Monday, May 15, 2017

The Wall Street Journal: "The Housing Market is on Fire"

So much for Austrian-lites who thought one Fed rate hike was going to doom the economy and result in the Fed reversing the one hike and possibly even taking rates negative.

We have had three hikes since that confused concern and another hike very likely coming at the June 13-14 FOMC monetary policy meeting.

In the meantime, we remain in the boom phase of the Fed created boom-bust business cycle.

It is not as Austrian-lites hold that the business cycle only dives downward. The business cycle is, well, a cycle. It is about a shift in where funds are spent, right now that is in the capital goods sector, which includes the stock market (at new highs) and the housing market.

Notes the Wall Street Journal (my emphasis)

Home sales in the first quarter hit their fastest pace in a decade, a sign that rising prices and slightly higher mortgage rates haven’t deterred home buyers from rushing into the market.

Total existing-home sales climbed 1.4% in the quarter to a seasonally adjusted annual rate of 5.62 million, the highest since the first quarter of 2007, according to the National Association of Realtors.

The national median home price, meanwhile, jumped 6.9% from the same quarter a year earlier to $232,100, the sharpest price gain in nearly two years.

The rate for a 30-year, fixed-rate mortgage has risen to 4.05% from about 3.5% in November.



  1. Yet Trump says gov't needs to "prime the pump" to stimulate the economy?

  2. The cycle eventually comes to an end though doesn't it Robert? And I would argue that the cycle is in the end stages. As long as the bust phases are continually interrupted by reinflation efforts by the central bank, the situation becomes progressively worse, eventually ending in a crack up boom or a total collapse of the banking system as we know it today. Rothbard wrote about this in Economic Depressions: Their Cause and Cure.

  3. Speaking of capital goods, what's your forecast for April industrial production tomorrow morning? I'll forecast weak.

    1. That we are so close to recession and IP beat this morning is surprising. Ford just announced layoffs and housing starts and construction permits disappointed.