UT: County housing market strengthening

[scaredyclassic]

i believe things are different this time. I wonder sometimes if the nation is even capable of saving money.

[CA renter]

[quote=Jim Jones][quote=Rich Toscano]I don’t think the relationship between rates going up and prices going down is so cut and dried. Look back at the early 80s – mortgage rates went well into the teens and home prices did not drop. Market activity shrieked to a halt, or so I’m told, but prices did not actually go down.

Generally speaking, there has been very little historical correlation between rates and housing expensiveness.

That said, a sufficiently violent rise in rates could certainly take down housing prices (especially given all the other factors in play). But I just don’t think it’s the done deal that a lot of people think (ie, “It’s ok if rates rise because prices will go down”).

Rich[/quote]

Rich,

I have heard your assessment of the situation with regard to the high rates in the 80’s before.

Can you see it possibly being different this time around based on three factors which to me come to mind?

1) The higher debt load of the average US consumer and home buyer

2) The reduced savings rate nationally

3) The longer life span of baby boomers who are financing their retirement and long term care need through the use of reverse mortgages instead of passing down the home to family members. Passing down the home would reduces supply while at the same time maintain long term price stability of the asset.[/quote]

Agree with this, and add the following:

4. Wages were rising pretty regularly through the 70s and 80s, and they’re not doing so now. Globalization (competition with workers who earn a tiny fraction of what we do) was just getting started. Unions were still fairly strong, and people were more inclined to have lifelong/more stable jobs in the 80s, PLUS they were more likely to have defined benefit pension plans (and better health benefits), which enabled them to spend more of their income during their working years.

5. The peak home buying years for Baby Boomers were in the 70s-90s. I think that trend is about to reverse (related to #3, above).

Finally…if the PTB didn’t think higher interest rates were going to kill the market, why have they thrown away **trillions of dollars** in just one year in an attempt to keep interest rates down? I’d LOVE for them to agree that interest rates don’t matter, but so far, they are not going along with my program. 😉

[CA renter]

[quote=Jim Jones][quote=Rich Toscano]I don’t think the relationship between rates going up and prices going down is so cut and dried. Look back at the early 80s – mortgage rates went well into the teens and home prices did not drop. Market activity shrieked to a halt, or so I’m told, but prices did not actually go down.

Generally speaking, there has been very little historical correlation between rates and housing expensiveness.

That said, a sufficiently violent rise in rates could certainly take down housing prices (especially given all the other factors in play). But I just don’t think it’s the done deal that a lot of people think (ie, “It’s ok if rates rise because prices will go down”).

Rich[/quote]

Rich,

I have heard your assessment of the situation with regard to the high rates in the 80’s before.

Can you see it possibly being different this time around based on three factors which to me come to mind?

1) The higher debt load of the average US consumer and home buyer

2) The reduced savings rate nationally

3) The longer life span of baby boomers who are financing their retirement and long term care need through the use of reverse mortgages instead of passing down the home to family members. Passing down the home would reduces supply while at the same time maintain long term price stability of the asset.[/quote]

Agree with this, and add the following:

4. Wages were rising pretty regularly through the 70s and 80s, and they’re not doing so now. Globalization (competition with workers who earn a tiny fraction of what we do) was just getting started. Unions were still fairly strong, and people were more inclined to have lifelong/more stable jobs in the 80s, PLUS they were more likely to have defined benefit pension plans (and better health benefits), which enabled them to spend more of their income during their working years.

5. The peak home buying years for Baby Boomers were in the 70s-90s. I think that trend is about to reverse (related to #3, above).

Finally…if the PTB didn’t think higher interest rates were going to kill the market, why have they thrown away **trillions of dollars** in just one year in an attempt to keep interest rates down? I’d LOVE for them to agree that interest rates don’t matter, but so far, they are not going along with my program. 😉

[CA renter]

[quote=Jim Jones][quote=Rich Toscano]I don’t think the relationship between rates going up and prices going down is so cut and dried. Look back at the early 80s – mortgage rates went well into the teens and home prices did not drop. Market activity shrieked to a halt, or so I’m told, but prices did not actually go down.

Generally speaking, there has been very little historical correlation between rates and housing expensiveness.

That said, a sufficiently violent rise in rates could certainly take down housing prices (especially given all the other factors in play). But I just don’t think it’s the done deal that a lot of people think (ie, “It’s ok if rates rise because prices will go down”).

