More of the Same for Housing as Economy Remains Weak

On the positive side, house prices are no longer falling. House price indicators from Case-Shiller and the Federal Housing Finance Agency both registered their fourth consecutive monthly increases in July.

Downgrading its assessment of the recovery and looking for additional stimulus, the Federal Reserve announced it will begin Operation Twist. It will sell short-term securities to buy long-term securities in an effort to put downward pressure on long-term interest rates, without increasing the size of its portfolio.

President Obama's proposal to create jobs though tax cuts, business tax credits and spending programs would likely provide a short-term economic boost if it can get through Congress.

However, the plan contains some significant negatives for housing - including limits on the mortgage interest deduction and an increase of the tax on capital gain due to carried interest.

Households continue to repair their balance sheets in the face of a slow and bumpy recovery and job growth that is too weak to boost the economy or housing market.

The multifamily market appears to be improving. NAHB/Wells Fargo multifamily production index shows growing optimism among builders, while rental prices in Consumer Price Index have been heading up.

Less encouraging, the single-family market remains depressed, little changed and gaining no forward momentum over the past 12 months. The latest NAHB/Wells Fargo housing market index remained exceedingly low, new single-family home sales and starts were down modestly in August. Lending for AD&C home building purposes continues to decrease.

- Courtesy of NAHB