You Know Debt Contagion is Uncontrollable When… | Watch Closely

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TOPICS AND TIMESTAMPS:
It’s On 0:00
Debt Piles Up 0:25
Inflation Over the Top 4:47
Consumer Is Worried 6:52
Passive Income 9:14

THE 2022 HOUSING MARKET:

CNBC reports that “the number of new listings last week jumped 8%, right as the average borrower is paying 38% MORE than they would for the same home, a year ago.” In response to that, 12% of homes had a price drop…which is 9% HIGHER than a year ago, with these kinds of drops occurring faster each month.

In addition to that, The Federal Reserve is warning of a Housing Market Bubble - They show that - throughout 1999 through 2008 - the market experienced irrational exuberance, just like it’s showing NOW - from 2020 until…who knows how long. Housing is so popular, too, that 11 out of 25 countries are seeing the EXACT SAME EXCITEMENT for the real estate market - with CANADA leading them all, with the largest price gain, year over year.
https://www.dallasfed.org/research/ec...

Even though there is an imbalance between the “Price to rent ratio,” “price to income” IS HIGHER than normal…but, still not “exuberant.” They explain that recent patterns may prove to be a less-useful measure of home affordability, because low interest rates and stimulus allowed more money to be spent…so, this chart MIGHT be overly cautious when valuing something we haven’t quite seen before.

FIRST: They believe that MILLENNIALS AND GEN Z WILL KEEP THE MARKET STRONG.
They reported that most first-time buyers are younger than 40, which means the buyer pool is deep, and indicates that demand will likely remain elevated.

SECOND: SUPPLY CAN’T KEEP UP WITH DEMAND
They say that the “supply-demand imbalance is the primary reason home prices have escalated so rapidly”

THIRD: UNLIKE 2008, BUYERS ARE LESS LIKELY TO DEFAULT ON THEIR MORTGAGE.
Today, more than 76% of mortgages go to borrowers with a credit score EXCEEDING 760, lending standards have increased, and home equity is at a record high.

FOURTH: A DECLINING ECONOMY COULD IMACT HOUSING VALUES.
They mention that, rising interest rates could put a damper on consumer spending, which increases the likelihood of a recession.

AND FIFTH: MOST PREDICTIONS INDICATE THAT HOUSING PRICES WILL CONTINUE TO RISE - BUT SLOWER.
For instance, the Mortgage Bankers association predicts a 4.8% increase throughout 2022…CoreLogic expects a 6% increase…and Realtor.com predicts a 2.9% increase.

-This was written by Graham Stephan

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The Money GPS is the most active, most informative channel in the financial world. Day after day, breaking down the data and making it easy to understand. This channel is not here to help build a portfolio, give stock picks, or financial advice. It's simply data that is generally not found through conventional means.
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