Equity Home Mortgage Second Vs
A Damper Housing Market
We at S&P expect mortgage rates to continue rising over the rest of this year and dampen home sales further. House price appreciation continues to soften, which is indicative of the below-peak demand, in our opinion. Builders are likely holding their asking prices back to sell units. Also, new home price appreciation would likely be even weaker if the data could factor in incentives and upgrades, which are also supporting the current pace of sales.
We now see a 35% chance of recession in 2007, due to heightened tensions in the Middle East.
Fundamental Outlook
S&P equity analysts project second-quarter operating earnings for the S&P 500 to advance 12%, vs. their June 28, 2006, growth estimate of 9%. Full-year 2006 earnings are now projected to rise 13%, compared with the earlier forecast of 12%.
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The Housing Outlook and Its Impact
Recent data suggest that the housing market topped out last summer and that home sales and price increases have slowed. Although the picture is confused by an unusually warm January and by rebuilding after Katrina, which together created a spike in housing starts, the overall picture is becoming clear as the spring data become available. .