Quick Take on the Economy: April 16, 2008

By Lawrence Yun, NAR Chief Economist

Mortgage Applications - Updated Every Wednesday

Mortgage applications for home purchases fell one percent in the past week. That is essentially no change given the typical weekly swings of plus or minus 10 percent.
Current purchase applications (not approvals) are down 4 percent from a year ago. That is much less of a decline than that reflected in home sales.
Refinance activity picked up modestly. Refinances are relieving stress as most are presumably for getting out of higher interest rate loans.

Consumer Price Index

Consumer inflation picked up, rising 0.3 percent in March. Inflation is now up 4.0 percent from a year ago.
The core inflation (after removing food and energy components) rose 0.2 percent during the month and is up 2.4 percent from a year ago. The rise is a re-acceleration of a key figure that the Fed closely monitors.
Apartment rental rates rose 3.6 percent from a year ago. This figure has been falling modestly lately after having peaked at 4.0 percent growth rate a few months ago.

Housing Starts

Housing starts fell to 12 percent in March and are now down by 37 percent from a year ago. The current starts of 947,000 are well below the 2 million housing starts during the boom years.
Single-family construction continued its slide. Multifamily starts tend to be more volatile and fell sizably in the latest month.
Building permits - a very good precursor of future starts - also fell, this time by 6 percent.

Industrial Production

Production at the nation's factories rose 0.3 percent.
The production of construction supplies fell - not surprising. The production of business equipment rose - suggesting companies are still spending.

What does it mean for Realtors® and Consumers?

Given the high inventory of homes for sale, a fall in new home construction should be welcomed. It is a necessary correct adjustment.
Stable home sales and falling new home construction is the right combination to bring down inventory.
Today's mortgage activity is another sign of stabilizing home sales activity.
Corporate profits are quite decent outside of financial companies and homebuilders. The continuing business spending is a nice counter balance to falling new home construction spending in keeping the economy afloat. GDP growth in the first quarter looks to be right at zero, and certainly not a notable contraction of one percent or more.
Inflation is well beyond the comfort zone for Fed Governors. Further interest rate cuts must be carefully weighed against rising inflation.

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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