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As I have mentioned before, I have never experienced a time when more people seem to want a recession.
Almost daily we see numbers that seem to counter that fear. Right now 30-year mortgages are available for 3.7%. If you had said you could get a mortgage for under 4% in the 1970s or ’80s, you would have been thought looney. I remember 8.75% and 11% mortgages. They were painful. Those rates affected all consumer lending and the cost of doing business in general.
Existing home sales were announced today as I am writing this and were reported 5.47 million in August, the highest in 12 years and reaching the level we have been praying for since the recession. Why are existing home sales so important?
First, if you purchase a new, just-constructed house, there will be lots of expenses like landscaping, window dressings and other things that typically transfer from one home to the next when you purchase an existing home.
Second, if you build the home, it will cost more than you ever thought possible. On every decision, no matter how small, what you want is more expensive than the original quote. And there are hundreds of decisions, not just paint, carpet, appliances and other large items, but the little things that will drive you nuts: cabinet hardware, plumbing fixtures, tile, the kitchen (granite, marble, quartz?), drapery rods and so much more.
Finally, in this country, many homeowners selling their homes will net out tens of thousands of dollars after paying off the mortgage, even after putting a down payment on the next home. This gives this homeowner liquidity to show it off as soon as possible. If you are in your next home, which is probably larger than your old home, you will need new furniture and decorative accessories. And who wants to sleep on those nasty old mattresses?
Lower interest rates are the government’s way to stimulate the economy. It will no doubt help both single-home construction and multi-family builds, too. Incomes are improving, inflation is minimal, employment has been great, consumer confidence and spending have been encouraging, and the stock market is within spitting distance of new highs.
The reason the stock market is so strong is because the investment community senses a trade agreement with China. It might be an interim agreement, a partial agreement or even an agreement to settle trade issues today and continue to work on technology and enforcement in the future. Any agreement will be welcome.
I would hate to see you miss that spending rush.
