State Of The U.S. Housing Market 2016

PROFILE PIC

Today I spoke with David Lyyken about the state of the housing market in America.

Some questions that we discussed were:

1. Where will mortgage rates go?
2. Will home prices in America rise again?
3. How will the Fed impact long term rates?
4. What should one make of the oil crash in America and how  will it impact oil states?
5. Where have all the first time buyers gone?
6.What is really causing the shortage of homes?   Hint: It is not an inventory problem.

The housing pundits have failed this country by lying that low inventory has kept national sales from growing .
The truth is that from 2012-2015, there has been more inventory than at any point in time from 1999-2005.  Low sales growth is due to demand, not supply.   Demand is low because buyers have insufficient incomes and assets – and this is due to demographics, debt and the Great Recession. So the next time someone in media tells you housing is held back due to inventory remember this chart :

More Inventory years 2012-2015 than any period from 1999-2005

months-supply-of-inventory-11211

Mortgage purchase applications have been the true walking dead this cycle, as I predicted back in 2010. 2014 was the worst year every recorded, once adjusted to population.  The rise in 2015, just makes 2015 the 2nd worst year ever recorded. All this has happened while mortgage rates have been below 5% since early 2011.
PURCHASE APPS

Interview below, starts at the 34 minute mark.

http://www.blogtalkradio.com/lykkenonlending/2016/01/11/1112016-housing-forecast-for-2016-with-logan-mohtashami

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 ZeneHome.com 

 

3 thoughts

  1. Inventory isn’t a problem on the high side. It is very much a problem on the low side … which are the very homes that are not being built.

    I’ve come across more and more people who aren’t buying simply because they can’t afford $250-300k+ homes and the homes they can afford are overpriced fixers, i.e. money pits from failed wannabe investors. The same goes for move up buyers with homes around or below $200k … they don’t have homes to move up to.

    And with the total rent being paying by many, lots of people could easily afford a mortgage payment, but they have to afford the house first. Condo sales and rentals are elevated in places they shouldn’t be, because there’s no inventory for the everyday American who can afford a modest home.

    Real estate is local, so this represents one market … even still, we’re very much in a seller’s market and will be for a while.

    1. But, net inventory as a nation is higher from 2012-2015 than any period from 1999-2005.

      Now, home prices have gone up a lot from 1996-2016, so that 250K-300K home from the year 2,000 is no longer that price point

      When you have more inventory than you did from 1999-2005 and then you have the worst demand curve ever on record post WWII with the lowest interest rates post WWII, that can’t be an inventory issue because median square foot being built in America in 2015 is 2,500 roughly, it was 2,000 back in the year 2,000.

      This is a demand issue, part of that demand problem is that equity owners don’t have enough equity to sell their homes and move up.

      That’s due to the lack of affordability to move up.

      Everyone on T.V. says housing is very affordable,

      But, their model is flawed.

      They assume every American is 20% down, 0 Revolving credit debt balance, starting DTI of 25% and Fico score of 740.

      So, they put that model for move up buyers, but that would imply that they have at least 28%-33% equity to sell, pay transaction cost and move up because the demand for higher move up homes isn’t that strong either.

      The demand curve for housing will get better, but that is a 2020-2024 story line.

      That point our demographics will have a bigger supply of college educated dual income families having kids.

      However, now, today you have over 5 months inventory for both national and new homes, that’s plenty of inventory to move the housing chains in terms of demand. That is a reason why we have roughly 5.8 million total home sales in 2015.

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