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Triangle Business Today

Today in Real Estate: Homebuilders wary

Posted June 16, 2010

We have another very busy week on the economic data front – many reports are being released in the next three days, so let’s get right to it.

Wednesday brings us the release of four important reports:

  • Housing Starts
  • Producer Price Index
  • Industrial Production
  • Capacity Utilization.

Given the uncertainty we’re continuing to see globally, there is a good chance that a less-than-positive reading on any of these reports will give us continued downward pressure on mortgage interest rates – something we’ve been enjoying for many weeks now.

Thursday brings us the weekly jobless claims number and the consumer price index report, as well as leading economic indicators and the Philadelphia Fed Survey. We’ll be watching all of these reports very closely to see what impact they have on this week’s interest rate market.

One glaring note to make you aware of regarding homebuilder sentiment this week – the NAHB/Wells Fargo Housing Market Index dropped five points to 17 – a much greater than expected decrease.

David Crowe who is NAHB’s chief economist says that builders are still very cautious in their outlook – primarily due to three subindexes which could impact short- and long-term growth in the building sector: production financing for new development, faulty appraisal practices and the potential glut of homes being brought back to the market either via short sale or foreclosure.

All three subindexes saw declines in June. As a litmus test barometer – a score of 50 on this scale is the line where builders feel confident about the future – we have quite a ways to go based on this recent report.

Switching gears to the interest rate front, a position paper recently released by the Federal Reserve Bank of San Francisco indicates that we may see record low interest rates into 2012. While these comments are not the official position of the Federal Reserve Bank, the paper’s author, Glenn Rudebusch is a senior vice president and associate director of research at the San Francisco Fed.

The paper could carry added significance because Janet Yellen, who is the current president of the San Francisco Fed, is President Obama’s nominee to be vice chairwoman of the central bank. Stay tuned as the second half of 2010 will most certainly be an interesting ride for housing.

And finally on a very positive note for the Triangle, Newsweek just ranked the region one of the top academic areas for high school excellence – showcasing 14 local high schools as leaders across the nation. This is just another feather in our cap as to why we continue to lead the nation as a destination for relocation, business development and continued long-term success.

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About this Blog:

Jeremy Salemson, CEO of Corporate Investors Mortgage Group, blogs about economic trends and data and their impact on Triangle business. Each week, he interviews a Triangle-area business leader for a personal look at the local economy.