Let me preface this by saying I'm so far out of my lane on this, however I have some thoughts on the paper.
- One thing that I've picked up from a number of sources that isn't mentioned in the article, is that millennials entering the home buying phase of their lives as being a big reason why housing was primed to pop between 2020-2024. Basically demographics have played a huge part in this boom.
- Most mortgages are actually in good shape from a paper perspective [1]
- Most mortgages are 30-yr compared to the crazy ARM instruments [2]
My theory is that home prices will NOT drop, like in 2008, but rather will stabilize. Three reasons why:
1. Milliennials will keep overall demand up
2. Homebuilders will slow down on producing new inventory, and we're already at all time lows for inventory
3. Existing homeowners will be hesitant to sell because most are locked into a 30-yr with most likely a sub 2-3% mortgate
All of that, in theory, will result in less overall supply which will keep prices stable
1. We have a demographic trend towards lower demand as GenZ population is smaller than Millenial, and Baby boomers will mostly die off over the next 10 years (Japan problem). Yes this considers immigration
2. We are close to all time highs in home construction pipeline, and the rate of starts is at 2000s bubble levels and increasing. We will likely eclipse the 70s building peak sometime this year.
3. If they aren't selling they also aren't buying (generally). Somebody choosing not to move due to low rate has no net effect on inventory
These narratives have been powerful in shaping the FOMO psychology though, despite data showing the exact opposite is true.
What's driving housing now is pure psychology, and low active listings (not low structural supply). The Fed will likely start selling MBS, driving rates to 6% or above to solve both of these.
Though the fact they even bought MBS for so long to begin with somewhat implies they don't care about creating a bubble in housing. Maybe they do nothing and let it ride
- One thing that I've picked up from a number of sources that isn't mentioned in the article, is that millennials entering the home buying phase of their lives as being a big reason why housing was primed to pop between 2020-2024. Basically demographics have played a huge part in this boom. - Most mortgages are actually in good shape from a paper perspective [1] - Most mortgages are 30-yr compared to the crazy ARM instruments [2]
My theory is that home prices will NOT drop, like in 2008, but rather will stabilize. Three reasons why: 1. Milliennials will keep overall demand up 2. Homebuilders will slow down on producing new inventory, and we're already at all time lows for inventory 3. Existing homeowners will be hesitant to sell because most are locked into a 30-yr with most likely a sub 2-3% mortgate
All of that, in theory, will result in less overall supply which will keep prices stable
[1] https://twitter.com/LoganMohtashami/status/15084587889693450...
[2] https://twitter.com/lenkiefer/status/1507870733615214598