The future of the housing market remains precarious — and remains precariously tied to the overall economy. As I wrote last week, there are a number of reasons that housing starts may be behind schedule — not least of all, a shortage in the labor market. January was also a rough month from a weather perspective, so it’s no surprise that housing-starts were down. However, building permits were also down in January, down 0.2%. Now, that’s a very small change, but it actually hides much larger volatility, with a 2.1% increase in multi-family units, but a 1.6% decrease in single-family permits.

 

A few months ago, I wrote about the fact that with U.S. houses priced as they are, and the strength of the U.S. dollar, it was perhaps time to consider shopping for your next property somewhere up north. Since then, the housing market has stayed strong, the dollar has stayed strong, and Chinese investment in the high-end of U.S. properties has continued. As a result, we’re now seeing actual flight from our neighbors to the north. Canadians are using the current housing/dollar market to take some profits.

 

Throughout the first half of the aughts, U.S. rental property vacancy rates hovered at the high 7% range (between 7.75 and 7.9). With the ’08 crash, vacancy rates jumped substantially, to well over 8%. But since the peak in 2009, vacancy rates have been steadily declining. As I pointed out last week, new houses aren’t being built as quickly as they’re being planned. The net result? We have way too few vacant homes. Of course, some markets are worse off than others, but no matter how you cut it, we need to be building more homes.

 

For almost all of 2015 we had an unusual state of affairs — the housing market looked great, because the filings for new permits kept looking great; but at the same time, housing starts didn’t manage to keep up, and sometimes even fell. The Fiscal Times has an interesting take on this that I hadn’t considered before: housing starts aren’t happening because contractors can’t hire enough workers. It’s interesting, because the labor market has unquestionably shrunk, but perhaps we’re back above full employment again.

 

Steve Goldstein, D.C. Bureau Chief for Marketwatch, contends that manufacturing and housing are yin-and-yang in the markets. While it is true that the housing market is running along at a frothy pace (and as Goldstein points out, is expected to grow at roughly twice the rate of inflation for the next two years), and it is true that manufacturing is being hurt by the strong dollar, it does not follow that these are yin-and-yang. In fact, I would argue this can only hold as a temporary state of affairs, and if manufacturing doesn’t improve, it could hurt housing, much the way housing hurt manufacturing after ’08.

 

Towards the end of last year, I wrote a few times about the fact that we have pretty much fully-recovered from the ’08 crash. In fact, some might argue that we’re in a bubble again, or at least very close. But we don’t often look at (or hear in the news about) what the long-term impact of the housing crash was, and who was most impacted. It’s probably a surprise to absolutely no one that there are far more renters in the market today than home owners. But exactly who got hit the hardest may surprise you quite a bit — mostly wealthy men.

 

A few weeks ago I wrote about a blog post from the Federal Reserve. In their blog post, they had explained why the rate hike shouldn’t impact long-term mortgage rates. And they were right. In fact, we’ve seen exactly the opposite happen. We’ve had weeks and weeks of decreasing rates on long-term, fixed-rate mortgage rates. So, what’s going on here? Well, long-term interest rates don’t follow the Fed funds rate, but they do track to 10 year Treasury bonds. And investors are flooding the bond market.

 

This blog covered in a post last month the fact that the Fed has indicated a commitment to keeping long-term interest rates in the housing market low. In fact, as we also reported, the Fed rate hike was unlikely to affect long-term, fixed-rate mortgages. However, markets are complicated, and the Fed has more than one lever. As a result of its QE program, the Fed now owns $1.7 trillion in mortgage backed securities. And they’re not selling. Which is causing banks to get out of the business  Which will reduce liquidity, and may cause interest rates to rise.

 

Fitch, the rating agency, released their predictions for the 2016 housing market, and concluded that, “low oil prices, generally robust employment growth, demographics, pent-up demand, still attractive affordability/housing valuations, and a steady, moderate easing in credit standards should further stimulate housing demand in 2016”. And that was their prediction, based on the likelihood of mortgage rates going up, which, as we covered Monday, they haven’t and don’t seem likely to.

 

 

Everyone knows that student debt is mounting. There’s an entire generation coming of age under a mountain of debt, with the value of that debt (in terms of job prospects) being somewhat questionable. In a somewhat under-reported change in mortgage regulations, life got a little harder for those carrying such debt. As of last September, the FHA no longer excludes deferred student loans from the debt-to-income ratio calculation — which means that for every $10k owed in student loans, you made need to be making as much as $200 more in income if you want an FHA loan.