Poor economic and housing news has been blamed on the weather, lack of inventory and even Easter. Could it be the economy is just not doing well?
0:00- 5:38 Introduction
It’s the Weather! It’s Lack of Inventory!
5:38-7:32 It’s lack of demand, poor economy and tight lending standards that are preventing a rise in home sales, NOT the weather or lack of housing inventory. Home prices have been pushed up by low interest rates which has the unintended consequence of making homes unaffordable. Low interest rates caused the housing bubble of the mid 2000’s and the Fed is trying to bailout the home owners that found themselves underwater after the bubble burst. Rising home prices means fewer home sold that harms first time home buyers and the real estate industry.
Will Lending Standards Drop as Interest Rates Rise?
7:32-8:39 Will the banks start lending out their reserves if rates rise? This might stave off a price drop in homes but probably won’t increase home sales. New home sales are at the same levels as they were at in the 1960’s and 1970’s when there were fewer people in the country. This dynamic makes it difficult to claim there is a housing recovery.
Why are Home Builders Not Building Homes to Alleviate the Housing “Inventory Shortage?”
8:39-10:50 home builders are not increasing their activity despite reports of an inventory shortage. CNBC blames their lack of activity on a a land and labor shortage. The real reason for lack of builder activity is low demand because new homes are priced significantly higher than existing homes.
Initial Jobless Claims
10:50-12:04 Initial jobless claims were up during the prior week, yet the media insist that the job market is improving claiming “the rise probably does not suggest a shift in labor market conditions as the underlying trend continued to point to strength. Fewer people losing their jobs does not mean more people are getting jobs, rather it means there are not as many people left to fire after five years of layoffs and tepid hiring. Non farm payroll has not gone up as initial jobless claims have declined. Easter has also been blamed for an increase in jobless claims:
U.S. jobless claims jump 24,000 to 329,000 in week ended April 19, probably an Easter-related bump. Claims usually rise around the holiday.
12:04-13:28 The housing recovery has been only in rising prices. Existing home and new home sales have been low. Mortgage applications are down. Now it looks like home prices have started to level off.
Housing Recovery at the High End
13:28-19:05 Even though mortgage applications are at a all time low, CNBC points out the bright side- Loan amounts are at an all time high. This highlights that the entire economy is geared towards benefiting the wealthy. Home affordability has become the latest excuse for low home sales before that it was higher interest rates, but they never blame the economy. Consumer confidence in the housing market however is the highest since 2007 (just before the last crash). Home owners’ views re the direction of home prices are not a good predictor. The Dark Side of Rising Home Prices is discussed.
The Economy is Based Solely on Rising Home and Stock Prices
19:05-19:45 The economy is based on the rising stock and real estate markets. If they start to fall they will take the entire economy with them.
19:45-26:30 discussion of creative loan programs that might boost the housing market. The Fed needs to find ways to continue to boost the housing market as their economic recovery is based upon rising home prices. The Fed won’t allow the market to restructure. Discussion of foreclosures listing outside the MLS.
Concept Stocks On the NASDAQ are Soaring Soon to Fall
26:30-35:23 discussion of the valuation of Nasdaq stocks like Zillow with no earnings but plenty of “unique visitors” are rising just because. These stock if examined rationally have no basis to be trading where they are. Zillow straddles both pillars of the economic recovery-the stock and real estate markets. If few homes are being sold why are so many people visiting Zillow and other real estate sites.
Janet Yellen and Negative Interest Rates
35:23-44:40 discussion of geo political events in Russia and the potential of European QE that might involve them buying U.S. Treasuries to coincide with the Fed’s tapering. The labor market and Janet Yellen’s view of it are discussed. There is another FOMC meeting next week and Louis and Ryan expect another taper to continue to gain credibility so they can start printing dollars again. Louis believes that Yellen has an itchy finger and wants to print money as she is in favor of negative interest rates. Discussion how all central banks are enamored with money printing and officious intermeddling in economies.
What’s Next for the Fed?
44:40-47:35 Discussion of what the Fed might try next to improve the economy and job market. The Fed takes its orders from the TBTF banks not the other way around. How the banks will make money as interest rates rise, perhaps by lending it out at higher rates to businesses that will hire workers.
How Millennials are Shut out of the Economy
47:35-49:50 Discussion of how prior younger generations led economic revivals. The Fed’s QE program has entrenched older economic losers and crushing student loan debt and poor job prospects have further hampered opportunity.
How Wall Street Rewards Companies that Lose Money
49:50 Discussion of how Wall Street rewards companies that lose money vs companies that show decent operating margins. Comparison to the dot com mania that eventually ended with a crash. The same will happen here.
Re housing inventory does not create demand!
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