Home sales are not pulling the economy up as in past recoveries. That may be the only clear thing from the Federal Reserve’s internal discussions about the housing segment of the economy at its June meeting. (Minutes were released in the last 7 days.)
Mortgage rates remain low; indeed they have fallen in the last month. Still, that’s not been enough to stimulate home sales and the Fed seems as puzzled as the rest of us. Or, perhaps there is no single explanation, but instead a long list of reasons:
- Tough credit standards
- High down payments
- Weak demand from young families, driven by burdensome student loans
- Lot shortages
- A low supply of “desirable” homes on the market
- The pool of foreclosures and other distressed properties
- Rising construction costs
And then there’s this potential biggie: “The possibility that more persistent structural changes in housing demand associated with an aging population and evolving lifestyle preferences were boosting demand for multifamily units at the expense of single-family homes.”
Source: Fed minutes outline the different reasons housing has been sluggish – Capitol Report – MarketWatch.
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