Home prices have risen at the fastest rate in seven years. Sales of previously owned homes in April hit their highest level in more than three years. The housing market has finally turned the corner, right?
Not necessarily says Heidi Moore, U.S. finance and economics editor at the Guardian. The so-called housing recovery may be “dubious,” she writes in a recent column: “What looks like a housing recovery to the rest of us, but is, in fact, something of a trap.”
Moore joined Dan Gross, an editor and columnist at Newsweek/Daily Beast and author of “Better, Stronger, Faster: The Myth of American Decline…and the Rise of the New Economy” and The Daily Ticker's Aaron Task to discuss the state of the U.S. housing market.
Moore says banks and investors are propping up the recovery, not real buyers. Banks now own a large percentage of available homes for sale because of foreclosures and are controlling the supply to artificially increase prices, she argues.
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But “doesn’t that make the rise in the volume of home sales all the more impressive?” Gross asks. Banks are less reluctant to approve mortgage requests unless borrowers have high credit scores and cash for a down payment. Tighter lending requirements have also forced Americans to responsibly pay down debt. Now, more individuals are “in position to go out and buy these houses at higher prices, at higher rates, with more money down,” Gross notes. “To me that is a positive.”
Yes, more Americans have become smarter about their finances, but that doesn’t make them richer, Moore points out. Real wages adjusted for inflation have been falling for the last three years.
“It’s not people buying these houses,” she says. It’s investors, people who want to flip it. It’s the people who have ready cash. Right now it’s a big boys game in housing.”
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