Why everyone's worried about the US Housing Market?
Mortgage Applications to buy a house just collapsed to an index level of 147.
That's the lowest level of buyer demand in 28 YEARS. Lower than anything we saw in the 2008 Crash. Down 41% from last year. (Source: Mortgage Bankers Association)
Collapsing Mortgage Demand is a huge problem for the US Housing Market. Because despite all the reports of "cash offers", they still only represent 29% of home sales. The other 71% still require a Mortgage to complete the transaction. (Source: NAR)
Why is Mortgage Demand collapsing so much?
Because both Home Prices AND Mortgage Rates are way too high. Creating a situation where the monthly payment for a homebuyer (Mtg+Tax+Insurance) is now over $2,500/month.
In the 2006-07 Bubble, it peaked at $1,400/month.
And Income Growth has NOT kept up with these increases in the cost to buy a house. Right now the House Payment / Median Income Ratio is 40%. Meaning the typical American family CANNOT AFFORD to buy a house.
This isn't a "choice". It's simple math.
This makes the propaganda being spewed about a "recovery" in the Housing Market absolutely laughable. Nothing in the fundamental data supports a recovery. In fact, quite the opposite when you consider a Recession, and increased foreclosures are likely on the horizon.
As the old adage goes - "Something has to break". The current state of the US Housing Market with 1) Near record high prices. 2) 7% Mortgage Rates. 3) Sellers refusing to cut the price. Will not last. Something will break.
Let's see how it pans out.
Cheers!
End-Week Wisdom:
"In the pursuit of wisdom, we must read much more of what has endured over time (such as history or biographies) than what is ephemeral (such as daily news, social media trends, and the like)." - Gautaum Baid
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