U.S. housing data is making the economy look better, even as other parts lag. And it’s true, the housing market, as we’ve covered for the last several quarters, is doing really well — and the recent Fed rate hike appears to have had little, if any, effect on that. However, as we’ve also pointed out before, we live in a global world, where everything is connected to everything else. As you’ll see in tomorrow’s article, the same news that is good for the U.S. economy is bad for the U.S. economy.
We’ve already covered the fact that last quarter’s rate hike from the Fed shouldn’t have had any meaningful impact on long-term, fixed-rate mortgages. But everyone expected them to have an impact on short-term, adjustable rate mortgages. Contrary to prevailing wisdom, so far in January, refinancing is up significantly (12% week-over-week) and within those loans, the share of activity from adjustable rate mortgages has increased within the increase! Just goes to show you, you can’t trust the news. (More about that in our next two posts).
That’s the average mortgage balance across the U.S.: $157,154. Of course, whether you’re over or under that number doesn’t really say anything useful at all — it depends on so many factors, from where your home is, to whether it’s a first or second home, to how long you’ve owned the home, and so on and so on. But it’s a good point to start a conversation, and The Motley Fool brings up the number in the context of discussing “good” vs. “bad” debt, and how to make a mortgage work in your favor Check it out.
The Huffington Post, Canada, put out a piece last week about why Canadians should no longer be looking to buy property south of the border. And they’re dead-on with most of their reasoning, from the change in exchange rates between U.S. and Canadian dollars, to the recovery of housing prices in most, interesting U.S. markets. But all of the arguments they make also have an obverse, and the flip side of that coin is that now may well be the time for you to start looking at buying a vacation property in the great white north.
OK. We hate making predictions about mortgages or the housing market, and we don’t think you should do so, either. But that doesn’t stop plenty of professionals. Here are five predictions for the 2016 U.S. Housing Market from TheStreet.com: prime mortgage rates will rise; both prices and sales will grow, but sales more slowly; cities will continue to become less affordable; more single people will purchase homes; and Millennials still won’t fully move into purchasing at the same rate as previous generations. Give the article a read for slightly more detailed explanations behind each prediction.
PropertyWire put out an interesting article last week. They don’t really make any claims in it, and quite frankly, I can’t really draw any conclusions from it. To make matters worse, the title is confusing: “Value of US housing stock in 2015 down from overall growth the previous year”. What they really mean is that there was deceleration in the rate of growth — only growing at 4.1% in 2015 vs 6% in 2014. But those are still interesting numbers, and the article is chock-full of other ones. Give it a read, and see if you can puzzle anything out.
I really like the way this guy thinks. I’ve written many times before about the futility of making predictions in general, and the weird state of the housing market in particular. Business Insider wrote a very good article for The Real Deal, that asks the simple question “are we in a bubble”. The truth of the matter is, we’re more than 50% back towards the 2006 peak, from a housing-price-to-income perspective, and that’s probably not good. But, it’s also not likely that things will crash immediately. And neither of those statements should have much, if anything, to do with your home-buying decision.
For most people who aren’t economists, we tend to think of markets as singular, localized things (e.g., we think of “the” housing market). But the truth is, markets tend to vary quite a bit regionally, and as this blog has pointed out before, seemingly unrelated markets (e.g., China’s stock market) can have large impacts. CNN Money points out that the energy market is another place that affects the housing market, and that low energy prices are good for some regions, and bad for others, in terms of housing prices.
Whether you think we’re actually in a housing bubble, and whether we are or not in actuality, doesn’t really matter, in the long term. The truth of the matter is, almost certainly we will find ourselves in one again. They happen regularly, and in lots of different countries, and for lots of well-meaning policy reasons. Alex Pollock has written a very good, concise piece for the American Enterprise Institute that explains why these policies are appealing to policy makers, and why bubbles are a problem.
We’ve covered the Fannie/Freddie issue before — the institutions are still precariously balanced, there’s broad support to overhaul them, but there’s huge debate on exactly how to overhaul them. Housingwire has a blog post that proposes one way to fix the problems, and asserts that it is not, in fact, too late to fix them. This particular proposal comes from The Housing Policy Council, and the blog post does a decent job of summarizing both the problem and their proposed solution. It’s worth a read, just to understand what is being proposed.
