I love this chart.
You couldn't have a bigger stimulus than this to prompt investment and economic growth. Interest rates have never been lower (since the Fed started tracking 30 year mortgage rates) and housing prices are a mere fraction of what they were a year ago.
The problem is why isn't this translating into economic growth or at least a stabilizing factor in the housing market? I'll give you the answer;
There's no real hope.
You see, in order for a person to take on a large purchase such as a house and a large responsibility such as a 30 year mortgage, they have to have faith that their investment is going to pay off in the end. Not that the house is going to go up in value, but that it doesn't tank in value either. You throw in property taxes that continually go up, property maintenance, insurance, etc., you can see why people are a bit leery of buying a house. It's a liability, not an asset.
Go on the investment side and you see another angle. Banks won't even loan money out in the first place. Why? Because they're not certain about the economic future of the nation. Still stinging from the housing collapse (not to mention this newest "signing scandal"), they are reluctant to loan money out for housing. Anybody try to refinance their homes recently at these historically low interest rate? I'm sure some of you have only to be denied because you;
1. Were self-employed.
2. Had a decrease in your income
3. Wore blue socks on Tuesdays
Running scared from the housing crisis, banks are now perhaps OVERLY cautious and are just keeping their capital ratios close to their hearts.
Then there's the business side of things. Well if home buyers can't get financed, then certainly businesses and entrepreneurs will!
Heh, heh. Sadly they see no reason to invest because once again, there does not seem to be any genuine hope or faith in the future economy. They might go and invest in China. They might go and invest in Chile. They might go and invest in Brazil. But why invest in Japan-Circa-1990-Part II?
You see, you can have all the "stimulus" you want and pretty words from Barry and low interest rates, but without faith in the future of the economy, nobody is going to avail themselves of these opportunities because the prospects of an adequate ROI doesn't warrant it. Matter of fact, if the cost of debt capital is 3.5%, that implies investors and businesses don't even expect that paltry of an amount in today's economic climate.
At this point I would normally go on about how eliminating the corporate tax rate and making it constitutionally PERMANENT would flood the economy with real investment and hope for the future. But of course this is like shouting into the hurricane. My readers understand the reason for such a policy, but it is the masses of idiotic Americans who have been brainwashed to loathe those "evil" corporations.
And so I merely just point out the economic humor and irony of seeing interest rates so low, yet no growth and then laugh at the people who wonder why there isn't any economic growth, who in the same breathe blame the "corporations" for all their problems and want nothing more than to "make them pay their fair share" (all while wondering why their 401k isn't going up).
Enjoy the decline!