Is U.S. Housing Investment Under Threat of an Impending Slowdown?
by Edmund Burden 3
It’s no secret 2016 started off in precarious fashion as several U.S. stock indices tumbled on news of China’s slowing economy, weakening international crude oil prices, and quietly transmitted rumors of a looming recession. Upon these revelations and other market performance indicators, the FOMC announced last week “to maintain the target range for the federal funds rate at ¼ to ½ percent” in accordance with “its objective of maximum employment and 2 percent inflation.” This was a data dependent decision by the FOMC in part because “economic growth slowed last year.”
Unfortunately on January 28th more troubling news surfaced from abroad as The Bank of Japan (BOJ) communicated interest rates are going “minus 0.1%” causing the yen to weaken further against the dollar. This is bad news for U.S. exports in view of an existing trade imbalance between the two allies, which may now expand disproportionately in favor of Japan. So it appears achieving U.S. economic stability-prosperity is unlikely for the foreseeable future given the instability of domestic variables and a myriad of global marketplace pressures.
Additionally there are intensifying investment uncertainties over the domestic real estate market. According to market analyst Marc Hanson, “housing prices…are about 25% to 60% above what the fundamentals of the U.S. economy can justify” and suggests “taking out no more mortgage debt than would result in a maximum debt-to-income ratio of 43%.”
While the subprime mortgage-backed securities (MBS) debacle that catapulted America’s economy into the Great Recession is of little concern now a study by Moody’s Investors Service suggests “for every 10% decline in house prices (in real terms), GDP falls by around 4% from its pre-peak path” noting “property price downturns since 2006 have been linked to a larger fall in GDP.” Terrifying words since the U.S. Census Bureau compared homeownership rates in 2014 to 2015 and the result was a leveling off of purchase activity. Thus as the Fed advances normalizing monetary policy, thereby increasing the federal funds rate and driving up the cost of mortgage money, it is reasonable to anticipate the possibility of housing investment to succumb to a cooling off period.
I help business owners grow their businesses through effective use of financial technology tools. Personal finance is a passion of mine so I try to stay on top of all the trends and write about where I see the market going.
On February 5, 2016 President Obama addressed the nation to announce national unemployment “dipped to 4.9 percent in January” noting “151,000” jobs were created during the month. Obama used this opportunity not only to quell public anxieties over rumors of a looming recession in 2016, but also scolded GOP presidential candidates for stoking the flames. However, given job rates tend to increase around the holiday season – hence the term...
Since the early 1990’s the United States has and continues to suffer trade imbalances, or trade deficits, of substantial and growing proportions with several foreign nations. For those unfamiliar with the term balance of trade (BOT), it is simply the difference between a country’s imports versus its exports. For nearly 2.5 decades U.S. leadership has apparently permitted (to the extent supported) this economic disparity to manifest into an extremely lopsided...
According to multiple news sources America is starting the New Year in precarious fashion as several credible economic analysts predict recession in 2016. Evidence of this anxiety is easily demonstrated by the recent and substantial drop in various stock market indices. As of today NASDAQ retracted to its approximate valuation as measured this time one year ago. Fears the global marketplace is facing an impeding hard contraction are growing. In...
Put simply, the value proposition of Pay with GasBuddy is that you can use a special card that's accepted at most gas stations in order to save a few cents off of every gallon of gas you buy. That sounds good — almost too good, if you think like me.
Over the past few months, I've been a bit torn. While I love saving money and keeping costs down, the convenience of grocery delivery has proven too powerful for me to resist. Now one of my favorite discount grocery stores is rolling out a better option with the introduction of Aldi Curbside Pickup. Yet, the question still remains: is this option actually worth it?
Over the past few years, the free credit score site Credit Karma has expanded into other aspects of finance. This includes offering an unclaimed funds finder as well as a free tax filing platform (which they recently sold off to Block Inc now that Intuit’s purchase of Credit Karma has been completed). Additionally, Credit Karma has rolled out a free checking account in the form of Credit Karma Money Spend ...
A few short weeks ago, I shared my review of an app called Current Rewards that allows you to earn gift cards and cash just for listening to music (although you'll need to do a bit more if you want to really earn points). As I noted in that review, I was first made aware of the app's existence thanks to an ad I saw for the Mode Phone. Well,...
First the bad news: considering all the major data breaches that have hit retailers, websites, and freaking credit bureaus alike, there’s a very strong chance your personal info has been compromised at some point. Luckily, in addition to steps you can take, such as freezing your credit reports to prevent criminals from using this data, there are a growing number of tools you can use to foil thieves in the...
Comments are closed.