Expansion Slows as Stimulus Fades

 

Participants generally anticipated that, in light of the severity of the economic downturn, it would take some time for the economy to converge fully to its longer run path.
Courtesy of University of Birmingham

Expect persistant weakness in the housing market. Federal Reserve Board and Federal Open Market Committee met and made conclusions about the big picture perspective to the housing market...

On net, the upswing in the volume of real estate transactions in recent months was likely to boost the brokers’ commissions component of residential investment in the second quarter. However, starts of new single-family homes, which had trended higher in the first four months of the year, declined sharply in May.

In addition, the number of permits for new homes, which tends to lead starts, fell for a second month in May. House prices declined somewhat in recent months, reversing some of the modest increases that occurred in the spring and summer of 2009.

Although readings from the housing sector had been strong through mid-spring, participants noted that the strength likely reflected the effects of the temporary tax credits for homebuyers. Data for the most recent month suggested that, with the expiration of those provisions, home sales and starts had stepped down noticeably and could remain weak in the near term. With lower demand and a continuing supply of foreclosed houses coming to market, participants judged that house prices were likely to remain flat or decline somewhat further in the near term.

Overall, participants continued to expect the pace of the economic recovery to be held back by a number of factors, including household and business uncertainty, persistent weakness in real estate markets, only gradual improvement in labor market conditions, waning fiscal stimulus, and slow easing of credit conditions in the banking sector. Unfortunately those in the landscape industry may need to buckle up for a longer recovery than first anticipated.

– Courtesy of Mortgage News Daily