The housing sector is far more important than many realize. They notice only when it falls apart.

april 11, 2021

For most people, buying a home is the biggest single purchase they ever make. It continues to represent the largest part of their net worth. It is also the most leverage most people ever take on. The risk of loss is very high if you have little equity in the home and need to sell it.

Housing has other effects on the economy, too. Booming home values contribute to a “wealth effect” that increases consumer confidence, making people spend more freely. Some homeowners tap their equity to finance other purchases. Some of it finds its way into the stock market. The industries that feed on all this—construction, building materials, mortgages, title companies, real estate agents, etc.—are huge employers.

Now, we may have a problem if mortgage rates keep rising, as they have recently.

Intended or not, the policies that bail out our government should also serve to cap mortgage rates at historically low levels.