An Update On The Housing Recovery
Lance Roberts | Jan 17, 2014 02:15AM ET
In stated previously, the optimism over the housing recovery has gotten well ahead of the underlying fundamentals. While the belief was that the Government, and Fed's, interventions would ignite the housing market creating a self-perpetuating recovery in the economy - it did not turn out that way. Instead, it led to a speculative rush into buying rental properties creating a temporary, and artificial, inventory suppression.
The rising risk to the housing recovery story lies in the Fed's ability to continue to keep interest rates suppressed. It is important to remember that individuals "buy payments" rather than houses. With each tick higher in mortgage rates so goes the monthly mortgage payment. With wages remaining suppressed, 1 out of 3 Americans no longer counted as part of the work force or drawing on a Federal subsidy the pool of potential buyers remains contained.
While there are many hopes pinned on the housing recovery as a "driver" of economic growth in 2014 - the lack of recovery in the home ownership data suggests otherwise.
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