Manufacturing Under President Donald Trump



President Elect Trump was elected on the thesis that he would bring back manufacturing jobs to the U.S. and stop them from leaving.  Before we can gauge the future success or failure of this proposed  initiative we need to understand the current landscape for manufacturing jobs in the country.

The first myth that needs to be busted is that the US doesn’t make anything anymore. Our manufacturing output is the highest it’s ever been.  While it is true that China displaced the US as the largest manufacturing nation in 2010, the US has outperformed most other wealthy countries in the growth of “value added” which is a measure of the economic contribution of manufactures  in the design, assembly and marketing of the product.

From Fred:


While our manufacturing output has been stellar, we have seen a downshift in employment that started decades ago.   This was due to displacement technologies that the movement of manufacturing to areas with cheaper labor to create better profit margins.

From Fred:


When China entered the World Trade Organization,  the trade balance got bigger and manufacturing employment fell in the U.S.  Advances in technology and cheaper labor allow for lower prices and better profit margins. This is a price we do pay for living in a capitalist, shareholder nation.

From Calculated Risk:

The Census Bureau shows us that even though manufacturing is the 4th biggest employment sector in the U.S. it is now less than 9% of the total work force.

Employment in manufacturing  has been falling while output is growing.  A lot  of the productivity gains have come in the manufacturing sector, and while this is great for output it impacts total employment.

From Fred:

From Brooking:


Will we really go into a trade war with China? I don’t believe Trump will start a trade war because while near 48% of the US population are workers, 100% of them are consumers and the US is a consumption based economy.  Consumers will be negatively affected by a trade war and that will impact the economy, even if it results in some gains in manufacturing. So far President Elect Trump has not talked about taxing companies who are headquartered in the U.S. but do manufacturing in other countries. He has talked about making the U.S. more business friendly, and taxing current manufacturing plants seems to be in direct conflict with this.

So, let’s be realistic.  Regardless of who is president, we cannot expect to gain 5-9 million manufacturing jobs in the next 4-8 years. A more realistic scenario is that while output may continue to grow with future advances in technology, jobs in this sector will likely continue to shrink, stay flat or at best grow slowly against population growth.


The strong dollar, too puts limits on manufacturing growth expectations.  With a much stronger dollar, oil and commodities will get hit. So much of the world imports follow oil prices.

Another “must-follow” on twitter:


Higher oil prices = positive (!) for US manufacturing activity. Goods news ahead if oil prices continue rising



An infrastructure bill could do more for employment in the short term then dithering around the edges of the manufacturing sector by passing out favors to some companies that promise to keep jobs in America while threatening punishment on others.   Steve Bannon’s  trillion dollar infrastructure plan actually makes sense  if we can find workers that are capable to do this type work.   Last I heard we were planning on deporting some of those people. There is a big difference  for economic output between hiring existing working crews to work than hiring new people who don’t have jobs. The job openings for construction jobs is growing every year with hours worked being at all time highs for a reason. This is a reason why I like Bannon’s  go big thesis to make sure we target areas  of high unemployment of men of all ages. It might be wishful thinking with unemployment claims low and job openings above 5.5 million but one can hope.



I hope this article gives you some perspective on the state of manufacturing in America. We have new President and we should hope for his success, as his success means America is doing great.

On another note, my readers and followers on social media know my love hate relationship with the Anti American bears. These are people who call for the collapse of America every year with worthless economic rants.  I hate smoking, but every 15 years I am going to pull out a cigar and take a photo of me smoking it,   to make a point that America hasn’t collapsed yet,  like the extreme left and right talk about every day. The stock markets are at all time highs and we still have 74 straight months of job gains. Recessions come and go but 24/7 bears always stay 24/7 bears ( Hence the 24 hour fitness shirt for you)

Merry Christmas Bears !!!!

