Arm Chair YouTube'r by the way, just talking here for conversation sake, not directed at anyone, just some thoughts after seeing that video.
As much as he talks the bottom line is home prices are what the public can afford to pay. Simple stuff.
We had a world health event which stopped the real estate market just as much as any other industry = result lower inventory.
Simple stuff but let's go a step further, feeding into the lower inventory and driving prices even higher was Federal Intervention in the markets by forcing down mortgage rates to the lowest in history and sending out stimulus checks. Just look at part of that guys chart, look at what normal interest rates look like.
Common sense simply says what I say is true. Low inventory, high home prices, artificially low interest rates, higher home prices.
The fact of the matter is, homes sold and will continue to sell. Now that FINALLY we are getting close (but not quite there) to normal interest rates this will force down home prices because the fact of the matter is, if people could not afford the homes they would not be able to get the mortgage to buy one!
Once we see rates 7 to 8% this will keep a cap on higher home prices, once we see building supplies back to normal this will hold down cost increases, once we see all the mentioned, we will see developers having to adjust their pricing to the home builders lower.
Over and over I say it. Supply and Demand, price are what the public can afford. Forget the dooms day, it will always correct to what the buyer market can afford.
Another inaccurate statement if I heard correctly is his reference to percentage of income being spent on homes. That is always the same or they would not get a mortgage. "
Fannie Mae's maximum total debt-to-
income (DTI)
ratio is 36% of the borrower's stable monthly
income." It's as simple as that. If you have a lot of cash reserves and incredible credit you could possibly go up to a max of 45%. But for the general population its 36% if your a first time buyer.
He also points to the "median home price" that is good. But (not that it matters) I dont know where he got those income amounts. He states he starts in 1997 if so I come up with an income level 20% higher than he has on his spread sheet at $37,000.
US Median Income table by year, historic, and current data. Current US Median Income is 67,521.00.
www.multpl.com
But everything in this insane long post means nothing other than there is always a dooms day person to get attention yet the free market always hums along nicely. Home prices are what the public can afford and when the public can no longer afford them, the prices will come down, which they are doing on the West Coast right now, stabilizing on the East Coast. If they crash, they crash, it's no different when they ran up to the sky in price increases. Sooner or later it will always play out but this one is the world health event, followed by Federal interference, to keep demand high when their was no labor force to build homes, no supplies to build homes and when those supplies were available sky high prices but with so much money poured into the economy and wages rising faster than a tide during a hurricane housing demand remained high.
Now it will stabilize or slow the pace if increases. His terrifying meltdown is other peoples opportunity to buy a home. We are due for sure and some people will get burned for paying so much if they plan on selling anytime soon.
www.wsj.com
www.cnbc.com
