Here A Look At Real Estate With Lower Interest Rates, Plus China’s Collapse Is Getting Worse

Here is a look at real estate with lower interest rates, plus China’s collapse is getting worse.

China’s Struggles Continue To Mount
August 14 (King World News) – Gerald Celente:  In July, the value of China’s exports in dollar terms rose 7 percent, year on year, lower than June’s 8.6-percent increase and missing analysts’ forecasts of a 9.7-percent jump.

In the same month, imports climbed 7.2 percent, reversing a 2.3-percent slump in June and more than doubling economists’ expectations of a 3.2-percent gain.

Chinese officials “will look at this and think the export engine is probably going to slow down sooner than they thought,” economist Louise Loo at Oxford Economics said to the Financial Times.

President Xi Jinping has channeled investment into the “new productive forces” of artificial intelligence and advanced computing, biotechnology, high-tech manufacturing, and clean energy technologies.

Beijing has been relying on a sustained export boom to offset a dormant domestic economy brought on by a continuing, three-year-old crisis in residential real estate…

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The export surge was expected to buy time while the government tried various incremental policy tweaks to see if that solved its economic malaise at home. 

Those tweaks have failed to reawaken consumer spending. 

Now the export boom may be waning as Western nations are putting up tariffs and other barriers to keep Chinese products from swamping the countries’ own domestic producers.

Protectionism is a key cause of July’s decline in exports’ rate of growth, Heron Lim, a Moody’s Analytics economist, told the FT. Not only Western countries are erecting barriers to Chinese clean energy products, he added, but other nations and products are joining the list. 

With few options remaining, “we’re definitely expecting more to come in terms of stimulus” by the government into the domestic economy, Lim added.

TREND FORECAST:
As we have said previously, China is running out of options.

Five years ago, it announced its plan for a “dual circulation” economy in which a thriving consumer economy would help to support a thriving export market. When president XI Jinping shut down the country for three years during the COVID War, that plan flopped.

The country’s economy then fell victim to a massive residential real estate crisis that destroyed consumers’ willingness to spend and paralyzed the domestic economy.

Western countries have shut the door to China’s last best hope of selling its high-tech goods overseas.

Lacking the ability to dump massive amounts of goods overseas, officials are facing the prospect that massive stimulus is the only rescue for the country’s economy.

Lower Interest Rates And Real Estate
Gerald Celente:  The average U.S. interest rate on a 30-year, fixed-rate mortgage fell to 6.55 percent during the week ending 2 August, its lowest since May 2023, the Mortgage Bankers Association (MBA) reported.

Applications for mortgages to buy a home ticked up 0.8 percent, its first rise in four weeks. Requests to refinance shot up 16 percent to the most in two years. 

The combined index of applications to buy or refinance grew by 6.9 percent, the most so far this year. 

The mortgage interest rate peaked at 7.29 percent in April and fell 0.74 of a percentage point to reach the new low. 

The lower rates “should set the stage for a modest recovery in transactions in the rest of the year, providing that recession fears prove unfounded as we expect,” North America economist Thomas Ryan at Capital Economics, wrote in a note. 

“We think this marks a turning point for the housing market, which has been frozen for a while now,” he added…

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Mortgage rates rise and fall with yields on the 10-year U.S. treasury bond. Those yields dove below 4 percent on 2 August following a shockingly weak jobs report that sparked fears a recession was on the way.

Those fears ebbed on 12 August and the yield climbed back up to nearly 4 percent.

That indicates that the turnaround for the housing market is not yet here.

Many people still cling to their older, low-rate mortgages and remain unwilling to trade those for newer ones until rates fall significantly.

If the 30-year rate falls to 6.4 percent, only 4 percent of current homeowners would find that enough of an incentive to sell, according to Bank of America analysts.

There likely would not be a wave of refinancing applications until rates fall by at least 1.5 to 2 percentage points, FHN Financial reported after studying a similar situation early in this century.

TREND FORECAST:
As we have long forecast, lower interest rates will at best (or worse if you are a seller) only lower home prices marginally, thus increasing the sale of homes which are not up for-sale now because interest rates are still too high for the sellers who want to become new buyers. 

History shows that once house prices rise, they do not come back down significantly except after a major economic crash… which is a strong possibility.

Also, pent-up demand will grab any low- or moderate-priced homes in short order.

Since politicians launched the COVID War in January 2020, lowered interest rates to zero and pumped several trillion dollars into the system, home prices have spiked nearly 50 percent since then. Thus, the COVID and post-COVID home sales frenzy has permanently altered the American housing market. 

There will not be enough affordable homes to meet the demand of middle- and working-class households. Those families that can afford a home, either on their own or with help from friends and family, will be the lucky ones.

Too many potential buyers have been relegated to rental units, where they pay such high rents that it will take years to save enough for a down payment on a home.

As a result, a larger proportion of the population will be denied the chance to own a home, fulfilling that portion of the American dream.

For those who can buy a home, it is unlikely that they will be able to build wealth in the way that previous generations have done. 

Gold & Silver
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