Rich[/quote]

Rich,

I have heard your assessment of the situation with regard to the high rates in the 80’s before.

Can you see it possibly being different this time around based on three factors which to me come to mind?

1) The higher debt load of the average US consumer and home buyer

2) The reduced savings rate nationally

3) The longer life span of baby boomers who are financing their retirement and long term care need through the use of reverse mortgages instead of passing down the home to family members. Passing down the home would reduces supply while at the same time maintain long term price stability of the asset.[/quote]

Agree with this, and add the following:

4. Wages were rising pretty regularly through the 70s and 80s, and they’re not doing so now. Globalization (competition with workers who earn a tiny fraction of what we do) was just getting started. Unions were still fairly strong, and people were more inclined to have lifelong/more stable jobs in the 80s, PLUS they were more likely to have defined benefit pension plans (and better health benefits), which enabled them to spend more of their income during their working years.

5. The peak home buying years for Baby Boomers were in the 70s-90s. I think that trend is about to reverse (related to #3, above).

Finally…if the PTB didn’t think higher interest rates were going to kill the market, why have they thrown away **trillions of dollars** in just one year in an attempt to keep interest rates down? I’d LOVE for them to agree that interest rates don’t matter, but so far, they are not going along with my program. 😉

[CA renter]

[quote=Jim Jones][quote=Rich Toscano]I don’t think the relationship between rates going up and prices going down is so cut and dried. Look back at the early 80s – mortgage rates went well into the teens and home prices did not drop. Market activity shrieked to a halt, or so I’m told, but prices did not actually go down.

Generally speaking, there has been very little historical correlation between rates and housing expensiveness.

That said, a sufficiently violent rise in rates could certainly take down housing prices (especially given all the other factors in play). But I just don’t think it’s the done deal that a lot of people think (ie, “It’s ok if rates rise because prices will go down”).

Rich[/quote]

Rich,

I have heard your assessment of the situation with regard to the high rates in the 80’s before.

Can you see it possibly being different this time around based on three factors which to me come to mind?

1) The higher debt load of the average US consumer and home buyer

2) The reduced savings rate nationally

3) The longer life span of baby boomers who are financing their retirement and long term care need through the use of reverse mortgages instead of passing down the home to family members. Passing down the home would reduces supply while at the same time maintain long term price stability of the asset.[/quote]

Agree with this, and add the following:

4. Wages were rising pretty regularly through the 70s and 80s, and they’re not doing so now. Globalization (competition with workers who earn a tiny fraction of what we do) was just getting started. Unions were still fairly strong, and people were more inclined to have lifelong/more stable jobs in the 80s, PLUS they were more likely to have defined benefit pension plans (and better health benefits), which enabled them to spend more of their income during their working years.

5. The peak home buying years for Baby Boomers were in the 70s-90s. I think that trend is about to reverse (related to #3, above).

Finally…if the PTB didn’t think higher interest rates were going to kill the market, why have they thrown away **trillions of dollars** in just one year in an attempt to keep interest rates down? I’d LOVE for them to agree that interest rates don’t matter, but so far, they are not going along with my program. 😉

[CA renter]

[quote=Jim Jones][quote=Rich Toscano]I don’t think the relationship between rates going up and prices going down is so cut and dried. Look back at the early 80s – mortgage rates went well into the teens and home prices did not drop. Market activity shrieked to a halt, or so I’m told, but prices did not actually go down.

Generally speaking, there has been very little historical correlation between rates and housing expensiveness.

That said, a sufficiently violent rise in rates could certainly take down housing prices (especially given all the other factors in play). But I just don’t think it’s the done deal that a lot of people think (ie, “It’s ok if rates rise because prices will go down”).

Rich[/quote]

Rich,

I have heard your assessment of the situation with regard to the high rates in the 80’s before.

Can you see it possibly being different this time around based on three factors which to me come to mind?

1) The higher debt load of the average US consumer and home buyer

2) The reduced savings rate nationally

3) The longer life span of baby boomers who are financing their retirement and long term care need through the use of reverse mortgages instead of passing down the home to family members. Passing down the home would reduces supply while at the same time maintain long term price stability of the asset.[/quote]

Agree with this, and add the following:

4. Wages were rising pretty regularly through the 70s and 80s, and they’re not doing so now. Globalization (competition with workers who earn a tiny fraction of what we do) was just getting started. Unions were still fairly strong, and people were more inclined to have lifelong/more stable jobs in the 80s, PLUS they were more likely to have defined benefit pension plans (and better health benefits), which enabled them to spend more of their income during their working years.

