No Housing Nirvana In This Cycle

Home-Sales-New-population-adjusted (1)

In 2015 I expected  growth in all metrics measuring housing demand, which are:

– Purchase applications    5%-10% growth, rates range 3.5%-4.5%.
– New Home Sales              8%-12% growth, with bigger upside if median price falls.
– Existing Home Sales       5.0 – 5.2 million sales, cash buyer still stay at a high level.

My reasoning was rooted in the soft metrics all three displayed in 2014.  With such low numbers as comparison, the idea that we would see negative year over year demand seemed unlikely.  

Today new home sales numbers did miss the target number, although still showed double digit growth.  
However, as always context is key to a full understanding of what the numbers mean.

Adjusting to population new home sales are down – 46% compared to 
1963 levels. 

Also of great importance to note is that this weak demand curve is coming at the lowest interest rate
cycle we have seen post world war II.

Population Adjusted

2015 I was looking for 5%-10% total growth for purchase applications which we will easily get.

However, again, context is key!

Existing homes sales are showing growth as well,  and we are seeing less cash buyers and more mortgage buyers.   This is a key metric to watch and which I believe will indicate a return to a healthier purchase market. 

However, we are entering one of the longest economic expansions post World War II and this was all 
we have to show for it —  even with a very high historical cash buyer metric in 2015.

Existing Home Sales Growth

 When I began writing about housing economics in 2010, I had one core thesis:

“We simply don’t have enough qualified home buyers in America once you X-out the cash buyers to have a real recovery
in housing.” 

This is based on my own (Non-Basis) economic observation and work in the financial industry for almost 20 years. This thesis has held up better than most high valued housing pundits.   Math and numbers always win out at the end unless you have an artificial demand driver in play.  It is worth noting that in spite of  triple the usual percent of cash buyers in this cycle, the demand curve remained low.

Housing needs one group before the demand curve gets better, and that is college educated dual income households with children.   My prediction is that this group will not be buying houses in any meaningful numbers until 2020-2024.  

Logan Mohtashami is a senior loan officer at AMC Lending Group,  which has been providing mortgage services for California residents since 1988 and is in a partnership with 

Renting Nation Still Has Legs

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Housing starts still have legs to run!

With household formation still rising and rental demand booming in year seven of this economic cycle, the softness of single family construction can be tolerated by the economy.

Core inflation is soft, but it’s being held up by rent inflation. More supply is needed in the rental market so kudos are due to builders for constructing multifamily rentals instead of single family residences. Some (#NAR) have been screaming for more single family residential construction but the demand for these bigger new homes isn’t as strong as these folks expected.

Core inflation without shelter costs is still very soft, (the blue line below), while rent inflation is booming (yellow line).

A must follow on twitter

Housing inflation versus everything else…

Core Inflation Housing Inflation

Context is key with this cycle and charts below are very telling.  Privately owned housing starts are creeping up from a great recession low.


Even with the strong rental demand, total housing starts have been slow. However, since we over built privately owned homes and under built homes to rent in the last cycle, we shouldn’t should be surprised by the low total starts.

The demand for home ownership will increase in years 2020-2024 due to the increase in dual income, college educated households starting families. However, until then, the most urgent issue is to find a way to cool down  housing inflation  in the rental market.
Presently,cash buyers, wealthy foreign buyers and strong income domestic buyers have been holding up housing demand. I don’t see any a change in this dynamic until years 2020-2024.
homeowneret (2)

  Logan Mohtashami is a senior loan officer at AMC Lending Group, which has been providing mortgage services for California residents since 1988

2015 Housing & Economic Update Interview with David Lykken


We go over housing, U.S. economics, Greece and other economic subjects.

Logan Mohtashami is a senior loan officer at AMC Lending Group, which has been providing mortgage services for California residents since 1988

Existing Home Sales: The Good, The Bad & The Ugly

The Ugly


If you look at my Twitter post today, before the existing home sales came out, I predicted 5.35 million in existing home sales.  That is exactly what was achieved. However the expected number (NAR and others) was 5.25 million.
For the last two months, pending sales were positive. Also the purchase application numbers from 2 months ago showed growth. Therefore I expected 5.27 million in SAARs last month but we actually achieved only 5.05 in SAARs. Last months
number seemed off to me for those reasons

Irvine, CA



So what is the real story on this number

#1  The Good


NAR Quote: “All-cash sales were 24 percent of transactions in May for the third straight month and are down considerably from a year ago (32 percent).

Finally we have real evidence in 2015 that the cash buyer is falling as a percentage of the market with sales rising year over year. In a real recovery this would have happened years ago. However, in this cycle we didn’t have the right  Incomes, Liquid Assets or  Demographics  for this to happen.  The decrease in cash buyers should be talked about more as this indicates a return to a more normal market.

# 2 The Bad

NAR Quote: “The percent share of first-time buyers rose to 32% in May, up from 30% in April and matching the highest share since September 2012.”

