My Mortgage Blog

You have most likely noticed that the current flow of world economic news is like a muddy river that carries rocks and boulders to our feet. Then drops them on us.

This time last week, I was willing to hazard a bit of light-headed optimism. I even thought, despite the growing evidence to the contrary, that we might see better employment numbers on Friday and further evidence that real estate prices were firming and sales volume was increasing.

I mean, really—this is all rather crazy-making. Example of positive news: CoreLogic, a major compiler and reporter of real estate data, just released its April Home Price Index, and it showed that home prices “in the United States (including distressed sales-short sales and REO transactions) increased on a year-over-year basis by 1.1 percent in April.” It’s the second time we’ve had two year-to-year sales volume increases in 2012 and, further, CoreLogic reported a 2.2% month-to-month increase in home prices in April.

Sounds curiously like good news, no? “We see the consistent month-over-month increases within our HPI [Home Price Index] and Pending HPI as one sign that the housing market is stabilizing,” said CoreLogic’s CEO Anand Nallathambi. “Home prices are responding to a restricted supply that will likely exist for some time to come—an optimistic sign for the future of our industry.”

Yeah, but we’ve just spent about five days watching the pleasant benefits of our optimism slip out the door in the wake of the country’s employment report and Pending Sales Index. What are we to do here?

Clear Capital, a real estate consultancy and appraisal firm, recently announced in its Home Data Index [HDI] that home prices had risen in both its year-to-year (by 0.1%) and its quarter-to-quarter (by 0.4%) computations for the first time since August 2010. “Strength in REO-only price trends as well as some early indications of price gains spreading from low tier sectors to the mid, and higher-priced homes is helping confirm that the country continues to make progress on its recovery, and we are expecting to see improvements extend over the next several months,” reported Clear Captal’s director of research and analytics, Dr. Alex Villacorta.

We can gather dozens more such reports. They say that the nation’s real estate market is turning around at last—for real. They tell us that there are fewer homes on the market, and that prices are firming as a result. They say that the number of distress sales is edging lower, slowly but surely.

But we learn that the number of existing home purchase contracts signed in April was a rather numbing 5.5% lower than in March. We see a significant decline in the Consumer Confidence index. We see the number of weekly mortgage applications continue to edge down. What to make of all of this?

We need to acknowledge two facts.

First, Europe has come to the edge of a fiscal cliff—its experiment in economic unity is in great distress—and there is nothing normal, regular or orderly about Europe at the moment. How the countries of Europe will pull themselves out of this, no one knows. Economist Ken Rogoff has suggested that nothing less than a blank check from the region’s central bank will do the job, if anything will.

Europe, therefore, is an explosion waiting to happen, and its trading partners watch with a degree of terror.

Second, we’re looking at data that has been whipped into unusual levels of volatility. We need to wait until things settle a bit. In the meantime, every indicator is rather suspect, its levels depending largely on what day, what hour, what minute the data was gathered.

The good news is that we have attractive interest rates to continue driving this market. It’s a slow affair, to be sure, but it could be very much worse.

Do the work, keep acting as if the recovery is continuing to firm, and don’t get waylaid by fear-crazed economic reports and indicators.