The Economist’s Money Talks podcast had a nice discussion on housing both in the US and internationally. It wasn’t groundbreaking, just summarized what is already well known. If you’re anxiously waiting for home prices to cool off from the +20% bump vs 2021 in our area, like me, it may be helpful. It won’t be helpful in reassuring that housing prices will correct, it will be helpful in understanding why they may not correct.
The conclusion of the podcast is that, given:
- The size of owners locked into low mortgages who have no interest in moving and taking out a new high rate mortgage
- The largest generation ever (millennial) deciding to join the ranks of homeowners post-covid
- The low volume of supply, lack of subprime mortgage volume
- The generally very strong economy, with unemployment at ~3.5%
…it is unlikely that home prices will fall materially. The only chink in the armor of that thesis is the last point on the economy – as most believe some sort of recession is coming.
I remember what the GFC was like; I simply characterize it as somewhat terrifying. Stepping out on big purchases, whether a home or any asset, seemed like you were alone in the pursuit. I remember buying $25K of Bank of America at just under $7 / share, and thinking “I may never see this money again, why am I doing this?” And this was in late 2011, not 2008/2009. The economy, despite headlines, is so incredibly far from that feeling of despair and battening down the hatches. Air traffic is making record highs, hotels are full, and most telling after taking a breather late last year, housing is picking up again (at 6%+ mortgage rates, no less).
So to conclude, as this is mostly a missive to myself, don’t bet on pending distress in the housing market. It likely won’t come without an unpredictable major economic dislocation, something one can’t reasonably plan life around occuring.