Positive signs for the economy and housing market
Between the euro zone debt crisis, the sluggish economic recovery here at home and the bickering in Washington, we’ve certainly had a share of bad news this year. But there were encouraging signs in recent weeks that the tide could be turning on the economic and housing front.
Pending home sales both nationally and in California shot up in October, the most recent figures available. We also learned that the economy grew faster than expected. And unemployment actually moved lower last week as well – all very positive signs for the real estate recovery.
Nationally, pending sales rose 9.2 percent in October compared to the same month a year ago, according to the National Association of Realtors. Meanwhile, the California Association of Realtors reported that pending home sales in our state were up for the sixth straight month in October, climbing 3.1 percent from the previous month and 10.7 percent from a year ago.
A sustainable recovery in the housing market depends a great deal on the labor market bouncing back. And last week we saw signs that could be starting to happen, albeit slower than any of us would like.
The Labor Department last week announced an unexpected drop in the unemployment rate in October to 8.6 percent from 9 percent, raising hopes of a solid recovery. Although some of the improvement was due to a contraction in the labor market, the country did add 80,000 jobs, marking 13 straight months of employment gains.
Finally, U.S. manufacturing expanded at a faster rate in November than expected and the overall economy grew for the 30th consecutive month, according to a closely watched index released last week by the Institute of Supply Management.
All of this is not to suggest that the economy and the housing market are out of the woods yet. But the combination of positive economic trends – coupled with strong corporate earnings reports through much of this year – certainly gives us reason for optimism as 2011 comes to a close. If these trends continue into the new year, they will go a long way toward reigniting the housing market across the country.
One final note: Getting Congress to agree on anything these days seems virtually impossible. So it was all the more surprising – and encouraging – when the U.S. House of Representatives and the Senate pulled together a couple of weeks ago on a critical piece of legislation returning the maximum loan limit on FHA-backed mortgages to $729,750.
The bill that was passed by Congress and signed by President Obama will give more homeowners access to lower cost loans at higher limits, especially necessary in high-priced markets like the Bay Area. Moreover, it was an encouraging sign that our Congressional representatives understand how fragile the housing recovery is right now and the importance in doing whatever they can to create sustainable growth.
The limit on the loans, known as FHA-conforming loans, had been $625,500 after a temporary increase on limits expired on Oct. 1. The House voted in favor 298 to 121, with 101 Republicans voting against the bill. The Senate voted 70 to 30 in favor of the bill. The vote raising the FHA limit was a big victory for the housing industry and for consumers. Credit goes to industry groups like the National Association of Realtors and the National Association of Homebuilders for making persuasive cases on Capitol Hill in recent weeks.
“Restoring the higher loan limits for the FHA will provide homeowners and homebuyers with safe and affordable financing, while providing a much-needed boost to housing markets all around the country,” James Tobin of the National Association of Homebuilders wrote in a letter to Republican Speaker John Boehner.
