No Housing Nirvana In This Cycle

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