Keeping You Updated on the Market for the week of May 26, 2009

MARKET RECAP
As the economy sputters and putts along, many economists continue to look for signs the housing market is climbing out of the chasm dug by the subprime mortgage meltdown. Given the sentiment from homebuilders, some may say the housing market is finally making progress on scaling the chasm's often-slippery walls.
On that front, the National Association of Home Builders/Wells Fargo Housing Market Index rose by two points (to 16) in May, reflecting greater confidence in the newly built residential housing market. The fact that the May index continued to tick up from April’s five-point increase provides confirming evidence that the improved confidence level was no fluke.
Despite growing optimism in the new-home market, many economists remain less sanguine on the prospect of an overall housing-market recovery, given that the number of new housing starts declined 12.8% last month to a seasonally adjusted annual rate of 458,000 units, the lowest pace on records dating back 50 years. But it is worth noting that much of the decline was concentrated in apartment construction, which tumbled 46.1%. On a brighter note, single-family home construction actually climbed 2.8%.
Mortgage-market trends, on the other hand, offer a promising, tangible sign that a sustained recovery is possible. The Mortgage Bankers Association’s index of purchase applications, though falling slightly last week, continues along a higher long-term trend, thanks to investors and home buyers taking advantage of lower home prices and stable, historically low mortgage rates. On the latter, the 30-year fixed-rate mortgage remains near record lows reached at the end of March.
Not to repeat ourselves on one theme too often, but mortgage rates are unlikely to go significantly lower. Many of the government's recent economic stimulus initiatives have increased the odds of more inflation down the road. And that's not just us talking: Federal Reserve Bank of Philadelphia President Charles Plosser said prices may rise 2.5% in 2011, a rate well above central bankers’ preferred range, and cautioned against complacency on inflation – another reason we remain convinced that there is no time better than the present for getting a mortgage or for buying a home.

Bad News as Good News
There has been no shortage of media coverage on the foreclosure market over the past six months. In fact, the foreclosure market seems to be the only growth market left in the country, if you listen to some accounts. The bad news is that foreclosure activity is up 32% from last year, with one in every 374 US housing units receiving a foreclosure filing in April, the highest rate yet seen by RealtyTrac, which has tracked activity since January 2005.
The good news is that demand for these homes is growing. Indeed, Housingwire.com ran an article that basically stated foreclosed homes are becoming the “hot-ticket” item in real estate. In a survey by Trulia.com and RealtyTrac, 55% of survey participants indicate they are at least somewhat likely to consider purchasing a foreclosed home in the near future, compared to the 47% who said the same in November 2008.