Economist's Commentary: April 28, 2008

Quick Take on the Economy: April 28, 2008

By Lawrence Yun, NAR Chief Economist

The homeownership rate rose a notch to 67.9 percent in the first quarter from 67.7 percent in the prior quarter on a seasonally adjusted basis. Since hitting a peak of 69.2 percent three years ago, homeownership has softened despite today’s rise in accordance with weaker home sales activity.
The increase in homeownership was driven by younger people becoming owners. The ownership rate among the 35 and under crowd rose to 41.3 percent from 41.0 percent.
The homeowner vacancy rate rose to a modern high of 2.9 percent in the first quarter of this year from 2.8 percent in the prior quarter according to today’s data from the Census. Rising foreclosure rates and many investor owners simply walking away are factors leading to higher vacancies.
The rental vacancy rate was unchanged at 10.1 percent from a year ago. But it was a jump from the 9.6 percent rate from the fourth quarter of 2007.

As today is a fairly light news day, let me delve into important data to be released this week:
GDP will be released on Wednesday and I expect 0.1 percent growth
FOMC meets this week and will set a new Fed funds rate. The market is calling for another quarter point cut to bring it down to 2.0 percent. I would prefer no cut given the inflationary pressures and weakness in the dollar – both of which can hurt 30-year mortgage rates. Irrespective of the decision, this rate policy will be the last cut before rate increases, which may occur before the year end.
Employment data will be released this Friday. The unemployment rate will most likely rise with continuing job cuts in the payroll data.

A positive economic growth, albeit barely, will force the use of the “recession” word to become less prominent. That could raise consumer confidence in upcoming months, which is critical to homebuying at this point in the cycle.
A first phase of economic recovery generally involves increased production but with fewer people. Job losses, therefore, will continue for few more months.
The low point on mortgage rates has already past. Luckily, mortgage rates are still at historically attractive rates of near 6 percent.

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 >