Realtors Struggle With Flat Existing-Home Sales
ST. LOUIS, (PRNewswire), March 9, 2008 - The volume of existing-home sales is expected to hold steady through late spring, with a gradual recovery during the second half of the year as the mortgage situation improves in high-cost areas, according to the latest forecast by the National Association of Realtors(R).
Lawrence Yun, NAR chief economist, said many buyers have been waiting for higher mortgage loan limits. "The higher loan limits for both FHA and conventional loans will increase consumer choice and provide greater access to lower interest rate mortgages in high-cost regions," he said. "Therefore, a notable rise in home sales can be anticipated in the second half of the year."
The Pending Home Sales Index,* a forward-looking indicator based on contracts signed in January, held at a stable level of 85.9, unchanged from December, but was 19.6 percent below the January 2007 reading of 106.8. "This additional sign of a stabilizing market is encouraging, and our members are telling us there's been a pickup in shopping activity," Yun said. "Our hope is that the increased traffic of buyers looking at homes will translate soon into more contract offers."
The PHSI in the West jumped 13.0 percent in January to 93.8 but remains 12.7 percent below a year ago. In the Midwest, the index rose 0.6 percent to 85.2 but is 13.3 percent lower than January 2007. The index in the Northeast declined 4.1 percent in January to 69.6 and is 28.0 percent below a year ago. In the South, the index fell 6.1 percent in January to 89.5 and is 23.8 percent below January 2007.
Existing-home sales are forecast to remain flat around an annual level of 4.9 million in the first half of the year before improving to a 5.8-million pace in the second half. With a weak first half, total sales for 2008 are projected at 5.38 million, but are then seen to rise 3.5 percent to 5.60 million in 2009. The aggregate existing-home price is projected to decline 1.2 percent to a median of $216,300 this year, and then increase 3.5 percent to $223,800 in 2009.
A pattern of disparate price performance continues around the country with a roughly even split between up and down markets. Recently released data for the fourth quarter shows strong price gains in markets such as the Kennewick-Richland-Pasco area of Washington; Topeka, Kan.; and Atlantic City, N.J. At the same time, many areas that have lost jobs are showing price declines.
"Significant price declines in some local markets have sharply and quickly improved local affordability conditions, and are inducing buyers to return to the marketplace," Yun said. NAR's housing affordability index is forecast to rise 14 percentage points to 127.0 in 2008.
New-home sales should decline 23.7 percent to 590,000 this year before rising 7.2 percent to 633,000 in 2009. Housing starts, including multifamily units, will probably fall 25.1 percent to 1.01 million this year, and then continue to slip another 2.7 percent to 987,000 in 2009.
"As builders sharply cut back production, vacant new-home inventory has consistently declined over the past year-and-a-half," Yun said. "That will permit a quicker return to balanced market conditions in many local areas." The median new-home price is likely to fall 6.1 percent to $232,200 this year, and then rise 5.1 percent in 2009.
The 30-year fixed-rate mortgage, which has moved erratically in recent weeks, is expected to hover around 5.8 percent most of the year, and then rise to an average of 6.3 percent in 2009.
Growth in the U.S. gross domestic product (GDP) should be 1.5 percent this year and 2.4 percent in 2009. The unemployment rate is projected to average 5.4 percent in 2008 and 5.5 percent next year.
Inflation, as measured by the Consumer Price Index, will probably be 3.2 percent this year and 1.5 percent in 2009. Inflation-adjusted disposable personal income is expected to grow 1.4 percent in 2008 and 3.1 percent next year.
Flu Pandemic: Is the U.S. Ready
ST. LOUIS, (SLFP.com), March 9, 2008 - If history is any guide, a modern-day influenza pandemic in the United States would likely hit city dwellers and non-whites the hardest, based on an economic analysis from the Federal Reserve Bank of St. Louis.
Thomas A. Garrett, an economist with the St. Louis Fed, wrote the analysis for the March/April issue of Review, the Reserve Bank's bi-monthly journal of economic and business issues.
Researchers at the U.S. Center for Disease Control and Prevention have estimated that deaths from a flu pandemic could total more than 200,000, with an initial cost to the U.S. economy of $166 billion, or about 1.5 percent of GDP. Moreover, the long-run costs could be even greater.
To find a comparable parallel, Garrett looked at the 1918 flu epidemic in the United States. "That pandemic killed 675,000 people in the United States," said Garrett, "which is greater than the number of U.S. troops killed in both world wars combined." He based his analysis on economic data from the period as well as newspaper accounts at the time, which provide some evidence of the pandemic's effects on business and industry.
Garrett's analysis reveals that Pennsylvania, Maryland and New Jersey suffered the highest mortality rates in 1918, while Michigan, Minnesota and Wisconsin had the lowest.
His research shows that influenza deaths were generally greater in cities than in rural areas. In fact, he found that influenza mortalities in U.S. cities were three to five times higher, on average, than during a non-pandemic year. Interestingly, the cities with the highest mortality rates in 1918 were all located in Pennsylvania: Pittsburgh, Scranton and Philadelphia. The cities with the lowest rates were all located in the Midwest: Grand Rapids, Mich., Minneapolis, Minn., and Toledo, Ohio.
Although newspaper articles detailing the economic effects of the pandemic of 1918 were few, the anecdotal information Garrett obtained from reading some of the newspapers from the Fed's Eighth District is revealing. In addition to daily listings of the number of sick and dead, newspapers noted church, school and theater closings. Most businesses suffered huge declines in sales and revenue. Coal mine operators, industrial plants, rail lines -- all reported dramatic reductions in activity. (Not surprisingly, the only business in Little Rock, Ark., that showed an increase in sales was a drug store.)
While mortality statistics from both the pandemic and non-pandemic years suggest that non-white influenza mortalities were higher than whites, the latter experienced relatively higher mortality during the pandemic year (1918) than did non-whites. "It is likely," said Garrett, "that racial differences in influenza mortality rates reflect, to some degree, differences in population density. Census data show that the great majority of the urban population at the time was more than 90 percent white."
But would that picture change if an influenza pandemic struck today? Garrett's analysis shows that the non-white population in the United States has become much more urban (27 percent in 1910 versus 91 percent in 2000), compared with the white population (49 percent in 1910 versus 75 percent in 2000). While acknowledging that both racial groups have become more urban, Garrett said a modern-day pandemic "may result in greater non-white mortality rates because a greater percentage of the non-white population now lives in urban areas."
Another critical factor that will affect all Americans in a flu pandemic will be access to health care. "It stands to reason that mortality rates in urban areas may be somewhat mitigated because the access to health care will be relatively greater than in rural areas," said Garrett. He also noted that urban dwellers generally tend to have greater incomes, "but this is an average and ignores those individuals with low incomes in urban areas who cannot afford health care." The key element, he added, will be the ability of emergency rooms and free clinics to remain open during such an emergency.
While there have been notable advances in science and medical technology, as well as health insurance coverage since the flu outbreak of 1918, Garrett concluded that "given our highly mobile and connected society, any future influenza pandemic is likely to be more severe in its reach, and perhaps in its virulence. Although we are certainly more prepared for an influenza pandemic now than in 1918, there should still be concern about government's readiness and ability to protect citizens from a pandemic."
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