Guest Post by Martin Armstrong
Fannie Mae admitted their forecast of declining home prices was incorrect. They initially projected that housing would fall by 1.2% in 2023, followed by 2.2% in 2024. Housing prices remain strong because this in an inventory crisis. There are 47% less available single-family houses on the market compared to the start of the COVID crisis. Homebuilders cannot keep up with demand, and the demand for investment-bought rentals is outpacing single-family sales.
Our Residential Index elected a Yearly Bullish Reversal at the end of 2012. That confirmed the long-term trend had changed. However, urban condos and commercial properties were forming a divergence. I assumed that was being caused by the debt and rising taxes in cities. In that regard, I suppose I was only partially correct, for the rest had been the braindead response to COVID and failed QE policies. The failure of QE caused a collapse in confidence in the future. When people fear the future, they save. Increasing the money supply does nothing until the people decide to spend it.
Socrates also selected the precise target for the January 2021 directional change in US real estate. Our index began declining in January 2022, anticipating the first rate hike on March 17, 2022, by a quarter point. The claim that interest rate hikes imply that real estate will decline is very old school, and once more, it presumes everyone is buying on leverage. In 2021, cash sales represented 25% of existing home sales in the key markets, which were a level unmatched since 2016. Nationally, buyers paid cash for almost 15% of the homes in 2021 in markets that were booming from migration from other states.
Real estate is undergoing three separate trends. First, there has been mass evacuation from cities and high-taxed states thanks also to draconian COVID laws. Secondly, we have the flight of capital to flee banks, etc, which is part of just getting capital off the grid. Then thirdly, there has been a flight of international capital fleeing to the United States because of geopolitical instability in Europe.
This market has been LESS impacted by interest rate hikes than any previous booming market, all because of the migration from interstate within the US and the flood of European buyers looking for assets outside of Europe as the prospect of a global war increases. I have warned that real estate will decline in those states where people are fleeing. It has boomed in places they have been migrating to, such as Texas and Florida. Obviously, you can no longer make a blanket forecast in real estate.
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I have received good, vetted info that there will be a Scout Report tonight.
using TBP comment section for cryptic back channel communication makes you seem like a Fed posing as a Nazi rather than a Nazi fruitlessly trying to avoid Feds.
Just sayin
It’s not exactly cryptic, because he already told us what a Scout Report is. I don’t remember, but I do know that I read it.
There are foreigners swarming into this country buying up properties that are much cheaper when compared to like properties in their own country (more than likely using money from drugs and other illicit means that are washed in the property market). I recently saw a stat where more people are buying houses with cash. Many people used stimulus money and other means (low interest loans) to snap up houses to convert them to Airbnb’s. Now I’m seeing commercials and videos of investment firms creating their own residential sub-divisions which are not sold but the houses are only rented. If you don’t already have a house fuuuhhgeetaaboutit.
The 10 Year Treasury Note is back up over 4%. From 3.71% on June 27th to 4.05% today. Mortgage rates will also be up by another 1/3% over that time period. Also the higher rates go, the more banks are insolvent. Another few runs on deposits could collapse more banks.
Iska- Banksters are not your friend. Inflation is caused by banksters and that is why we are in this bubble….. so F’em. The last thing on my worry list is banks/banksters/the Fed.
This current inflation was caused by money the US government’s money printing. The government prints money fueling inflation, then raises interest rates to cool inflation. What a bunch of idiots.
easy $ causes inflation —
I remember mortgage rates at 14% in the eighties and people were still buying houses.
No matter what the cost of bananas, people will buy them, no matter what the cost of fuel/gas people will buy them. Housing is a need, so they are brought under the “Bigger fool” maxim .. but unfortunately 30 years of lower and lower interest Rates and not a “real” recession in that time just brought you, as Von Mises concluded, a complete breakdown of the Monetary system that supports debt.
Oh it is coming
The new way to be successful, buy high, sell low!
Jesus! I’m glad this ball of dirt is only temporary lodging! A few more years and God won’t be able to rent here!