Most Asian stocks dropped, with the regional benchmark index set for its longest streak of weekly losses in two years, after reports showed the U.S. economy grew at a slower rate than forecast and jobless claims unexpectedly rose, reducing the earnings outlook for Asian exporters.
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Japanese stocks fell, leading the Nikkei 225 Stock Average to its biggest drop since October, as tension escalated in the Middle East and Moody’s Investors Service downgraded the country’s debt outlook.
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Emerging-market stocks fell for the first time in three days after JPMorgan Chase & Co. reduced its outlook for equity gains and as protests in Bahrain escalated.
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Fitch Ratings has lowered its assessment of Harmony Gold, maintaining a negative outlook for future re-ratings because of concerns over the gold producer’s cash holdings.
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Third-quarter residential production by U.S. lenders fell 3 percent from the second quarter, the Mortgage Bankers Association projected. The trade group has fourth-quarter production falling another 34 percent. But MBA’s forecast conflicts with third-quarter reports from major lenders as well as forecasts from Fannie Mae and Freddie Mac — all which indicated that third- and fourth-quarter volume will end up higher.
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Report suggests little change in economic outlook.
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The latest economic and housing market outlook from Freddie Mac predicts this year’s residential originations from all U.S. lenders will come in at $1.4 trillion. Projected activity is a 30 percent decline from 2009′s estimated activity. Next year, Freddie sees production staying at the same level as 2010.
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On any given day, people can easily find articles and news stories describing an impending bust of the so-called real estate bubble. Despite this gloomy prediction, many experts believe that the recent slowdown in housing will be a gradual and modest readjustment rather than sharp bust or decline. These experts believe that factors that lead to a sharp decline in the real estate market are just not present in the current economic outlook. In fact, a recent study by the Joint Center for Housing Studies at Harvard University noted that “despite the current cool-down, the long-term outlook for housing is bright.”
The rise and fall of the real estate market is subject to the forces of supply and demand, and these factors point to stable and positive growth in the real estate segment.
SUPPLY FACTORS
Limited supply of real estate makes it scarce and usually pushes home prices up. In contrast, an oversupply of real estate tends to put downward pressure on home prices. Despite the current slow down in the real estate market, factors that impact limited supply favor continued growth in the real estate market. Some of these factors include:
1. Builders have readjusted growth plans in regions that have an oversupply of new housing. Over time, any excess inventory is likely to be depleted and equilibrium achieved between supply and demand.
2. The availability of land in certain regions, as well land use regulations and associated compliance costs will continue to restrict the supply of new homes.
DEMAND FACTORS:
Housing located in regions with high demand tend to be more expensive than homes in regions with low demand. Factors that impact the demand for housing suggests a favorable long-term housing outlook. Some of these factors include:
1. No current evidence of significant and across-the-board job losses; forecasts of relatively low unemployment rates.
2. Long-term increased demand for second homes, vacation homes and senior housing by baby boomers.
3. Long-term increased demand for entry-level homes by the children of baby boomers.
4. Long-term increased demand for entry-level homes by immigrants.
5. Long-term increased demand for entry-level homes by second-generation Americans.
6. Forecasts that the outflows and inflows of the U.S. population in and out different regions will not significantly impact the overall U.S. real estate housing market.
7. Relative stability in interest rates.
8. Continued stability in long-term home appreciation rates.
9. Overall, rising rate of wealth across all age groups.
SUMMARY
In summary, strong household growth, overall rising incomes and wealth, and a stable economy all bode well for continued long-term growth in the real estate market. While the overall housing outlook is favorable, affordability will continue to be a challenge, as wages, especially in the lower income levels, have not kept up with housing costs.
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