In a recent post, I reviewed mortgage affordability. I argued that the front-loaded cash outlays of conventional mortgages are a relatively arbitrary choice. The reason mortgages are especially unaffordable now, given the amortization products that are common, is because of high rents and the supply shortage.
I think no matter which metrics we look at, from $/sqft to monthly payment / income, these ratios are all at the most unaffordable they've been.
We see Zillow with their 1% down and longer duration mortgagees (35, 40, 50 years). There are also mortgage copayment ($500 - 1000 saved per month) in exchange for equity like https://restatehomes.com
There are so many dynamics that its hard to predict, but at least right now it seems to be a stalemate of 8% 30 year rates with a market that has barely drawn down from its peak.
Isn't one explanation for the Schiller "gap" simply ZIRP? It shows up in the price of equities, as well. In that sense, housing is like any other risk asset--it inflates when money is cheap.
The US population of working age adults--homebuyers and growth-makers--has been flat-to-down since ~GFC. We've had unit-growth (supply) in excess of people-growth (demand) for ~15 years, and yet prices have gone up, coincidental with rates coming down. I understand the supply-side arguments--I really do--but the elephant in the room is on the demand side. There is at least some evidence that when people-driven demand growth came to an ebb, cheap money stepped in to fill void (and has been doing so ever since, until just recently).
More on Mortgage Affordability
I think no matter which metrics we look at, from $/sqft to monthly payment / income, these ratios are all at the most unaffordable they've been.
We see Zillow with their 1% down and longer duration mortgagees (35, 40, 50 years). There are also mortgage copayment ($500 - 1000 saved per month) in exchange for equity like https://restatehomes.com
There are so many dynamics that its hard to predict, but at least right now it seems to be a stalemate of 8% 30 year rates with a market that has barely drawn down from its peak.
Isn't one explanation for the Schiller "gap" simply ZIRP? It shows up in the price of equities, as well. In that sense, housing is like any other risk asset--it inflates when money is cheap.
The US population of working age adults--homebuyers and growth-makers--has been flat-to-down since ~GFC. We've had unit-growth (supply) in excess of people-growth (demand) for ~15 years, and yet prices have gone up, coincidental with rates coming down. I understand the supply-side arguments--I really do--but the elephant in the room is on the demand side. There is at least some evidence that when people-driven demand growth came to an ebb, cheap money stepped in to fill void (and has been doing so ever since, until just recently).
More here: https://www.therandomwalk.co/i/120973131/consider-the-everything-bubble