By Elliot Eisenberg, Ph.D., GraphsandLaughs, LLC
Looking ahead at the second half of 2013, the economic news is pretty solid. The US economy is on the mend, the labor market is slowly healing and house prices are up about 10% from year-ago levels. In addition, Europe (while in recession) appears to be holding together, DC budget brinksmanship is fading, car and light-truck sales along with consumer sentiment are rising, and new home construction continues its steady ascent. The only serious domestic fly in the ointment is the significant fiscal drag from Washington as the result of sequestration and year-end tax increases. The biggest foreign drag is Europe’s recession is hurting US exports.
With all this in mind, I expect Q3 GDP to be about 1.75% and Q4 GDP to come in slightly higher at 2.1%. As for housing starts, in Q3 they should, for the first time in years, exceed a million units (seasonally adjusted and annualized) with single family starts coming in at 675,000 and multifamily starts reaching a pace of about 340,000. In Q4 single family starts should hit to 700,000 with multifamily starts unchanged.
Inflation will remain benign. The combination of weak global growth, flat to declining energy and commodity prices, and flat to mildly rising food prices will keep CPI growth well below 2%. Moreover, the combination of tiny rises in import prices, producer prices, consumer prices and anemic wage growth means that personal consumption expenditure inflation, the Feds preferred inflation measure, will barely exceed 1%, giving the Federal Reserve ample room to continue its program of quantitative easing.
As for jobs, despite an improving labor market, the unemployment rate at the end of the year will remain above 7%. And combined with an annual inflation rate of well below 2%, it makes me think Bernanke and the rest of the voting members of the interest rate-setting Federal Open Market Committee will continue purchasing $85 billion/month in Treasuries and mortgage-backed securities at least through October 2013. Any tapering of QE3 will commence in late 2013 and more likely in early 2014.
Another reason why QE3 will be maintained in that due to weak wage growth, consumer spending is rising quite slowly and is being fueled, at least in part, by a decline in the personal savings rate which now stands at a scant 2.5%. Of course rising stock prices, improving home values and easing credit market conditions are also aiding the rise in consumer spending. But a sudden rise in interest rates could derail these positive developments and weaken manufacturing, which is currently neither expanding nor contracting. As such, the risk is simply not worth the return, at least for now.
What would change my thinking about QE3 would be consistent monthly non-farm payroll job growth of greater than 187,000. If we manage to achieve that, the Fed would likely reduce the amount of its monthly bonds purchases and interest rates would rise. However, given a growing economy, the rate rises would not be growth-sapping and I put the chances of a new recession at no more than 10%. In the meantime, I look forward to continued, slow and steady improvement the rest of the year.
Make plans to join us for the 2013 St. Tammany Parade of Homes. Here you can tour 21 beautiful homes built by some of the area’s premier builders. Homes will be open May 11-12 and 18-19 (noon-5pm) and on May 16th for our first ever Twilight Tour (5pm-8pm)!
The 2013 “Raising the Roof for Charity” Raffle House will also serve as the Parade of Homes Info Center. You can visit the home at 769 S. Corniche du Lac, Covington during Parade hours to pick up your FREE Parade of Homes Magazine, tour the home and buy a House Raffle Ticket.
We will once again offer our free Parade of Homes app for iPhone and Andriod. The app provides you with home descriptions, map and images of the homes. You can scan the QR code for the app on our Parade of Homes page.
The Sales and Marketing Council held its 3rd Cook-Off Competition on Saturday, March 9th at TerraBella Village. We lucked out with incredible weather as 12 teams competed to see who had the best food! Thanks to everyone who participated:
- Bevolo Gas & Electric Lights
- First Community Bank
- GMFS Lending
- Habitat for Humanity-St. Tammany West
- Iberia Bank
- Mahony Title
- Raindance Irrigation & Landscaping
- Robin Realty Group- Keller Williams
- Ron Lee Homes
- St. Joe Brick
- St. Tammany Homestead
- St. Tammany Hospital Foundation
From the National Association of Home Builders
The definition of a “navigable water” is at the heart of a case in which NAHB, the Southern Arizona HBA and the HBA of Central Arizona filed a lawsuit seeking an injunction against the Environmental Protection Agency and the U.S. Army Corps of Engineers on Jan. 18.
Why is this such a critical issue for home builders?
Determinations of Clean Water Act jurisdiction come with a very high price tag.
According to the U.S. Supreme Court (Rapanos v. United States), the average applicant for an individual Clean Water Act permit spends 788 days and $271,596 in complying with its requirements, whereas the average applicant for a nationwide permit spends 313 days and $28,915. And that’s not counting the substantial costs of mitigation or design changes.
This case has far-reaching implications for home buyers and property owners nationwide. By designating the waterway in question — the Santa Cruz River — as “traditionally navigable,” the federal agencies immediately gain jurisdiction over dry desert washes, arroyos and other water features within the 2.3 million-acre Santa Cruz watershed.
The lawsuit challenges a 2008 federal regulatory ruling that an Arizona riverbed fed by runoff from sewers and storm drains is in fact a traditional navigable water, and therefore is subject to federal regulation under the Clean Water Act.
These water features would not otherwise qualify as “waters of the United States” under the Clean Water Act — but they are covered by state and local regulations. Meanwhile, no water flows permanently in the Santa Cruz riverbed, and it appears to not be an “interstate highway of commerce,” which would constitute a traditional navigable water.
NAHB and the Arizona HBAs raised a similar claim in a suit filed in March 2009, but were denied review on the grounds that the Clean Water Act precludes pre-enforcement judicial review of a traditional navigable water determination and because the lawsuit failed to demonstrate an “injury” to a specific member.
The U.S. Supreme Court has since issued a ruling providing a basis for challenging a jurisdictional determination. Furthermore, the plaintiffs (home builders) have identified several members suffering specific, tangible injuries. In light of these developments, NAHB and the Arizona HBAs have reinitiated their lawsuit.
From The National Association of Home Builders
Exceptionally low interest rates helped ensure a slight gain in nationwide housing affordability amid relatively stable house prices in the final quarter of 2012, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI), released today.
In all, 74.9 percent of homes sold between the beginning of October and end of December were affordable to families earning the U.S. median income of $65,000. This was up nearly a percentage point from the 74.1 percent of homes sold that were affordable to median-income earners in last year’s third quarter.
“The most recent housing affordability data should be encouraging to many prospective home buyers, because it shows that homeownership remains within reach of median-income consumers even as most local markets appear to be on a recovery path,” said NAHB Chairman Rick Judson, a home builder from Charlotte, N.C. He noted that the most recent reading of the NAHB/First American Improving Markets Index found that 259 out of 361 metros currently qualify as improving, including representatives from all 50 states and the District of Columbia.
“The median price of all new and existing homes sold in the fourth quarter of 2012 was $188,000, essentially unchanged from the previous quarter’s $189,000 that marked a nearly three-year high,” noted NAHB Chief Economist David Crowe. “It is noteworthy that affordability remains historically high thanks to favorable mortgage rates even as national home price indexes show some rise in values.”
Ogden-Clearfield, Utah held its position as the nation’s most affordable major housing market for a second consecutive quarter at the end of 2012. There, 93.7 percent of all new and existing homes sold were affordable to families earning the area’s median household income of $71,500 – up slightly from the 93.2 percent of homes affordable to median-income earners in the third quarter.