Historically, in housing markets that displayed robust price increases, the rally was driven by increasing employment and rising wages. This has long been considered a fundamental of all housing price movements. The logic behind this is simple. New jobs need to new household formation which puts greater demands on the available housing stock. Further, rising wages allows these new buyers to bid more for the supply available pushing prices higher. But what happens to a market where home ownership rates are declining? Is it really possible to have a sustained rally in house prices when the traditional fundamentals are absent? [Read More...]

Everyone is cheering the bottom of the housing market, and the false assumption is that all properties will rise in price at a rapid rate as housing “recovers.” Properties priced below the conforming limit will almost certainly continue to rise thanks to restricted inventory and record-low interest rates, but the move-up market is a different story entirely. As I pointed out last week, Delinquent jumbo loans in Coastal California pollute bank balance sheets. But it’s not just Coastal California that will feel pain in the jumbo market. The jumbo market is not supported by government-backed loans, and as Mike pointed [Read More...]