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The latest housing data may show continuing recovery.
Any industry but that's the big picture break it down and there are still some troubling trends especially when it comes to mortgages.
To the chief economist at -- and Humphrey stand welcome -- -- Title or are you very well thank you -- 25% of American homeowners are still underwater in their mortgages they -- their property than it's worth.
Let's get and you -- the problem is far worse when you look at the number of people dealing with the so called infected negative equity first -- that.
And how many people fit into the category.
That's right so while while the negative equity itself is just -- your outstanding mortgage balance is greater than the current value of the house that's negative equity.
Their and that creates a lot of problems like foreclosures.
Affected negative equity is actually looking at how many people have enough equity in the current house that when they sell what they can afford the down payment to the next house.
And while the thirteen million people are actually in technical negative equity there another nine million Americans who were ineffective negative equity making it very hard for them to actually.
-- the next house which is clogging up.
The housing market creating lot of access it is -- inventory constraints in a lot of markets right now.
And it's those inventory constraints.
Stand there driving prices higher rights when we -- -- increasing prices at first glance I think all of that's a positive sign but.
Perhaps in reality is not.
That's right I mean prices the price spikes are seeing a lot of markets -- to be California markets Vegas Phoenix and some of the Florida markets.
A really being driven by these two distortions in the marketplace one -- hybrids -- negative equity.
The heart of the negative equity the more we're -- inventory constraints and of course constraining supply does try to prices in the second to -- we're seeing a marketplace right now is these incredibly low mortgage rates.
Which is really leading to a spike in demand so.
Always demand is coming in a -- -- supply predictably prices are skyrocketing.
These low mortgage rates are result of this accommodative monetary policy obviously it's -- fed week here so let's go down this that line of thinking where's the sweet spot for interest rates because if there's one sector he taught me that she.
She benefited from monetary policy as it -- it is housing.
So it's really too soon as most of would agree to start raising rates and tightening up here so how do you adjust this so you haven't ended the right level of an interest rate that's -- Provide a healthy through and through -- housing market.
-- it's it's a particularly thorny problem for the Federal Reserve because we've just about their you know whether few policy issues they can use is controlling interest rates.
And that translates primarily a housing market a bit which transits in the broader economy that translates very slowly into the broader economy particularly those negative equity to -- people refine their homes.
So the -- still trying to goose the economy because the broader economies -- growing as fast as we would like.
The trouble is that in order affect the broader economy there haven't -- housing the housing sector itself.
Much more mean -- desire which is which if it persist for much longer could lead to prices in some markets becoming much higher -- they should.
-- which which could be quite problematic.
OK so do you wanna see slightly increased interest rates what are some other solution -- do you just let the -- clear outlet foreclosures happen and you wanna see mortgage restructures with.
Decreasing principles should the government be more involved dare I say what he thinks stand.
You know I don't think the government should be more involved I think the private sectors actually fighting pretty adequate solutions to these and many of these problems were -- for example.
Investors have been a great job and been putting Florida most markets and provide some demand during the time when mainstream buyers -- want to -- comes.
In terms of interest rates I do think there's going to be more sentiment for pushing those rates up.
Sooner than I think the Fed hated it thought a lot of expectations have been mid -- -- but I think that we are going to see.
In some markets emerging housing bubbles over the next year year and a -- and -- think that's gonna put additional pressure on the Fed to perhaps he's.
He's there coveted stances in terms of monetary policy and start.
Push rates up -- again as we -- that's a little bit scary to say that you're seeing some bubbles formulating here so do you see this bottom line these trends negative equity and effective negative equity bubbles in describing to me.
Resulting in another -- similar to the one net.
We're just you know coming out of 45 years later.
No I don't we we definitely don't foresee another house recession like we would like we've had -- mean that housing recession was the result of really.
Almost seven years of other -- accommodative monetary policy and and runaway.
And -- have largely corrected those.
But what we are concerned about is that -- near term with very low mortgage rates.
There are some markets -- -- to have her high appreciation rights like Vegas and Phoenix and are not actually we're not concerned about the affordability in those markets because they got so low.
But -- some other markets for example California markets like San Francisco Orange County in San Diego which prices are skyrocketing.
And actually when you look at affordability relative to historical levels.
They actually they still look good but the only look at a 3.5 percent mortgage rates to record of 56% mortgage rates homes actually start to look expensive relative to -- -- standard OK and that conservatives expect here but.
There -- -- about three years from now right Stan Humphries thanks so much for your time your insights.
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