2016                                                             2001

Logan Mohtashami is a financial writer and blogger covering the U.S. economy with a specialization in the housing marketLogan Mohtashami is a senior loan officer at AMC Lending Group,  which has been providing mortgage services for California residents since 1987. Logan also tracks all economic data  daily on his own facebook page

U.S. Job Market Nearing Full Employment



Today the B.L.S. job report came out showing a gain of 176,000 jobs with the U.S. unemployment rate standing at 4.6% and a dip in hourly average earnings to 2.5%

Unemployment rate declines to 4.6% in November; payroll employment increases by 178,000

Sometimes numbers and charts can say more than anything written. For this article I just want the Anti American Bears, Zero Hedge,  Gold bugs and all economic cult groups from the left and right to just see this, because you all failed.

From Doug Short:


Part-time jobs ticked up in November, but overall, employment growth in recovery has been almost all full-time.


From Calculated Risk:


From Doug Short:

74… As in 74 consecutive months of jobs growth, by far the longest streak in history.


From Doug Short


To give a quick recap of 2016,  we have seen the longest job expansion streak ever at 74 months and job openings have  had the highest print ever recorded in U.S. history at 5,900,000 in all sectors of the U.S.  Unemployment claims have hit a 43 year low even with the oil crash and weakness in Europe, Japan, South America, Russia and China and the number of total and full time year round workers grew.


I understand why the anti-America bears cry wolf everyday:  The nature of man is to oppose any economic reality when they’re not in power. Look for my fellow conservatives, starting next year for 4 years,  to not care about labor participation rates.  Look for the  Zero Hedge Gold Bugs to change their tune regarding  the mystical 95 million people out of work.  I also caution my liberals friends not to over react to a Trump Presidency by predicting doom and gloom, just like conservatives have done over the last 8 years. Both sides play this game and neither seems concerned with reality.


Economic cycles come and go and we will have recessions. It’s all part of the economic process.  The take home message for both sides is that we are  living in the Greatest Country in the History of the world.


Logan Mohtashami is a financial writer and blogger covering the U.S. economy with a specialization in the housing marketLogan Mohtashami is a senior loan officer at AMC Lending Group,  which has been providing mortgage services for California residents since 1987. Logan also tracks all economic data  daily on his own facebook page

New Home Sales Still Showing Growth



Today the Census Bureau reported that 563K new homes sold in October 2016. Sales for the previous month were revised downward to 574K.

“Sales of new single-family houses in October 2016 were at a seasonally adjusted annual rate of 563,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 1.9 percent below the revised September rate of 574,000, but is 17.8 percent above the October 2015 estimate of 478,000”
emphasis added

Sales of new single-family houses in October 2016 were 563K (SAAR) down 1.9% (+/- 13.1%)* from September 2016.

I  predicted for 4%-8% growth in new home sales for 2016 and higher sales if the median home price fell or stayed flat.  The report for October 2016  shows a rise in the median price from the lows of the year.  But the median home price, in general has remained stable for the last twelve months. This can be viewed as a bullish factor for new home sales going forward because it means more smaller size homes are part of the sales mix.

From Doug Short


But new homes are still expensive, compared to existing inventory and that is one of the factors that is preventing stronger demand in this sector. And this will just get worse  with higher mortgage rates.

From Doug Short:


Keep your eye on new homes sales if  mortgage rates hit 4.5%. In 2014, a rise in interest rates to 4.5% was followed by the biggest miss in new home sales estimates that I have ever seen in my 20 years in finance. And,  that was working from a low 400K level  in sales.  The cycle is older now, demographics are getting better  and we are still working from historical low levels in new home sales.

Still, 2016 was a growth year for new home sales.

From Calculated Risk:


Logan Mohtashami is a financial writer and blogger covering the U.S. economy with a specialization in the housing marketLogan Mohtashami is a senior loan officer at AMC Lending Group,  which has been providing mortgage services for California residents since 1987. Logan also tracks all economic data  daily on his own facebook page

Bloomberg Financial Interview: Low Inventory Myth Crushed By Existing Home Sales



Today I gave a interview on Bloomberg Financial to talk about existing home sales and the state of the U.S. housing market.

