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The housing market is still savagely unhealthy - Logan Mohtashami

By DooDahMan follow DooDahMan   2022 Apr 21, 4:54am 236 views  7 comments           share      

The real story of 2022 is that the savagely unhealthy housing market continues as inventory is still lower than last year, sending home prices growth into double digits again. However, hope for a balanced market is real this year because, with higher rates, we should see more days on the market coming up and growth in the inventory data.

The 5.77 million sales print on Wednesday is in line with my 2022 forecast sales range between 5.74 million and 6.16 million. Last year I discussed sales levels coming back down to 5.84 million, and I am looking for more of the same in 2022, at the 5.74 million level. Like last year, I was anticipating a few prints under 5.84 million. We only got one, and the same with this year under 5.74 million.

However, unlike the previous year, we have a material change in the U.S. housing market; the 10-year is above 1.94%, something that didn’t happen in 2020 or 2021. This means higher mortgage rates, so we need to talk about the housing market in a rising-rate environment without going into housing crash mode like the professional grifters do for clicks.

From NAR: Total existing-home sales dipped 2.7% from February to a seasonally adjusted annual rate of 5.77 million in March.

How does application data look? Due to COVID-19, I needed to make severe adjustments because the year-over-year data has been out of whack. This data line has been negative since June of 2021. With proper adjustments, you can tell what is going on.

2022 is looking to be the first actual negative year-over-year purchase application year since 2014. However, the decline is mild so far.

—Week to week: -3%
—Year over year: -14%
—4 week moving average YoY: -975%

The week-to-week action has produced two mild positive and two mild negative prints for four weeks. I believe the COVID-19 comps ran out by mid-February this year. So the year-over-year data is good to go. We are between what we saw in 2018 — with a mild response to higher rates — and 2014, where the reaction was much more severe. When it moves, this data line moves up and down 20%-30%. So the four-week moving average, while a noticeable weakness, isn’t anything too big yet.

Inventory levels are always seasonal; rising in the spring and summer and fading in the fall and winter. The goal is to get higher inventory data on a year-over-year basis in 2022, and higher rates should do it. Even if we get some positive year-over-year prints, the housing market is still working from all-time lows. However, we have to start somewhere.

My goal has always been the same; we want inventory to get back into a range of 1.52 – 1.93 million. We have a lot of work to do to get back to those levels.

This year, I am “team higher mortgage rates” because the writing was on the wall for another year of unhealthy home prices. We are showing negative year-over-year data in inventory even this week. Since we blew past my 23% home-price growth model for five years in just two years, I need to adjust how I looked at the housing market once rates rose.

For example, if home prices grew 3% a year in 2020, 2021, and 2022, mortgage rates rising wouldn’t be a big deal. However, in 2020 alone we had 10% home-price growth. I create models to keep us in line with the data and not run into hypothetical situations.

As long as home prices grew at 23% cumulative for five years of total home sales, both new and existing homes should be 6.2 million or higher. However, since we broke that in two years and are still showing 15% home-price growth in 2022, we risk demand being hit harder than usual when rates rise. Well, this is what is happening in 2022.

A big theme of my work regarding higher rates is that we need more days on the market. Higher rates didn’t create more inventory in 2018, but they did generate more days on the market and gave people more choices and time to buy a home. I can’t express enough how savagely unhealthy housing is when days on the market are still running at teenager levels.

NAR: First-time buyers were responsible for 30% of sales in March; Individual investors purchased 18% of homes; All-cash sales accounted for 28% of transactions; Distressed sales represented less than 1% of sales; Properties typically remained on the market for 17 days.

All in all, we still have a savagely unhealthy housing market. However, there is some hope of higher rates creating balance. Wednesday’s existing home sales report and Tuesday’s housing starts data are backward-looking and account for a 5% plus mortgage world. Continuing a years-long trend, the inventory crisis got worse in America in 2022, and we are paying for it in much higher home price costs for homebuyers that don’t have a significant down payment; their cost of shelter just got a lot more expensive than last year.

