**Information taken from Youtube channel: https://www.youtube.com/@MHFIN **
Some analysts believe we are heading toward an inevitable global housing market crash. The data points below are collected from the Youtube channel MHFIN.
The 30-year mortgage is over 7.6% for the first time since 2000. This is up from its all-time low of 2.65% in January of 2021.
A 3-fold increase in Interest rates have raised the monthly mortgage for a median-priced home by nearly $1k.
The Case-Shiller index tracks typical home prices and shows a 32% increase in home prices since 2020. The combined effect of rising interest rates and inflation has caused mortgage payments to double across the board. This is unsustainable.
To afford the median home price of $300k after a 20% down payment, a household income should be no less than $182k.
This means families must be in the top 15% of US household earners in order to afford a modest, "median-priced" home. This budget gets you 2 options if shopping in Cary, NC:
Post 2008 housing crash, the Fed depressed rates for 10 straight years. The Case-Shiller CPI backs out the inflationary effect and finds there was still a 66% increase in home prices since 2012.
The 30-year fixed is tied to the 10-year treasury note. The 10-year note is paying 4.7%. The interesting thing is that the 2-year note is paying 5.1%. Normally, this is the other way around, you would receive higher interest on longer term notes. When this happens, it is called an "inverted yield curve".
This occurrence has been an historic signal for a impending recession with 100% accuracy.
From the early '80s, early '90s, early 2000s, '08, 2020, and 2024 is looming large.
Homebuilder activity is another indicator. The National Association of Homebuilders record a slip in builder confidence as inventory grows. Expect discounts on new homes as they see existing home sales as zero-sum.
Also, cancellation rates are up and comparable to Oct-2022 and 2020.
Investors are cited as a cause for the fluctuation in prices going back to the '08 crisis. The concerning characteristic to investor dynamics is, unlike homeowners who purchase for residence, the investor does not need to find another home to purchase after selling. They can choose to exit at a loss affecting the "comp" calculations and value of residents. People are going to stay put over eating a huge loss. This affects people who must move for reasons other than upgrading or downsizing, etc. Equilibrium is coming. In the meantime, those who can afford so, will purchase. Those who cannot, will save.
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