My portion starts at the 22 minute mark.

In the interview I stressed the fact that low inventory and tight lending are not  the causes of the soft demand in housing.  Existing home sales hit cycle highs today, inventory is down year over year but mortgage purchase application are at cycle highs, back to 1998 levels. Move up buying is limited due to affordability, but there are plenty of homes out there to buy.   This article provides more background on this economic dynamic:

Low Housing Inventory Lie Still Lives On

A. Existing Home Sales cycle high

From Doug Short:


B. Mortgage demand is at cycle highs, back to only 1998 levels.

From Calculated Risk:


The Months of Supply is higher now from 2012-2016 than in any period 1999-2005. However, mortgage demand has only hit 1998 levels.  If we had more demand we would have more supply in an up cycle, so it might take a U.S. recession to get us to over 6 months supply. This cycle is very long.  By mid-2019 we will have experienced a record in terms of length of expansion.


Unsold inventory is at a 4.3-month supply at the current sales pace, which is down from 4.4 months in September.


First time we hit 6 months supply post 1996 when prices started to deviate from historical norms was February of 2006.  This was at the peak of  speculation demand and the start of the housing bust.  We are not a natural 6 month inventory country, post 1996.


Housing has changed since  1996 due to price increases that has deviated from historical norms. The ability to move up and release more supply to the market is limited. Some of this is due to investors buying up distress properties.

From Calculated Risk :


Adjusting to inflation, prices are not near the housing bubble peak. We adjust to inflation on all other data points but seem to forget to do this for housing prices. Still you can see, even with the adjusted to inflation metrics, we have deviated from historical norm


Logan Mohtashami is a financial writer and blogger covering the U.S. economy with a specialization in the housing marketLogan Mohtashami is a senior loan officer at AMC Lending Group,  which has been providing mortgage services for California residents since 1987. Logan also tracks all economic data  daily on his own facebook page

Housing Starts Up 23.3% Year Over Year



Today, the US Census Bureau reported their housing start data.   While we cannot expect this rate of growth to continue,  this data for October is the best print of the cycle. Additionally the report shows that the trend of single family growth is still moving in the right direction. As always, be mindful of any new home sales or housing start print that deviates from trend up or down.

Today Census reported their housing start data

Housing starts in October 2016 were 1.323M (SAAR), 25.5 percent (+/- 12.6%)* above September 2016 estimate.

BUILDING PERMITS Privately-owned housing units authorized by building permits in October were at a seasonally adjusted annual rate of 1,229,000. This is 0.3 percent (±2.0%)* above the revised September rate of 1,225,000 and is 4.6 percent (±1.4%) above the October 2015 estimate of 1,175,000. Single-family authorizations in October were at a rate of 762,000; this is 2.7 percent (±1.4%) above the revised September figure of 742,000. Authorizations of units in buildings with five units or more were at a rate of 439,000 in October.

HOUSING STARTS Privately-owned housing starts in October were at a seasonally adjusted annual rate of 1,323,000. This is 25.5 percent (±12.6%) above the revised September estimate of 1,054,000 and is 23.3 percent (±14.4%) above the October 2015 rate of 1,073,000. Single-family housing starts in October were at a rate of 869,000; this is 10.7 percent (±10.2%) above the revised September figure of 785,000. The October rate for units in buildings with five units or more was 445,000.

We saw big rebound in multifamily numbers which was lagging this year in terms of  rate of growth.

Year to date

Single family units: +10.1%
Multi-family units: -1.8%

From Calculated Risk:

The more important trend  is growth in the single family home sector.  We need to see expansion in the sector over the next eight years in order to really see a full recovery.  I still believe that demographics for housing will get better but not until the  years 2020-2024.

From Doug Short:


For the future, keep and eye out on 4.5% mortgage rates to see if that impacts new home sales in reagard to future housing start activity.

Logan Mohtashami is a senior loan officer at AMC Lending Group,  which has been providing mortgage services for California residents since 1987. Logan also tracks all economic data  daily on his own facebook page

Will Higher Mortgage Rates Impact The Housing Market?



