Fund Manager: Might Take A Debt Jubilee For All Households For Fed To Save Economy
SilverDoctors.com
June 20, 2019
The Fed is running out of bullets, and it looks like MASSIVE money printing is coming up next. Dave Kranzler explains…
by Dave Kranzler of Investment Research Dynamics
“The latest University of Michigan consumer confidence report noted that its index tracking those who think it’s a good time to buy a home has fallen by a hefty eight points in the past two months even as mortgage rates have dropped.” – Danielle DiMartino Booth, “The Fed Can’t Help Housing Or Autos At This Point”
I’m not the only analyst who has concluded that lower rates likely will not re-stimulate housing market activity. As I’ve argued in my Short Seller’s Journal, the “pool” of potential homebuyers who can qualify for a mortgage has greatly diminished. In fact, mortgage delinquencies are rising because many who stretched to buy a home in the past several years are struggling with the all-in cost of home ownership. Stagnant wages and the rising cost of necessities are largely the culprits.
“Despite lower mortgage rates, home prices remain somewhat high relative to incomes, which is particularly challenging for entry-level buyers.” – NAHB Chief Economist Robert Dietz. That quote accompanied the NAHB’s release of its Housing Market Index, which used to be called the Homebuilder Sentiment Index because it’s a “how do you feel?” survey.
The Housing Market index fell to an index level of 64 in June from 66 in May. Wall St’s finest were looking for a consensus 67. All three sub-indices declined: current sales conditions, buyer traffic and expectations for the next six months. Buyer traffic has been below 50 for two months in a row. This is despite more than a 1% decline in the average rate on a 30-year fixed rate mortgage during the last 7 months.
At the end of the day, it doesn’t really matter how homebuilders “feel” about the sales environment now or in six months, declining foot traffic translates into decline sales volume. The quote above reinforces my theory that the “pool” of potential homebuyers, especially first-time buyers, who can qualify for a mortgage and afford the monthly cost of home ownership is drying up. Lower interest expense somewhat offsets high prices relative to income. However, the general cost of home ownership other than debt service is rising beyond the spending budgets of many potential home owners.
The Rest…HERE
