Friday Update September 16, 2022
1715 single family existing homes available for sale today. This means we have plateaued for the last month or so. If this is how it's going to be then maybe we will see inventory numbers drop off into winter to try and catch up with the drop in demand. It's gonna need to be a hell of a drop to catch up with the drop in demand though, yo.
Month to date we have 519 units closed out for a median sold price of 455k.
Last year same time frame we had 862 closings.
The last time we had this few sales in September was in 2018. Late 2018 the Fed raised rates and threatened to start unwinding their balance sheet. The market shit it's pants and I bought a house in October 2018 for 206k at 5.25% interest that I sold this year for 360k when rates were below 4%. I'm not saying you're going to buy a house today and come up 80% in the next 4 years. Matter of fact I'm pretty confident that will not be the case. But I do think the amount of fear out in the world is becoming pretty obvious, the news keeps getting shittier and shittier, and right at that very moment where everyone thinks housing is going to 0 is when you should have your ducks lined up and be ready to buy.
Rememeber, be greedy when others are fearful and vice versa.
For the time being it seems like interest rates have no ceiling. This kind of seemed like the case back in 2018 as well. If you read my rants you might recall that 2018 for the year saw almost 0% appreciation in our area. Like the median house started January at 295k and finished December at 300k.
This year we kicked off with a median price of 445k, peaked over 500k and are now back at 455k. My prediction was we would finish the year at 480k median, now I think it's going to take some pretty amazing news for that to be true.
I'm going to adjust my year end median price prediction to 435k. That would take us roughly 13-14% off peak pricing in early summer.
We all need to look at housing as part of the financial cycle. Easy credit, low rates, surge in demand creates FOMO. Fed tightening, higher rates, drop in demand creates fear. Don't be a victim to either one of these ridiculous mental states. Make decisions based on your family's wants and abilities. Do not follow the Joneses because having met a lot of the Joneses in my life, they are morons. They have nice shit and they argue about who takes those payments over as part of their divorces. Make. Smarter. Choices. Most people buy emotionally and justify their decision logically. Try to do the opposite.
I messed up last week and said the Fed meeting was this week. My bad, it's next week. Wendesday they're going to come out and tell us that the Fed funds rate will go up by some amount. Seems like pretty good odds of a .75% increase, and not insignificant odds of a 1% increase. I think if we see .75% we will see mortgage rates soften up a bit, if we see 1% we could see them climb a bit higher. Remember markets try to price in news releases before they happen.
A big part of the reason that mortgage rates have spiked well over 6% in the last 2 weeks is because inflation data keeps coming out pretty terrible. CPI came out at something like 8.3% for August which was above market consensus. So the bond market reacted with a sell off which drove rates higher across the board. 10 and 2 year treasury note yield is still inverted by 42 basis points which is a pretty significant and deep inversion. It's not a good thing.
Here is the good news. The recession that we are already in and have been in for the last 6 months or longer, is already taking its toll on the economy. It will get worse. We will have a moment of capitulation where the tide goes out and we get to see all the people, companies, and maybe even countries that have been swimming naked. Those folks are going to have a very rough and shitty time. I imagine quite a few people will lose their asses financially and there will probably be considerable pain across the economy.
How is that good news? Because we need a hangover from the bullshit we've gone through over the last 2 and a half years. We can't keep printing money indefinitely and reward people financially for not doing shit. So now it's time for a little deleveraging. A little moment in time that lasts maybe a few months or maybe a few years where it just gets harder to borrow. A period in time where loans will fail, a period in time where asset prices stand a solid chance of taking double digit annual losses. This is good news because it's normal and part of the financial cycle. If it wasn't for this we would have some sort of blow off top in the economy that would be so violent that it would make history.
I don't know about you but I'm good on history making shit for this decade.
So yea. The going is getting a bit tougher. But we all knew it would at some point. Hope you've been getting ready for a rainy day.
I'm going camping.