Investor’s Business Daily warns that government policies could provoke a housing crisis.
With home prices soaring in most markets, this is the best time to be a homeowner since 2005. But there’s a downside: Thanks to continued government meddling, the housing market has rarely been more fragile. Is another housing crunch brewing?
We’ve talked before about the strength of the U.S. economy, particularly after tax cuts kicked in. And that’s still true. Unfortunately, 10 years after the 2008 financial crisis, there’s one exception: The housing market, which, despite superficial signs of health, remains dysfunctional.
Homeowners are happy now, but they may soon be reeling. The Fed, worried about ultralow 3.8% unemployment and rising incomes, has signaled it could raise rates as many as seven times between now and the end of 2019. Not only would new buyers no longer qualify to buy homes, but homeowners who bought during the Fed’s zero-interest rate days might get a severe shock as payments surge and buyer demand dries up.
Right now, housing suffers from an affordability crisis. Despite median household income rising strongly since President Trump took office, the average price for a new home today is just under $330,000, vs. about $248,000 in 2006, before the last housing crisis. Higher Fed rates followed by a downturn in housing prices would devastate the U.S. economy.
How did we get here? Unfortunately, you can blame government.
