{"id":1965,"date":"2023-10-19T01:26:08","date_gmt":"2023-10-19T01:26:08","guid":{"rendered":"https:\/\/connectwithfund.com\/news\/chart-of-the-week-the-broken-housing-market-that-isnt-broken\/"},"modified":"2023-10-19T01:26:10","modified_gmt":"2023-10-19T01:26:10","slug":"chart-of-the-week-the-broken-housing-market-that-isnt-broken","status":"publish","type":"post","link":"https:\/\/connectwithfund.com\/?p=1965","title":{"rendered":"Chart Of The Week \u2013 The Broken Housing Market (That Isn\u2019t Broken)"},"content":{"rendered":"
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<\/picture>
<\/figcaption><\/figure>\n<\/p>\n

Mortgage rates officially hit 8% today. It\u2019s amazing considering mortgage rates were as low as 2.5% back in just 2020. But it isn\u2019t the high rate that is so alarming \u2013 it\u2019s the rate of change. And this is what separates this period from any period in the past.<\/span><\/p>\n

The Fed has made an unprecedented change in the pace of rate hikes. But the fun part about the Everyone Gets a Narrative Economy is that depending on where you look, the real estate market is or isn\u2019t broken.<\/p>\n

For instance, let\u2019s look at just how bifurcated the real estate market has become. The commercial side is in a death spiral.<\/p>\n

Commercial prices are down 16% and financing for commercial deals has evaporated. Work from home has created huge excess inventory, and there\u2019s $2T+ of debt that\u2019s going to be rolling in the coming few years.<\/span><\/p>\n

\n

\"Total <\/picture>
<\/figcaption><\/figure>\n<\/p>\n

Meanwhile, residential has also frozen, but work from home made our homes more valuable and rising interest rates locked most existing home owners in their \u201cGolden Handcuffs\u201d. So there\u2019s no forced selling, low inventories and high unaffordability. And prices are now\u2026 up 1% from a year ago.<\/p>\n

When you dig into the data, it\u2019s a disaster. Existing home sales are down 40%+. The NAHB Home Builder Sentiment Index is plumbing its recent lows.<\/p>\n

Mortgage applications are at a 25-year low. And the buy:rent index is just sitting at levels that we last saw before the Housing Bubble. It\u2019s hard to frame real estate data as anything other than bad.<\/p>\n

It\u2019s also amazing because you can both argue that the real estate market is totally broken, but you can also argue that the housing market is holding up remarkably well in the face of some very strong headwinds.<\/p>\n

What\u2019s Coming Next?<\/strong><\/h2>\n

We\u2019ve long been saying that this issue cannot resolve itself without one or two things happening:<\/p>\n

    \n
  1. The Fed needs to cut rates back to about 2-3% to bring mortgage rates below 5%.<\/li>\n
  2. Real estate prices need to experience a lot more pain.<\/li>\n<\/ol>\n

    Given the bifurcation in commercial and residential, it\u2019s hard to see the super bearish case for residential unless the employment situation gets a lot worse. That\u2019s the lynchpin holding a lot of this together. And if it worsens, then we might all need to buckle up.<\/p>\n

    But so far that hasn\u2019t been the case. Commercial remains a ticking time bomb, but is vastly smaller than residential, so it plays a less important role in the broader economy. And since the Fed is holding up the Golden Guillotine of bond losses in bank balance sheets, that hasn\u2019t been as worrisome as expected earlier this year.<\/p>\n

    \n

    \"\u201cthis <\/picture>
    <\/figcaption><\/figure>\n<\/p>\n

    So it\u2019s all holding together, even if it feels like the \u201cthis is fine\u201d meme. But as I\u2019ve been saying for the last few years, this ain\u2019t over. Not by a long shot. One or both of the above conditions will happen with absolute certainty in the coming years. The question is whether we get there in a panicky way or if we get there in a controlled way.<\/p>\n

    Original Post<\/em><\/p>\n

    Editor’s Note:<\/strong> The summary bullets for this article were chosen by Seeking Alpha editors.<\/p>\n<\/div>\n

    Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

    Mortgage rates officially hit 8% today. It\u2019s amazing considering mortgage rates were as low as 2.5% back in just 2020. But it isn\u2019t the high rate that is so alarming \u2013 it\u2019s the rate of change. And this is what separates this period from any period in the past. The Fed has made an unprecedented change in the pace of rate hikes. But the fun part about the Everyone Gets a Narrative Economy is that depending on where you look, the real estate market is or isn\u2019t broken. For instance, let\u2019s look at just how bifurcated the real estate market<\/p>\n","protected":false},"author":1,"featured_media":1966,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[42],"tags":[],"class_list":["post-1965","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news"],"yoast_head":"\nChart Of The Week \u2013 The Broken Housing Market (That Isn\u2019t Broken) | ConnectWithFund<\/title>\n<meta name=\"description\" content=\"Mortgage rates officially hit 8% today. It\u2019s amazing considering mortgage rates were as low as 2.5% back in just 2020. 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