5. The peak home buying years for Baby Boomers were in the 70s-90s. I think that trend is about to reverse (related to #3, above).

Finally…if the PTB didn’t think higher interest rates were going to kill the market, why have they thrown away **trillions of dollars** in just one year in an attempt to keep interest rates down? I’d LOVE for them to agree that interest rates don’t matter, but so far, they are not going along with my program. 😉

[pemeliza]

I may be dead wrong on this but I think what is keeping buyer’s on the sidelines isn’t prices being too high but rather the reality that prices are still dropping in many price ranges and desirable areas. I believe that there are many buyer’s that can afford today’s prices but are afraid of the house selling next door for 100k less 6 months after their purchase. Given that:

1.) prices are essentially down to 2002 or lower levels in all but a small handful of pockets across the county.

2.) Interest rates are ultra low.

3.) The number of government tax rebates (both state and federal).

4.) The stock market has recovered most of its losses since the crash.

I would have thought that we would have a very strong spring selling season. However, just in looking at the market activity in my area over the last 3-4 months it feels like we have another leg down as buyer’s seem extremely hesitant. Only the absolute best deals are closing and many houses that make it to escrow are ending up back on the market and then just languishing. I also think the combination of shadow inventory and the perception that the market has lost all fairness and credibility (people living in their houses for free indefinitely, insider short sales) may be signaling buyers just to say screw it and rent regardless of home prices.

[pemeliza]

I may be dead wrong on this but I think what is keeping buyer’s on the sidelines isn’t prices being too high but rather the reality that prices are still dropping in many price ranges and desirable areas. I believe that there are many buyer’s that can afford today’s prices but are afraid of the house selling next door for 100k less 6 months after their purchase. Given that:

1.) prices are essentially down to 2002 or lower levels in all but a small handful of pockets across the county.

2.) Interest rates are ultra low.

3.) The number of government tax rebates (both state and federal).

4.) The stock market has recovered most of its losses since the crash.

I would have thought that we would have a very strong spring selling season. However, just in looking at the market activity in my area over the last 3-4 months it feels like we have another leg down as buyer’s seem extremely hesitant. Only the absolute best deals are closing and many houses that make it to escrow are ending up back on the market and then just languishing. I also think the combination of shadow inventory and the perception that the market has lost all fairness and credibility (people living in their houses for free indefinitely, insider short sales) may be signaling buyers just to say screw it and rent regardless of home prices.

[pemeliza]

I may be dead wrong on this but I think what is keeping buyer’s on the sidelines isn’t prices being too high but rather the reality that prices are still dropping in many price ranges and desirable areas. I believe that there are many buyer’s that can afford today’s prices but are afraid of the house selling next door for 100k less 6 months after their purchase. Given that:

1.) prices are essentially down to 2002 or lower levels in all but a small handful of pockets across the county.

2.) Interest rates are ultra low.

3.) The number of government tax rebates (both state and federal).

4.) The stock market has recovered most of its losses since the crash.

I would have thought that we would have a very strong spring selling season. However, just in looking at the market activity in my area over the last 3-4 months it feels like we have another leg down as buyer’s seem extremely hesitant. Only the absolute best deals are closing and many houses that make it to escrow are ending up back on the market and then just languishing. I also think the combination of shadow inventory and the perception that the market has lost all fairness and credibility (people living in their houses for free indefinitely, insider short sales) may be signaling buyers just to say screw it and rent regardless of home prices.

[pemeliza]

I may be dead wrong on this but I think what is keeping buyer’s on the sidelines isn’t prices being too high but rather the reality that prices are still dropping in many price ranges and desirable areas. I believe that there are many buyer’s that can afford today’s prices but are afraid of the house selling next door for 100k less 6 months after their purchase. Given that:

1.) prices are essentially down to 2002 or lower levels in all but a small handful of pockets across the county.

2.) Interest rates are ultra low.

3.) The number of government tax rebates (both state and federal).

4.) The stock market has recovered most of its losses since the crash.

