RECENT American economic news has been pretty good. Employment grew in March, activity in manufacturing and services is expanding, equity markets are rising\u2014things seem to be trending in the right direction. Except in housing. Sales, starts, prices, and builder confidence have all weakened in early 2010, which is particularly worrisome given the end, in March, of Fed support for interest rates and the end, this month, of the government’s home-buyer tax credit.<\/p>\n
The Federal Reserve is paying attention. This is from the newly released minutes<\/a> of the March Federal Open Market Committee meeting (H\/T Calculated Risk<\/a>):<\/p>\n Participants were also concerned that activity in the housing sector appeared to be leveling off in most regions despite various forms of government support, and they noted that commercial and industrial real estate markets continued to weaken. Indeed, housing sales and starts had flattened out at depressed levels, suggesting that previous improvements in those indicators may have largely reflected transitory effects from the first-time homebuyer tax credit rather than a fundamental strengthening of housing activity. Participants indicated that the pace of foreclosures was likely to remain quite high; indeed, recent data on the incidence of seriously delinquent mortgages pointed to the possibility that the foreclosure rate could move higher over coming quarters. Moreover, the prospect of further additions to the already very large inventory of vacant homes posed downside risks to home prices…<\/p>\n The staff did make modest downward adjustments to its projections for real GDP growth in response to unfavorable news on housing activity, unexpectedly weak spending by state and local governments, and a substantial reduction in the estimated level of household income in the second half of 2009. The staff’s forecast for the unemployment rate at the end of 2011 was about the same as in its previous projection.<\/p>\n<\/blockquote>\n How serious this is isn’t easy to say. A return to sustained declines in home prices would be very bad news but also seems relatively unlikely. Continued stagnation is more probable. High levels of excess inventory and lacklustre sales will mean that construction won’t add very much to output or employment growth for some time. Meanwhile, a lack of price growth will mean that the slog out of negative equity is a long and hard one, and in the meantime reduced labour mobility will slow labour market adjustment. In other words, a weak housing sector will be a drag on employment, and so long as employment growth lags, recovery is in doubt.<\/p>\n","protected":false},"excerpt":{"rendered":" RECENT American economic news has been pretty good. Employment grew in March, activity in manufacturing and services is expanding, equity markets are rising\u2014things seem to be trending in the right direction. Except in housing. Sales, starts, prices, and builder confidence have all weakened in early 2010, which is particularly worrisome given the end, in March, […]<\/p>\n","protected":false},"author":4534,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-519226","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/519226","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/users\/4534"}],"replies":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/comments?post=519226"}],"version-history":[{"count":0,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/519226\/revisions"}],"wp:attachment":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/media?parent=519226"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/categories?post=519226"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/tags?post=519226"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}\n