Another Housing Bubble?

 The Mortgage Corner

“WASHINGTON (July 9, 2026) – Existing-home sales decreased by 2.4% month-over-month and increased 2.8% year-over-year, according to the National Association of REALTORS® Existing-Home Sales report. NAR

FRED30yrmortgage

It’s been months since I last wrote about the housing market, and why it’s had such a slow recovery. FRED’s 30-year fixed mortgage graph tells us why, and why we have a housing shortage.

And the 30-year fixed rate mortgage has hovered above 5 percent since 2023, its longest stretch above 5 percent since 2007 and the start of the Great Recession. Lower interest rates would certainly stimulate more housing construction, especially on the affordable end.

But new Fed Chair Kevin Warsh has been repeating that inflation is too high at his congressional hearings and the Fed may have to make some hard choices and become an inflation hawk to bring inflation back to its 2 percent target rate.

If only we still had Ayn Rand disciple and free market lover Alan Greenspan as the Fed Chair! In a similar situation during the GW Bush 2000 decade, Fed Governors resisted raising the Fed rates to help fund the Bush administration’s wars on terror, despite enacting the large Republican tax cuts that caused the first $trillion in federal debt.

A caveat is to be careful what you wish for, since the last such building surge inflated the housing bubble for mostly the wrong reasons.

And the busted housing bubble that led to the Great Recession of 2008-09 also led to the current housing shortage. Can we ever return to the ‘good old days’ when there was enough housing for those that want to own?

It fueled an earlier housing bubble It was the combination of interest rates being held below rising inflation that caused housing prices to increase by double digits for a couple of years and we were left when a massive oversupply of unsold homes.

Right now we have both a demand and supply problem—how to bring down mortgage rates to lure more home buyers, and kick start more housing construction.

The Trump administration is also attempting to talk down interest rates in the face of its massive tax cuts as it has been waging war on several fronts—from attacking Venezuela to Iran, while again ballooning the federal debt.

The 30-year average fixed mortgage was last at a much more affordable 3 percent rate during the COVID-19 pandemic. It is 6.58 percent at this writing and has remained above 6 percent since 2022 when the Fed last raised interest rates to combat inflation as world economies began to recover from COVID.

And we know both home buyers and mortgage lenders are incredibly sensitive to mortgage rates, in part because mortgage lenders have kept credit standards much higher than they were in the lead up to the housing bubble that caused so many defaults. Anyone remember the no-income verification, liar loans of that time?

The National Association of Realtors remain hopeful that the home buyer market will approve.

"The back-and-forth in monthly home sales activity, driven by mild fluctuations in mortgage rates, shows how sensitive home buyers are to affordability conditions,” said NAR Chief Economist Lawrence Yun. “However, job gains—more than half a million since the beginning of the year—will continue to provide support for the housing market.”

But so much is similar to the housing bubble and bust. Trump’s Big Beautiful Tax Bill and Iran war is raising the costs of everything as did Bush’s tax cuts and war on terror.

Are we seeing a housing revival with the slight uptick in existing home sales? Hope springs eternal, as the saying goes. Sales have hovered around 4 million residential units since the busted housing bubble and 2008-09 Great Recession. There has never been enough supply to satisfy the demand of an increasing population since then because the busted housing bubble restricted new home building for almost 10 years, and 30-year fixed rate mortgages have hovered above 6 percent ever since, per the FRED graph.

Higher interest rates are raising construction costs. Trump’s tariffs on steel, copper, lumber and other materials are lifting construction prices and interrupting some jobs. This is while immigration enforcement is worsening worker shortages and delaying projects.

I said last week,

“We get so many things thrown at us in the construction industry,” said Tony Rader, the chief relationship officer at National Roofing Partners, a commercial roofing company in Coppell, Texas. “It just seems like every time we turn around, we’ve got something else to fight.”

The bottom line is too many resources have been diverted to funding wars, not peaceful enterprises since then, leaving little room for more housing construction, or curing our homeless problem.

When will that change?

Harlan Green © 2026

Follow Harlan Green on: https://twitter.com/HarlanGreen

Consumers' Confidence Sinking

 Popular Economics Weekly

“Consumer confidence edged downward in May as the inflationary impacts of the war in the Middle East intensified,” said Dana M Peterson, Chief Economist, The Conference Board. “Consumer appraisals of current business conditions and the current labor market were moderately less positive compared to last month.” Conference Board

Conference-Board

American consumers are more worried than ever. The Conference Board and University of Michigan’s surveys are at historic lows; back to levels not seen since the COVID-19 pandemic.

