From the NYT:
The Housing Market Is Worse Than You Think
Everyone is feeling the squeeze.
“Mortgage rates are sky high, prices are sky high, and there’s no inventory,” said Mark Zandi, the chief economist at Moody’s Analytics. “This may be the worst time in my living history for the home buyer — it just doesn’t make sense.”
Mortgage rates recently broke 7 percent, the highest since 2002, and more than double what most borrowers paid near the start of the pandemic.
Between soaring prices and rising rates, the typical home buyer in October paid 77 percent more on their loan, per month, than they would have last year, according to Realtor.com. With a national median asking price of $425,000 and a 10 percent down payment, that works out to an additional $1,117 every month.
Home contract signings fell for the fourth straight month in September, down 31 percent, compared with September 2021, according to the National Association of Realtors. The same month, search interest in the phrase “U.S. Housing Bubble” reached a 15-year high, according to Google trends data. The searches were most popular in Idaho, where the median home price in Boise was $549,900 — an eye-popping 51 percent increase since September 2019, according to Realtor.com.
The days of record-low mortgage rates are over, but juiced-up home prices have not fallen in kind. And sales are stalling, as both buyers and sellers wait for the other shoe to drop.
First
I don’t have access to any of these online papers… can’t see the NYT link but it’ll be interesting to see where prices and sales are a year from now. I am starting to see reductions though in towns 25 miles outside the NYC radius. If you bought anywhere in the last decade, you probably have a mortgage rate with a “3” handle. If you sell and buy again, you’re screwed. If you’re a 1st time buyer or renter looking to buy, same deal. Interesting times.
As rates rise expect to see more rent to own listings.
Rent to own – Don’t remember if that’s what we saw in the recent past? I can remember rates in the 80s, 10% plus mortgages but I was too young to be a buyer at that time. My oldest sibling bought a house in the early 80s. CD rates were nice back then, waiting for 5% or better now to consider parking some cash.
There is a house in my town that’s been on the market since the summer, on a quiet street off a cul de sac, and right near the park, walk to elementary and middle/ high school. House looks pretty good pictures wise updated kitchen. There is an in ground pool which might be a negative for some people, and the upstairs is not dormered ( cape) there have price reductions over the months still has not sold. The new asking price is 40k higher than the closed price in 2005.
3b,
Where did they start with price on that house? Were they out of whack compared to comps in the summer? Now with rates at 7%, they have no choice but to cut hard.
If you’re China/the CCP and you control TikTok, do you push voters towards the D’s or the R’s the next few days? Yesterday, I hung out with a group including a half-dozen or so late 20’s women. Lots of references to TikTok memes or songs or whatever from the ladies. The CCP can deliver whatever content they want and women from 16-35 are drinking it in for hours a day each evening. The CCP can (A) push end of Roe OR (B) they can push high grocery prices and fire them up either way. The difference between TikTok today and CCP control of same (ask Jack Ma about going against the regime) makes the stirring about 2016-Russia-FB so darn trite.
Push toward the D’s = R’s get stirred up that the election is stolen because the predicted Red Wave doesn’t show up. More political acrimony as D’s drive toward base (trans rights, woke, insurrection, etc.) and ignore the working class (crickets re unionization at SBUX and AMZN, where is the paid federal maternal leave?) because there was no consequences for doing so the last two years. R’s mad and feel like the ballot box is not where you can express your frustration with the status quo.
Push toward the R’s = the R’s have their impeachment of Biden and investigation-after-investigation of Hunter and such. More political acrimony as R’s go more-MAGA, and the potential for the Kari Lake’s and other MAGA state officials to create policies/actions/news stories that become big and concerning to centrists (e.g., one can imagine Kari Lake says “throw out those ballots because signature doesn’t match”; hardcore state action against the undocumented, or illegals, depending on your term).
Either way for the CCP, Trump started the tough-on-China policies and Biden didn’t take them off (hello, Chips Act), so I don’t know if there is a geopolitical preference of party. Ergo, if you’re China, you probably just want to fan the flames of US and Western political division. Will be interesting to see the ramifications of more distance in the US – China relationship.
Fast Eddie says:
November 5, 2022 at 9:56 am
CD rates were nice back then, waiting for 5% or better now to consider parking some cash.
Fast Eddie, TD America has a CD right now paying 5.641%. These CDs can be sold any time with absolutely no penalty. Next week they will probably be a higher rate. I have been tracking them since June 6th.
I have all my ammo ready and have been investing in short ladders , but will soon be making the ladders more years once we reach 6-7% , it will happen.
Jim,
It’s about time. We had zero gain on savings accounts and CDs for far too long.
Fast: They started at 650k , back in the Spring, perhaps a little maybe should have started at 600/ 625, but considering rates were still low then and the location of the house, the asking price was not in my mind out of line based on what other houses sold at in lesser locations. Even if they sell at the full new asking price, once commission and other closing costs are paid, they won’t make any profit on the sale, and that’s after 17 years.
I’m also short laddering.
Waiting for that 7% handle to take to loosen duration.
This is a really nice long term chart of rate trends: https://www.longtermtrends.net/real-interest-rate/ I think Lib may have posted it first? Anyhow good link to bookmark.
Jim,
I’m good on the estimated. Appreciate you looking out for me as usual. You are a good person for it. When I sold the place, I redid my taxes from last year in TurboTax to see what impact the investment home sale would have and adjusted from there. The gains were not really that great, sadly.
Crushed,
This is a respond of 4 video parts.
