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The Case For Housing

December 19, 2011 – 5:56 pm

There is going to be a lot of housing data out this week starting with the reading on home builders’ confidence out this morning. The number was 21 from the National Association of Home Builders. That was 1 point better than expected and the best reading in months. It means little since a reading above or below 50 is considered to the be the point where the housing market is healthy or unhealthy. A reading of 21 certainly expressed the weakness of the housing market.

The housing market health is one of the basic necessities for a truly sustained and strong economy. Without it we will continue to struggle with slow growth and possible dips into recession depending on what happens in the rest of the world. Housing is a store of wealth for the average homeowner and that store has been raided by the housing collapse. The resultant destruction of wealth has weakened the American Dream in a way that doubt has been sown in the wisdom of buying a home.

Affordability is at record highs. The average house is cheap enough, the average worker making enough money and interest rates are low enough to attract far more buyers than are showing up, but where are they? Besides the fear that a home no longer is a good place to store wealth, banks do not want to loan money. Sure the rate is low but to get that loan the banks are demanding onerous documents boarding on the impossible. The banks fear that the government may require in the future more cash reserves to be held on their balance sheet and they are just as frightened as the home owner about the home being a store of wealth, to say nothing about the high foreclosure rate.

When this situation will change is hard to say but as long as it lasts it is going to retard the growth of our economy.
Good Trading
Steve Peasley

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