From Bloomberg:
Trouble in Housing? It’s More 1994 Than 2007
Housing market softness in the back half of 2018 has investors and the public wondering how bad things might get. It’s understandable that people would be worried, considering that the last housing downturn led to the worst economic crisis since the Great Depression. But housing market fundamentals in this cycle are nowhere near as risky as they were in the mid-2000s. Real-time data on mortgage applications suggest a milder path. Coincidentally, it looks a lot like 1994.
The economy in 1994 is remembered largely for financial market turmoil brought about by sharp increases in the federal funds rate by the Federal Reserve. During that year, the Fed increased its target rate for lending between financial institutions to 5.5 percent from 3 percent, a 2.5 percent increase in one calendar year. Perhaps not surprisingly, mortgage rates increased sharply as well. The average 30-year fixed mortgage rate increased by around 2 percentage points in 1994, ending the year north of 9 percent. New home sales slumped. In December 1993, the seasonally adjusted annual rate of new single-family-home sales was 812,000. A year later, in December 1994, it had fallen over 20 percent to 629,000.
The other noteworthy story of the 1994 economy was what happened to the yield curve. Because of the sharp increase in short-term interest rates, the yield curve flattened significantly. The spread between two-year and 10-year Treasury rates at the end of 1993 was 1.58 percent. By the end of 1994 the spread was at 0.15 percent — close to zero, but not quite inverted.
The story in 2018 is similar. While the increase in mortgage rates this year is not as severe as it was in 1994, the housing market is dealing with other headwinds — rising costs from land, labor and materials prices, plus a shortage of inventory after years of building fewer homes than population growth would seem to warrant. An increase of one percentage point in mortgage rates between mid-November 2017 and mid-November 2018 made homes less affordable.
…
It’s understandable why many fear this is a prelude to another big crash. Home sales have fallen, and inventories are rising. Home price appreciation has slowed, particularly for higher-end homes. The yield curve has flattened, with investors starting to anticipate interest-rate cuts in 2020 and beyond. Prospective buyers see negative stories about the housing market, get nervous, and decide to sit back and see how things go rather than putting in offers. It’s the same thing that happened before the onset of the housing bust and the great recession.Except we’ve built nowhere near as many homes over the past decade as we did in the years leading up to the 2008 financial crisis. Underwriting standards remain strict, as anyone who has needed financing to buy a home in recent years can attest. Household mortgage debt relative to incomes or gross domestic product continues to fall. Job growth continues, and wage growth is accelerating at a slow pace.
And while it’s still too early to draw any conclusions, mortgage application data in recent weeks is starting to tell a different story. Because of the volatility in financial markets since the beginning of October, interest rates have fallen. The 10-year Treasury rate has fallen more than 0.3 percentage points from a peak of 3.24 percent in early November. Since the middle of November, average 30-year fixed mortgage rates have fallen by around 0.2 percentage points.
Also from Bloomberg:
The Long-Anticipated New York Area Housing Slump Has Officially Arrived
The tales of housing malaise stretch across metro New York.
A Long Island home sat idle on the market until both its price and taxes were slashed. Buyers in Connecticut are asking to rent houses before purchasing them. Hoboken brokers lament their slow business.
Now, the growing consensus is prices are headed in one direction: down.
From the high-rises of Manhattan to the city’s manicured suburbs, homebuyers are pulling back as they reel from a triple whammy of costly hits. First, it was years of unrelenting price gains, followed by a federal cap on state and local property-tax deductions. Then came a surge in mortgage rates, making purchases even more expensive.
“Brokers ask me, ‘When is it going to get better?”’ said Greg Heym, chief economist of Terra Holdings, which owns brokerages Halstead and Brown Harris Stevens. “‘Better’ for this market, in this area, is lower prices.”
Home sales are slowing across the U.S. after a multiyear boom marked by frenzied deals, fueled by historically low borrowing costs. So far, values in most of the country haven’t fallen — but the rate of appreciation is slipping, particularly in the New York area. Prices in the 12 counties that include and surround New York City rose 4 percent in the third quarter from a year earlier, compared with a 4.8 price increase across the U.S., according to Attom Data Solutions.
…
In New York’s affluent Westchester County, No. 1 on Attom’s list of high-tax areas, single-family home sales fell for a fifth straight quarter in the three months through September, according to appraiser Miller Samuel Inc. and brokerage Douglas Elliman Estate. Purchases slumped for two of the last three quarters in the Long Island suburbs, which include Nassau County, with the fifth-highest tax burden in the country.
New Jersey’s Bergen County — No. 4 — had a 6 percent drop in third-quarter sales contracts from a year earlier, according to Otteau Group Inc., which tracks real estate transactions and prices.
Obviously, I was not killed in Colombia.
Bogota isn’t all that bad, I was fairly impressed. Very very young demographic.
Very very young demographic
The older crowd got whacked during the c0caine wars. :o
Grim did you stay here?
https://www.economist.com/the-americas/2018/12/15/they-used-to-kidnap-tourists-now-colombias-ex-rebels-run-a-hotel-for-them
A decade after the financial crisis, the U.S. economy seems to be firing on all cylinders, with unemployment at a 50-year low and growth hitting its stride. But a deeper look reveals a more troubling picture: Between 2012 and 2015 — a period when the recovery seemed to be gaining speed — nearly half of all counties nationwide saw flat or declining growth, according to new government data.
More broadly, the Commerce Department figures highlight a stark and worrisome reality: While a handful of places around the U.S. are thriving, most regions are barely trudging ahead. And that trend is creating a widening geographic gap between a relatively few prosperous areas, mostly urban oases, and the desert of stagnation that lies beyond.
A short seller yesterday published a report on XPO Logistics, claiming that people working for or assisting the CEO are associated with past accounting scandals.
HQ is in Greenwich, CT.
https://www.sprucepointcap.com/xpo-logistics-inc/
Chris Christie declined the White House chief of staff role…
The End Is Nigh (Libturd Edition):
https://www.wfaa.com/article/news/watch-teen-suspended-from-usa-hockey-play-after-nasty-attack-during-game/287-623040691
Are housing commentators looking at transactional evidence? Last Hoboken resale:
http://tax1.co.monmouth.nj.us/cgi-bin/m4.cgi?district=0905&l02=090500171____00005____C0001M
Chicagofinance – Chinese $$$ driving that one?
Can you confirm this?
Yo! says:
December 14, 2018 at 4:45 pm
Are housing commentators looking at transactional evidence? Last Hoboken resale:
http://tax1.co.monmouth.nj.us/cgi-bin/m4.cgi?district=0905&l02=090500171____00005____C0001M
you want snark? even you know they made a mistake…..
a pair of kids overpaying for a patch of grass in the back…..
Yo! says:
December 14, 2018 at 4:46 pm
Chicagofinance – Chinese $$$ driving that one?