The Mortgage Corner

Another sign that the economy is finally recovering—new housing starts surged 15 percent, to their highest levels since 2008 and the beginning of the Great Recession. This is boosting construction employment in particular, but also finance, insurance and other related sectors. Construction employment is up 7 percent just this year, for instance.

And privately-owned housing building permits in September were at a seasonally adjusted annual rate of 894,000. This is 11.6 percent above the revised August rate of 801,000 and a huge 45.1 percent above the September 2011 estimate of 616,000. This is an even better indicator that new housing inventories, which have fallen to a 4-month low, will recover.

As Calculated Risk reported, Three-fourths of the way through 2012, single family starts are on pace for about 520 thousand this year, and total starts are on pace for about 750 thousand. That is actually an increase of about 20 percent from 2011, and confirms rising builder optimism in the NAHB sentiment survey.

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Graph: Calculated Risk

And The Federal Housing Finance Agency (FHFA) just released its August Refinance Report, which shows that Fannie Mae and Freddie Mac loans refinanced through the Home Affordable Refinance Program (HARP) accounted for nearly one-quarter of all refinances in August.

Nearly 99,000 homeowners refinanced their mortgage in August through the HARP program with more than 618,000 loans refinanced since the beginning of this year. This continues the strong pace of HARP refinancing with the program on target to reach a million borrowers in 2012.

In August, borrowers with loan-to-value (LTV) ratios greater than 105 percent continued to account for more than half the volume of HARP loans as HARP enhancements were fully implemented in the second quarter of 2012.
In August, nearly 18 percent of HARP refinances for underwater borrowers were for shorter-term 15- and 20-year mortgages, which help build equity faster.

But the best sign that consumers are feeling more confident was the surge in retail sales, up a huge 1.1 percent.

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Graph: Inside Debt

Retail sales rose in September as Americans stepped up purchases of everything from cars to electronics, a sign that consumer spending is driving faster economic growth. Reuters’ Inside Debt reports consumer spending remains the U.S. economy’s biggest engine, and expectations for third-quarter economic growth improved after the Commerce Department reported a 1.1 percent increase in retail sales.

Lastly, three and a half years after peaking, the number of California homes entering the foreclosure process fell last quarter to the lowest level since the early stages of the housing bust. Mortgage default filings hit their lowest point since first-quarter 2007, due in large part to a stronger economy and housing market and more short sales, a real estate information service reported.

All of these factors—especially consumer spending–are the reasons economists are upgrading their estimates of GDP growth for the rest of the year. 

Harlan Green © 2012