When mortgage rates jumped in anticipation of the start of Fed tapering back in June 2013, the inherent cracks in the foundation of the housing industry became apparent.
Seriously, how healthy is a housing market that relies on artificially capped interest rates and literally tens of billions of dollars a month of fiat money pumped into Treasurys and bonds?
Now it’s a full year later and despite the fact that interest rates are nearly back to where they were a year ago, housing has stalled out.
Worse, unless you believe the happy-happy-joy-joy analysts on CNBC or anything on Business Insider, it’s been pretty apparent for, oh, the past 12 months.
That’s not to say that it’s doom and gloom. There are some strengths showing, despite the top-line numbers showing year-over-year drops in everything from sales and construction spending to price increases and mortgage originations.
So, market-driven or artificial, here are three reasons all is not lost.
1) Interest rates
Right, wrong, or just desperate, the Federal Reserve is keeping ZIRP for the foreseeable future. People buy the monthly payment, and a lower interest rate makes for a lower payment, of course. Some expect the first increases to come as late as second quarter 2015; others like St. Louis Fed President James Bullard says first quarter 2015. Either way, right now they’re holding at 4% on a 30-year fixed, so it’s pretty far from usury.
2) Falling inventory
The MBA delinquency survey for 1Q2014 shows foreclosures improving to almost pre-crisis levels, meaning there’s less inventory, i.e. supply. With the stall-out in construction activity for residential projects (most of the starts have been multifamily) there are fewer single-family properties coming on line.
3) Credit boxes
FHA Commissioner Carol Galante says her agency is working to expand access to mortgage credit. FHA is launching the Homeowners Armed with Knowledge (HAWK) pilot program, which provides borrowers who complete housing counseling with savings on FHA-insured loans.
Thursday is jobs day. Ignore the twaddle headlines you’ll see in the mainstream press. Even if the numbers come in above expectations (doubt it), where the job growth is and in what fields is far more important.
We’ll have the coverage at HousingWire.
Meanwhile, go watch soccer and cheer for 'Merica, even if we're not playing.
No, scratch that. Cheer for 'Merica especially if we're not playing.