How to Address the U.S. Housing Slack

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June 20 (Bloomberg) -- Pimco Deputy CIO Virginie Maisonneuve and Pantheon Macroeconomics Founder Ian Shepherdson discuss U.S. housing and the economy on “Bloomberg Surveillance.” (Source: Bloomberg)

20 roles.

We are joined i ian shepardson and pimco cio virginie maisonneuve.

Do the low rates actually help the housing market in new -- in any way?

I think will be less plausible over the second half.

We are seeing some emerging inflation pressure.

We have some clear evidence of margin building.

We have costs offsetting in the business sector.

We have a clear and present danger of accelerating wages.

I think markets are going to become less and less convinced that the fed can hold rates.

Long-term interest rates and mortgage rates are going to rise again.

We have some economic data coming up next week.

You don't have a lot of faith in the numbers.

It is hilarious.

That is joe.

-- joke.

Every other indicator says the market is slow down drastically.

We had the biggest deterioration in housing affordability in more than 30 years.

That is why we saw a big drop in home sales.

It is taken the wind out of the pricing numbers as well.

It makes no sense.

Let's adjusted for inflation.

Let's call it the real home price aaron this is in today's dollars.

We are way up before that in 2014. i think this is the idea of a wealth affect versus income effect.

What psychologically is the affect of an event -- diminished home price?

The hit was enormous of the time that happened.

All that was funded through home equity withdrawals.

It is gone.

Home equity lending is still shrinking every week according to the fed's data.

We are relying on faster payout roles of need wages to pick up.

In our investments, do we have a wealth affect?

Do we feel better?

You are putting it in the right perspective.

A lot of places there is a gap doing rich and poor.

It is at a very high level.

You put that into longer-term pressure that we have, they have pockets of growth in the economy.

There is a lot of liquidity which means risk assets are being supported.

They are containments.

When you look at affordability, i think we will be in this sort of narrower range of growth.

We will have a very high debt.

Did you see how she mentioned new neutral twice?

I want to point this out.

That is the thesis.

You guys were the new normal.

You downgraded to the new neutral.

That is 2% gp the -- gdp for a long time?

A lot of slack in the global economy.

The world is in a multispeed mode.

During the crisis, everybody was working together trying to get the shipwreck avoided.

Now you have the u.s. at the front of the line.

You could with the u.k. in the same place.

That is a very good example.

Then you have europe putting in qe.

You have japan in the next few months going to talk about qe.

China is the second largest economy in the world and they are in deceleration.

They should still get 5% growth.

We have headwinds between politics in china with anti-pollution.

We all know that 7.5% growth is going to be hard to achieve.

This is putting some headwinds in the world otherwise recovering and healing.

We have pockets of strength like the u.k. doing well.

The u.s. has a pocket or strength as well.

I know that after the last report in april, will it be a net drag on the growth?

It could be a drag easily.

If long-term rates have to rise, mortgage rates will go up and that will push housing back down again.

Housing construction was 3% of gdp.

90% -- 97% of the economy is not housing.

We can live without it.

Last time everything was focused around this crazy housing boom.

They don't have to be.

Some countries do.

In britain every cycle is a housing cycle.

Then go right to that.

We will look at this from an economist viewpoint.

Does that mean use of cash appropriations has changed away from dividends and spending money to create jobs?

I am looking for action the small business sector.

That is not where the action is going to be.

What we have instead is a seven-year catch up where the small business community did nothing because they could not get any credit.

Having can.

The banking system is putting as much credit into small businesses.

It is a big turnaround.

Frank keating is joining us in the next hour.

We have these guests for the

This text has been automatically generated. It may not be 100% accurate.


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