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The real estate market is beginning to give mixed signals. Now, if you have been around this channel for any length of time, you know that persistently. I think since the beginning I have been bullish on real estate. I have never changed that view. And so, I would like to present some new data that is starting to come out that is looking both ways here.
So, I want to present both sides of the coin here, both sides of the argument, so you can make a more educated decision for yourself about whether you should be bullish on the real estate market, bearish on the real estate market, or somewhere in between. Keep in mind that this is all going to be U.S. data. Unfortunately, there is just not the time or scope to do this for other markets.
Timecodes
0:00 Video Introduction
1:12 Lending Markets Siezing Up in Europe
2:10 Small Market Uptick in a Downward Trend
3:52 Refinance on Mortgage Rates Increase
5:37 U.S. Existing Home Sales
7:28 Housing Starts Data
8:53 Housing Completions
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As the housing market continues to recover from the pandemic, it’s starting to send mixed signals. On the one hand, home prices are still rising, mortgage rates remain near historic lows, and buyers are eager to purchase. On the other hand, there’s concern that the market could be headed for a slowdown as the pandemic continues to drag on and the economic recovery remains slow.
The good news is that home prices are still rising. The latest data from the National Association of Realtors showed that the median home price rose 10.1% in April compared to the same period last year. This is the biggest annual increase since June 2005. Low mortgage rates are also helping to drive up prices. The average rate for a 30-year fixed-rate mortgage is currently at 2.98%, according to Freddie Mac.
But there are signs that the market could be headed for a slowdown. Inventory is still low and the number of homes for sale has been trending downward since the start of the pandemic. This is causing some buyers to be priced out of the market or to have to wait longer to find a home.
The pandemic is also causing uncertainty in the market. The economy is still struggling and unemployment remains high. This could lead to fewer buyers in the market and a decrease in demand.
The housing market is also facing headwinds from rising inflation and the potential for higher interest rates. The Federal Reserve recently announced that it expects inflation to rise in the coming months. This could lead to higher mortgage rates and make it more difficult for buyers to qualify for a loan.
The housing market is starting to send mixed signals. Home prices are still rising and mortgage rates remain low, but there are signs that the market could be headed for a slowdown. It’s important for buyers to do their research and be aware of the potential risks before making a purchase.
rents are sky high because landlords know people cant get a mortgage.
The idea that homeowners are rational actors who have it all worked out is false. We just saw people buying like their hair was on fire because everyone else was doing it. Housing is cyclical. The idea that people have no choice but to buy overpriced boomer houses is also false. An expensive house is just a ball and chain you shovel money into. Very few people can actually afford the opportunity costs. People have choices.
Show me the number of homes & apartments owned by hedge funds and private equity but are unoccupied. That is another area not looked at by anyone. Some blame this on high rent prices.
I bet that most of the new sales are on adjustable rates because experts expect big rate collapse in 12-18 months !
Its the declining home values that cause the problems. People who cant afford their homes and enter foreclosure in a appreciating market don’t bring down the markets (because it can be sold without a loss). With home prices now falling, the problems will soon follow. Banks have already started to dramatically shift lending standards for this reason.
Rates need to rise and prices to go down, debt is wrecking this country appart
Has anybody checked out who is buying? It could be going up because Chase just allocated $1 billion to the real estate market. Plus we have black rock, state street at all who have been buying up to 25% of the homes sold last year. What’s the percentage now? That’ll let you know who’s buying
I lost my job 2020 (apparently COVID) at the age of 52, leaving me with X2 pensions of 30k and a mortgage of 80k. I have radically changed career and become a delivery driver with no employer pension, also asked some folks if I can perhaps put together my pensions but was told it wasn't worth it.. I know this is a pretty low amount, but what are my options?
This one is better and more believable, but seriously overusing the same thing over and over and over again.
A few things that don't get talked about enough.. 1 baby boomers going into nursing homes and assisted living facilities, many sell their homes to pay for these expensive facilities… 2 boomers beginning to die off (our largest generation by far, they own the vast majority of the houses , and wealth, in this country).. 3 remote work can be done overseas while living in cheaper countries… 4 the digital nomad/internet entrepreneur can work from any country in the world. 5. Aging of houses combined with the lack of knowledge, skill, or willingness for younger generations to do the work, and inability to afford the very expensive skilled labor to hire someone to do it, making renting more attractive since it's the landlord's responsibility (Younger generations value convenience, they pay $10 for a crappy latte plus $5 for delivery and tip another $5, just so they don't have to do it themselves). 6. Millenials and Get Z value practicality, mobility, flexibility, and simplicity, they hate being tied down and committing to one situation for a lifetime (30 yr mortgage, more prone to job/city hopping).. . unlike baby boomers, who preferred stability, comfort and had no problem with commitment (same house and job all their lives). Younger gen also has a tendency to throw away things when they're not good anymore (aging houses) rather than fix them and stick with them like the older generations did. 7. Greatest wealth transfer in our history is coming when millennials inherit from the boomers… They will quickly sell the home to liquidate and split the money amongst siblings, since it didn't cost them anything, they will sell for whatever they get as it's free money to them regardless, they just want to liquidate quickly…. or if they decide to keep the house, they will sell when the repair bills start coming in and they have to put up tens of thousands of dollars to repair these aging homes. .. Only way to combat the lack of demand in the future will be mass immigration and a push for Gen Z to go into the trades like they did to Millennials with college.
I remember last year or earler someone, maybe you, did a segment on 14 million empty homes being kept off the market by companies like blackstone, banks and so on. Is there an update on where they are or if they'll ever hit the market.
Remember, you said housing prices are on a upward trajectory and told your family to buy now….
