Mortgage rates did not cooperate last month, hitting an average of6.9% for October (30 year mortgage, per FRED). That made for a newhigh in monthly payments, despite the recent decline in home prices:
A chart that caught my eye was this one — pending sales havedropped to quite a low level compared to recent years:
That made me curious about where they stand in the long run, so Imade this graph of monthly pendings going back to 2006. It was evenworse than I expected — October had the smallest number of pendingsales since the GFC!
To put that in perspective, that’s happening against a backdrop ofstill fairly low inventory (unlike the GFC):
So putting them together, the all-important months-of-inventorylevel is not actually that high:
I think the biggest risk to SD housing is that more inventory comesto market. With the dismal level of demand (at these prices), anincrease in inventory would surely put further downward pressure onprices.
Could it happen? Of course. Yes people generally don’t want to giveup their <3% mortgages, and so forth… but when it comes down toit, sometimes people have to sell. Bear in mind that the current lowinventory environment happens to be taking place during a boomingjob market. If we get a recession, (resulting in job loss orrelocation — yes, sometimes people still have to live in the samecity as their employer) it seems very likely that more inventorywill find its way to the market.
Offsetting that concern, an economic slowdown would likely beaccompanied by declining mortgage rates, which might ramp demandback up due to increased affordability. Still — my thinking is thatthe housing market’s biggest vulnerability is the possibility thateconomic weakness will bring on new supply in the face of extremelyweak demand.
I guess that’s about it for this month. Prices took another notchdown; the single family price per square foot is down about 12% fromthe peak. That’s a noisy number, the smoother but laggierCase-Shiller (plus my recent estimate thereof based on smoothedpr/sqft) is down about 9% from the peak as of last month.
Random graphs below…