Don’t believe the hype…. as Public Enemy once said.  Thirty two percent first time home buyer number is still trending at the worst levels ever recorded as a percentage of first time home buyers in the market place. Add to this fact that this is year 7 of the economic cycle with rates at 4%.

Potential first time home buyers need to Rent, Date, Mate, and Marry before they will be ready to buy.  3.5 to 6 years after marriage with dual incomes, college educated Americans having kids still works.

This model of mine still is in play. However, to get more buyers in this group with the demographic trends we have, we are looking at 2020-2024  time frame.

3. The Ugly
The Ugly

Now back to context of total existing home sales

From Doug Short

Home-Sales-Existing-Growth (5)

Not much going on here considering population growth of over 40 million since the year 2000 when
Interest rates were at 8%

So, 7 years into the economic cycle, rates below 5% since early 2011 and a high level of cash buyers has gotten us this
headline number of 2.3% SAARS growth and a negative -10.5% adjusted to population number.

So, the reality if you believe in math, facts and data,  this housing cycle on the demand side has been booming from the rich and those renting. When 2020-2024 time frame comes and after the next recession, the demand curve will look so much better due to demographics. However, 7 years into the cycle and all the hype of housing nirvana was really on the renting side of the equation not the ownership side of the equation from main street America.

Logan Mohtashami is a senior loan officer at AMC Lending Group, which has been providing mortgage services for California residents since 1988

Yellen Still Needs A Course In Residential Lending



Fed chairwomen Janet Yellen spoke today and as always she is so predictable.

Yellen: “Credit availability remains quite constrained for mortgages.” Those without pristine credit ratings find it quite difficult

Yellen: “housing “remains quite affordable”


From Political Calculations (Great Charts Here)


I made my case recently here that tight lending is a myth. However, for years now, math, facts and data don’t matter to the tight lending crew.

Homes are so affordable that Americans are renting in mass as a response to the Fed’s affordable thesis.
This is happening at the lowest rate curve on 10’s since 1941-1945 time frame

Don’t the let data change your mind Mrs. Yellen

homeowneret (2)

All Fed members should be mandated to take a residential lending course before they say lies to the American public.

My recent interview with bankers to explain in detail why the Fed and many others are spreading lies about tight lending standards.

Housing is about incomes, liquid assets, debt to income rations, and down payments not a fico score.

Logan Mohtashami is a senior loan officer at AMC Lending Group, which has been providing mortgage services for California residents since 1988

10 Year Yield Having A 2nd Taper Moment


One of my 2015 Housing Predictions was this:

For mortgage rates – I predict the 10 year note yield will be in a range of 1.60% – 3.04%, which means mortgage rates will be in the 3.50%-4.5% range. Even with stronger economic data from the U.S., other areas around the world such as Japan, Europe, Russia and even China are now experiencing economic slowdowns. My yield range prediction is based on recent history: In May of 2013, the 10 year note yield was 1.6% before it climbed to 3.04% over the next 18 months. If we see an upside break in the yield to over 3.04% this would be a bullish indicator for the economy, but it would also lead to increased mortgage rates. The bottom line is that I see no significant increase in mortgage rates from the 2014 peak which was roughly 4.5%. The short end of rates rising makes it very interesting for 2015 as the Fed dots are set to raise short terms rates in 2015.

From Doug Short

We didn’t get to 1.60% like I thought we would, but 1.64% is close enough. Now, we are seeing a steady rise in yields from the lows put in by the bond market.

What does this mean for housing

1. Rate & Term refinances are dead outside a few streamline FHA loans.

2. Home purchases soon will see if they can handle the 2nd hand of housing inflation. However, we need to see yields in a range of 2.66% – 3.04% to get a good test on this.

On May 7th, 2013 I warned that the U.S. housing market should be worried about housing inflation.

The economic cycle is bit more mature now than it was back in 2013 when people were raving that housing was in Nirvana. However, if we break over 2.66% on 10 year yield we will see how well housing does. This will be the first real test for housing with the second hand of housing inflation in play.

Logan Mohtashami is a senior loan officer at AMC Lending Group, which has been providing mortgage services for California residents since 1988.

Bloomberg Business Housing Interview: New Home Sales , Housing Inflation & The Chinese Buyer


My segment starts at the 8:05 mark.
As always, I talk about how the housing year over year 2015 demand data has to be put into context.

From Doug Short
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Logan Mohtashami is a senior loan officer at AMC Lending Group, which has been providing mortgage services for California residents since 1988.

Housing Starts & Permit Reality In This Economic Cycle



Today’s strong housing start numbers sparked  the same rabid fascination from pundits, as a dog jumping into a pool after a tennis ball. We first hear that this is the strongest report we have had in the past few years then  the discussion degrades into that same sad song that tight lending is holding housing back.  The usual refrain of excuses for why housing “isn’t what it could be” is  given by people who don’t understand that main street America simply doesn’t have the income in this cycle to have a Nirvana-like recovery.

