Three disclaimers:
1. I do not have a graduate degree, only an undergrad.
2. I am not an economist
3. Real Estate trends are geographic, and do not hit all 50 states equally
With that said I read this morning that in the month of May, mortgage applications across the U.S. were the lowest in 22 years. So in addition to the lowest demand for mortgages in over two decades, we have the following:
- Housing prices have risen continually since 2010, and have skyrocketed the last 2+ years. Anecdotally, my home (which is in a hot market) is currently worth more than double what we paid for it not even 6 years ago.
- Interest rates are rising (albeit from historic lows)
- Housing prices, and average monthly housing costs, have risen substantially higher than wages, making homeownership affordable for an even smaller portion of the population.
- We have broad inflation challenges
- Stock markets are down considerably YTD (Dow around 12-15%, NASDAQ 20%, S&P 15-17%)
- Revolving credit is at record highs
- Depending upon which poll you read, a vast majority of Americans are pessimistic about the economy
At the same time, a number of people (primarily those who work in real estate) continually claim that housing prices will not materially decline because we have "such a shortage of homes."
My simpleton point of view, informed by the bullet points above, is as follows:
- The cost of housing has risen substantially faster than wages and therefore, many people who would like to buy a home will be unable to do so until prices decline.
- While there may be a housing shortage, people who want to buy houses are not living on the street, they are renting.
- Unless homes continue to be purchased by institutional investors, demand is going to continue to plummet to the point where prices will have to drop
Can somebody please explain why this "housing supply shortage" will supersede all of the universally agreed-upon bullet points above, and continue to keep housing prices high?