news maybe mitigated that worry, maybe not. Mortgage applications went
splat again as refinancing fell almost 18%. Applications overall are at
October 2008 lows, the height of the Great Recession burn off. Momentum is
a fickle thing, particularly when it is based on rates and rates are
rising. Don't try to sell any of that 'but rates are still at historical
lows' dogma: it is rates relative to incomes and the rate of change in
rates that makes housing affordable or not. You know the story: part-time
jobs, low wages losing to inflation 2 to 1, extremely low views of the
future regardless of the stock market gains, vivid memories of the 2008
housing collapse. All of that tips the balance to the 'I think we should
wait on a house, Martha' mindset.
Case/Shiller: Prices are up nicely,
+0.7% and 13% year/year.
Prices are up nicely, +0.7% and 13% year/year. The CNBC boys were high
fiving the results, but Professor Shiller was hardly exuberant. He says
there is no reason to believe people believe there is a 'great new era'
launching. Despite high stock prices he says people 'are not so excited
about the future despite record stock prices.' He concludes that you
'cannot trust momentum' because the hedge funds and investors say they are
in for the long term but will bail at the first sign of trouble.
Darn interesting. Not sure I agree with all of it, but it is nice to hear
someone who was saying you could buy a house, hold it for 12 months, then
sell it for a profit (speculator?) now saying you cannot trust the
Building Permits: jumped 6.2% but as noted earlier, it was all
multi-family with virtually no single family permits. THAT sounds healthy 5
years into recovery. that is typically an EARLY cycle indicator, but
housing prices are surging as Case/Shiller belatedly shows yet rentals are
surging. Answer: wages/earnings remain low so affordability is lower.
Mortgage rates are higher. Prices are rising. Combined with lower wages,
affordability is slipping away.
reports that mortgages costs make up 40% of incomes today versus 20% just a
year ago. Is it just mortgage rates? No. Incomes are not keeping up with
inflation along with mortgages costs rising. It is a double edged sword
when wages are low as even moderate inflation levels cut sharply into
disposable income and in this case, housing affordability.
Fargo joined in with the Fed and others chanting the chorus of 'wait
until next year.' Noting that mortgage activity was down (and quite
frankly is still falling), it said that it expected the mortgage market
to 'stabilize' in 2014. Stabilize? That is not that good a prediction
as you might think if it means it 'stabilizes' at low levels. Many
stocks 'stabilize' after long declines, going nowhere for a long time.
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 Quarter Sales-2013
2nd Quarter Sales-2013
3rd Quarter Sales-2013
4th Quarter Sales-2013
Back to New Listings/Monthly & QTR Sales-
Final Monthly Sales-2012
Final Monthly Sales-2011
Final Monthly Sales-2010
Final Monthly Sales-2009
Final Monthly Sales-
Final Monthly Sales-2007
Final Monthly Sales-2006
Commentary supplied by
Investment House &
information please contact Vinther Properties
San Mateo Units
Copyright @ 1997-2013 Vinther Properties All rights reserved