A brief excerpt:
House prices are up 20% year-over-year. Inventory is near record lows. And real estate agents are still selling homes well above list price. And on credit, lending standards have been reasonably solid, and mortgage delinquencies are very low.There is much more in the article. You can subscribe at https://calculatedrisk.substack.com/
However, mortgage rates are up sharply (from 3% six months ago to 5.64% today), and we are starting to see an increase in inventory levels. House prices are too high based on fundamentals like price-to-income and price-to-rent. And some investors appear to be pulling back due to higher cap rates, and some builders are reporting buyers actually want to negotiate on price!
On mortgage rates, it is the change in monthly payments that impacts housing. Monthly payments include principal, interest, taxes, insurance (PITI), and sometimes HOA fees (Homeowners Association). We could also include maintenance, utilities and other costs. The following graph shows the year-over-year change in principal & interest (P&I) assuming a fixed loan amount since 1977. Currently P&I is up about 35% year-over-year for a fixed amount (this doesn’t take into account the change in house prices).
The last time we saw an increase like this in monthly payments was in the ‘78 to’82 period. This is one reason I’ve been suggesting Housing: Don't Compare the Current Housing Boom to the Bubble and Bust, Look instead at the 1978 to 1982 period for lessons.