On the other hand, homeowners are chilling like villains in their lovely homes with their fixed payment loans and enjoying life. It should be an exciting year ahead of us.

The post The housing market is still savagely unhealthy appeared first on HousingWire.



1   DooDahMan   2022 Jun 22, 3:38pm  

The savagely unhealthy housing market is now a nightmare - Logan Mohtashami

The housing nightmare continues. The National Association of Realtors (NAR) reported that existing home sales for April were 5.41 million wondown 3.4% from last month and 8.6% from last year. However, the data line that is savagely unhealthy is that house prices are on the rise 14.8%.

Now that we’re close to July, we can safely say the premise that once mortgage rates hit 4%, The mass panic selling of American homeowners, who needed to get out at all costs, sending total inventories into the millions, didn’t happen. In fact, that’s always a terrible premise.

On the other hand, my nightmare scenario, yes happened and this is bad news for everyone. Total housing inventory has fallen to an all-time low since 2020 and because this happened for the years 2020-2024, it created a forced bid and pushed my prices higher. 23% five-year home price growth model in just two years.

Home prices have risen at the fastest rate ever, making homes more expensive, so in theory some homebuyers can’t move. High-equity home sellers are not sensitive to higher rates because they yield significantly lower down payments. Inventory soars again by historical standards of 2 million to 2.5 million, What I think is the best thing ever for housing, is not going to happen this year.

It will take longer to reach that historical inventory level. I have emphasized that housing does not move like the stock market.

Homeowners are in better financial shape than stock traders, which is why the idea of a panic sale doesn’t reflect the reality of housing

You don’t get a margin call at noon and are forced to sell your home in seconds

A real estate investor, on the other hand, has no such relationship with a home, as a homeowner does

More Here: https://realestate24hours.net/the-savagely-unhealthy-housing-market-is-now-a-nightmare/
2   HunterTits   2022 Jun 22, 5:32pm  

DooDahMan says

this happened for the years 2020-2024

Doo is posting shit from the future now.
3   ad   2022 Jun 22, 10:08pm  

HunterTits says

Doo is posting shit from the future now.

He self identifies as a time traveler.

4   ad   2022 Jun 22, 10:17pm  

DooDahMan says

The savagely unhealthy housing market is now a nightmare - Logan Mohtashami

If I want to buy a starter home for $500,000 (3 bedroom, 2 bath, 2 car garage within 3 miles of Florida panhandle beach) at a 30 year mortgage rate of 3%, then my monthly payment is $2108. The bank determined I can afford that monthly payment.

Now with the rate at 6%, my monthly mortgage is $2998.

The home price would have to come down to $360,000 (at the 6% rate) in order for the monthly payment to be near $2108.

That means a drop of $140,000 (from $500,000 to $360,000 or 28%).

That is why I am figuring housing prices need to come down about 30%.

I think in a way the Fed is doing this to bring housing prices back to just above 2020 levels. They'll keep rates steady for a while and then make adjustments as necessary.

For the ones who bought at 3% interest rate for a mortgage in 2020 to 2021, I don't think this matters much if they plan on staying in their homes for at least 7 years.

5   DooDahMan   2022 Jun 23, 5:13am  

Doo is posting shit from the future now

Doo did not write the article and is not responsible for any typos however feel free to contact Logan directly at his website (listed below) or on Instagram or Twitter and I am sure he will be more than happy to explain or answer any reasonable questions.

6   HunterTits   2022 Jun 23, 6:53am  

ad says

If I want to buy a starter home for $500,000

Ok. That is not my idea of the price fir a starter home.
7   HunterTits   2022 Jun 23, 6:55am  

DooDahMan says

Doo did not write the article and is not responsible for any typos however feel free to contact Logan directly at his website (listed below) or on Instagram or Twitter and I am sure he will be more than happy to explain or answer any reasonable questions.

YOU posted this shit here, not Logan What-The-Fuck.

So my statement stands. You posted shit from the future.

Just like you got castrated from posting new posts for pushing that Jan 6 coup bullshit article.

YOU did that.

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