You make a good point. Your point is the world of James Jesus Angleton.
https://youtu.be/vTgneJQxCts
The foundation of those early years in the CIA was the statement that Damon says toward the end. His character here is loosely based in Angleton.
https://youtu.be/LbbxQqKXUIk
But I think what is going to happen is
https://youtu.be/HKVBvooZ2c8
So meet your future prez…
https://youtu.be/dkYfmRwryQo
And thanks the boomer for killing it…..
Grim, Please approve. The comment require 4 sequential you tube videos.
You and every other whale will lock up safe money for years. Locking it out of growing the economy. Why it will probably not happen. Too easy. Won’t happen.
“I have all my ammo ready and have been investing in short ladders , but will soon be making the ladders more years once we reach 6-7% , it will happen.”
Boomer Remover says:
November 5, 2022 at 2:07 pm
This is a really nice long term chart of rate trends: https://www.longtermtrends.net/real-interest-rate/
Boomer , great chart! not sure I have ever seen this before. Maybe Pumps could take the time and analyze it before he spouts off about interest rates being too high again. Thanks! ( my wishful thinking)
Libturd says:
November 5, 2022 at 5:09 pm
Jim,
I’m good on the estimated.
Lib,
I am glad you did , I think we pay enough in taxes without paying federal and state fines. The more you can keep the better.
The Great Pumpkin says:
November 5, 2022 at 8:36 pm
You and every other whale will lock up safe money for years. Locking it out of growing the economy.
Pumps , your lack of experience is showing, Pivoting into a higher paying asset is just plain smart. At 71 my concern is much more about asset preservation, and passing money on to my children and grandchildren. It is just like when your Grammy gave you a multi family house, she knew you were not capable enough to do it on your own.
Read and look at the chart Boomer posted, the basic advice is still : DO NOT Fight The Fed. Unless Jay Powell blinks rates will go up to 7-9% plus.
For christ’s sake. Money that goes into bonds/CD’s is put to use by the issuer. It is NOT locked out of the economy.
I said locked out of “growing” the economy. Safe investments sustain the economy, they don’t grow it by taking major risks. If everyone just invested bonds/cds, and stopped investing in high risk growth stocks….say goodbye to real growth.
Think of it like this. Low rate bonds provide cheap capital to grow the economy. If bonds are paying out 5%, that’s a lot more added cost to growing the economy. So companies will borrow less money to grow the economy because it is more expensive to do so.
So great for the individual investor who has access to high rates combined with low risk, but not so much for the growth in the economy.
Not an idiot says:
November 6, 2022 at 7:29 am
For christ’s sake. Money that goes into bonds/CD’s is put to use by the issuer. It is NOT locked out of the economy
but Paul Krugman told me it was
Jim,
Covid pandemic response is why we have inflation. It’s fake artificially created inflation, it’s not sustainable. It’s a combination of shutting down the economy, aka shutting off supply lines, while maintaining demand through govt stimulus. Simple as that.
Look at this. My friend sent me this yesterday. This is your inflation combined with supply chain bottlenecks it created. Forgiven loans to how many businesses?! Business owners flush with cash. Buying exotic cars and going on vacations!
“Do you know what’s crazy, I keep hearing about this employee retention tax credit up to 26,000 per employee that was employed through Covid. So I looked into it from my boss and I’m in talks with this law firm and I just got them all my bosses financials from 2019 to 2021 and it looks like he’s going to get back 350k. Where’s my fuckin cut boss?!”
“He had 15-18 full time employees every year from 2019-2021(Covid time) so for every one you can get up to 26k each per year, also depends on if they received any PPP loans during that time. If they received any PPP loans, which they did twice and both were forgiven.”
What’s hypocritical: most of these business owners are republicans and cry about govt handouts. Now they better stfu.
Clearest Sign Inflation Is Rolling Over
The Treasury Department announced Series I bonds will pay an annualized interest from November 1, 2022, through April 2023 of 6.89%, down from the 9.62% rate offered since May 2022.
A 2.73% decline is large. It shows how quickly interest rates can fall, once they start falling.
The Implications Of Lower Series I Bond Rates
Based on the latest Series I bond interest rate, I believe there’s an increasing chance one or more of the inflation figures coming out on November 10, December 13, January 12, Feb 14, March 14, April 12, and May 10 will either be below inflation expectations or have a blended overall inflation rate below expectations.
If inflation comes down quicker than estimated, we should see an increase in risk appetite for stocks, real estate, and other risk assets. After all, the net present value of future cash flows increases when interest rates go down. So does the relative desirability of risk assets.
Of course, nobody knows how well risk assets will perform in the future. Time will tell whether I’m a dummy or not. But the large decline in the Series I Bond interest rate makes me believe the worst is over.
In other words, I believe 3,577 was most likely the bottom of the S&P 500 on October 17, 2022.
If the S&P 500 gets below 3,600 again, I will be aggressively buying. And if it gets below 3,700, I will be buying more than my normal size and cadence.
Chart Of The Week
Here’s the caveat. After the Fed pivots, history has shown even greater declines in the S&P 500. Why?
Because the Fed likely went too far in hiking rates and caused a greater-than-necessary recession. Investors may begin to focus on the weakness in the economy as the reason for the need to pivot.
re: ” After the Fed pivots”
Fourth straight 75-basis-point interest rate increase and they are going to pivot? Hahhah wake me up when they print trillions again on fannie & freddie bonds.
Just wait until people who thought they were 401K poor, but still house rich find out that they are house poor too. Think that will curtail spending? A Stunami is coming.
Sleep well kiddos.
G’nite John Boy…