JP Smith, who accurately forecast the 1998 Russian stock market crash, says China is in for a bust as bad as the ’08 U.S. mortgage bust, next year. TheStreet.com provides detailed coverage, on the reasoning, state of the Yuan (the Chinese currency), and other market factors. The reason that this is interesting to us is that, if Smith is correct, the Chinese money outflows are likely to accelerate in 2016, and as we’ve reported before, that can have a big impact on the U.S. housing market.
If you’ve been reading this blog for a while, you know that I generally scoff at predictions. Few people are as accurate as Cassandra. Still, with the proper use of data, some predictions can be better than others. Mitch Lipka recently interviewed Svenja Gudell, the new Chief Economist at Zillow. There are no deep, earth-shattering predictions, but the Q&A format of the interview is nice, and it’s always good to hear what a Zillow economist is thinking — it’s definitely a different style than the typical CNBC talking head.
We reported yesterday on a blog post that the Federal Reserve put out, arguing their case that the rate hike shouldn’t have any impact on long-term, fixed rate mortgages. It turns out, they’re not the only ones who think that. CNBC wrote a similar piece last week. The main difference is, their article is a little less technical; a little easier to read. So, if you didn’t read the Fed blog post, check out this article But the conclusion is the same — long term treasuries are what matter for long-term mortgage rates.
The Fed doesn’t want long-term mortgage interest rates to rise. At least, that’s the conclusion we draw from a blog post they released, Monday. The post goes to great lengths to draw the conclusion that their recent rate hike shouldn’t affect long-term mortgage rates. To be sure, it will affect short term, adjustable rate mortgages, but their argument is that long-term mortgage (30-year fixed) rates are more tied to long-term treasury rates, which in turn are tied more to Fed signalling than to actual rate hikes.
There are many reasons to think that the housing market is still in great shape; that it can easily withstand the next year’s worth of rate hikes. And the next few months are still likely a great time to buy, seasonally, even if the weather isn’t particularly wintery this year. But if you’re not in a position to be buying directly right now, you may still be able to reap some benefits through indirect investment. This interview on Portfolio Advisor discusses why rising interest rates may be good for investors.
There is a very long list of things that one must consider when buying or building a house. Now, there’s one more to add to the list: man-made hazard risk. This is only the second year it’s been conducted, but RealtyTrac just released it’s annual Manmade Environmental Hazards Housing Risk Report — and a shocking 38% of U.S. homes are in zip codes that are listed as high risk or very-high risk. This is a new study, and with numbers that high, you may not want to give it too much weight, but it probably is something to start considering.
It seems that for the entire year, all the data on building permits have been good, but people have been slow to actually break ground. That’s perhaps changing, finally. A Reuters journalist reporting on the general economy agrees with everyone else that the overall economic position is good, even in the face of manufacturing weakness. A key piece of data in his article, at least from this blog’s perspective, is that actual housing starts finally rebounded in November, coming off a seven month low.
The Fed just announced the first increase in the “benchmark target rate” for the first time since 2006. The problem for most of us mortals is, not only do we not know what the Fed is, nor what the target rate is, but we really don’t know what this means or why it matters. Nevertheless, it’s literally all over the news, not just in the U.S., but around the world. Thankfully, Matt Phillips wrote a great article over on Quartz. In about 5 minutes of reading, you’ll understand at a basic level everything you need to know about the rate hike. Even better, it comes with a video in case you don’t want to read it.