Chart Notes
This article was originally published by Mish Talk.
You can see the impact especially in mortgage rates and thus housing.
30-Year Fixed Mortgage Rates 1975-Present
30-Year Fixed Mortgage Rates – One Year
Existing Home Sales Decline 9th Month, Down Another 5.9 Percent
With the Fed rate hikes, Existing Home Sales Decline 9th Month, Down Another 5.9 Percent
Existing Home Sales Crash
That’s a crash. And never have we seen such declines other than in recessions.
The crash is in transactions, not price.
Cost of Owning
“Nationally, it cost $888 a month more to buy an entry-level single-family home than to rent it, according to September data from John Burns Real Estate Consulting. A 30-year-fixed mortgage with 5% down (including principal, interest, taxes, insurance and maintenance) on such a home cost $3,058 a month, while the median monthly rent on such a single-family house was $2,170, based on John Burns research.”
The cost of owning a home with a mortgage is the most expensive since at least 2000.
The Current Housing Cycle Landscape
1-3 Year Housing Outlook
Falling Real Estate Markets
Several major markets have now reached the falling phase of the cycle, characterized by flat or declining prices, limited capital investment, and shrinking housing demand.
Housing is Local (Until it Isn’t)
Slowing markets include Dallas, Jacksonville, and Raleigh-Durham.
The rest are plateauing. There is no major market bottoming, recovering, or growing.
It may be true at the micro level, but I’m tired of the expression “Housing is Local” when nearly the entire country is headed the same way.
Not a Crash?!
New Home Sales
Last month I noted huge new sales negative revisions for the August. This month the Census Department reports negative revisions for September.
If the pattern holds, there will be negative revisions next month too.
What About Cancellations?
The Census Department does not subtract cancellations from its reports and cancellations due to rising mortgage rates have been huge.
In declining sales environments and economic downturns (now), the Census Department dramatically overstates sales, even if we ignore revisions.
In economic upturns, the Census Department understates sales.
For discussion, please see New Home Sales Bounce 7.5 Percent From Negative Revisions
Factoring in cancellations, new home sales are about 468,000 SAAR about where they were in 1963.
But hey, let’s not call that a crash either.
Housing Hell
Looking Ahead
The range of hikes is allegedly 5-7 percent.
Who Cares How We Get There
Rate Hike Odds for December 2022
Expect another half-point hike on December 14.
Rate Hike Odds for December 2023
Impeccable Track Record
The market does not think we get to 5.0% next year and neither do I.
Bullard has an impeccable track record of being wrong.
Meanwhile, housing is going to hell. Don’t expect that to change for 1-3 years according to John Burns.
If housing is weak for three years, expect the economy to be weak for three years as well.
Nonetheless, my forecast for unemployment is not as dire as most. For discussion, please see Expect a Long Period of Weak Growth, Whether or Not It’s Labeled Recession.
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