Between the House passing the China currency bill (and I think the Senate may as well) and various politicians pushing for a foreclosure moratorium, one has to wonder what sort of politics/policy another year of 9-10% unemployment will generate. I am guessing China will finally emerge as the new bipartisan big bad for U.S. politics (more for economic than military reasons), while there will probably a flurry of new housing ideas like this one proposed by economist Glenn Hubbard.
Politics and policy from inside Washington
A housing bottom is not a boom. My guy Ed Yardeni sums things up nicely (bold is mine):
The unemployment rate was 9.5% in June, the highest since the summer of 1983. Average hourly earnings was up 2.7% y/y during the month, the lowest since September 2005. The CPI tenant rent index was also up 2.7% y/y in June, the lowest since November 2004. This is not a scenario that triggers a V bottom in home prices. But then why does the latest batch of home prices suggest that they’ve stopped falling? Bear markets don’t last forever. In many neighborhoods prices are down 25%-35% from their peaks. Housing affordability has soared. While many young adults may have moved in with mom and dad to save on rent, household formation tends to run over 1 million per year, even during bad times. In other words, there is underlying demand for houses, and they are certainly more affordable.
From RDQ Economics:
New and existing home sales, housing starts, building permits, and homebuilder sentiment all appear consistent with the picture of a bottoming out in housing activity, albeit at very low levels. It seems likely that the drag from housing on GDP growth in the second half of the year will be significantly smaller than the average subtraction of 1.0% point per quarter over the last three years.
Me: Less of a drag on GDP, sure. But no rising home prices …