Economist's Commentary: October 23, 2008

Quick Take on the Economy: October 23, 2008

By Danielle Hale, Research Economist

Initial claims for unemployment insurance, which rose from 463,000 to 478,000, were higher than analysts expected. The October 18 weekly figure is down somewhat from its late September peak in part due to receding effects from this summer's hurricanes, but it is still well above the 400,000 figure typically indicative of a recession.
Continued claims decreased by 6,000 for the week ending October 11. When measured on a four-week basis, however, insured unemployment rose to 3.68 million.
Federal Housing Finance Agency House Price Index (FHFA HPI formerly OFHEO HPI)
The FHFA House Price Index (HPI) fell 0.6 percent from July to August and was down 5.9 percent for the 12 months ending in August. By region, the Pacific showed the largest decline at 1.8 percent while the Northeast index saw the greatest growth at 0.4 percent.
August's House Price Index is roughly the same as the September 2005 Index Value meaning that on average, any appreciation in price since then has been wiped out.

According to Freddie Mac's weekly survey, the 30-year fixed-rate mortgage (FRM) averaged 6.04 percent for the week ending October 23, 2008, down from last week's 6.46 percent. Last year at this time, the 30-year FRM averaged 6.33 percent.
The 42 basis point change in mortgage rates amounts to a savings of about $50 a month for the median home buyer.

Weakness in the economy persists and is leading to hesitancy in the markets. Participants are worried that tomorrow will be worse in a way that is unexpected today.
For those who are not timid, affordability is high due to reduced prices and lower mortgage rates. A first-time home buyer tax credit is available that not only reduces costs in the first year, it also insulates buyers against some of the downside risk that exists.
FHFA showed a smaller monthly decrease in home prices in August than in July. Is this an indication that the bottom is near? Tomorrow, NAR's research division releases Existing Home Sales for September which will shed new light on the housing market.

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

Comments? Questions? E-mail NAR Research.

NAR members, learn how you can add this commentary to your Web site, blog, or newsletter. Read more >