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Thursday, May 01, 2014

Why Housing Has Stalled — And Why Everything Else Will Follow

It’s not easy being a mainstream economist. You spend your life building models that become your professional identity. And when those models fail to describe and predict reality, you’re left wondering about the meaning of it all.

The latest case in point is US housing. Keynesian economic models say that if you lower mortgage rates you get more houses bought, sold and built. A nice, simple piece of cause and effect. But today’s mortgage rates are at levels that would have incited a buying frenzy a generation ago, employment is rising — and home sales, home building and mortgage originations are all flat-lining.



Anonymous said...

Qualifying for a mortgage is brutal. If in business for yourself, forget it! One needs to have a perfect job and a sizeable down payment. It is not the banks fault, but the Federal Government. The banks are anxious to lend, but not until the Feds loosen up a little will the demand increase for housing.

Daddio said...

No one wants to buy a house today, because it may lose value and become upside down tomorrow.

All this artificial bloating of the economy can backfire in a moment's notice -- leaving many holding the bag.

After being stung by the wave of foreclosures of recent years, who wants to voluntarily jump into that fire?

Anonymous said...

Neither of you have any clue about the housing market. Daddio is somewhat correct if you are only talking about property in the lower 3 counties. 8:26 doesn't have any assets. You can get a mortgage without having a job or income if you have equity in other properties or stocks. If your only vision is locally, you will never get ahead. I am (was) a local boy that went looking for opportunities beyond the Shore when the SHTF in 2008. Bought properties in the areas that were the first to be hit by the housing collapse. Have doubled and tripled my investment in these areas. The only buyers in Wico are slumlords and they are making money too.

Anonymous said...

8:26 Loosen up? That is what created this mess in the first place. Bankers would give anyone a mortgage just to collect all the loan fees. Then sold the mortgage to someone else so they were not stuck holding the bag.