Back in 2013, when housing was reported by some to be in Nirvana, a number of housing analysts said that higher rates would not dampen housing demand because overall payments would not increase that much, higher rates would mean the economy was doing better so people would have more money to spend on mortgages and sideline buyers would rush into the market (the sideline buyer line being one of my personal favorite marketing gimmicks).

I, on the other hand, in May of 2013, before the Taper started, warned  that higher rates would impact demand.

Housing Mammoth Stuck in Tar Has Bigger Problems To Worry About

When rates did rise due to the Taper spike on the 10 year yield, mortgage rates rose from 3.5% to 4.5%.  Following this, purchase applications fell and continued to fall into 2014 to an all-time low, when adjusted to population.

A must follow on twitter

Ahead of election results 30-year fixed down year-over-year, but 10-year Treasury yields up ~0.3 pp since Tuesday.


From Calculated Risk ( My circle and arrow added)

Additionally, new home sales had the biggest miss on sales estimates that I have ever seen in a up cycle. Some “experts” were expecting 20%-30% growth in this sector but instead watched sales dip below 2% growth compared year over year, even though we were working from the lowest base in any economic cycle, post WWII.   To be fair I was looking for 8% growth and we didn’t see that either. Existing home sales went from 5,090,000 to 4,900,000 and new homes sales grew at 2% but “growth” was only because the previous year was so not so a high bar to beat.   Today, new home sales are higher than the levels we saw in 2014 higher and are working to be at cycle highs in 2016. The question remains: will higher rates impact new home sales and if so by how much?

I have stayed true to my 10 year channel of 1.60% to 3.% for many years now. This recent rise on the 10 year is event driven but inflation is picking up.

One of the biggest Technical developments this week concerns the Breakout in 10, 30 yr Treasuries above 3 year Trend


We had a bigger move in the 10’  last year when we saw 1.64% – 2.50% with inflation picking up on the Core Consumer Price Index. However, since Brexit we have had a double test of the lows on the 10 year,  in the low 1.30’s.

However, always caution yourself on short terms events, especially when they’re 3 standard deviation moves.  The 1.60% – 3% channel sticks.  The only reason we go lower than 1.60% has to be some European event like what saw in 2012 with  the Spain default fear trade and Brexit this year. Unless Personal Consumption Expenditures inflation and Core Consumer Price Index inflation takes off, I can’t see the 10 year breaking well above over 3% anytime soon. When the dollar gets stronger our imports become cheaper ( Oil) but service inflation always rises.

From Doug Short


A 3% 10 year equals a 4.5% mortgage rate  could be in play if we do test the higher band of that range. However, I 100% disagree with Alan Greenspan thesis that the 10 year goes to 5% soon. You would need to see a lot inflation for that to happen and our younger demographics can create some of that, but not yet. We have to be mindful there is still trillions of dollars in negative rates around the world and for the 10 year to get to 5% that has to change as well. Older demographics are deflationary and that doesn’t change with just a Donald Trump presidency.

We are still a few years away from the stronger demographic patch that will bolster housing demand, but keep in mind, that for now, mortgage demand is low.  Don’t believe the hype that housing is strong.  Housing hasn’t been strong in this cycle, and that means that the possibility of an existing home sales crash is unlikely.  Even when rates hit 4.5%, we only lost 200K in sales, some perspective is needed. You can make a thesis that the rate of growth will be challenged but a housing collapse not so much.

The real risk is on the new home sale side because these sales are more mortgage rate sensitive because they are more dependent on mortgage demand. Not to mention new homes are much more expensive than existing homes. However, since we are working from a level of  580K new home sales for 2017,  the downside is limited.  This level of sales is more typical of what we were see in a recession, not  in the 8th year of a cycle when mortgage rates have below 5% since early 2011.  So keep an eye out at that 4.25% – 4.5% level on mortgage rates level and see if it does impact any activity this time around. With the economic cycle older, better demographics and more footing that we had in 2013, the housing market should act better than mid to low 400K in new home sales.

