For over a year I have shared with you on TownHall that the recovery was being hyped to help Obama. The purported housing recovery was based upon the manipulation of interest rates by the Fed, and inventory manipulation by the withholding of millions of foreclosures from the market, and not upon organic growth.
It is not possible for the economy to recover until housing recovers and neither can recover until the job market recovers. New home construction rising to 50% of healthy was being hailed as recovery. A pace of 5 million existing home sales (about 30% foreclosures) was being hailed as recovery when 6 million (3% foreclosure) was considered normal.
Without any organic growth in jobs, with 7 of 8 jobs created under Obama having been part time, the entire recovery talk was nothing but hopium. QE, and ZIRP are false foundations. Obama’s policies the wrecking ball. Fake now meets reality.
Excerpts from the left leaning BusinessInsider: Everyone’s Kinda Freaking Out About All the Ugly Housing Data……
The new home sales report for July was very weak, not only because of a 13.4% decline to 394k annual rate in July (cons 487k, UBSe 500k) but also because of downward revisions to the prior three months. June was revised to 455k from 497k; May was cut to 439k from 459k; and April was trimmed to 446k from 453k.
Home price measures certainly do not show soft demand. That said, this was an undeniably weak report and raises the possibility that higher mortgage rates are having a larger effect on sales than we anticipated.
Guggenheim Partner’s Scott Minerd:
…New home sales are booked when a contract is signed, a key difference from existing home sales, which are booked months later when the deal closes. As such, new home sales are the most current indicator of housing activity. This makes the recent collapse of new home sales exceptionally disturbing. All told, there has been a 20.7 percent decline in new home sales in June and July. We would view any other business that experienced a 20 percent decline in activity over a two month period as in a highly difficult position.
BlackRock’s Russ Koesterich points to another up-to-date high frequency housing market indicator: mortgage applications.
As interest rates have climbed, mortgage rates have followed suit. The cost of a 30-year conventional mortgage is now at about 4.7%, up from 3.6% in early May, and the monthly mortgage payment on a median US house has increased roughly $200 during the same period. As rates (and mortgage costs) have risen, mortgage and home sales activity has started to falter. A recent Mortgage Banker Association survey shows loan activity down by more than 50% from a May peak…(end BI excerpts).
From the libertarian leaning ZeroHedge:
With the West down 4.9% and Northeast down 6.5% MoM (the biggest 3-month drop in 3 years), even the much-vaunted fair-and-balanced National Association of Realtors are forced to admit that “higher mortgage interest rates and rising home prices are impacting monthly contract activity.”(end quote)
I hate to say I told you so, but I told you so. We long of tooth know that mortgage interest rates in the 4% to 5% range are actually phenomenal, however are up 30% collapsing the purchasing power of prospective buyers still lucky enough to have full time employment.
The Bernanke money mischief will have unintended consequences for years to come as normal buying and selling patterns are distorted when families with a 3 % mortgage don’t enter the market impacting both supply and demand. The QE/ZIRP false foundation.
Worse are the wrecking ball Obama economic policies which are nothing more than the codification of radical liberalism. Obamacare, Dodd-Frank, EPA, green energy policy has damaged but not yet destroyed the true foundation for growth: capitalism.
The Obama enabling Republican leadership better wake up fast and defund Obamacare, screw the lid down on the debt ceiling, and reign in an out of control Imperial President ignoring constitutional constraint dictating through the administrative state rules and regulations that destroy America’s foundation just like termites. Time for treatment.
Over four years ago I predicted it was impossible for a recovery with the proposed Obama agenda. The laws of economics can’t be fooled like voters.
The socialist Keynesian spending, the expansion of the welfare state, higher taxes, debt/deficits, and concentrated power in the central government suppressing the private sector have never led to prosperity in history. Sadly for America they fail again.
Time for the Republican leadership to make a stand to save America, or time to mount a tsunami of voter rejection to radical Democrats and Republicans who refuse to stop them.
The opinions expressed here are solely those of Fritz Pfister or identified sources, and not necessarily those of RE/MAX Professionals of Springfield or RE/MAX International.