I would have thought that we would have a very strong spring selling season. However, just in looking at the market activity in my area over the last 3-4 months it feels like we have another leg down as buyer’s seem extremely hesitant. Only the absolute best deals are closing and many houses that make it to escrow are ending up back on the market and then just languishing. I also think the combination of shadow inventory and the perception that the market has lost all fairness and credibility (people living in their houses for free indefinitely, insider short sales) may be signaling buyers just to say screw it and rent regardless of home prices.

[pemeliza]

I may be dead wrong on this but I think what is keeping buyer’s on the sidelines isn’t prices being too high but rather the reality that prices are still dropping in many price ranges and desirable areas. I believe that there are many buyer’s that can afford today’s prices but are afraid of the house selling next door for 100k less 6 months after their purchase. Given that:

1.) prices are essentially down to 2002 or lower levels in all but a small handful of pockets across the county.

2.) Interest rates are ultra low.

3.) The number of government tax rebates (both state and federal).

4.) The stock market has recovered most of its losses since the crash.

I would have thought that we would have a very strong spring selling season. However, just in looking at the market activity in my area over the last 3-4 months it feels like we have another leg down as buyer’s seem extremely hesitant. Only the absolute best deals are closing and many houses that make it to escrow are ending up back on the market and then just languishing. I also think the combination of shadow inventory and the perception that the market has lost all fairness and credibility (people living in their houses for free indefinitely, insider short sales) may be signaling buyers just to say screw it and rent regardless of home prices.

[Rich Toscano]

Yes, as I mentioned there are other bearish factors for housing that were not in place back then. But this doesn’t nullify my argument that there is not a dependable link between rising rates and lower prices. What I’m trying to argue against is the seeming tautology that some people cite wherein rising rates will exactly be offset by lower prices.

CAR’s item #4 notes a compelling distinction, though… in the 80s, people wages were rising to at least somewhat keep up with rising monthly payments. Home prices stayed flat nominally, but real home prices fell. In an environment of lower wage growth perhaps nominal prices would not be able to hang in there so well if rates were rising.

Anyway, in my second post I cited what I think is the biggest risk factor, which is the existence of forced sellers in a high rate environment. I think that would push prices down. (But I don’t think that’s dependable either).

Rich

[Rich Toscano]

Yes, as I mentioned there are other bearish factors for housing that were not in place back then. But this doesn’t nullify my argument that there is not a dependable link between rising rates and lower prices. What I’m trying to argue against is the seeming tautology that some people cite wherein rising rates will exactly be offset by lower prices.

CAR’s item #4 notes a compelling distinction, though… in the 80s, people wages were rising to at least somewhat keep up with rising monthly payments. Home prices stayed flat nominally, but real home prices fell. In an environment of lower wage growth perhaps nominal prices would not be able to hang in there so well if rates were rising.

Anyway, in my second post I cited what I think is the biggest risk factor, which is the existence of forced sellers in a high rate environment. I think that would push prices down. (But I don’t think that’s dependable either).

Rich

[Rich Toscano]

Yes, as I mentioned there are other bearish factors for housing that were not in place back then. But this doesn’t nullify my argument that there is not a dependable link between rising rates and lower prices. What I’m trying to argue against is the seeming tautology that some people cite wherein rising rates will exactly be offset by lower prices.

CAR’s item #4 notes a compelling distinction, though… in the 80s, people wages were rising to at least somewhat keep up with rising monthly payments. Home prices stayed flat nominally, but real home prices fell. In an environment of lower wage growth perhaps nominal prices would not be able to hang in there so well if rates were rising.

Anyway, in my second post I cited what I think is the biggest risk factor, which is the existence of forced sellers in a high rate environment. I think that would push prices down. (But I don’t think that’s dependable either).

Rich

[Rich Toscano]

Yes, as I mentioned there are other bearish factors for housing that were not in place back then. But this doesn’t nullify my argument that there is not a dependable link between rising rates and lower prices. What I’m trying to argue against is the seeming tautology that some people cite wherein rising rates will exactly be offset by lower prices.

CAR’s item #4 notes a compelling distinction, though… in the 80s, people wages were rising to at least somewhat keep up with rising monthly payments. Home prices stayed flat nominally, but real home prices fell. In an environment of lower wage growth perhaps nominal prices would not be able to hang in there so well if rates were rising.

Anyway, in my second post I cited what I think is the biggest risk factor, which is the existence of forced sellers in a high rate environment. I think that would push prices down. (But I don’t think that’s dependable either).

Rich

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