Posts Tagged ‘home prices’
The news headlines are saying the U.S. housing market is witnessing robust growth and flipping homes for profit is back.
While many are now saying there is growth in the U.S. housing market and that it will continue, I disagree with them, based on many different factors…all of which I want my readers to know about.
Yes, home prices have gone up, but that’s about it for positive developments. The housing market still suffers, and there are problems that need to be fixed before it sees a full-on recovery.
The delinquency rate on single-family residential mortgages in the U.S. remains staggeringly high. In the second quarter of this year, it was 9.41%. Yes, again; it has declined from its peak of 11.27% in the first quarter of 2010, but it’s still almost 140% higher than its historical average of 3.94%! (Source: Federal Reserve Bank of St. Louis web site, last accessed November 8, 2013.)
As I have been harping on about in these pages; institutional investors jumped into the U.S. housing market buying residential homes in bulk, and as a result, prices increased. But we didn’t see first-time home buyers run towards the housing market—an increase in first-time home buyers is essential for any economic recovery.
According to the National Association of Realtors, in September, first-time home buyers accounted for 28% of all existing home sales in the U.S. Meanwhile, investors were behind one-third of all existing home sales! (Source: National Association of Realtors, October 21, 2013.)
The “U.S. Economic and Housing Market Outlook” report issued in October by the Office of the Chief Economist at Freddie Mac said, “According … Read More
Let’s face it: the U.S. housing market is still under severe stress. No matter how the bulls may spin their argument, it’s far from a real recovery. The historical fundamental factors behind a typical housing market recovery are still missing.
According to real estate information company Zillow, in the second quarter of this year, almost 24% of all homes with a mortgage in the U.S. housing market had negative equity (the homes were worth less than the mortgage issued on them). More than 12 million home owners in the U.S. economy remain “underwater.” And in some geographical pockets, the spread between the mortgages and the values of the homes is very wide; in the Las Vegas area, almost 13% of home owners with a mortgage owe two times the amount of their home’s current value! (Source: Zillow, August 28, 2013.)
Sadly, the misery in the U.S. housing market doesn’t just end there.
The delinquency rate on single-family residential mortgages at all commercial banks stood at 9.41% in the second quarter of 2013. Yes, it has declined a little from 9.7% in the first quarter of this year, but it still remains very high compared to the historical average. (Source: Federal Reserve Bank of St. Louis web site, last accessed October 7, 2013.) The average delinquency rate on single-family residential mortgages from 1991 to 2006 was only 2.2%.
These negative factors working against the housing recovery are just a few of many.
Since 2012, the majority of activity in the housing market has been the result of investors buying up homes, renovating them, and renting them out. We didn’t really see … Read More
Consumer confidence is anemic in the U.S. economy as Americans are being financially “squeezed.” Consumer confidence, which is missing in this so-called economic recovery, leads to higher consumer spending, which makes up two-thirds of gross domestic product (GDP) in the U.S. economy.
Two days ago, we got news the Conference Board Consumer Confidence Index declined to 80.3 in July, down about 2.2% from June. (Source: The Conference Board, July 30, 2013.) This is nowhere close to the consumer confidence levels we saw prior to the financial crisis in the U.S. economy.
The survey of consumer confidence in July showed 35.5% of respondents are claiming jobs are difficult to get.
But that isn’t all…
We are told the housing market is improving, but few mention that millions of Americans are living in homes they purchased with positive equity that now have negative equity—their home prices are lower than the mortgage they borrowed on them. The number stood at 9.7 million homes with negative equity at the end of the first quarter. (Source: CoreLogic, June 12, 2013.) This phenomenon breeds consumer discouragement, not consumer confidence.
All of this is not a surprise to me; I have been saying it all along. Consumer confidence cannot improve because the Federal Reserve is buying $85.0 billion a month of U.S. Treasuries and mortgage-back securities—none of which helps the “little guy.”
Look at Japan, a country that has become famously known for its monetary policy and quantitative easing. One would … Read More
Profit Confidential — IT'S FREE!
"A Golden Opportunity for Stock Market Investors"