Confidence then peaked in 2021 during the pandemic recovery and has been declining ever since. This is while financial market indexes are reaching unsustainable levels on the hope that the next big thing (A.I.) may bring in another Age of Enlightenment.

But beware, we have had such periods before. It looks like another period of mass hysteria over the possibilities of A.I. as companies invest $trillions, mostly in borrowed money, that is creating another asset bubble like the Dot-com and housing bubbles.

We called it Irrational Exuberance in the 1990s. It’s over enthusiastic investors over-investing in artificial intelligence.

The U. of Michigan reported,“Sentiment is now just below the previous historical trough seen in June 2022. The cost of living continues to be a first-order concern, with 57% of consumers spontaneously mentioning that high prices were eroding their personal finances, up from 50% last month.”

And consumers know why finances are eroding. Inflation can only go higher with the Iran war shortages, and tariff levels settling at 1930 pre-Great Depression levels with no formal treaties (which choked supply chains at the onset of the Great Depression).

There is no relief for either consumers or producers in sight amid the chaos that is being generated. The biggest worry is the rank naivete of a Republican Party that won’t hold its leader’s craziness to account. Americans are beginning to realize that the Trump administration has lost the Iran war, and the tariff hikes were illegal. It’s also showing up in the record lows in the polls.

In wanting to play the autocrat, Trump has booted the intelligent advisors who gave him intelligent advice. Iran can now keep the Hormuz Strait closed, while intelligence agencies are reporting Iran has enough missiles and drones to decimate the infrastructure of the other border countries, if the U.S. should try a land invasion to open the Strait.

A.I. is beginning to alarm economists, such UC Berkeley Professor Brad Delong in his Grasping Reality blog:

“The current $1.5T AI arms race: are hyperscalers building utopia, building dystopia, building digital god, or simply lighting trillions of dollars on fire in a dollar auction?”

Said $Trillions are chasing the next big thing, in other words, which happens when our government holds too much debt instead of paying it down. This results in an excess money supply sloshing around the economy looking for the next big deal, instead of investing in what Americans most need that Republicans have been intent on abolishing: (e.g, , programs to improve healthcare, environmental protection, education, climate prediction, alternative energy).

So consumers are right to be worried. This is the time for such programs that were created in the Biden administration to prepare Americans for the future, rather than a return to the past.

Can we do it without bursting another (A.I.) bubble that turns into another recession?

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Fitrst Quarter Economic Growth Improves

 Financial FAQs

Real gross domestic product (GDP) increased at an annual rate of 2.0 percent in the first quarter of 2026 (January, February, and March), according to the advance estimate released today by the U.S. Bureau of Economic Analysis. In the fourth quarter of 2025, real GDP increased 0.5 percent.

BEA.gov

“The U.S. economy has just powered through shock after shock,” was Fed Chair Powell’s summation of the state of the U.S. economy at his last press conference as Federal Reserve Chairmen.

First quarter 2026 real (inflation adjusted) GDP growth picked up +2.0% in the government’s first estimate, following +0.5% growth in Q4 2025, thanks to the $billions being spent in AI energy center build outs.

Kevin Warsh will take over as the new Fed Chairman in May, so there is speculation that he will push for easier monetary policy as President Trump’s pick for the new Fed Chairman by lowering the Fed’s interest rates and a more hands off management style.

Trump badly needs easy credit to maintain growth because of his economic mismanagement. A barely functioning government is either tied up in congress with the various shutdowns (last fall and current DHS funding), while illegal tariffs have choked supply chains.

Meanwhile, to Powell’s consternation, economic growth is picking up “through shock after shock”, from the Great Recession, COVID-19 pandemic, the 37-day fall government shutdown, tariffs, and the various wars that have caused energy prices to skyrocket.

The AI build out was predicted to boost growth, consumers continued to hold up their end, and government spent more on the Ukraine and Iran wars. The Defense Department reported the Iran war has already cost $25 billion in just the first two months.

And the financial markets continue to rally to new highs, so we are seeing some irrational exuberance, despite the game of chicken by Iran and Trump over the Hormuz Strait blockade. It’s obvious market investors continue to believe that Trump with his TACO policies will find a way to extricate American out of his latest war sooner rather than later.

But it also means $4 plus gas prices and soaring inflation for months to come. Even if the Iran war is settled sooner, predictions are that Middle East energy production won’t be restored to previous levels for at least one year.

The real problem is the Trump administration’s economic mistakes have taken us back to a Cold War economy—more military spending, fewer government social services, while endangering the good faith and credit of the U.S. federal government as the debt continues to balloon.

Something has to give, in other words. The financial markets won’t rally forever on the AI investment bubble, and consumers won’t keep shopping until they drop without an ensuing downturn.

