Courtesy of Lee Adler of The Wall Street Examiner
Today I’ll dig a little deeper into the new home sales data and related data. I want to help you see how the media spins the story to suit its narrative in support of the status quo. The status quo includes the ideas that the housing “recovery” is a big deal, that housing inflation is a matter of “appreciation,” and that we should all thank the Holy Fed for stimulating this great recovery. But the data suggests that rather than stimulate recovery, Fed actions seem to have retarded it.
Yesterday we covered the idea that the media ignores historical perspective in touting the strong recovery off the housing crash low. Even with the rebound, the market is still little better than recession levels from 20 years ago. At the same time, by pushing mortgage rates to record lows, the Fed has stimulated enough housing inflation to suppress sales in spite of population growth and growth in the number of full time jobs. It has also cost savers trillions in lost income.
The Fed wanted lower mortgage rates to stimulate the market. But the combination of the increase in jobs being mostly low pay service jobs, and the rapid inflation of house prices has left most households off the Fed’s gravy train. At typical qualifying ratios and down payments, households at the median household income can only qualify to purchase a house priced around $200,000. The problem is that home builders aren’t building houses priced less than $200,000. That leaves almost half of US households unable to buy new homes. In some overheated metro markets, the percentage is even greater.
In June, nationally, builders sold only 8,000 houses priced at less than…
Read the rest of this post at David Stockman’s Contra Corner.
