Close But No Cigar
- Oct 15, 2013
As of Monday night, the debt-ceiling standoff was reportedly close to resolution—at least if word from the various top Senators involved could be taken at face value—but no resolution had been achieved. No word on whether the House would go along with any deal the Senate cooked up, either, though everyone seems to be aware of the looming debt-ceiling deadline, if in fact the Treasury Secretary Jack Lew’s estimate of Thursday is correct.
Large questions remain. Even if the deal is done quickly, and gets through Congress, how much damage has already been done to the U.S. economy, directly through the two-week shutdown of the government, and (arguably) more importantly to investor and consumer confidence in the country’s ability to govern itself in important economic matters? If the debt ceiling is raised until, say, January, will the same unnerving spectacle happen again so soon? Prognosticators incorrectly said after the summer of 2011 that because arguments over the debt ceiling were clearly a bad idea—they seemed to temporarily damage an already-weak economy—and they wouldn’t happen again.
In the meantime, the data federal government data blackout continues. A good number of economic indicators might not exist for October unless key federal data crunchers, such as the Bureau of Labor Statistics, get up and running this week. One critical collection of data, the October employment surveys, is normally slated to begin this time of the month by the BLS.
Housing affordability drops
Other economic data, privately generated, continued to trickle in on Monday. The National Association of Realtors reported, for instance, that housing affordability reached a four-year low in August because of increasing home prices this year, as well as upticks in interest rates. In August, the median mortgage payment was $851, or about 16 percent of median U.S. household income. A year earlier, the median payment was $683, or 13.3 percent of median income.
The last time monthly payments were as much as 16 percent of income was in July 2009, when home prices were generally on their way down. With home prices still edging up, it seems likely that lower affordability will slow purchases down in the second half of 2013, and help put the brakes on those price increases as well.
In a related note, the Wall Street Journal reported on Monday that homebuilders are turning to cash incentives and upgrades more now than in the summer or spring to close deals with homebuyers put off by increasing prices and higher interest rates. It isn’t clear yet, however, whether these efforts will help keep new home sales on track to have a better year in 2013 than any since before the recession (though no one is expecting housing-bubble rates of sales, or as bad a year as 2009).
On Monday Investors were still betting that the government won’t default sometime this week. The Dow Jones industrial Average was up 63.9 points, or 0.42 percent, while the S&P 500 gained 0.41 percent and the Nasdaq advanced 0.62 percent. Stocks markets around the rest of the world didn’t seem to panic, either, with shares edging up both in Europe and Asia.