Six days ago we published a post (“Hope That This Wasn’t A Surprising Revelation”) on the impact that student loan debt was having on the housing market. Well, two days ago we got a glimpse of just how painful this debt load may be on the housing market, as the National Association of Realtors announced that existing home sales had fallen -6.4% in December and that they were down -10.3% from December 2017. OUCH!
A January 22nd WSJ article speculated as to why the weakest result since 2015 may have occurred, blaming both monetary policy (rising interest rates) and stock market volatility as the primary culprits. Really? Our previous blog post highlighted the ever-growing mountain of student loan debt as a likely cause behind the sluggish US housing market.
Despite claims to the contrary, our employment situation is not robust, as we are still significantly behind where we were in 2007 with respect to the Labor Participation Rate (63.1%). Furthermore, the US continues to have a significant percentage of underemployed workers and those that have attached themselves to on-call jobs. Both of these categories have climbed substantially since before the GFC. In addition, wage growth, which had been muted for more than two decades, has only begun to show some life, which is one of the primary reasons that inflation has remained muzzled.
With so many Americans barely able to squeak by financially, a lack of affordable housing, modest wages, and an escalating debt burden may be too much to overcome at this time.