An article in today’s Wall Street Journal states that Americans are falling behind in their mortgage payments. And it’s not just the subprime loans reserved for higher-risk borrowers that are taking a hit. Other parts of the mortgage market are being affected as well. Mickey Levy – chief economist with Bank of America – spoke with Liz Claman on “Morning Call” today about whether or not the housing slowdown is strangling the U.S. consumer.
Levy did see some constraint in consumption growth – but weakness in housing and mortgage refinancing has never been all that important a factor – and it won’t be this time. Measured year-over-year – consumption has only fallen three times in the past 45 years.
Levy feels the most important factors driving the consumer – real disposable income, real interest rates, wealth – are all positive at the moment.
“Product demand is continuing to grow, and as long as it does, the weakness in housing will have a relatively localized impact on the overall economy,” Levy says.