Posted on 06/24/2012 10:49:22 AM PDT by whitedog57
When I spoke at the American Action Forum with Douglas Holtz-Eakin and Jared Bernstein about housing, I didn’t mention the following nasty chart of M2 Money Velocity and house prices:
What this chart says is that monetary policy is ineffective (M2 Money Velocity) and will not be able to stimulate a recovery in the housing market. Why? A lack of available mortgage credit.
Credit is tight (720+ FICO scores required) and the Fannie Mae analyst mentioned that Fannie Mae would not purchase or insure any mortgage of someone who had defaulted for 7 years. So even though house prices are lower than they were during the bubble and mortgage rates are at historic lows, the mantra that housing is the most affordable it has been in decades is misleading. If you cannot qualify for a mortgage, these lower house prices and mortgage rates are for naught. Throw in higher down payments and housing is not the most affordable in decades.
Throw in the massive supply of foreclosed properties and borrowers in the foreclosure pipeline, and it is difficult to argue for a sustained housing recovery beyond this summer.
And in the UK, Mervyn King of the Bank of England is signaling that UK banks could relax lending standards. Interesting development since our government and lenders have tightened lending standards.
Another chart I did not share at the American Action Forum conference is the Citi Economic Surprise Index for the US. It shows an almost straight-line decline since February indicating that economic news is surprising to the downside and worsening. I didn’t want to depress the audience any more than the Fannie Mae presentation already had at the beginning of the program.
(Excerpt) Read more at confoundedinterest.wordpress.com ...
Nice economic recovery Obama!
I don’t beleive he’s correct in saying you have to have a 720 FICO score to get a mortgage.
I don’t beleive he’s correct in saying you have to have a 720 FICO score to get a mortgage.
Get the foreclosures done! It’s the quickest way to prosperity again.
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