The responsible economist feels compelled to remind them how soft this recovery actually is.

Four new charts from Doug Short bring some perspective to the discussion.

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When one considers the epic crash in new home sales and starts that occurred after the housing bubble burst, you might assume that by now we would see more velocity to the upside in total activity.  But this does not account  for the fact that we simply won’t have enough quality home buyers at this point in the  economic cycle to have a real recovery. This  is true for new home sales as well,  which are typically sold to the more well-to-do buyer and make up only 1/10th of all home sales in this cycle, usually 1/6th. Some of those buyers are finding better value in existing homes.

The problem with the builders is simple. New homes are very expensive because they’re big.  The metric of Median Income to Median Price homes has deviated too much for main street to afford the debt of a new home (or any home in most cases) if we are looking for strong housing demand recovery.This is the reason why new home sales trend have been soft in a 90% mortgage marketplace that is tilted to the more wealthy buyer once you adjust it to population growth.
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Why would the first-time home buyer even look at a new home which is much more expensive than a existing home coming into the market. For a while builders had the advantage of low existing inventory but now more existing homes are cominginto the market, increasing the competition  for housing dollars.

With that said, year over year growth in new homes sales, starts and permits are expected because previous numbers were so soft in 2014. But don’t let growth  from historic lows blind you to the fact that, thus far, this has been the weakest housing recovery in American history. It’s all about incomes and assets, and the lack there of, not tight lending.

Logan Mohtashami is a senior loan officer at AMC Lending Group, which has been providing mortgage services for California residents since 1988.

The Fall Of Homeownership In America



The census report released today shows a decline in the home ownership rate to a low of 63.7%  (

The notion that the lack of  demand for mortgages from main street America, (despite interest rates hovering  at 3.75%), is due to the lack of qualified home buyers, appears to be taking hold.  In my article on housing predictions from 2010, I wrote:

“The longer term consequences of an unstable residential real estate market may be more serious than just the destruction of individual wealth. The ideal of middle class home ownership may be at stake. The census bureau reported a 7% decline in national rental vacancy rates in 2010, along with an overall decline of 0.7% in home ownership rates compared to a year ago. There were fewer “organic” buyers, more renters and more investment buyers in the market in 2010 and I expect this trend to continue into 2011. Are we at the beginning of a sociological movement away from middle class home ownership and towards a cultural split between the investment property landlords and their renters both of whom may have less personal investment in neighborhood security, local schools and shared public facilities compared to primary homeowners.”

Now it is 2015, 7 years into the economic cycle.  Millions of jobs have been recovered and  interest rates have been below 5% since early 2011.

Even with strong rent inflation the demand for mortgages  from main street America, especially amongst first time home buyers, has never been this low. Demand is back to 2000 levels when rates were 8%.   If you remove the non historical average of cash buyers from the market, the demand for  existing homes  looks even worse.

From Professor Anthony Sanders:

From Doug Short

New home sales have also suffered (down  a whopping 80% plus from the high with marginal recovery since), primarily due to their high price tags.
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A host of reasons have been blamed for the poor demand including tight lending, low supply, winter, debt default, etc etc etc.   Now housing pundits seem to have finally come to the conclusion that weak demand is because people just don’t make enough money.

“Weak home sales are ‘much more of an income problem than a credit problem,’ said David Blitzer of S&P Dow Jones Indices. #housing #NAR

‘I don’t think there is a housing shortage…It’s strictly a matter of low demand, said’ “NAHB Chief Economist Crowe: #housing #NAR @NAHBhome”

See also my interview with Diana Olick from CNBC last year:

I hope all the economist, professors, financial media, housing analyst can now agree that housing demand is really about incomes and liquid assets and that more time is needed to have a “Housing Nirvana recovery” that some have predicted.

As we look toward the future we do see some positive signs.  Net housing demand should be better  in the 2020-2024 time frame because there will be more dual income households. Other factors come into play, however,  such as timing of economic cycles, rates and world events.   We should see also increased demand from our young working force as they become more settled in life, married and ready to buy.

Tight Lending was a myth and it’s slowly dying away. The rise of new home ownership will result from wage growth  and increased liquid assets, not from  financial engineering.

Logan Mohtashami is a senior loan officer at AMC Lending Group, which has been providing mortgage services for California residents since 1988.

Interview With David Lykken: Slaying The Tight Lending Myth



Trying to prevent the sickness of a financial engineered housing recovery.

My segment starts around the 40 minute mark

“All truths are easy to understand once they are discovered; the point is to discover them.”
Galileo Galilei


Logan Mohtashami is a senior loan officer at AMC Lending Group, which has been providing mortgage services for California residents since 1988. Logan is also a financial contributor for