https://www.angelinvestmentnetwork.net/x1s4rbbg
Since the mid 1990s, mortgage interest rates and home sales moved in opposite directions. Dodd-Frank made this inverse correlation even stronger.
Back in February of 2013 when mortgage rates were near record lows, I wrote that future housing markets would be very interest-rate sensitive, despite assurances to the contrary from most macroeconomists. Last year I noted that fewer home sales or lower prices was sure to follow higher mortgage interest rates. Generally, volume precedes price, and as one would expect, the recent spike in mortgage rates is already hurting sales.
https://www.greenlifestylemarket.com/2022/11/17/3k7tki9kzi2 The prevailing economic view is that the housing market would respond positively regardless of what happens with mortgage rates because house prices in the past have correlated poorly with mortgage rates. For example, during the 1970s, interest rates rose significantly, which should have caused house prices to drop, but instead, California inflated a housing bubble. During the crash from the bubbles in the 1990s and the 2000s, interest rates declined, and so did prices.
https://partyhosthelper.com/s1re0tmv However, after the housing bubble from the late 80s petered out in the mid 90s, housing markets began to show a strong inverse correlation between interest rates and sales. If interest rates went up, sales went down, and visa versa.
https://www.bobbimccormick.com/6cwi4epoz 
Since the new mortgage rules changed the way housing markets work, the housing market today displays more sensitivity to fluctuations in mortgage rates than before.
https://kevinreillycollection.com/6z7t1468 According to the theory I postulated back in early 2013 — prior to the rate surge from 3.5% to 4.5% — rising mortgage rates should decrease sales volumes and declining mortgage rates should increase sales volumes. The restricted inventory may cause prices to go up, but the changes in affordability caused by mortgage rate fluctuations would necessarily impact sales volumes by pricing out (or pricing in) marginal buyers.
In October of 2013 after the sudden mortgage rate spike pummeled sales, I wrote about the mounting evidence of the market’s sensitivity to mortgage rates. The mechanisms used to inflate previous bubbles — using teaser rates, allowing excessive DTIs, and abandoning amortization — these were banned by the new residential mortgage rules. Lenders fail to soften the impact of interest rate fluctuations or provide “affordability” when the market reaches a friction point, which is the main reason the market changed so dramatically and so suddenly when mortgage rates surged in 2013.
The sensitivity of the housing market to changes in rates is remarkable. As the two charts above demonstrate, the inverse correlation began to take hold in the mid 1990s, and the passage of Dodd-Frank made the inverse correlation even stronger because lenders can no longer evade the underlying math.
Pending home sales drop unexpectedly to lowest in a year, down 2.8% in January
Diana Olick, February 27, 2017
https://www.bobbimccormick.com/10lznjm Higher mortgage rates and near record low supply resulted in disappointing home sales to start the year.
https://www.angelinvestmentnetwork.net/6101jt3z73s Buy Real Valium Online Uk House hunters signed 2.8 percent fewer contracts to buy existing homes in January compared with December, although December’s read was revised slightly higher, according to the National Association of Realtors.
Pending sales are nearly always higher in January than December. Fewer people shop for homes in December than in any other month, and the last two weeks are lost to the holidays. Usually, January picks up from December, and February improves over January, the so-called Super Bowl effect. If pendings are down again in February, then the rise in mortgage rates signifies real trouble.
Buy Soma Overnight The group’s so-called pending home sales index is now just 0.4 percent higher than January 2016, and this is the lowest reading since then. Pending home sales are an indicator of closed sales in February and March.
Buy Valium London Only the NAr failed to expect this. Anyone who understands how sensitive home sales are to mortgage rates would anticipate this decline.
Buy Diazepam Fast Delivery “The significant shortage of listings last month along with deteriorating affordability as the result of higher home prices and mortgage rates kept many would-be buyers at bay,” said Lawrence Yun, chief economist of the NAR. “Buyer traffic is easily outpacing seller traffic in several metro areas and is why homes are selling at a much faster rate than a year ago. Most notably in the West, it’s not uncommon to see a home come off the market within a month.”
