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The State of Housing

The residential housing market tends to be a favorite conversation. It also happens to be a large driver of the economy. The housing market boomed during the first couple years of the pandemic but came to a screeching stop last year when the period of ultra-low mortgage rates came to a halt. This understandably caused many to think back to the housing collapse that caused the Great Financial Crisis in the 2008 period. While we don’t think house prices are set to accelerate higher soon, we also do not believe a collapse is coming.

First, if we look at homeowner vacancy rates, we can see they are now near all-time lows. During the last housing bubble, they moved to double the normal rate.

Next is a look at existing home inventory for sale. Not only is inventory near lows but it is substantially lower than during the prior housing bubble.

Last, we thought this view of how various countries are positioned was rather interesting. Those with adjustable-rate mortgages could find their monthly payment moving notably higher with the rise in rates. However, we see the U.S. positioned in the bottom left corner indicating a low level of adjustable-rate loans and a very low consumer debt level as a percent of their income.

There is little question that the housing market got ahead of itself during the pandemic for a variety of reasons. Now, like so many other aspects of financial markets the housing market is normalizing. This will take time as buyers and sellers find a new middle ground to meet. However, most importantly for the economy is the housing market this cycle does not look to be in a high-risk position of collapse like that of 15 years ago.



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