Federal Reserve Chair Janet Yellen spoke before the Joint Economic Committee on Thursday and delivered her projected forecast for the state of the U.S economy. Chair Yellen said that while things in 2014 for the most part appear mildly sunny, a dark cloud could very well be looming over the housing market, she warns.
According to Yellen, she states that despite a sluggish first quarter, showing a paltry 0.1 percent annual growth rate, the U.S economy will see healthy and steady growth. Yellen attributing the poor first quarter numbers were a result of the treacherous winter vortex as a factor in the poor gross domestic product the first quarter of 2014. Janet Yellen predicts that the economic growth will be noticeably more accelerated than the 2.6 percent growth rate reached last year due to factors including the gradual decline in the unemployment rate, while still not where is should be, is certainly better than it has been, Yellen says.
While those words from Janet Yellen may seem encouraging, the woman with her finger on the pulse on the country’s finances delivered a word of concern when it comes to the U.S housing market. Yellen cautions that homes will prove to be a big burden on the economy. The Federal Reserve Chair said the forecast for the housing market remains lackluster and will need to be closely monitored, stating its performance has fallen short of analysts expectations.
As the housing market has been trying to pull itself out of the slump it found itself in since the start of the great recession of 2008, Janet Yellen reports that the motivating efforts to recover the housing market have been found to be losing steam and drying up. With the noticeable 2.4 percent slow down in new home construction, home sales and purchasing has become near impossible for the average American. With stagnant inventory, escalated prices and out of reach mortgage rates and the closed purse strings of major lending institutions. Some with their eye on real estate are calling Yellen’s report pessimistic countering that home sales did rebound in the month of March even if the number of those actually applying for mortgages was soft, they say they are confident that residential sales will rebound.
During Yellen’s testimony, many were seeking concrete answers on the topic of interest rates and when the Feds intend to raise them. Janet Yellen remained muddy on the issue of short-term rates giving unclear and definitive answers, which may occur because Yellen understands that when she talks, the markets respond. Some suggest that the Chair speaking on the topic of the state of the economy causes the stock markets to rally on conjecture instead of hard facts. As Janet Yellen delivered her report to congress, stocks started to slide and did not rebound until she concluded, with the Dow finishing up 100 points. While Yellen gave no clear answer on the issue of short-term interest rate increases, others predicted that rates could climb within the next six months or early in 2015.
As many on Wall Street and main street hang onto Janet Yellen’s every word, the forecast on the economy and the housing market remains inconclusive. As many hold their breath waiting for a sigh of relief, others are clutching to their anxieties waiting to be delivered from fickle finances.
By Hal Banfield