Rich On Money

America needs a housing recovery to sustain an economic recovery

This past October which is the latest period available,
house sales were up 1.4% from the previous month. This is a seasonably adjusted rate of just about 4.97 million units. During 2010, the level was 4.91 million units, and 2010 was the lowest number in the last 13 years. In the meantime, mortgage rates are less than 4%. It’s been more than 60 years since we have seen a mortgage rate that low.

Now here’s the problem, the median price of a house is about $162,500. This is down more than 4.7% from 2010. The implications are simply that the sheer number of homes being sold is UP, but each of them are being sold for
less because individual housing prices are down.

The logic behind what is happening is simple. During last month October, it looks like a disproportionate number of sales contracts fell through. The deal simply could not get closed. The answer comes in two parts. Appraisals are coming in under the agreed value between the buyer and the seller and therefore – no deal. The second reason is that many buyers upon putting in their paperwork are not getting the deal approved. Lending standards
are getting stronger.

CONCLUSION

Without question, this is what you need to know. This country cannot have a major economic recovery without housing turning itself around. Too much of the economy is dependent upon housing. From employment to buying furniture, paint, and new sheets, without a housing recovery, the economy at best will move along at a weak 2% or lower growth rate, and that doesn’t spell well for America.