Vashon Homes & Events from Go! Real Estate

Vashon Island Housing Market News: The State of the Economy

January 1, 2009 at 5:18 am Leave a comment

On December 24, 2008, the National Association of Realtors released its report on the surge in mortgage applications and home refinancing applications for the preceding week. 

Mortgage Applications

·     The Mortgage Loan Application Index, a measure of mortgage loan application volume, rose 48 percent from a week earlier to the level of 1245. Refinance applications surged 62.6 percent in one week. Purchase applications increased 10.6 percent.

Comment: While the application volume surged in the wake of federal government industry bailout activity, the actual numbers of loans issued has NOT been reported.  The actual loans issued are expected to be constrained significantly by more rigorous lending standards adopted by lenders.  NARs believes that a surge in applications represents a step toward home price stabilization.  However, the nexus between applications and prices is attenuated.  A better indicator of market stabilization will be an actual correlation between applications and loans made.

Personal Income and Consumption

·     Personal income fell more than expected, a decline of 0.2% in November, after increasing 1% in October.

·     Consumption fell 0.6% after falling 1% the prior month. Consumer spending is the driver of economic growth. It accounts for more than two-thirds of the nation’s gross domestic product. Deteriorating economic conditions, including the recent credit crunch, have squeezed consumer credit, leaving them with less to spend on retail goods.

·     The savings rate rose to 2.8% in November, the largest level since May when the tax rebate lifted income.

Comment:  As indicated by the NARs data, personal income fell less than spending, meaning that consumers are saving money, a significant factor in consumer capacity to finance home purchases.  The U.S. Commerce Department’s Bureau of Economic  Analysis reported that the 2.8% savings rate represents an increase of 0.4% over October’s data.  Savings data represents a solid note of improvement in consumer economic fundamentals.

A difficulty, as noted by the December 30 Seattle Times, is that banks are also saving to build up their capital as a protection against losses, meaning that federal bailout money is not being passed along to consumers and is not effectively stabilizing the housing market.

More to come . . .

Statistical data, unless other wise noted, is subject to the copyright of the National Association of REALTORS®, and reprinted with permission. Comments and analysis are provided by Go! Real Estate.

Entry filed under: • Real Estate, Housing Market News, Real Estate Statistics. Tags: Vashon Island economic news, Vashon Island housing market news, Vashon island mortgage news, Vashon Island real estate news, Vashonb Island National Association of Realtors.