In addition to the foreclosure burden, unemployment is over 9% and the lending guidelines are stricter than they have been in years, which mean fewer buyers in the market. All of these factors are going to continue to push prices lower.
Paul Dales a senior U.S. economist at Capital Economics Ltd. in Toronto said, “With the foreclosure pipeline still full to bursting, it’s hard to see this downward pressure on prices abating,” and “I wouldn’t be surprised to see prices continue to fall this year and maybe into next year.”
While housing prices are taking a hit, consumer confidence is wavering. Consumers are concerned about the jobs outlook and the economic recovery while getting hit with loss of equity in their homes. Consumer confidence fell to its lowest level in six months from a reading of 66 in April to 60.8 in May. This leads to less spending by the public which makes up 70% of our nation’s GDP.
There have been more than three million foreclosures (with 1.8 million homes over 90-days past due) over the past three years which has pushed more people into renting. Rents have been rising across the US which adds to inflation as well as cuts into peoples’ purchasing power. With more people expected to go into foreclosure in the next few years the supply of rentals is going to get tighter only causing higher rents.
All of these factors are weighing on the economic recovery which will only continue to bode well for precious metals. Gold today sits at $1,533/oz only $33 off its al-time high close. Silver today sits at $38.50/oz which is about $11 off its most recent high. Gold and silver tend to perform well when bad economic news frightens investors, because gold is used as a safe haven asset.