Broadside after broadside. Applications for mortgages to buy a home, not to refinance one, dropped 6% for the week, to the lowest level since September 2011, 17% below the same week last year, the Mortgage Bankers Association reported on Wednesday. Not a one-week debacle: they’ve declined sharply year-over-year since fall. Blame the weather?

Then the Census Bureau reported that in January single-family housing starts, an indicator for housing construction, plunged 15.9% and multifamily production 16.3% from December. Overall they were 2% below prior year – “due largely to unusually severe weather,” explained soothingly the National Association of Home Builders (NAHB).

OK, I get it. Life-threatening cold temperatures, polar vortices, and snow mayhem can put a damper on home construction. But housing starts also plummeted 17% in the West, including on the populous West Coast where the weather has been gorgeous.

Now the hope is that after the winter-weather delays there would be an explosion of activity in the spring as – to use NAHB Chief Economist David Crowe’s words for this phenomenon – “pent-up housing demand is unleashed.”

Home builders aren’t that gung-ho. Their confidence outright cratered. In January, it was a lofty 56 (above 50 shows positive sentiment). In February, it dropped 10 points – its largest monthly dive ever – to 46. The NAHB blames the “unusually severe weather conditions across much of the nation” that led to a drop-off in buyer traffic.

But…. the largest drop occurred in the sub-index for the West, including the West Coast where most of the West’s construction takes place, a region that was cursed with more sunny weather instead of much needed rain: home builder confidence plunged 14 points!

Blaming the weather is convenient. Yet, purchases by first-time home buyers – the crux of the housing market – dropped to just 27% of all purchases in December, from 28% in November, from 30% in December 2012, and from the 30-year average of 40%. First-time buyers have been pushed out not by bad weather but by higher home prices, higher mortgage rates, and a flood of cash buyers – 62.5% of all buyers in Florida – many of whom are investors.

But not a word from the NAHB about soaring prices and higher interest rates, and how they’ve pushed homes once again beyond the reach of many hardworking Americans.

The “potent combination of rapidly rising home prices” and “significant uptick in interest rates in the second half of 2013 caused the monthly cost of owning a home using traditional financing to jump substantially in many markets over the last year,” said Daren Blomquist, VP of RealtyTrac, whose housing affordability analysis has just been released. The monthly cost of owning a home was becoming “dangerously disconnected,” he said. On one side, “still-stagnant median incomes”; on the other, prices that had been driven up “by investors and other cash buyers who are not tethered to the typical affordability constraints.”

The monthly cost of a median-priced three-bedroom home purchased in the fourth quarter of 2013 rose on average 21% from a year earlier in the 325 counties included in RealtyTrac’s analysis. But in the 15 most populous counties in the study, the monthly cost jumped 34%.

In my beloved and crazy San Francisco, the median home price finally hit a cool $1,000,000, up 9% year over year. With the higher mortgage rates, the estimated monthly payment for that home increased 21% to $4,762. In the same vein, monthly payments soared 39% in Riverside County, 40% in Los Angeles County, 43% in San Bernardino County, 46% in Alameda County, 50% in Solano County, 53% in Sacramento County, and 56% in Contra Cost County. In just one year!

Nationwide, a similar scenario played out. Dekalb County, Georgia, won the race. Monthly payments for a median home skyrocketed last year by 62%.

Which raises some thorny economic issues.

In Los Angeles County, the median household income is $53,001, but it takes $95,389 in qualifying income to buy a median home. In Santa Clara County, the median income is $91,425, but it takes $149,389 to buy a median home. In Alameda County, $70,500 vs. $114,284; in Contra Costa County $74,177 vs $84,647; in San Mateo County, the heart of Silicon Valley, $81,609 vs. $170,284. And in San Francisco, the king of the hill, the median household income is $73,012, but it takes $228,569 in qualifying household income to buy a median home.

So who the heck can afford to buy these median homes?

In 29 of the largest counties where 20% of the population of the 325 counties in the study live, the monthly cost of owning a home now exceeds the costs of renting an equivalent home. Despite gravity-defying rents!

That’s why home builders were complaining about buyer traffic. That’s why mortgage applications have been plunging. That’s why first-time buyers have fallen off a cliff. That’s why sales have cratered. Housing Bubble II has pushed home prices out of reach for the hardworking strung-out median American household.

It’s called the “wealth effect.” The Fed’s ingenious invention. It has kicked in gloriously. After five years of money-printing and bond-buying with the express purpose to inflate stocks, derivatives, mortgage-backed securities, farmland, housing, bank balance sheets, and what not, and after blowing the largest credit bubble in history, the Fed has succeeded in creating a situation where, increasingly, buying a median home is something only the wealthy can do.

But that’s where the economics of the ingenious wealth effect fall apart. There aren’t that many wealthy people to buy all these median homes. And wealthy people don’t want to buy median homes. Hence, cratering sales. Forget the weather. The problem is, as Blomquist put it, “the disconnect between prices and incomes.”

Ha, we knew that from Housing Bubble I, which blew up in 2007.

And first-time buyers, in addition to the price having moved beyond their reach, are struggling with a particularly tough handicap: ballooning student loans. Total student loan balances have quadrupled since 2003. An immense burden on the fragile shoulders of young people. They’re already having trouble servicing their student loan debt, with delinquency rates spiraling elegantly out of control.

“This is a huge issue for us,” admitted Mortgage Bankers Association CEO David H. Stevens. “Student debt trumps all other consumer debt. It’s going to have an extraordinary dampening effect on young peoples’ ability to borrow for a home, and that’s going to impact the housing market and the economy at large.” Read…. The Young Subprime Debt-Slave Generation

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