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Blaming the lack of inventory is a tired excuse Yun falls back on whenever sales are down. The inventory problem has been with us for years, and it will continue to be a problem. However, it never seems to be a problem when sales are up, but when they are “unexpectedly” down, then Yun resorts to this lame excuse.
Carisoprodol 350 Mg Overdose Mortgage rates moved sharply higher after the presidential election and have remained elevated ever since. Home price gains continue to increase with the weaker supply, clearly weighing on affordability. Experts had expected a slight gain for pending home sales, as new supply was expected to come onto the market in January. …
https://integraleuropeanconference.com/2022/11/17/scwhqtgn “January’s accelerated price appreciation is concerning because it’s over double the pace of income growth and mortgage rates are up considerably from six months ago,” said Yun. “Especially in the most expensive markets, prospective buyers will feel this squeeze to their budget and will likely have to come up with additional savings or compromise on home size or location.”
Many would-be homebuyers voluntarily withdraw from the market because they become dissatisfied with their alternatives. Some potential buyers will accept less, but many others are priced out, which is largely why sales volumes decline when rates rise.
https://militaryanalizer.com/9chi2m6bl Regionally, … https://markmadsen.com/2022/11/17/xwfnbj0 The biggest drop was in the West where sales plunged 9.8 percent for the month and were 0.4 percent lower compared with a year ago.
https://pastiebap.com/site-news/yyotpgnn The new mortgage regulations will prevent future housing bubbles, but we witness the success of these new regulations in a change in housing market behavior: high prices hurt sales volume. Housing economists’ conventional wisdom states that rising house prices creates “escape velocity” as potential homebuyers become more motivated, they compete with one another, and they drive prices higher. The motivation may be there (kool aid is eternal), but the key enablers of this behavior are unable to play along; the new mortgage regulations curtailed affordability products.
When you think about it, sales volumes should decline with higher prices. Basic supply and demand theory says that at higher prices, a lower quantity of any good or service is demanded. For years housing behaved differently due to the credit cycle with affordability products. Now that these products are effectively banned, the housing market behaves as any other market would.
Let’s just hope Trump fails in his efforts to let the Genie back out of the bottle by dismantling Dodd-Frank.
Real estate brokers may have finally crossed the line with ‘SoHa’
Harlem’s gentrification and increasing real estate prices aren’t news at this point, but a local community board thinks certain real estate brokers have crossed a line. Keller Williams has reportedly created a separate office for “SoHa,” their new branding for South Harlem. Following in the footsteps of NoLo (SoHo + Nolita + Lower East Side), DoBro (Downtown Brooklyn), and Hellsea (Hell’s Kitchen + Chelsea), the moniker is seen as an attempt to make buyers and renters feel like they’re cashing in on the next trendy ‘hood. But residents of the Central Harlem area, roughly West 110th to 125th Streets, feel the marketing tactic is “arrogant” and “disrespectful,” and so Community Board 10 has introduced a resolution that would prevent brokers from using the nickname.
If Orange County realtors wanted to make us trendy, they could tout our Rapid Appreciation Potential, OCRAP.
Cheap Msj Diazepam Why Real Estate Will Never Be The Same
We’ll never see a near non-stop and unprecedented real estate boom like the one from 1933 to 2005 again.
We’re heading right into a great residential and commercial real estate crash ahead.
Demographically speaking, this crash is unavoidable.
I expected Japan’s 67% drop in residential real estate to rebound substantially, even with its smaller, but still substantial millennial generation. But that hasn’t happened. So, I went digging to find out what was going on.
I’ll admit that this had me stumped for a while… until I began to understand that real estate was different than other consumer sectors of spending. It’s obviously not a consumable like food or clothing. But it’s not like a durable product either, like cars and washing machines. Real estate, with the exception of natural disasters or human insanity (arson, wars, etc.), tends to last forever.
This led me to the realization that I couldn’t just predict the housing cycle by lagging births 41 years for peak spending there. I also had to subtract the diers at age 79 (because diers are obviously sellers!).
