These are all the risks that the housing market is facing right now
There is no better barometer on the health of the U.S. economy than housing. It’s an industry that encompasses a myriad of vital sectors — banking, manufacturing, commodities, international trade, transportation and, of course, consumer spending. So it’s not surprising the Federal Reserve closely monitors housing trends in the course of setting monetary policy.
Early this month, the government reported that new home sales dropped 6.9% in January to a 607,000 annual rate, which happens to be 4.1% below its year ago level. Not a great start to 2019. Sales crept up a disappointing 2.2% all of last year. 2. With baby boomers retiring at a rate of 10,000 a day, one would look to the millennial generation as the next wave of demand for homeownership. But many in this cohort are incapable of making such a financial commitment. They are burdened with a record $1.6 trillion in college debt. And “serious delinquencies” of student debt topped a record $166 billion in the final quarter of 2018.
5. The average low rate of 4.50% last year on a 30-year conventional mortgage was not enough of a catalyst to spur much home buying, especially for existing units. With the Fed now declaring a pause on further hikes in short-term rates, mortgage rates have dropped to 4.34% this week, which is the lowest in a year. That rate will certainly drop further in the next few days now that Treasury yields TMUBMUSD10Y, +0.
2. Home builders still face a plethora of regulations, which account for 25% of the cost of constructing a home.
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