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...































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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.

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