This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Stink of GDP Spreads to Housing Market

NEW YORK (TheStreet) -- The jaw-dropping Gross Domestic Product number for the first quarter of 2014 -- a weak 0.1% -- may be bad news for the real estate market.

In fact, it probably already is.

What's especially disturbing about the soft GDP Q1 number isn't the narrative picked up by economists and the media (which seem shocked there's cold weather in January and February), but the long-term trend it signifies.

For seven straight quarters, the economy as measured by GDP hasn't grown more than 2.8%, save for the third quarter of last year when it measured a robust 4.1%. In three of those past seven quarters, GDP hasn't crested 1.2% (the other three quarters saw growth of 2.8%, 2.5% and 2.1%.)

Must Read: What You Should Know Before Cutting the Cord on Your Landline Phone

In other words, save for one quarter, the economy hasn't grown more than the 3% economists generally concede is needed to push the economy into strong growth.

In the housing market, one weak quarter of growth can be shrugged off. But two years of paltry economic performance is a problem -- a big problem.

Since its inception at the outset of the Great Depression, when President Franklin Delano Roosevelt needed harder data to manage a fragile economy, GDP has included basic ingredients to measure the financial health of the nation. Those ingredients include individual income, inflation, business inventories and consumer spending, among other criteria.

Not coincidentally, those are some of the same measurements used to measure the real estate market. And when all, or most, of those criteria are generally down, the housing market suffers along with the rest of the economy.

When you combine seven quarters of largely sluggish U.S. economic growth, and cap it off with that 0.1% stink bomb, all the ingredients are there to stop the nascent real estate recovery in its tracks.

We're seeing signs of that right now.

According to the Mortgage Bankers Association, mortgage applications were down by 5.9% across the U.S. last week. That's surprisingly tepid for the last week of April, traditionally a busy buying period for mortgage lenders, home sellers and real estate agents.

The 5.9% drop signifies what the MBA calls the market composite index: a measure of mortgage loan application volume, including refinancings and straight-up home purchases. The index is at a 14-year low, which spells trouble for the entire housing market.

"Both purchase and refinance application activity fell last week, and the market composite index is at its lowest level since December 2000," says Mike Fratantoni, MBA's chief economist.

The bad news keeps coming from the MBA, again signaling potentially tough times for the real estate market.

"Purchase applications decreased 4% over the week, and were 21% lower than a year ago," he adds. "Refinance activity also continued to slide despite a 30-year fixed rate that was unchanged from the previous week. The refinance index dropped 7% to the lowest level since 2008, continuing the declining trend that we have seen since May 2013."

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $95.46 1.90%
FB $117.97 -0.51%
GOOG $695.79 -0.35%
YHOO $36.20 -0.90%
TSLA $236.77 -2.10%


Chart of I:DJI
DOW 17,780.25 -110.91 -0.62%
S&P 500 2,065.22 -16.21 -0.78%
NASDAQ 4,778.7780 -38.8160 -0.81%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs