This is the topic of many arguments; whether bull or bear, conservative or liberal… many Americans are wondering just what is keeping the economy down?
I wanted to give you my own take on what’s going on and what’s not going on.
The economy, sad but true, is experiencing measly growth, job losses and people who are simply saving and not spending, but its bigger than that…
Sure, these items fan the flames of an economy that just got torched, but they’re not the catalysts.
What I see as the major catalyst is the housing market, more specifically the “existing homes” market.
This afternoon, Mark Billings was sitting in for Rush Limbaugh, a show I listen to intently, 5 days a week, and he pointed out something that most people really weren’t thinking about. I’ll paraphrase…
Right now we have an existing home glut. There are tons and tons of homes on the market but nobody is buying.
Why aren’t people buying when we have the lowest mortgage rates the country has seen in a very long time?
Its because when someone buys an existing home, nine out of ten times, the buyer has to sell their own house. It’s simply a chain reaction that unfortunately is not working; in fact it might be working backwards.
Why, with the rates at 4.5% or less, are people not jumping on existing home sales?
People are scared and they have every right to be. People are worried that they won’t have a job tomorrow and jumping into a 30 year “risk” is something that quite frankly they’re going to do without until things get better.
That’s the key here folks, once the economy starts to flatten and starts to head upwards, the housing market will follow, its not the other way around and it never will be.
One thing to think about is this – lending standards are incredibly tough now, and they should be. Why should banks have to loan money to high-risk customers? Well besides the fact that they have to, its nothing but a potential loss and I can’t help but think that if these standards were in place over the last 10 years, we wouldn’t be in the position we’re in now.