Logan Mohtashami is a senior loan officer at AMC Lending Group,  which has been providing mortgage services for California residents since 1987. Logan also tracks all economic data  daily on his own facebook page

President Donald Trump

NEW YORK, NY - AUGUST 29:  American business magnate and TV personality Donald Trump visits "FOX and Friends" at FOX Studios on August 29, 2011 in New York City.  (Photo by Slaven Vlasic/Getty Images)


This has certainly been an interesting election period. As a long time Republican even I am amazed that the House, Senate and White House are now in Republicans hands.

The popular vote is very telling: as of 1:47 pm  pacific time Wednesday November 9, 2016

Clinton:  59,787,604

Trump: 59,581,587

Compare those numbers to the 2012 election:

President Obama 65,915,795 

Mitt Romney 60,933,504

Democrats, especially the left wing of the party, were never really in love with Clinton and that probably did cost her the election.

With all that said… the future!

We are still one country and all Americans. Some people who read my work assumed I was a Democrat because like some democrats I fought against economic bears who predicted that a great American recession was imminent.  But my opinion was based on my work as a data miner not on unfounded ideology.

Politics and presidents  play a minor role in my economic thinking. Readers may have noticed that in the last 3 years I rarely wrote anything on President Obama. I stick to economics.  Demographics, and inflation are more powerful informers of the economy than the Fed or any sitting president.   Maybe that notion will give some solace to those who are disappointed with the current election results.

A lot of my left leaning friends asked if I am bearish now on the US economy, this day after the election.  Nothing has changed in my thinking except  I think we might finally get a major infrastructure bill and we probably won’t raise taxes to pay for it.  So, domestic investment could be better in the next 2 years. As we can see below, domestic investment has been light recently.

From Doug Short


And we can see from that data below that public construction spending has been light compared to residential and non residential construction spending.

From Calculated Risk:

I love a massive infrastructure plan, and I am not afraid of the federal debt here in America. Our Country GDP and Net Assert wealth is over 125 Trillion dollars.  We are the only economic super power left in the world and we have the U.S. dollar.

But,  I don’t expect  any infrastructure plan  to have super major multiplier impact. It will be a positive for sure but not this panacea of growth as some have forecast. This is a repair package that will draw workers from existing crews. We have a labor shortage in construction right now, so the ability for the government to find new workers is limited.

The unemployed are largely high school drop outs, high school educated only, drug addicts and those coming out of jail, so employing these potential workers should be a priority of any plan. Be mindful that as all mature countries of size have limits to what a infrastructure package can do. This isn’t like building a massive amount of homes, cars, streets, commercial building for a growing labor force that didn’t have any before. Still with that said, with house, senate and White House all on the same side  of the isle, this is a deal that can happen  in the short term.

The 10 year has taken off today.  We are at 2.06% as I write this. With the prospect of an infrastructure package, the market for copper and lumber are probably going to play long.  Until 10 year breaks over 3.04%, I still believe in my long term channel of 1.60% – 3.04% being the range for some time.  Inflation is rising in the U.S. but is nowhere close to being a major concern.

With regards to the effect of the change in the political regime on regulations, I don’t feel that I can make any meaningful predictions, other than I would imagine the banks are going to benefit on anything that President Trump can accomplish.

On the Affordable Care Act, who knows what will happen there and the free college plan for those families making less than 125,000 is probably dead. A lot ideas and plans are still up in the air. However, stick to economic cycle data readings such as leading economic indicators and unemployment claims to get a big macro perspective of what is going on in the cycle. A lot of  noise out there but math, facts and data still matter.

America is great, was great and will be great. We have solid demographics compared to the  rest of the world.  We have over 100 trillion dollars in financial assets, over 155 million, working men and women,  the biggest military in the world, friendly neighbors, and two oceans as borders.  We are going to be fine.

