December 2019 housing graphs

Submitted by Rich Toscano on January 21, 2020 - 9:22pm
Well, here's how the stats looked for the year:



Quite a change from December 2019, notably with months of inventory down 36%. It's no coincidence this took place alongside a steep drop in interest rates. I think the behavior of the past 2 years -- the rapid  slowdown when rates rose, followed by a rebound when rates fell again -- makes it pretty clear that the housing market is very much beholden to continued low rates.

Here is what I believe to be the best indicator of short term market strength -- months of inventory (number of homes for sale divided by the number of pending sales in a given month).



You can see the serious weakness that took place in 2018, as mortgage rates rose to nearly 5%. Once rates dropped back down to the 4%-and-below level, months of inventory dropped to its typical (in recent years) levels.

The next chart shows that months of inventory (inverted on the chart) generally coincides quite well with monthly price changes. Current supply/demand levels are supportive of further price increases in the near term. But the charts above should serve as a cautionary tale... should rates abruptly increase as they did in 2018, the dynamics of the housing market could change just as fast.



More charts below...































(category: )

Submitted by rebaroo on January 23, 2020 - 2:46pm.

Thanks, Rich!

Submitted by Escoguy on January 25, 2020 - 8:58pm.

When I consider alternatives for money these days:

1. buy stocks paying 2%
2. buy bonds paying 1.7% on ten year
3. pay down debt at 3.1%
4. buy real estate with rental yields of 6%,

It seems like real estate could win.

My normal instinct would be for caution but I'm not seeing much on the horizon which may really shift the overall economic environment.
I would expect real estate to appreciate by at least 1% per year going forward.

Haven't posted in a while, any thoughts are appreciated.

Submitted by gzz on January 27, 2020 - 10:52am.

Treasuries are an awful long term investment. The market is dominated by central banks (Ours and foreign both) that buy for reasons nothing to do with their actual value.

I like the taxable muni fund GBAB. Monthly payments and about 5.5% taxable yield right now. That has long been my low risk liquidity investment.

Stocks and local RE I think are both good investments. I like local RE more though. Better tax treatment. Also, anyone can buy US stocks, but we personally have advantages that allow us to do higher yielding landlording.

Paying back RE debt at 3.1% fixed? I wouldn’t.

Submitted by Escoguy on February 21, 2020 - 1:08pm.

So last weekend I made a bid on a 4BR house in 4S, 2100 sf.
Buyer accepted the offer and now they have to find a home.

They made a bid on a home which wasn't accepted so now the sale is at risk of failing if they don't find another home in 12 days (17 total) from signing of contract.

Has anyone been in this situation? How did things work out?

We can mutually extend the time they have to find a house too but my potential renter is coming in early April so I don't have a large time window.

Thoughts?

Submitted by recordsclerk on February 21, 2020 - 3:29pm.

I would offer a rent back. Doesn't help your renter situation, but you get the house.

Submitted by aka3739 on February 25, 2020 - 12:52am.

Rich,
I’m curious to hear your thoughts on the economic implications of the Covid-19 coronavirus, which is likely to reach Pandemic status soon. Our reliance (in pretty much every industry) on China are staggering, and I’m curious to know your perspective on the potential implications for our real estate values here in America’s Finest City.
Thanks,
Andrew

Submitted by Escoguy on February 27, 2020 - 10:36pm.

So our sellers made at least 5 offers but none were successful, there are often competing aginst 10-11 other offers.

We're about to bid on another house, as it is too difficult to buy from a contingent seller in this market.

Submitted by Rich Toscano on February 29, 2020 - 1:02pm.

Hi Andrew - I'm afraid I don't have any special insight into that. In the short term, who knows. It's possible it could tip the economy into recession and bust up some supply chains.

But long term I don't see why it would have an impact. There will be a vaccine eventually so the effects will not persist forever. A recession was going to happen at some point anyway; having moved it forward doesn't really change things in the big picture. Supply chains will adapt, as they do (and as they already have been doing due to the trade wars).

That's my take. Summary:
short term - unknowable
long term - irrelevant

Rich

Submitted by bibsoconner on March 23, 2020 - 12:06am.

Rich,

How about an updated post? Many (most?) of us are stuck at home with time on our hands.

Thanks!

Submitted by Rich Toscano on March 24, 2020 - 8:31pm.

I only have thru Feb, not very interesting at this point. I will post once I get March.

Submitted by bibsoconner on March 25, 2020 - 1:18pm.

Sounds good. Thanks! I'm reading anything and everything right now. But I especially like your posts.

Submitted by Rich Toscano on March 25, 2020 - 3:00pm.

Thank you!

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.