Lombardi Publishing Corporation, a 28-year-old consumer publisher that has served over one million customers in 141 countries, is weighing in on recent U.S. housing market data and warning of a major slowdown.
“To see where the U.S. housing market is headed, it’s important to look at what real home buyers—those who are planning to actually stay in their homes—are doing,” says Wendy Potter, managing editor at Lombardi Publishing Corporation. “Institutional investors who came into the housing market in 2012 and snapped up massive amounts of homes are speculators; they’ll rush out of the housing market as quickly as they entered it, provided they think they can turn a profit or get a better return on their money elsewhere.”
According to Potter, real home buyers are not very active in the U.S. housing market, as they face challenges. In fact, it appears as though the number of real home buyers in the housing market is declining.
Between January and December of 2013, the 30-year fixed mortgage rate tracked by Freddie Mac increased by 31%. The 30-year fixed mortgage rate stood at 3.41% in January, and it increased to 4.46% by December. Higher interest costs are a real challenge for home buyers. (Source: “30-Year Fixed-Rate Mortgages Since 1971,” Freddie Mac web site; http://www.freddiemac.com/pmms/pmms30.htm, last accessed January 15, 2014.)
In fact, real home buyers were caught off guard in the spring of 2013, when interest rates suddenly soared after the Federal Reserve hinted it would start to taper its $85.0-billion-per-month quantitative easing (money printing) program. According to Potter, it is widely expected that the Fed will continue to taper throughout 2014 as it drastically pulls back on its massive money-printing scheme.
“Another challenge home buyers face is stagnant growth in their incomes. In 2013, average hourly earnings of production and nonsupervisory employees in the U.S. increased by only 1.85%—less than real inflation,” she explains. “But while incomes have not risen, consumer costs have; food prices have increased and gasoline prices remain staggeringly high. The cost of living, despite what the government statistics tell us, is rising quicker than the increase in real incomes.” (Source: “Average Hourly Earnings of Production and Nonsupervisory Employees: Total Private,” Federal Reserve Bank of St. Louis web site; http://research.stlouisfed.org/fred2/data/AHETPI.txt, last accessed January 15, 2014.)
On top of that, the demand for mortgage originations, which the big banks use as a gauge of demand from home buyers, has experienced a sharp and sudden decline. Further, at the end of 2013, the Mortgage Bankers Association reported that the mortgage activity in the U.S. housing market declined to the lowest level since 2000. Mortgage applications are a leading indicator of where the housing market will go and how home buyers are reacting to changes. (Source: “U.S. mortgage applications jump in latest week -MBA,” Reuters, January 15, 2014; http://www.reuters.com/article/2014/01/15/usa-economy-mortgages-idUSN9N0AR02420140115.)
“While some analysts suggest the U.S. housing market is a bright spot, the underlying indicators point to the opposite,” Potter concludes. “Thanks to the sharp decline in mortgage applications and originations, it’s safe to say the so-called housing recovery could be grinding to a halt.”
Founded in 1986, Lombardi Publishing Corporation, which has served over one million customers in 141 countries, is one of the largest consumer information publishers in the world. For more information on Lombardi Publishing Corporation, visit www.LombardiPublishing.com.
Visit http://www.lombardipublishing.com/ for more information.
Name: Wendy Potter
Organization: Lombardi Publishing Corporation
Phone: 905 856 2022
Address: 350 5th Avenue, 59th Floor, New York, NY 10118