Why There’s Concern Over the Housing Market

Wall Street Journal: “So why have home sales slowed? Prices are rising in part because there aren’t very many homes for sale … Home buyers may still be adjusting to the reduced affordability from the combination of higher prices and rates.”

“Here’s the problem: If low inventories—and fewer foreclosures—have been holding back sales of existing homes, then builders should be putting up a lot more new homes. So far, that hasn’t happened. New-home sales plunged in March by 14.5% from February.”

“Builders have focused on building fewer homes that can fetch higher prices as they face rising labor, land and supply costs.”

“And builders have said that they are focusing on selling to more affluent buyers, as opposed to entry-level buyers, who are either struggling to come up with the cash to buy a home or aren’t interested in ownership right now.”

“Housing’s rocky recovery could signal weakness more broadly in the economy, reflecting the lingering damage from the bust that has left millions of households unable to participate in any housing recovery.”

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  • embo66

    The tepid housing market is symptomatic of a lot of other negative forces in our economy that have either been building for decades, or are actually new:

    — A huge percentage of foreclosed homes have been snatched up in the past 5 years by hedge funds and other Big Money investment types. These investors don’t want to sell homes back to the middle class; they want to rent them out.

    — Banks are still keeping mortgage credit incredibly tight. They are demanding 20% down and/or income and credit score levels that are too high for many. This despite these banks being able to borrow money for the last 5 years at zero percent while still charging interest to everyone else.
    — Far too many first-time home buyers can’t get a loan (see bank point above) or can’t even afford a loan. That’s partly due to having so much college-related debt that they are having to put home-buying and family-starting on a very long hold.
    — Meanwhile, the rich (and esp. the uber-rich) keep getting richer. Nearly all the real gains — in GDP, productivity, salaries, stocks, etc. — over the last 30 years have gone to the top 10%.

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