Mortgage purchase applications are down 18% year-over-year. The only recovery in housing at this point is the new and high end market ($1M+). Hedgeye's expectation remains that the back half of this year, and the first half of 2015, should see steady downward pressure on the rate of home price appreciation.
In the video below Housing Sector Head Josh Steiner states that various aspects of the U.S. housing market are deteriorating and describes how changes in housing prices and volumes are causing a major inflection point in this $18-19 trillion asset class.
We wanted to know what you think. Is the U.S. housing market heading higher or lower?
At the time of this post, 54% voted LOWER, 46% voted HIGHER.
Voters who forecast the U.S. housing market heads LOWER reasoned:
- Housing is slowing and could slow for many years to come. The 2011-13 rebound in US housing "reminds" me of the summer-of-2000 bounce in the Nasdaq. Too much erosion of sequential momentum to comp the comps in the intermediate term and too many regulatory and demographic headwinds to sustain the trend over the long term. This call is as easy as it gets, IMO.
- "At some point" price and wages have to come in line. Perpetuating rising home prices is a form of generational theft that is going to keep Millennials out of the market. With Millennials out of the market, the marginal buyer is institutional (including public pension funds that are searching for yield). This could turn into a battle of institutions that spike prices higher, but "at some point" the ability to collect rent from an under-employed populace will destroy the cash flow rationale. When the yields dry up, the liquidations will start and prices will follow.
- We won't see an across the board correction, just lower, for a slight correction, in some markets, but I also wouldn't be short housing since there are better areas to be short.
Those who voted HIGHER had this to say:
- I would rather think of it as a bond. Home prices will go higher on the low end "shorter duration" as Millennials compete to find homes below their current rental payments. The marginal homes just below the 1%ers are doomed as higher rates erode affordability.
- It's going higher in NY. Real estate listings that track price changes show brokers and owners raising prices by as much as 4-5% even over the course of just 1 month. It's probably psychological since they're getting lower offers than the original listing, so the new lower offer on the higher price ends up getting them the price they originally wanted, but there are also plenty of buyers who can afford higher prices in the city. It'll level off at some point, but probably not anytime soon.
- With the markets in solid shape, housing will unfortunately continue to rise, at least slightly, slightly before it drops. Like with everything in the markets, this is a timing issue, so though I think it'll go lower eventually, it'll inch up first.
- while there is congestion in the market now, longer term, people still want to own homes. the market may languish for a year or so, but ultimately will recover and move higher. the economy is in better shape than gurus want to admit
- depends on your time frame of course. Near term, 6 - 12 months, lower as incomes have not kept up with recent price rises. Longer term higher as populations rise and the need overcomes price discretion