The Title: Put the Elderly In Prison!

Flood Insurance and Fed Subsidies

From an article on flood insurance: “FEMA has begun a study on the affordability of repealing the subsidies, and Senate Majority Leader Harry Reid said there will be a 2014 proposal to delay the rate hikes.

Congress is under pressure to enact rate relief after administrators of the National Flood Insurance Program began sending notices of policy increases to property owners.

The rate increases were mandated by a 2012 law intended to cut the flood-insurance fund’s $24 billion debt by charging premiums more closely reflecting the true risk. Proponents of the measure said that caused steep increases that middle-class homeowners can’t afford. “

Did you know that the Federal Government (you and me) help pay for someone’s flood insurance premium?
I didn’t know this. Another example of how the federal Government spends our money without the majority having a say.

Housing Starts Graph - A Great Illustration

This is one of the best graphs on housing starts

The average is about 1,600,000 housing starts per year since the 1950’s using the top and bottom ranges (red lines).

If you consider the 1,600,000 starts as the top of the range since the 2,000,000 housing starts represent an overheated economy proceeding a recession. Using a different top of the range as being reasonable, the new average would be 1,200,000 housing starts per year. This is also consistent with the number of new homes needed to keep pace with population and to replace the number of homes demolished each year.

The new norm is really the old norm …………… 1,200,000 homes per year.

After each recession, the number of new homes built has increased substantially until the Great Recession! We are lingering  below the bottom range and well below the norm.

In previous posts, I have outlined what has happened to the housing industry and what will happen to the housing industry. Sorry but it doesn’t end well.

Again, I am not an expert and I hope that I am wrong but housing will stall with higher prices, higher interest rates, low inventory and weak demand. This will be the norm for many years. The good news is that local markets rule rather than national trends.

Millennial’s will have to stay in their parent’s home for a long time and stay on the fence for even a longer time.  

Baby boomers will age in place.

The trajectory of the Case-Shiller Home Price Index is troublesome!

The increase of current housing prices is almost as the sharp incline leading up to the housing bubble. What will stop this trajectory?

An increase in interest rates will slow the price increase but may cause the economy to falter again.

 Not raising interest rates will sooner or later cause inflation to skyrocket.

This is called between a rock and a hard place.

Do you agree or disagree with this assessment?

Low Supply and Weak Demand for Housing = ??

We have a low supply of existing homes for sale and a recessionary level of new housing starts compounded with rising interest rates.

Anytime interest rates rise, home buyers have always jumped off the fence and bought a home or a car. We just went through that surge when mortgage interest rates went from 3.5% to 4.5%. The home buying surge was tepid at most. 

I know the Fed is trying to land their quantitative easing like a hot air balloon to keep inflation in check but interest rates have to go up.

This will not cause more buyers to buy but cause them to stay on the fence?

What happens when you have low supply of homes on the market and weak demand?

A balanced market …………… not so much!

It is becoming clear.

We will not have a buyers or sellers market and we will not have a balanced market. I am not an expert and can’t predict what our politicians and the Fed will do but their tricks are limited. If they are running a sting, I can’t predict the outcome!

What I can predict but can’t predict the time frame ------- interest rates are going up, substantially!!

When interest rates go up, housing demand will stop cold! Yes we have pent-up demand but the Millennial generation will not buy, baby boomers will stay in place and families are not moving for new opportunities without assurances of work.

So what does this mean to us?

As housing goes so goes the economy. No one else is telling you but this “malaise” will mirror the Carter years and this is after years of “recovery”. Timing – not sure but hold onto your hats and your money.

If you really think that everything is going to be alright, you are in denial. There are a lot of events unraveling in the world and to the family, faith and freedom – how can the outcome be good?