DS News - Digital Archives

LOW SUPPLY POINTS TO PRICE INCREASES IN 2013 The low supply of housing stock recently reported is giving Capital Economics reason to believe home price forecasts under 5 percent are conservative estimates. Realtors in December were forecasting prices to rise by about 3.5 percent over the next year, while consumer estimates were more modest at 2.5 percent, the analytics firm noted in its regular monthly housing report issued in early February. The estimates show a growing optimism among both groups. For example, in March 2012, Realtors expected prices to rise by about 2.5 percent and consumers projected a 1 percent increase, Capital Economics explained. However, with the low supply of inventory, the research firm anticipates much bigger gains. Recently, the National Association of Realtors reported existing-home sales in December fell to a 4.4-month supply, the lowest level since May 2005, while the new home sales report from the Census Bureau and HUD says there is a 4.9-month supply of newly constructed singlefamily homes for sale. At face value, current inventory levels point to home price increases of as much as 10 percent year-over-year, according to Paul Diggle, property economist for Capital Economics. ���For now, our forecast is for a 5 percent rise during 2013,��� Diggle said. However, housing markets across the country are expected to perform markedly different. At the two far ends of the spectrum, the Northeast and the West will experience extremely diverse market climates this year, according to Capital Economics. The Northeast is much more likely to see no price growth at all than anything close to the 46 5 percent national average expected this year, the analytics firm stated in a recent outlook. A potential for an increase in supply is one factor that may keep prices at bay this year. Northeastern states have relatively long foreclosure timelines, and their foreclosure rate as of the third quarter of last year was 5.6 percent. This compares with just 2.7 percent in the West. Capital Economics, therefore, anticipates price increases in the region would lead to increased supply as both lenders and homeowners unload properties onto the market. ���Ironically, these factors will conspire to keep price gains muted in the coming years,��� the firm explained. On the other side of the country, the West has already dealt with much of its foreclosure inventory, and the region is well-positioned for potential economic growth and rising incomes. While housing starts increased 30 percent in the western part of the country last year, this growth was not necessarily reflected in the region���s total sales. New home sales made up 15 percent of home sales for the year���making the new construction increase ���unlikely to offset the lack of supply in the existing-homes market,��� according to Capital Economics. While the Northeast is likely to experience no price gain this year, the West may experience nearly 10 percent, according to the firm. Capital Economics says nationally, it expects to see a rebound in housing starts and an increase in the number of willing sellers, which means inventory will hit a bottom soon. The firm also noted the three major house prices indices���Case-Shiller, the Federal Housing Finance Agency, and CoreLogic���posted yearly price gains at around 5 percent and as high as 7.4 percent in November. COMMENTARY: FILLING THE VOID By Mark Lieberman, Economist for the Five Star Institute President Obama opened a big hole in his White House by tapping Jack Lew to replace Timothy Geithner as secretary of the Treasury, leaving empty���for the moment���the role of chief of staff. The president eschewed the progressive choice of New York Times columnist and Nobel economic laureate Paul Krugman to replace Geithner with yet another in-house appointee. Lew himself, in addition to swapping desks to become (presuming Senate confirmation) Treasury secretary, was moved from head of the Office of Management and Budget to his current chief of staff role. It���s not the first time the president has looked to change nameplates of those who already worked for him: Think Leon Panetta moving from the CIA to Defense or even David Petraeus moving from the military (yes, the military works for the president) to the Central Intelligence Agency (CIA). Strong managers, according to Harvard Business School theory, can move from one discipline to another without specific expertise, and Harvard Law alum Obama apparently picked up something beyond a law degree while in Cambridge. That���s not to say Lew doesn���t have the background to handle Treasury. In addition to his two government jobs for the president, he was COO for Citigroup from 2006 to 2009. While working in the White House, he was integral to the 2011 debt limit negotiations, where his stridency irked many Republicans, which might make confirmation difficult. In the end, he should get through in time to head this year���s debt limit talks���if there are any. (The president has said repeatedly he won���t negotiate over the debt ceiling.) With Lew moving, the president is still short a chief of staff but has an opportunity to turn to someone who has already proven himself to be a skilled���if somewhat blunt���negotiator, one of the key roles of a chief of staff. He has someone on his team with long relationships with members of Congress who knows his way around Capitol Hill and is not afraid to take on tough issues. That he has another job should not be an obstacle if Obama turns to Vice President Joe Biden to fill the chief of staff role. The chief of staff is the first person the president sees when he begins work and the last person before he ends his working day, an individual with unfettered access who is supposed to know what the president knows and present a unified face for the administration. Biden���his sole constitutional responsibility notwithstanding���fills those requirements for Obama. In slotting Biden to be chief of staff as

• Cover