Whats Your Outlook For Home Prices? (w/ Logan Mohtashami)

TL;DR

Home prices are not expected to experience a massive decline, but rather a gradual fall due to the expensive housing market for certain incomes. The COVID-19 pandemic has caused a slowdown in supply and increased housing tenure. Mortgage purchase applications and inventory levels are key indicators to monitor for potential market changes.

Transcript

LOGAN MOHTASHAMI: Home prices. I think that's where a lot of people have asked me the question, where are home prices going to go? I think one thing that home prices, real home prices were negative last year on a year-over-year basis, something not a lot of people knew about. I always thought that is bullish. I even wrote about that. The fact that ... Read More

Key Insights

• 👪 Real home prices were negative on a year-over-year basis, indicating an absence of an overheating housing market.
• 👪 Increasing supply and longer housing tenure contribute to a gradual decline in home prices.
• 🎚️ Monitoring mortgage purchase applications and inventory levels helps assess market demand and potential price adjustments.
• ❓ The bond market, the 10-year yield, and the St. Louis Financial Stress Index offer insights into overall market conditions and economic recovery.
• 🧑‍🏭 The housing market is expected to rebound after the COVID-19 pandemic subsides, but improvements depend on factors like lockdown protocols and economic recovery.
• 😄 Government policy actions, such as sending more checks and supporting small businesses, can help stabilize the economy and ease the recovery process.
• 🍉 Loan forbearance provides relief for those struggling to make mortgage payments, but careful consideration and understanding of the terms are essential.

Questions & Answers

Q: Why do you disagree with the notion of a housing bubble crash?

A housing bubble crash implies a return to trend levels, which would mean home prices falling back to 1996 levels. However, the housing market is not experiencing an overheating demand or production cycle, making a massive decline unlikely.

Q: What metrics do you consider apart from housing tenure?

Two key data lines to monitor are mortgage purchase applications on a year-over-year basis and inventory levels. A decrease in purchase applications and an increase in inventory suggest a decline in home prices due to reduced demand.

Q: What advice do you have for homeowners looking to sell during the COVID-19 crisis?

If you don't urgently need to sell, consider taking your home off the market until lockdown protocols are lifted. However, if you must sell, be aware that the market is not functioning normally, and uncertainties in price and the home-buying process exist.

Q: What factors are you observing for potential market movements?

The 10-year yield in the bond market, the St. Louis Financial Stress Index, and jobless claims are key indicators to watch. An increase in the 10-year yield suggests economic growth, while a decrease in the stress index and jobless claims indicates improving market conditions.

Summary & Key Takeaways

• Real home prices were negative on a year-over-year basis last year, indicating the absence of an overheating housing market.

• Increasing supply and longer housing tenure may lead to a gradual decline in home prices.

• Mortgage purchase applications and inventory levels are crucial indicators to track for the state of the housing market and potential price adjustments.