Today, Rick Santelli spoke to mortgage expert Glenn Schultz in order to glean some truth on the real state of the housing market beyond the simple attempts at headline propaganda, and sure enough he got it off the bat: "less refinancing activity, less turnover activity: this is the third straight month they have been below expectations." Not quite the glowing report many would expect to justify a spike in end-demand for housing. Glenn then focuses on the ability of homeowners to refi high coupon mortgages and while he sees some glimmers of hope, his summary is as follows: "basically you get a bunch of c-class renters and turn them into d-class homeowners."
Sadly, this does not foot with the recently reported data that the homeownership rate fell to 17 year lows [7]. In fact, what is happening, is that more housing units are indeed being converted into rental housing (thanks to what is rapidly becoming the largest landlord in the US, private equity firm Blackstone which has taken advantage of the REO-To-Rental generosity) driven by large asset managers, while in reality the homeownership picture continues to deteriorate.
And therein lies the rub: as we reported earlier [8], spending on home improvements has paradoxically tumbled, a fact which did not escape Santelli, who brings it up and gets the following logical response: "when the homeowner is confident about the future of price appreciation, they're willing to invest and remodel." And vice versa: so does that by implication imply a slide in expectations about future home appreciation? Santelli's conclusion is, as usually happens, spot on: "who will remodel more: a homeowner or a renter?" The answer is self-explanatory, as is any doubt as to whether the US is becoming a nation of renters.