Although we don’t generally think about it, it’s fair to say that, somewhere in the back of our minds, we all know that there are lots of microscopic organisms running around that we’d just as soon (and do) forget about. Well, it turns out, not only do we have lots, we have more than anyone imagined. In the first ever census of arthropods (bugs) in American homes, a team of etymologists found that homes carried between 32 and 211 different species! Thankfully, most of them are either harmless, or even helpful. But, don’t go looking at your carpeting under a microscope.
The same forces that are making the U.S. housing market look good, as we covered in yesterday’s post, are also increasing the strength of the dollar. The problem is that a strong dollar means cheaper imports, which ultimately puts a drain on U.S. manufacturing and the economy as a whole, which reduces people’s ability to purchase homes at the higher rates reported yesterday. Bottom line: very few economic changes are one-sided, and if you get all excited about one piece of news, you’re probably missing the piece on the other side of the balance scale. Ignore the news, buy the right house for you at the right time for you, not at the right time according to the news.
U.S. housing data is making the economy look better, even as other parts lag. And it’s true, the housing market, as we’ve covered for the last several quarters, is doing really well — and the recent Fed rate hike appears to have had little, if any, effect on that. However, as we’ve also pointed out before, we live in a global world, where everything is connected to everything else. As you’ll see in tomorrow’s article, the same news that is good for the U.S. economy is bad for the U.S. economy.
We’ve already covered the fact that last quarter’s rate hike from the Fed shouldn’t have had any meaningful impact on long-term, fixed-rate mortgages. But everyone expected them to have an impact on short-term, adjustable rate mortgages. Contrary to prevailing wisdom, so far in January, refinancing is up significantly (12% week-over-week) and within those loans, the share of activity from adjustable rate mortgages has increased within the increase! Just goes to show you, you can’t trust the news. (More about that in our next two posts).
That’s the average mortgage balance across the U.S.: $157,154. Of course, whether you’re over or under that number doesn’t really say anything useful at all — it depends on so many factors, from where your home is, to whether it’s a first or second home, to how long you’ve owned the home, and so on and so on. But it’s a good point to start a conversation, and The Motley Fool brings up the number in the context of discussing “good” vs. “bad” debt, and how to make a mortgage work in your favor Check it out.
The Huffington Post, Canada, put out a piece last week about why Canadians should no longer be looking to buy property south of the border. And they’re dead-on with most of their reasoning, from the change in exchange rates between U.S. and Canadian dollars, to the recovery of housing prices in most, interesting U.S. markets. But all of the arguments they make also have an obverse, and the flip side of that coin is that now may well be the time for you to start looking at buying a vacation property in the great white north.
OK. We hate making predictions about mortgages or the housing market, and we don’t think you should do so, either. But that doesn’t stop plenty of professionals. Here are five predictions for the 2016 U.S. Housing Market from TheStreet.com: prime mortgage rates will rise; both prices and sales will grow, but sales more slowly; cities will continue to become less affordable; more single people will purchase homes; and Millennials still won’t fully move into purchasing at the same rate as previous generations. Give the article a read for slightly more detailed explanations behind each prediction.
PropertyWire put out an interesting article last week. They don’t really make any claims in it, and quite frankly, I can’t really draw any conclusions from it. To make matters worse, the title is confusing: “Value of US housing stock in 2015 down from overall growth the previous year”. What they really mean is that there was deceleration in the rate of growth — only growing at 4.1% in 2015 vs 6% in 2014. But those are still interesting numbers, and the article is chock-full of other ones. Give it a read, and see if you can puzzle anything out.
I really like the way this guy thinks. I’ve written many times before about the futility of making predictions in general, and the weird state of the housing market in particular. Business Insider wrote a very good article for The Real Deal, that asks the simple question “are we in a bubble”. The truth of the matter is, we’re more than 50% back towards the 2006 peak, from a housing-price-to-income perspective, and that’s probably not good. But, it’s also not likely that things will crash immediately. And neither of those statements should have much, if anything, to do with your home-buying decision.
For most people who aren’t economists, we tend to think of markets as singular, localized things (e.g., we think of “the” housing market). But the truth is, markets tend to vary quite a bit regionally, and as this blog has pointed out before, seemingly unrelated markets (e.g., China’s stock market) can have large impacts. CNN Money points out that the energy market is another place that affects the housing market, and that low energy prices are good for some regions, and bad for others, in terms of housing prices.