The question is when on so many fronts. When will the wars end? When will enough consumers realize prices won’t come down and elect a congress that will control Trump’s extravagance and greed before he bankrupts the American economy?

When will it be one shock too many that drives us into another recession?

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

How Do We Repair Our Economy?

Financial FAQs

“The time to repair the roof is when the sun is shining. [State of the Union Address January 11 1962]” President John F Kennedy

 

President Kennedy’s maxim at his 1962 State of the Union address—the almost universal truth that the time to ‘repair’ our economy is when times are good—may seem dated today. At one time it was possible, but not for everyone today.

We have record federal debt fueled by a succession of economic blows—sequential tax cuts that didn’t pay for themselves, recessions, the COVID-19 pandemic, high tariffs, and several wars over the past decades.

And foreign investors are fleeing U.S. government bond markets that literally finance one-quarter of our federal debt because of it, driving up interest rates. Our ballooning federal debt is fast crowding out other government spending; maybe even reducing social security benefits in about 10 years.

Now is the time to repair our economic ‘roof’ while times are good. We have soaring financial markets and 3% annual GDP growth rates that have powered economic growth of late to pay down the soaring federal debt that is already at World War II levels as a percentage of our Gross Domestic Product.

Alas, there is no agreement on how to repair our debt problem. This is while another war is creating a 1970’s-style stagflation that will add $trillions more to the deficit.

International Energy Agency (IEA) officials, such as Fatih Birol, say the current Iran crisis is more severe than the oil shocks of 1973 and 1979, and the 2022 Ukraine-war shock, combined.

And businesses are not hiring new workers because of the economic uncertainty. It is fostering what has been called “The Great Hesitation” by the Wall Street Journal.

The WSJ cited the Baker, Bloom and Davis Economic Policy Uncertainty Index, a widely watched measure of policy-related uncertainty, that has surged to levels “typically seen during situations like the 2008 financial crisis (i.e., Great Recession) and the early months of the Covid-19 pandemic.”

Republicans aren’t showing much concern about the expanded deficit on their watch. Firstly, the highest tariff taxes since 1930 at the onset of the Great Depression has sharply raised every day prices. And the Trump administration’s immigrant shutdown is depriving the U.S. economy of enough new workers to replenish our labor force.

This is in part because Trump and the Republican Party have been unable to rein in the blatant racism of its Christian Nationalists’ policy that has branded almost all immigrant as undesirables. It has brought immigration to a trickle that once averaged one million entrants per year.

Yet immigrants have literally been the life blood of our economy and seed of economic growth. Stanford Business School studies have shown that immigrants represent nearly a quarter of the U.S. workforce in science, technology, engineering, and mathematics and more than a quarter of the nation’s Nobel Prize winners.

President Clinton was able to create actual budget surpluses in his last four years—from 1996-2000—by negotiating with congress to limit government spending on the military as well, until GW Bush busted the federal budget once again with Republican tax cuts while borrowing $trillions more to fight his wars on terror after the 9/11 attack.

How naïve President Kennedy sounds today when he said in 1962, “Members of the Congress, the Constitution makes us not rivals for power but partners for progress. We are all trustees for the American people, custodians of the American heritage.”

We need to repair more than the roof to survive as a democracy. But we must first realize we live under the same roof.

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

What Gulf War?

 Financial FAQs

“From the preceding month, the PCE price index for January increased 0.3 percent. Excluding food and energy, the PCE price index increased 0.4 percent. Excluding food and energy, the PCE price index increased 3.1 percent from one year ago.” BEA.gov

FREDBrentcrude

Oil prices spiked again on Thursday morning (to $94.35 per barrel) per the above graph on Brent crude oil prices, after Iran’s new leader said the crucial Strait of Hormuz should remain closed and that Iran will continue attacks on its Gulf neighbors,.

And the Fed’s favored inflation index, the Personal Consumption Expenditures core rate of inflation, which omits food and energy, rose by 0.4%. The core rate rose 3.1% in the 12 months ended in January, up from 3.0% in the prior month. It’s the highest rate in almost two years and decidedly not what the Fed wanted to see.

So, this is causing all the financial market indexes to plunge once again as it’s becoming increasingly obvious that Trump has no good reason for attacking Iran that is now morphing into another Gulf War.

“The war in the Middle East is creating the largest supply disruption in the history of the global oil market,” said the IEA in its March report released on Thursday that was cited by MarketWatch. Disruptions in the Strait of Hormuz have caused Gulf countries to cut total oil production by at least 10 million barrels per day, the energy body added.

