Take Your Time

USA Today recently published an article on the “continued housing recovery”, written by a journalist from the Des Moines Register.

The excitement started when Wells Fargo Home Mortgage announced they were building a complex in Des Moines for 1,800 employees. Wells has increased headcount by 18% over the past year because, as their senior economist stated: “…more people are interested in selling their house to buy larger ones.” The optimism was apparently fueled by the Fed’s commitment to keep interest rates low, which one Iowan banker in the article said has given people more confidence because “…everyone agrees we won’t see the unemployment rate coming down anytime soon.”

Pardon?! Sounds like illogical conjecture to me. People don’t build confidence and buy larger homes when they are out of a job. News of the unemployment rate dipping below 8% was welcomed, but the unemployment rate has been less than 6% on average over the past 30 years. Yes, loan delinquencies are at their lowest level in four years – but such delinquencies are still over 5% of banks’ portfolios (versus under 2% well before the housing crisis).

Don’t rush to buy a bigger house and lock in a bunch of debt right now just because rates are low. With the QE stimulus ending and people still out of jobs (while banks continue to unload their foreclosed product), and with taxes going up and the federal debt continuing to rise… there is still time before the other shoe drops.