Granted, this election was ugly.  What I saw on social media during this election,  not just from the pathetic cowardly trolls who hide behind fake names, but from non-affiliated people, was disgusting.

We can’t, as adults, treat other people this way. I can always forgive young people for their lack of integrity as they’re learning to become adults. However, both the left and right resorted to crass verbal abuse during this election and we have to  be better than that and set a better example for our children.

Speak like your kids and parents are watching.

America will be fine.  I, for one, don’t believe that Trump  will act like Hitler or do anything  that the fascist movement of Germany did.  The inherent strength of our system and our people will prevent that from ever happening.

We are still Americas and we always will be!  Have faith in our country and our people even if you don’t agree with their politics.

Logan Mohtashami is a senior loan officer at AMC Lending Group,  which has been providing mortgage services for California residents since 1987. Logan also tracks all economic data  daily on his own facebook page

Job Report Shows Some Wage Growth Punch



Today the Bureau of Labor Statistics reported employment gains of  161,000 in October and anunemployment rate of 4.9%

2h2 hours ago

Payroll employment rises by 161,000 in October; unemployment rate changes little (4.9%)

Today’s report maintained the streak of job gains – as we are now going into the 73rd month of gains — the longest streak  in U.S. history. 

73… As in 73 consecutive months of job growth, by far the longest streak in history.


From Calculated Risk:


 Average hourly earnings rose 2.8% , year over year, in October, but non manager growth was at 2.4% .

However,  the trend is your friend. We are seeing wages picking up . Look for the  Atlanta Fed Wage Tracker to hit 4% in 2017. According to that tracker, job switchers recently hit a cycle high of  4.3%. 

Pickup in wage growth is strong evidence the US job market is closing in on full employment


Our massive young demographic group
of ages 21-26 is kicking into the workforce and we are starting to see that effect on the employment numbers.

A must follow on twitter

Employment/population ratio for prime working age at 78.2%, a post-recession high. That’s good news #1.


Finally, the famous U-6
unemployment rate that every last America bear hangs his hat on, is showing cycle lows. 



U.S. Unemployment Rate by Type


Overall, we are seeing late cycle dynamics in job numbers. Wage growth in picking up, unemployment claims are low and trending low for some time, and job openings have been high. I am already lowing my expectations for job creation number for 2017, adjusting to demographics. 

Logan Mohtashami is a senior loan officer at AMC Lending Group,  which has been providing mortgage services for California residents since 1987. Logan also tracks all economic data  daily on his own facebook page

New Home Sales: Decent Print


Today the U.S. Census Bureau reported on for the month of September.  New home sales were 593K, a  miss from the 600K estimates, and only higher, month to month, due to a revision of the prior month from 609K to 575K.

Sales of new single-fam houses in Sep 2016 were 593k (SAAR) up 3.1% (+/-16.2%)* from Aug


For years, my theme for new home sales has been slow and steady growth.   This cycle started off from the lowest point of sales ever recorded in U.S. history, with that thesis you can expect growth. However, we are experiencing the weakest demand curve for new home sales ever, even with the lowest interest rates curve ever.

With that said, we are roughly 1 year to 2 years away from pulling out of that historic low numbers.  After that,  we can expect to see if  new home sales have the capacity to grow past 675K-775K. Once we start a year from a 675K-775K level, then we lose the very low bar thesis from housing.

The report also shows that the median new home price jumped. This means there are a larger number of bigger homes being sold. For new homes sales to get real traction in the market the sale of larger homes needs to slow compared to the sale of smaller homes.  Still we have a bullish trend for growth since median hoe price have slowed down,

From Doug Short:


Just like for  existing homes,  the monthly supply of new homes is  higher now than any period from 1999-2005 – so inventory is not slowing growth.

Growth is being held back because housing is expensive, demographics are light, and no more exotic loans being offered to unqualified buyers.

From Calculated Risk:


In general, we can say that 2016 has a very positive sales trend even with the revisions for the past 2 months. The trend  is much better than 2013, 2014 and 2015 when total sales disappointed everyone. We have more realistic expectation now for new home sales and this is refreshing to see.