Here’s the result in net housing demand, allowing for later retirement in the future. It’s a whole different, and more sobering, picture…
https://staticseekingalpha.a.ssl.fastly.net/uploads/2017/2/24/saupload_Slide1-1_thumb1.jpg
Interesting graph. I have read the opposite citing that demographics will lead to higher housing demand. I would love to see others input on this.
The 41-43 age group minus the 78-85 age group is fatnasically myopic and for multiple reasons.
https://victoriamapperley.co.uk/o31pb86 Volume always precedes price.
FHFA: Rising interest rates not slowing down home prices…yet
http://www.housingwire.com/ext/resources/images/editorial/Kelsey-Thompson/Charts2/Screen-Shot-2017-02-23-at-91334-AM.png?1487863798
Home prices increased during the fourth quarter and, despite rising interest rates, showed no sign of a slowdown, according to the Federal Housing Finance Agency’s House Price Index.
Home prices increased 1.5% from the third quarter and 6.2% from the fourth quarter of 2015, the report showed. FHFA’s seasonally adjusted monthly index increased 0.4% from November to December.
http://www.housingwire.com/ext/resources/images/editorial/Kelsey-Thompson/Charts2/Screen-Shot-2017-02-23-at-91056-AM.png
The FHFA monthly HPI is calculated using home sales price information from mortgages sold to, or guaranteed by, Fannie Mae and Freddie Mac. Because of this, the selection excludes high-end homes bought with jumbo loans or cash sales.
“Although interest rates rose sharply during the fourth quarter, our data show no signs of a home price slowdown,” FHFA Deputy Chief Economist Andrew Leventis said.
“Although it will certainly take more time for the full effects of the elevated interest rates to be felt, there is no evidence of a normalization in the unusually low inventories of homes available for sale, which has been the primary force behind the extraordinary price gains,” Leventis said.
CALIFORNIA PENDING HOME SALES DIP 9.2% IN JANUARY
California pending home sales slipped negligibly from a year ago, which suggests a softening in the housing market in the upcoming months, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) said Friday.
Based on signed contracts, statewide pending home sales decreased in January on a seasonally adjusted basis, with the Pending Home Sales Index (PHSI)* slipping 0.2% from 107.4 from January 2016 to 107.2 in January 2017. On a monthly basis, California pending home sales were down 9.2% from the December index of 118.0.
http://cdnassets.hw.net/dims4/GG/9e0ad3f/2147483647/resize/876x%3E/quality/90/?url=http%3A%2F%2Fcdnassets.hw.net%2Fca%2Fa7%2Ff3a35ac84633a5f4440f00765693%2Fscreen-shot-2017-02-24-at-2.04.51%20PM.png
Only the Southern California region posted a year-over-year improvement in pending sales last month, rising 8.1% from January 2016 and increasing 10.5% on a monthly basis. Riverside County led the region in pending sales, posting a 16.2% increase from a year ago. Los Angeles, Orange, and San Diego counties also posted modest year-over-year increases of 7.1%, 8.0%, and 4.0%, respectively.
San Bernardino County was the only area within Southern California that saw pending sales lower on an annual basis by 2.8%.
For the San Francisco Bay Area as a whole, tight housing supplies and low affordability contributed to a fall in pending sales of 9.7% compared to January 2016
“Los Angeles, Orange, and San Diego counties also posted modest year-over-year increases of 7.1%, 8.0%, and 4.0%, respectively.”
Are you kidding? 7.1 and 8 percent is modest? Those numbers reflect a hot market.
Ten-X predicts fall in February’s existing home sales
Existing home sales are forecasted to see a decline in February, according to the Ten-X Real Estate Nowcast.
Ten-X, an online real estate transaction marketplace, released its report, showing February existing sales will fall between seasonally adjusted annual rates of 5.34 to 5.69 million with a targeted number of 5.51 million.
