During August and September I wrote three articles about how the housing market was in trouble and trending downward, despite mainstream media headlines to the contrary. I also noted the importance of rising bond interest rates, which would affect the entire economy. (Follow those seven links to read the original articles, if you're interested.)
Now we see that both forecasts are coming true. Overall bond prices have affected mortgage interest rates, which (combined with higher house prices) have led to a fall in demand.
The number of Americans who signed contracts to buy existing homes fell in September to the lowest level in nine months. The decline reflects higher mortgage rates and home prices that have made purchases more costly.
. . .
Contracts to buy homes have slowed in recent months as mortgage rates reached a two-year high over the summer. Rates rose in response to speculation that the Federal Reserve would reduce its stimulus later this year.
There's more at the link.
Zero Hedge observes:
... the pending home sales data collapsed in September ... Affordability, argued by some serial extrapolators as still being 'relatively' positive - has drastically weighed on housing at the margin just as we argued previously. This is the first annual drop in 29 months, the biggest drop in 40 months, and the biggest miss against expectations in 40 months.
Again, more at the link. Bold print is their emphasis.
This is no time to be buying residential property, unless you luck into a real bargain. I predict another catastrophic decline in housing prices over the next few years as the impact of our fiscal folly takes hold of our economy. I don't know exactly when it will happen - it might not occur in the short term - but I believe it's inevitable. Certainly, if you can sell your house at a decent price now, if I were in your shoes, I'd jump at the opportunity to do so. It may not be there for long.
Peter
As the baby boomers sell their house, some have several houses, the price has to come down as there aren't as many people in the next generation who can afford them since they are paying the social security for all of those people selling the houses.
ReplyDelete"it is no time to be buying residential property"-- but someone has to own it, and when super inflation hits, money that is in a house will go up with inflation and if you have a note, you are paying off old dollars with inflated ones. I dont think it is such a bad idea -- just dont overpay.
ReplyDelete@both previous commenters: That's why I said "unless you luck into a real bargain". Find a good place at a really good price? Sure, buy it. At today's asking prices, it's another matter . . .
ReplyDeletein hyperinflationary times, governments may very well collude with the banks to tie mortgages to the inflation rate. It has been done before.
ReplyDeleteAlso, if one does sell a house now, where to put the money? We are in times where governments all over the world are actively seeking to sweep up any liquid assets they can find.