01-24-2008, 05:56 AM
Bad news on many fronts
Rates have plunged this month as news kept coming in that the economy is going stale:
* The unemployment rate for December jumped to 5 percent from the previous month's 4.7 percent.
* A panel of economists convened by The Wall Street Journal put the chance of a recession at 42 percent, up from 38 percent in December.
* Ben Bernanke, chairman of the Federal Reserve, said in a speech that "the baseline outlook for real activity in 2008 has worsened and the downside risks to growth have become more pronounced. Notably, the demand for housing seems to have weakened further, in part reflecting the ongoing problems in mortgage markets." He strongly hinted that the Fed will cut short-term rates again.
* The Fed's Beige Book, a summary of economic activity in the central bank's 12 regions, said economic activity increased modestly in the last six weeks of 2007, but at a slower pace than the six weeks before that. "Residential real estate conditions continued to be quite weak in all districts," the report said.
* Economists for the PMI Group, a mortgage insurance company, noted that home values have fallen an average of about 4.5 percent nationwide in the last year. "Are we nearing the end of the current housing downturn?" PMI economists David Berson and LaVaughn Henry wrote. "We don't think so, given the magnitude of the run-up in housing (with no significant housing downturn since the recession of 1991-92)."
Depreciation by metro region
PMI Group ranks the 50 biggest metro areas by the likelihood that house prices will be lower two years from now. In 12 of those metro areas, the odds are 65 percent or greater. Southern California's Riverside-San Bernardino metro area leads, with a 94 percent chance of lower prices two years from now. Following that are Las Vegas (89 percent chance) and Phoenix (83 percent). The rest of the depreciating dozen are in California and Florida.
North Texas fared best of the 50 biggest metro areas, with less than a 1 percent chance of a price drop in the Dallas-Plano-Irving area and in Fort Worth-Arlington. The rest of the Lone Star State is expected to escape falling house prices, too.
Rates have plunged this month as news kept coming in that the economy is going stale:
* The unemployment rate for December jumped to 5 percent from the previous month's 4.7 percent.
* A panel of economists convened by The Wall Street Journal put the chance of a recession at 42 percent, up from 38 percent in December.
* Ben Bernanke, chairman of the Federal Reserve, said in a speech that "the baseline outlook for real activity in 2008 has worsened and the downside risks to growth have become more pronounced. Notably, the demand for housing seems to have weakened further, in part reflecting the ongoing problems in mortgage markets." He strongly hinted that the Fed will cut short-term rates again.
* The Fed's Beige Book, a summary of economic activity in the central bank's 12 regions, said economic activity increased modestly in the last six weeks of 2007, but at a slower pace than the six weeks before that. "Residential real estate conditions continued to be quite weak in all districts," the report said.
* Economists for the PMI Group, a mortgage insurance company, noted that home values have fallen an average of about 4.5 percent nationwide in the last year. "Are we nearing the end of the current housing downturn?" PMI economists David Berson and LaVaughn Henry wrote. "We don't think so, given the magnitude of the run-up in housing (with no significant housing downturn since the recession of 1991-92)."
Depreciation by metro region
PMI Group ranks the 50 biggest metro areas by the likelihood that house prices will be lower two years from now. In 12 of those metro areas, the odds are 65 percent or greater. Southern California's Riverside-San Bernardino metro area leads, with a 94 percent chance of lower prices two years from now. Following that are Las Vegas (89 percent chance) and Phoenix (83 percent). The rest of the depreciating dozen are in California and Florida.
North Texas fared best of the 50 biggest metro areas, with less than a 1 percent chance of a price drop in the Dallas-Plano-Irving area and in Fort Worth-Arlington. The rest of the Lone Star State is expected to escape falling house prices, too.