government mortgage guarantees, not home buyer optimism, is behind the housing recovery.   However, investors may be focusing on guarantees because interest rates are low and the guarantees are offered, not because of fears of another housing collapse.

Either way, time will tell whether the housing gains — rising prices, higher sales and more construction — will be sustained going forward.  The next piece of important data arrives on Tuesday morning at 9 AM with the S&P/Case-Shiller Home Price Indices.  Stay tuned.

The posts on this blog are opinions, not advice.
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