Housing and the Shutdown

Oct. 8, 2013
While headlines say a government shutdown would hurt the recovery in housing and the broader economy, housing was already on the backside of the current business cycle.

A news article last week purported that the housing industry recovery was threatened by the government shutdown because it would cause delays in mortgage approvals.  Such delays would only temporarily disrupt a housing recovery trend, not squelch it, if the economic fundamentals underpinning the ascent in housing are real and durable.  It is not like your business or mine where a lack of responsiveness sends customers to competitors.  Fannie and Freddie have the home mortgage market pretty much sewn up. Thus, the article really does not hold much water. 

Regular readers and people who have heard our presentations know that rates-of-change (year-over-year comparisons) for Housing Starts and New Homes Sold are both moving lower (Phase C), showing there is downward business cycle pressure already evident in the housing industry.  This began in March 2013 and is unrelated to the current government partial shutdown.  

The Housing Affordability Index has been declining for seven months.  Again, it has nothing to do with the government.  It is all about economic fundamentals and normal swings in the business cycle. 

It is dangerous to assume government is responsible for all the “bad” things that happen in the economy, because then you would have to assume that they are also our benefactors with the “good” things happen. 

The truth is that the economy is too large for the government to control, let alone effectively manage.  Trust in the fact that changes in the business cycle are telegraphed well in advance and adjust your business accordingly.

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