In December of 2015, I predicted the following

“For 2016, I am predicting growth of 4%-8%, the lowest growth estimates I have given in this cycle. However, just like 2015, if we can get more lower priced homes in the market, new home sales growth can be much higher than 8.”

2016 Housing & Economic Predictions

This is largely what we have seen. The median home price has fallen,  we should end up with above 8% growth for the year.

From Calculated Risk:


From Doug Short


On a personal note, I will be speaking in 2 panels next week at the 2016/ Americatalyst conference in Austin, Texas

Panel 1    1.3 BREAKING BAD: Scoring the Housing Finance Market


Teresa Bazemore

Radian Guaranty

Sean Dobson

Chief Executive Officer | Chairman
Amherst Holdings

Mark Fleming

SVP | Chief Economist
First American Financial Corporation

Logan Mohtashami

Senior Loan Manager
AMC Lending Group

Ted Tozer


GNMA | Ginnie Mae

Panel 2 :   2.4 DEJA VU: House and Rent Price Projections


Douglas Bendt

SVP of Product Development & Research

Mark Fleming

SVP | Chief Economist
First American Financial Corporation

Logan Mohtashami

Senior Loan Manager
AMC Lending Group

Allan Weiss

Founder & CEO
Weiss Residential Research

Logan Mohtashami is a senior loan officer at AMC Lending Group,  which has been providing mortgage services for California residents since 1987. Logan also tracks all economic data  daily on his own facebook page

2016 Existing Home Sales Destroys Low Inventory Myth



Today the National Association of Realtors reported that existing home sales rose over 3 percent to nearly 5.5 million in September up from 5.3 million in August.

Total existing-home sales hiked 3.2% to 5.47 million in September from 5.30 million in August.


First-time buyers were 34% of sales in September; investors were 14%; all-cash sales were 21%; and distressed sales were 4%.


The median existing-home price in September was $234,200, up 5.6% from September 2015 ($221,700).


This means existing home sales are at cycle highs, with nominal prices near or at the housing bubble peak. We also have the highest percentage of mortgage buyers (as opposed to cash buyers) in this cycle.

These data should lay to rest the ideas that tight lending and low inventory are holding back the market, a thesis being touted by some of our so-called experts. Today, mortgage demand is back to 1998 levels and demand facilitates housing mobility or turnover.
From Calculated Risk

Let me give you a good example:

Months of inventory hit a recent multiyear high back in 2014, almost 6 months.

What happened in 2014?  Taper spike lead the 10 year to go from 1.60% to 3.04% and pushed mortgage rates to 4.5%. 2014 also was a negative growth year from the previous year in term of existing home sales.  Even with higher inventory supply, demand was weaker then. Today inventory is lower than 2014 but demand is higher and leading to highest level of sales in this cycle. This low inventory thesis is a false narrative discussion


If demand was stronger,  move up buyers would move up giving more supply to first time home buyers. This is one economic scenario where “trickle-down” actually works.

In less than 2 weeks I will be at the 2016 Americatalyst: Fast Forward conference :

One of the main ideas I would like to convey there is that the dual demons of  tight lending and low inventory have no power over the housing market. We trotted out these two old hags as excuses for poor demand long enough, when the real motivators and/or suppressors of the housing market  are demographics and affordability demand curve economics.

2016 is almost over and it hasn’t been a bad year for housing.   The facts are that home sales are at cycle highs with the highest mortgage demand in this cycle and the lowest demand from cash buyers.  But demand hasn’t breached 21st century levels in terms of the mortgage purchase application data. If cash buyers weren’t 11%-20% above historical norms then existing home sales wouldn’t have too many prints above 4.5 million. 2016 housing is about demand not tight lending or low inventory.

Logan Mohtashami is a senior loan officer at AMC Lending Group,  which has been providing mortgage services for California residents since 1987. Logan also tracks all economic data  daily on his own facebook page