USA Housing Market Update - July 2021

USA Housing Market Update - July 2021

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USA Housing Market Update (July)

NAR puts the average house price at $350,000, other organisations say its closer to $365,000 right now

Home prices rose 14% YOY

Mortgage demand down 7%, the lowest level since the start of the crisis
Home purchase applications are down 17% annually

Average loan size is now roughly $405k, that’s a far cry from the average home price, meaning that my thesis that if the fundamentals don’t reduce the housing market, then the affordability would. And that’s exactly what’s now happening, people are being priced out at the lower end of the market

Pending home sales down, inventory up = in a normal market the would mean lower housing prices. However, we have this wild card still hovering which is the record low % interest rates. So we have a stagflation effect right now on the housing market, both inflation & deflation at the same time. However, I feel the inflation aspect still outweighs the inflation due to the lack of inventory and low interest rates

Let’s talk about mortgage interest rates then: Even though mortgage interest rates dipped, it didn’t make any difference to the number of people applying for new mortgages. I think this is because they are giving too much emphasis on these 0.1% rate moves. The fact of the matter is that rates are so low that people don’t care about a 0.1% here or there. Once you get below 3.5-4% interest rates, the micro movements don’t make much difference. And besides, with such low inventory, why would mortgage applications be up? There’s not much to buy, and what there is to buy is lower quality stock in some places at very inflated prices

There’s a huge lack of inventory for smaller homes : What the USA is about to experience with young people being priced out of buying or renting their first home, even if that’s a small studio apartment, has already been experienced in the UK & Europe. The UK is a great example of this well if you are on minimum wage, there is no possible way that you can get your own place, this is why adults share housing in the UK from anywhere from 4 to sometimes as many as 8-12 adults sharing one home, this is called a house of multiple occupation

If the USA isn’t careful, you’ll be going back to a period in the past where very few people owned a home, and landlords owned all the houses and rented to people. This is not good. A healthy economy is where there are a lot of homeowners. And not a load of hedge funds owning the housing stock 

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