So why shouldn’t President Trump’s new Gulf War repeat the 1970’s Arab Oil Embargo (OPEC) stagflation—slowing economic growth + higher inflation—that caused several recessions and resulted in the double-digit inflation of the era, I said last week.

I’m not the only one bringing up the similarities to 1970’s stagflation. Nobel economist Joseph Stigliz, a Clinton economic advisor who won the Nobel prize for economics in 2001, said in a podcast interview with Jack Farley of “Monetary Matters” released on Wednesday, that “We are facing a risk of stagflation with prices going up because of tariffs and war while growth is slowing.” The 92,000 nonfarm payrolls contraction in February was evidence for the slump in economic activity, he said.

And it’s beginning to show up in slower GDP growth. Real gross domestic product (GDP) barely increased at an annual rate of 0.7 percent in the fourth quarter of 2025, revised downward from 1.4 percent, according to the second estimate released today by the U.S. Bureau of Economic Analysis. In the third quarter, real GDP increased 4.4 percent.

BEA.gov

Oil prices had spiked earlier in June 2025 to $80 per barrel because of the short-lived Israel-U.S. strikes on Iran’s military and nuclear facilities. That should have been a warning of the potential economic damage from a longer war.

The other shoe to drop will be job creation. We are already in a stagnant job market with the loss of -92,000 jobs in February that basically erased the +126,000 job gain in January. Further losses are being hinted at by other indicators, such as the government’s JOLTS report that has shown no net growth in new hires for months.

It’s becoming more obvious that President Trump’s seeming incoherence over the reasons for his new Gulf war is hiding the real reason he started another Gulf War that he blurted out recently:

“The United States is the largest Oil Producer in the World, by far, so when oil prices go up, we make a lot of money,” Trump said in a post on Truth Social.

The sad truth is that Trump and his oil buddies are profiteering from a war that Americans, and much of the world, will end up paying for.

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

What Housing Recovery?

 The Mortgage Corner

“Existing-home sales increased by 1.7% month-over-month in February, according to the National Association of REALTORS® Existing-Home Sales report. The report provides the real estate ecosystem—including agents, homebuyers and sellers—with data on the level of home sales, price, and inventory.” NAR

FRED30yrmortgage

It’s been months since I last wrote about the housing market, and why it’s  had such a slow recovery. FRED’s 30-year fixed mortgage graph tells us why, which is the reason we have a housing shortage.

The 30-year average fixed rate mortgage was a level 3% until 2022 during the COVID-19 pandemic until the Fed raised interest rates to combat rising inflation. It’s 6.0% today, after dipping very briefly to 5.98% last month.

It's this high today because Trump’s Iran war is costing $1 billion per day on borrowed money due to his Big Beautiful Tax Bill, which will add to the current $39 trillion in federal debt.

Are we seeing a housing revival with the slight uptick in existing home sales? Hope springs eternal, as the saying goes. Sales have hovered around 4 million residential units since the busted housing bubble and 2008-09 Great Recession. There has never been enough to satisfy the demand since then, because the busted housing bubble restricted new home building for almost 10 years and 30-year fixed rate mortgages have hovered above 6% ever since, per the FRED graph.

But, “Housing affordability is improving, and consumers are responding,” said NAR Chief Economist Dr. Lawrence Yun. “Still, there is a long way to go to return to pre-pandemic levels of transaction activity. There are more than 6 million more jobs than in 2019, yet home sales per year are down by one million.”

There isn’t much of a housing supply inventory, and builders aren’t cooperating now with less than a four-month supply of existing home inventory on the market at the current slow sales rate.

This is while privately-owned housing starts in October were punk, at just a seasonally adjusted annual rate of 1,246,000. It is 4.6 percent below the revised September estimate of 1,306,000 and is 7.8 percent below the October 2024 rate of 1,352,000, says Calculated Risk.

Unaffordably high mortgage rates are one reason for the construction shortage, but Trump’s tariffs on building materials are also adding to construction costs.

Higher import taxes on steel, copper, lumber and other materials are lifting construction prices and interrupting some jobs. Immigration enforcement is worsening worker shortages and delaying projects.

“We get so many things thrown at us in the construction industry,” said Tony Rader, the chief relationship officer at National Roofing Partners, a commercial roofing company in Coppell, Texas. “It just seems like every time we turn around, we’ve got something else to fight.”

So, we must throw in the costs of empire building because Republicans are so fond of waging wars. It’s not only the Federal Reserve keeping rates high, but also the huge federal debt has been boosting bond yields. It is the reason we still have a housing shortage of 2-5 million units, depending on who you ask, since the Great Recession and housing bubble.

Harlan Green © 2025

Follow Harlan Green on: https://twitter.com/HarlanGreen