Housing Market: What Goes Up...

Oh, man, where do we start today? The Dow dropped like a thirteen-year-old's testicles on the CPI increase, even without (as they constantly remind us) factoring in food and energy prices. Speaking of the CPI, said index also hit a three-month-high today. In case you were wondering how this affects housing:

One of the things the Fed will be keeping close tabs on is how energy prices affect inflation and economic activity.

Energy prices can make inflation worse. They also can crimp overall economic activity by forcing consumers and consumers to pare their spending and investment. Or, high energy prices can result in both scenarios — which would be an tricky position for the Fed to deal with. To counter inflation, the Fed would be inclined to boost interest rates. To treat economic weakness, the Fed would want to leave rates alone or in more serious cases, lower them.

Now, couple this with the continuing rises in interest rates (as eloquently explained by Jared Bernstein over at the American Prospect), and you have a recipe for disaster if you're stretched on your payments in any way.

Some people are just choosing to toss the keys away and let the bank take their home back, as evidenced by the weed growth around foreclosed homes in places like Michigan. Interestingly, Inman tells us that foreclosure rates dropped in April. Perhaps the warm weather got more buyers out in specific regions of the country.

Other homeowners are hearing "buyer's market" and are literally throwing the kitchen sink into the mix in order to get people closing the deal on their property. And realtors are becoming equally aggressive--thanks to a nice little find from a comment on Ben Jones' blog, I think we've found the most (ahem) nakedly honest realtor yet, in Wendy Heath:

I'd make a comment about "buying that for a dollar," but it's Long Beach, so I'd probably have to spend two.

Posted at May 17, 2006 04:08 PM

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Oh, man, where do we start today? The Dow dropped like a thirteen-year-old's testicles on the CPI increase, even without (as they constantly remind us) factoring in food and energy prices. Speaking of the CPI, said index also hit a three-month-high today. In case you were wondering how this affects housing: One of the things the Fed will be keeping close tabs on is how energy prices affect inflation and economic activity. Energy prices can make inflation worse. They also can crimp overall economic activity by forcing consumers and consumers to pare their spending and investment. Or, high energy prices can result in both scenarios — which would be an tricky position for the Fed to deal with. To counter inflation, the Fed would be inclined to boost interest rates. To treat economic weakness, the Fed would want to leave rates alone or in more serious cases, lower them. Now, couple this with the continuing rises in interest rates (as eloquently explained by Jared Bernstein over at the American Prospect), and you have a recipe for disaster if you're stretched on your payments in any way. Some people are just choosing to toss the keys away and let the bank take their home back, as evidenced by the weed growth around foreclosed homes in places like Michigan. Interestingly, Inman tells us that foreclosure rates dropped in April. Perhaps the warm weather got more buyers out in specific regions of the country. Other homeowners are hearing "buyer's market" and are literally throwing the kitchen sink into the mix in order to get people closing the deal on their property. And realtors are becoming equally aggressive--thanks to a nice little find from a comment on Ben Jones' blog, I think we've found the most (ahem) nakedly honest realtor yet, in Wendy Heath: I'd make a comment about "buying that for a dollar," but it's Long Beach, so I'd probably have to spend two.