successful as owners at achieving the American dream.”
In the years after the recession of 2008, more than 7.5 million homeowners lost their homes to foreclosure or short sales, and about 9 million more homeowners are still underwater and owe more than their property is worth. If one looks at the last seven years as a predictor of housing market behavior in the future, it certainly should give one pause about whether buying a home is a good investment or not.
The good news is that rising home prices over the last couple of years have lifted millions of homeowners out of negative equity. Since the lowest point in the housing market crash, rising prices have led to an additional $4 trillion in housing equity.
Home prices, including distressed sales, increased 10.5% in April 2014 year-over-year, according to the latest survey from mortgage-data firm CoreLogic, representing the 26th consecutive month of annual increases in home prices.
Conclusions – Where Do We Go From Here?
As we have seen above, there are mixed signals in the economy. There are indeed some “green shoots” emerging that suggest the economy is finally gaining some momentum. Yet there are also continued troubling signs that, while not warning of an impending recession, suggest we could be stuck in a structural period of continued below-trend growth.
I believe that the most likely path is one of continued slow growth in the US economy for at least another year or more. Like me, most forecasters have pared their estimates of 2014 GDP growth to something below 3%, with many now converging on a 2% trajectory for this year, well below their estimates at the end of 2013.
The fact that 1Q GDP came in so far below expectations at -1% cannot be ignored. The third and final government estimate of 1Q GDP growth will be out on June 25. We’ll have to see what that report has to say, but it will be very surprising if that number is revised up significantly.
In the meantime, we’ll have to wait until late July to see what the first estimate of 2Q growth will be. That report will be quite interesting in that most forecasters expect it to show 2Q growth of at least 3%. I’m not so confident, but we’ll see.
Onerous New EPA Regulations Will Hurt the Economy
In case you missed it, the EPA issued some sweeping new regulations last week that require coal-burning power plants to cut carbon dioxide emissions by 30%. If these new regs stand, it will almost certainly mean that many of these older power plants will be shuttered in the years ahead. If so, electricity prices could skyrocket.
The mainstream media did its very best to cover-up this news, but you need to know about it. Read my BLOG from last Thursday to get the details.
As always, I welcome your comments and suggestions.
Best regards,
Gary D. Halbert
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