6% of auto loans are 90+ days delinquent. This level is higher than at any time during the GFC. Nothing goes down or up in a straight line. Bottom in 2025.
Higher interest rate lower house price and vice a versa. Interest rates are deductable for contribution so it is possible it is better for the consumer higher interest lower house price until supply and demand rich equilibruim. Average person looks for a low monthly payment. Save money have a large downpayment, consider a 15 year mortage or pay cash. Inflation is devaluing currency, the housing control by the Governent has had houses over priced for years. Something got to give
Yes! THAT IS ABSOLUTELY CORRECT! the Wife and i have made money on Real state for 39yrs! money made helps make more money for the FUTURE, buy LOW sell HIGHER, dont wait to be greedy to wait for the height of the market, Make your money and give Parise to God. AMEN brother's and sister's
Just like the stock market right now, it's a dead cat bounce, people think things are going ro keep going up, 6 months things will be going down more
Mixed signals! WTF does that mean! Psychobabble like talk therapy
Thank you very much…
It's a very simple equation. [Monthly paycheck – mortgage payment => home price * interest rate]. That's all there to it. It's so simple a child could understand it. Will interest rates come down? Probably not anytime in the next several years. Will worker salary go up? Nope! That just leaves home price. Will home prices come down? Yup!
Manipulated markets!
If any market sends mixed signals, drop it and find a better market.
How about Boomerang aldults or multiple families stay together to short the house price?
Seasonal effects happening. December usually the seasonal bottom.
Thanks baldie. Love your insight.
In December, just last month, 68% of all pending contracts fell through. So the fact that there is more pending means the fall thru rate will set another record. Houses only have 1 way to go and that is down. With layoffs finally gearing up, many will have to give up their overpriced homes and cars. It's called economics.
But what about the demographics problems? In 20 years there will be a massive oversupply because the Baby Boomers will have moved on, and as their generation is the biggest, there will be over supply.
FRED financial conditions index is less than zero and declining. Easy money, in spite of an increase in the Fed funds rate. Of course, mortgage rates are drifting lower. Inflation will pickup again if the Fed hesitates, pausing too soon. God forebid, pivot. The next wave of inflation will be greater than the previous wave.
People can't afford homes with these interest rates… end of story.
housing has litterally gone down 15 to 20 % from peak in most places with out job losses
Those of us who have owned our real estate for many years may not have the worries of new owners who have paid high prices for their homes….I am glad that I don't have commercial properties at this time…
Also banks are buying up homes
I remember back in the eighties my parents bought a house with the interest rate being incredibly high like somewhere around 8 to 10 percent and that didn't stop them from buying. I live in Las Vegas and they are still building homes (in my neighborhood also) and asking way more for them than what my house is valued . I don't think they are building these hoping they get buyers as they are presold in advance.
I was just looking at inventory in the area my family wish to move to and can say that there are more price cuts than I have seen in YEARS…. All just in the last couple weeks….
What shirts do you wear in this videos?
I appreciate your confident and clear delivery. You present well-researched information in a thoughtful way.
Joe, you are missing so much info its hard to stomach this video…
1) People are losing very high paid jobs right now, and the situation seems to be getting worse. No money means no buying, and it may mean losing your house which ill push inventory up.
2) Population is not growing like it use to so less new homes are needed.
3) December is ALMOST ALWAYS the lowest sales month, if sales didnt pick up in January from December we would be in a melt down not a crash
4) Sales pick up in January is normally close to 7%, and it only picked up 2.9%, this is VERY BEARISH.
5) The FOMO is pretty much gone now. Im sure you will see people buying the dip, but in general we got 2+ years of falling to go…
There is a ton more, but simply not addressing those already invalidates this video.
Everything has to be subsidized by fiat money because its managed by a grossly mismanaged state that is the source of said fiat. The feds are market makers and the admin state leads get grossly wealthy doling out insider deals to pet funds and friends. Im with Thomas Sowell and Victor Hansen…we are screwed. Only thing left is terrible geological catastrophe to subvert the tide of greed and unearned money!
My theory is a three fold: One, ownership may be cheaper than renting at the moment, pushing normal renters into pursuing ownership even while trying to cut back, and for a few, they are able to pull it off. The second is there are much better deals being offered on the home price to lure in some of these people, especially in these new neighborhoods where builders have already invested in infrastructure and now are just trying to make sure to break even on their initial investment. Third, there is another large push by certain ESG lenders to promote loan products to minorities that are being assisted by government programs, which may be enticing other buyers into the market who would not normally choose to purchase without the offered benefits.
The commercial RE market remains incredibly strong. Vacancy rates in industrial at around 2% in many markets, demand for retail and office space remains high in secondary and tertiary markets. And all we hear about is recession risk. Talk about confusing.
Doubt it…. Market supply is still
Too low for a crash. Correction..5-10% in most areas. Sure. Mortgage rates are coming down a little. No crash like 2008. People need to wake up. Prices are not coming down that much. Loans written over past three years have been very good. Market would have to correct 20-30% across most markets for a crash. Doubt it. Boise, Vegas, Phoenix… down 15-20%. The rest 5-10%.
I am standing by what I have been saying since November 2022. Luxury homes have been skewing the national price drop data. Low and Mid tier homes are still in high demand and low inventory. Until unemployment raises above 5% for longer than 3 months, we will not have a housing crash.
Mixed signals…yeah nah, real estate is about to go mega bearish, multidecade lows incoming.
I remember 2007 when housing sales had a small jump before the last and largest crash.
One factor missing is perhaps the employment angle: doesn’t matter how much an homeowner doesn’t want to move if they lost their job; they’d be forced to downsize