This would be a decrease of 3% from January’s existing home sales reported by National Association of Realtors but up 7% from last year. Home sales in January hit their fastest pace in a decade, even surpassing Ten-X’s predicted increase.
“At some point, rising prices, higher interest rates, and limited inventory will begin to take their toll on home sales,” Ten-X Executive Vice President Rick Sharga said. “While online search activity remains strong, indicating healthy demand for homes, the relatively weak numbers in both new home sales and pending sales of existing homes suggest that buyers may be having trouble finding properties.”
“But monthly housing numbers are notoriously volatile, so it’s too soon to say whether we’re seeing an inflection point, or the market is just taking a breath before coming back strongly in the spring,” Sharga said.
And Ten-X isn’t the only one predicting a slow down in February home sales. After NAR released the Pending Home Sales report Monday, which showed a decrease in activity, experts predicted future home sales will be low.
This chart from Logan Mohtashami, AMC Lending Group senior loan officer and a prolific mortgage pundit, shows how pending home sales sets the path for existing home sales:
https://pbs.twimg.com/media/C5rzyftWAAEkDHg.jpg:large
Oh please crash and burn. I’m sick of this Yun guy, he deserves a slap on the face at this point. I know he really understands numbers which is the part that upsets me, he just chooses to be the clown instead and sell the kool aid.
That’s Yun’s job. He is not there to tell the truth or anything approximating the truth. He exists solely to spin data in the most positive way to generate a sense of urgency among potential homebuyers. It sickens me too.
According to what I am reading, what is slowing sales is a shortage of inventory that keeps getting worse. I think I read something along the lines that the shortage may be worst in a decade.
The prices are moving up at a decent clip, so what little is out there is being bid on. Actually, this scenario can turn into sharp price increases.
Rising mortgage rates would only be a problem if sales and prices are both weak. Here prices are strong. The home owner only cares about his price rising and that usually occurs when inventory is low triggering bidding wars. Good days are here again. That took long enough.
You selectively see what you want to see when it comes to real estate. The problems with a shortage of inventory is spin used by the NAr whenever sales or prices are weak. What’s worse is that they offer no coherent reason why inventory is so low, mostly because they don’t want to admit the inventory numbers are artificially low due to the lack of equity preventing homebuyers from 10 years ago making a move-up trade. Watch the NAr’s spin machine, Lawrence Yun in particular, and you will notice that whenever sales or prices are up, there will be no mention of the inventory shortage, but whenever sales are weak, it will be mentioned. Inventory levels are a red herring used by the NAr when it suits their purposes. It’s not the real cause of anything, other that perhaps some home price inflation, but when you think about that, it implies that prices will lose this artificial boost when inventory levels return to historic norms.
Either way you need facts whethe it’s you or Lawrence Yun.
Did inventory similarly drop 3%? I don’t know, but you both should use facts.
“Why real estate will never be the same”
Bravo Larry this is the most cogent article I have ever seen you write here. All the actions since 2000 have been intended to resist this demographic change. This time is not different.
I sat through a presentation yesterday on how demographics will impact real estate. One of the items that stood out to me was that the homeownership rate is expected to remain very low for many more years. As the Baby Boomers age, they will move into assisted living and die off. That generation has an 80%+ homeownership rate. They will be replaced by Millennials that only have a 52% homeownership rate. Millennials will come of age faster than Baby Boomers surrender their homes, but the two forces will largely balance out and keep the homeownership rate low overall. There will be areas where the Baby Boomers will face problems selling their homes because Millennials don’t want to live in rural areas with low employment growth. It will be interesting to see if we get more inventory coming to market in OC as the population ages over the next decade.
How do you think Prop 13 will play into this? I hope my parents live a very long time, but at some point they will inevitably pass away. Will we, their children, sell the house or will we work out among ourselves who will live in it (or will we rent it out)? The house has has a ludicrously low tax basis as my parents bought it over 30 years ago so if we kept it as a rental it would be a money-printing machine.
This is exactly right. Any prudent heir would do the same, but as we know, many people will cash out at the first opportunity and give up the money printing machine.