May 15th, 2014 10:35 AM by Nick Rapplean
What a mixture of optimism and pessimism there is among analysts today.
Janet Yellen, the recently-installed new chairperson of the Federal Reserve, spoke to Congress yesterday, that is, on Wednesday. There was little to nothing in her talk that startled anyone, except for the emphasis on what she called a possibly stalled real estate market. Along with the risks posed by geo-political concerns (read: Russia and the Ukraine), the possibility that housing sales are dead in the water is very much on Ms. Yellen’s mind.
Yours, too, I suspect.
Recent data, nonetheless, suggest that the real estate market may improve in the near-term.
Last week didn't give us many hopeful economic indicators-- especially among real estate-related-figures. The number of new loans (both refis and purchase money loans) applied for two weeks ago plunged. However, we had good news in the higher Pending Home Sales Index which very clearly suggests that the number of home sales will rise over the coming few months, if not longer.
Though this is precisely the news we need, the markets paid it little attention, and the general story in the financial press was that the economy had flattened a bit-- especially the real estate sector.
This week, though, we had a greater preponderance of stronger economic indicators than weaker, and analysts raised the optimism level in their comments. The number of people applying for new purchase money loans, for example, rose by a very impressive 9% over the course of the week. The larger economy, at the same time, seemed intent on convincing us that it is improving-- especially the numbers for our nation’s manufacturing sector-- reminded us that we have entered spring, a time when the economy (and real estate activity) traditionally awaken from an often-lengthy nap and, stretching their arms with a large yawn, our economic sectors come back to life, at least to some degree.
Adding the stubborn problem of unemployment in our nation to Yellen's short list of important problems, the editors at Bloomberg.com had this to say: "The great bulk of the nation's economy is picking up speed this spring but isn't yet forcing businesses to add employees at a greater rate."
This should serve to remind us that the economy is unlikely to truly pick up until we begin to punch bigger holes in the unemployment rate.
And, there's one more thing. Yellen and others continue to worry about our inflation rate. For those of us who lived through the 1970s and beyond, when the only good inflation news was that the rate of inflation had dropped, this is still difficult to wrap our minds around.
The economy simply isn't growing enough. The rate of inflation remains below 2%, threatening to take us through a non-growth period vaguely resembling the one Japan has endured for a long time. It completely changes the way we view interest rates, for example- and we'll discuss this again very soon.
What is clear, in any case, is that the rate of employment needs to rise, and the rate of inflation with it-- a neat trick.