patrick.net

Call it Crazy says

Another good example for the crowd that says "rates don't matter"... Look at the volume of sales when rates went up to the 17% range in the early 80's. The volume was cut in half, and when rates went back down, the volume returned...

If the discussion was about the correlation between sales volume and mortgage rate, then you might have a point. But, as we're talking about price, those charts are pretty close to irrelevant.

Should I take this as confirmation that you agree that interest rates have no historical correlation with house prices?

Logan Mohtashami says

A better chart is to use sales adjusting to population ... Because it shows how each cycle since 1981 has had 2 percent lower rate curve to boost housing and in real terms that didn't happen in this cycle as the mortgage demand curve has been dreadful for 7 years ... But in terms of home prices rising ... The cycle still has legs because inventory is low, distress sales are low and there is no job loss recession in site

Are you implying that 10 year treasury rates are purposely adjusted downward to help housing?

tatupu70 says

Are you implying that 10 year treasury rates are purposely adjusted downward to help housing?

That thesis is more for this cycle as the Fed's #QE thesis was to boost housing demand... it's why they bought so much MBS and long term bonds to drive long term rates lower to stimulate housing

The problem was that it really didn't work out as they hoped

When QE started after QE 1.. rates went higher after ever QE print and then went down after every #QE exit

The Irony of life, even today the 10 year isn't where it was when #QE was fully let go

#QE velocity thesis in their model they really don't undertstand why people aren't buying homes in bigger numbers and recently they did admit they were kind of shock the hit of housing demand when the Taper first happen. That even 4.5% 30 year could move the demand curve to a negative print

The question is why... why the weak demand curve

It's late in the cycle
12 million plus jobs recovered
unemployment claims at a 15 year low

We should be at 6 million home sales plus by now and over 800K on new home sales with a higher level of main street participation

Answer their algorithm is wrong, was wrong and always have been wrong. You can't run a economic model assuming every American has 20% down with a starting #DTI of 25% in each economic cycle

1996-2007 ( financial bubble years) that could fly... worse case 30% of that demand was fake...

2009-2015 though... you need to know the equilibrium factor model of your own people.....

Simple thesis I had... "We simply won't have enough qualified home buyers to have a real recovery in Housing"
and to be honest that's ok

It's year 2020-2024 that are the real crucial test

To answer your other question, rates historical are low, what we saw in the late 70's was an abnormal path of inflation and rates ... take the 10 year going back to 1790 it's very clear low rates are here to stay unless you get some massive wage inflation cycle

Hard to see that happening

When

#Globalization
#technology
#debt
#demographics

Are in play this cycle

Some of you people follow Bill Mcbride... Calculated Risk.... We had a great 2 hour talk a few weeks ago on housing economic and economics, we don't see that many things different..

Once the young Americans start to get going again a lot demand curve numbers will look better... it's just not yet

Strategist says

Which they should. No point making anything no one wants to buy. When the demand for entry level homes start expanding, builders that cater to that market will outperform the rest.

Hold you builder trade and buy on the dips when the recession happens, you're not that old so come the next recovery cycle you will have a good starting base to work from

Yet Logan Mohtashami, an Irvine, Calif.-based senior loan manager at AMC Lending and a financial blogger at LoganMohtashami.com, saw the numbers as evidence that the housing market was in the midst of “the most magnificent renting cycle we’ve seen in a long time,” adding that builders are focusing on larger homes for financially secure consumers and not creating the starter homes that were traditionally the homeownership entry point for those in the twenties and early thirties – many of whom are now seeking out rental housing.

“We’re in year seven of a renting recovery and the builders know it,” he said. “The cycle will go on longer while builders continue building expensive bigger homes

http://nationalmortgageprofessional.com/news/54522/may-housing-begins-plummet-while-building-permits-rise

Call it Crazy says

Another good example for the crowd that says "rates don't matter"... Look at the volume of sales when rates went up to the 17% range in the early 80's. The volume was cut in half, and when rates went back down, the volume returned...

Actually, when we had essentially this same discussion on April 1, my contention (perhaps not clear) was that volume acts as a pressure relief valve to explain why prices do not drop. In other words, either price or volume will get whacked, and due to human nature and general price "stickiness" my understanding was volume did (and would) go down.

See my comment on volume, Post #82
/?p=1279563

In any event, my attitude as one of the "rates don't matter" crowd was only in terms of price. In terms of volume, yes certainly, it matters and matters quite a bit. However, regarding the "when rates rise, prices are going to tank" thesis which was central to many many past, and some current patnetters, all I can tell you is history says you will be screwed if you are waiting for that 500K house to fall to 450K.

This aside, I appreciate you posting that graph - I was always told that volume tanked back then, but had not been able to find any data to back that up.

Today I told CNBC and The Wall Street Journal this

Here is a big call

I believe the demand curve will get better years 2020-2024. However, if we have another renting cycle in the next recovery stage. I am going to say that laws will be changed that favored home-ownership subsidizing to more rental friendly

RPD

Rental Payment Deduction