Economist's Commentary: October 20, 2008

Quick Take on the Economy: October 20, 2008

By Lawrence Yun, NAR Chief Economist

The leading index rose in September by 0.3 percent after having fallen in the previous five months.
The gain - somewhat surprising given many negative events in September - was driven by a higher money supply, a larger interest rate spread between short and long, and an increase in supplier delivery.
Falling stock prices, rising unemployment insurance claims, and a shorter work week in manufacturing were negative components of the index.
Despite the upward bump, one cannot be very optimistic about the next three quarters of economic growth. There is no index component that captures the significant stress in the current credit market.

The economy is in a recession. Normal economic indicators are signaling that we may climb out of recession in few months. However, we are not in normal economic times.
Another economic stimulus package will come up in the lame duck session after the election. There should be another emphasis in getting the housing market going because the economy will not rebound without the housing sector.
Making homebuyer tax credit clean - by removing the repayment feature - will go a long way in persuading homebuyers to enter the market. More buyers will mean a trimming of inventory, which in turn will help stabilize home prices. Once home prices settle, the valuation of mortgage-backed-securities will settle. In other words, helping the housing sector will help stabilize Wall Street.

This is one in a series of commentaries by the Research staff of the National Association of REALTORS®. Read more commentaries >

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