If my city (Houston) is any indication of the current state of the housing market - it is looking good (on the outside). I caught this post at Dr. Housing Bubble and thought it would be worthwhile to look at a couple charts.
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| Household real-estate assets to disposable income (blue; left) and housing starts (red: right). |
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| Real-estate loans to owner's equity (blue; left) and average house sales price (red; right). |
Starts and prices appear to have rebounded. It may seem that the low-inventory fueled price rebound has worn thin - until shadow inventory is factored in. What exactly would a bank do with newly built foreclosed houses on its book versus older houses?
If it were up to me - I would rent the newer houses and demolish the older houses (to build new units). How then would anyone be able to afford an assumed more expensive newer house? Credit.
We are indeed seeing greater mortgage application and refinance activity, and maybe soon we will see a rebound in mortgage amounts.
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| Mortgage debt (blue; left) and year-over-year change in mortgage debt (red; right). |
So what does it mean that the mortgage debt to owner equity ratio is climbing and then spike up just before and during the last recession.
ReplyDeleteIt may indicate a few things, one of which could be refinance activity - rolling-over debt. Michael Lewis in his book The Big Short made a point that it only took a flattening of housing prices to cause a crash. Having equity makes it much easier to refinance, supposedly.
DeleteHowever, I did not include that graph. The second graph is actually real-estate loans at commercial banks to owner equity. That graph may show banks' appetite for holding (risky) mortgages on their books versus selling a mortgage-backed security.