you look at the recent mortgage activity the housing outlook does not make
you feel better.
-3.3% last week versus +4.3% the week before. A startling -18% year/year.
The culprits? Higher mortgage rates combined with higher housing prices in
an environment of flat to declining wages makes house more and more
Average price: $280,500, the highest level in the MBA survey history. Why
are they advancing? I would say it is that the lower end is not selling
because speculators bought most of them. The only homes where mortgages
apps are being submitted are the more expensive ones. We are told that
there is a dearth of supply as potential sellers are not putting their
homes on the market for fear they may not be able to find a place after
selling. You would think that eventually higher prices would lure them in,
but if their incomes don't allow a mortgage for the home they might aspire
to then perhaps they view keeping their current home as not a bad
Home Sales fall 14.5%, 4.5% February
Home sales March are out after Existing Home sales March feel the lowest
level in 1.5 years, down 0.2%. The silver lining is that sales fell less
than expected. Small lining given millions are still underwater in their
houses and affordability is heading lower given higher mortgage rates and
at best stagnant wages. After the crash all-cash speculators bought
everything they could in the hard hit markets. Now they are no longer
buying and the baton has not been passed to the next buyers, the owner
Here is the rub: prices are rising when wages are not. 60 of the 300
metro housing markets Zillow follows are at or close to their pre-crash
prices. Prices could top per-crash levels in over 1,000 cities within 12
months . . . if there is no crash. Nationally prices are 13.5% below the
2007 peak. They say there are not enough houses in inventory. Hmm.
The Housing Market
the attention focused on the US housing market, some interesting facts
about housing markets elsewhere came out. The news could be good, it could
be bad. You make the call.
US: The 1.9% decline was the sharpest in 15 months, but off of 4 year
highs. You cannot stay at the peak all the time. Of course the revision
to August made the number an expectations beat. The beauty of low
The problem for the US market is affordability. Yes rates remain
historically low and have leveled out from the rapid rise. That helps for
future sales as it is the RATE of change that is the killer.
Unfortunately, rates remain elevated at the same time that income growth
(and I reluctantly say growth) is easily outmatched by price increases.
UK: Home prices in London jumped 10% month over month in October. 10%
appreciation in a month. Oh surely the recovery is here. But as pointed
out regarding the US economy versus the stock market over the weekend, the
'recovery' does not justify the price. The not so missing link that
underlies all markets: the excessive, massively excessive, liquidity is the
x-factor. It has single-handedly provided whatever mediocre growth
economies have experienced, and now it is threatening to unleash pretty
hideous inflation, at least as the London housing prices suggest. Kind of
an 'uh oh' moment.
China: But there is a worse case.
Bloomberg reports Shanghai average housing costs rose 12% over last week.
That's pricey. While London might be having an 'uh oh' moment,
Shanghai and China have to be thinking more of along the lines of an 'oh
crap' gut check.
1st QTR Sales-2014
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Oct 1, 2014
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