The Mortgage Corner
Existing-home resales weakened in January as the NAR’s pending home sales index fell sharply and is pointing to trouble for final sales of existing homes where the year-on-year rate for January had already fallen back below the zero line to minus 4.8 percent. Econoday reports new home sales also disappointed in January, sinking below the zero line on a year-over-year basis to minus 1.0 percent.
This has to be a consequence of the slight uptick in mortgage rates that have been at historical lows for more than 2 years. Many homeowners and buyers simply can’t afford this slight rise in mortgage rates, even though the conforming 30-year fixed rate is still at 4.0 percent for a 1-pt. origination fee, and 0 pts. @ 4.25 percent.
Higher interest rates usually follow higher inflation, but the only inflation is showing up in stock (and bond) prices, which is where most corporate profits are flowing these days; into investor and CEO pockets, rather than into consumers’ pockets. It is why one-quarter of the American workforce earns below the poverty line of $10/hour for a family of four.
It would help to see a rise in minimum wages. But the national minimum wage has been stuck at 7.25 percent since 2009, due to congressional inaction. This is the result of more than 30 years of trickle-down economics that has pushed most of America’s wealth to the top 10 percent of income earners.
In 2012, the top 10 percent of earners took home 50 percent of all income. That’s the highest percent in the last 100 years. The top 1 percent took home 20 percent of the income, according to a study by economists Emmanuel Saez and Thomas Piketty.
So what has really happened is housing prices are now rising twice as fast as household incomes, thanks to such low interest rates. That is where we see inflation; but not in household incomes which need to rise faster if housing is to remain affordable.
Harlan Green © 2018
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