Posted on 10/20/2012 9:39:06 AM PDT by whitedog57
Autumn is here, the leaves are turning color and existing home sales declined -1.7% in September. Here is my Fox Business interview with Laurie Rothman on the the housing recovery (and icebergs in its path).
To be sure, there are stil supply problems such as over 2 million foreclosed homes still in pre-sale. Also, problems such as negative equity persist. Until housing prices rise more and negative equity fades away, supply problems are likely to continue in many parts of the nation.
This comes on the heels of a excellent housing start report, partly fueled by The Fed’s massive purchase of Treasuries and agency mortgage-backed securities.
So, has housing turned the corner? We are in the fourth year of the slowest economic recovery since 1882. But there are some positive signs in terms of low mortgage rates, rising home prices, and increased housing starts. As long as we don’t hit another iceberg like we did in 2008, the housing market will slowly recover.
But there are icebergs ahead. They are 1) the fiscal cliff with increasing taxes (including Obamacare taxes) and 2) the continued lack of credit for mortgages and 3) employment continues to be a problems with U6 unemployment/underemployment at 14.7% and mean duration of unemployment at 40 weeks. To have a vibrant housing recovery, we need unemployment to decline at a faster rate than is happening since 2009.
M2 Money Velocity continues to decline from the peak in the 1990s. As long a velocity is low and declining, Fed monetary policy is NOT translating into increased lending and GDP growth.
In other words, it is difficult for The Fed to drive the housing market when the (monetary) transmission is broken.
Stay tuned! And watch out for the icebergs!
(Excerpt) Read more at confoundedinterest.wordpress.com ...
I love the 1882 reference, I looked at Fox Business Videos for the day and his video stuck out a mile!
Wait a second, I thought we were in a “housing recovery”.
And...assembly lines are “humming” again.
Has Keynes’ Liquidity Trap raised its ugly head?
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