Stymied! Mortgage Purchase Applications Fall With Real Household Income And Employment/Pop Ratio

Confounded Interest ^ | 09/12/2013 | Anthony B. Sanders

[whitedog57]

I was interviewed by a reporter from the Times of London on banks loosening credit standards and whether that will jumpstart the housing market. I said it is doubtful.

Expanding the credit box only works if borrowers want to borrow, or feel comfortable doing so.

As the economy rebounds and home values climb at about the fastest pace since 2006, lenders including the largest, Wells Fargo & Co., JPMorgan, Bank of America Corp., and mortgage insurers are easing the tightest credit conditions in two decades, lifting restrictions put in place after the worst real estate bust since the Great Depression.

I also mentioned the FHA reducing the “penalty box” for borrowers who have defaulted on their loans. It is now only 1 year now (with asterisks).

The problem is that mortgage purchase applications are stuck at 1995/1996 levels.

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The employment to population ratio is declining with mortgage purchase applications. As Jay Leno joked, “President Obama is so thrilled about declining unemployment rates that he is asking more Americans to drop out of the labor force.”

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But with negative growth in real median household income, the well of borrowers is more shallow than it used to be.

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Household debt service as a percentage of disposable personal income is back to President Carter levels. This is an aggregate proxy for debt-to-income.

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And M1 Money Velocity is also back to Jimmy Carter levels.

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And with youth unemployment (future 1st time homebuyers) at 22.7% and

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Obamacare taxation on young men (starting October 1st) rising between 49 and 56% for those under 40,

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this creates thinness in the homeownership pool in the USA among younger people. Just like in Italy where shrinking baby boomers pushing house prices down further.

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So, loosening the mortgage credit box may work, but there are definitely some demographic and economic headwinds against a strong CONSUMER recovery.

[whitedog57]

Good luck with that central planning Fed/FDIC!

[Georgia Girl 2]

There is no housing recovery. There will not be as long as we hae rising interest rates and 90 million plus workers out of work. Not gonna happen.