File – Work is performed on the roof of a home under construction in Folsom, Calif. Wednesday, Oct. … [+]
As much of a pain that a recession always is, usually more to some than others with income inequality a big factor, there have been people speculating that just maybe it would help cool down the cost of housing.
It’s a fair question, but unlike in 2009 and on, where the Great Recession that sat in part atop insane property valuations, conditions are different. Even with property values likely to fall some, it won’t set things back to whatever passed for normal before the pandemic. The millions who haven’t been able to approach a house purchase because of outrageous prices might at best find them “only” incredibly steep, and with higher mortgage rates, maybe as unreachable as they have been.
House prices rise over time. Not always in a straight line and sometimes with reversals, but they do tend to go up. In the last few years, you could have said that instead they hitched a ride on a rocket booster. Below is a graph from the Federal Reserve Bank of St. Louis showing median house prices from the Census Bureau and U.S. Department of Housing and Urban Development.
Median home prices over time.
The period from the start of the pandemic in 2020 to the present is unprecedented. At the end of the first quarter of 2020, the median house price was $322,600. The median price at the same point of time in 2022 was $449,300, an increase of 39.3% in two years. Unheard of.
When house prices drop, it’s usually not by a huge amount. The counter example of 2006, the height of the “trade-up-your-house” hype that resulted in a housing market meltdown, was median prices going from $257,400 at the end of 2006 to $208,400 at the end of 2008. That enormous crash—fueled by millions of people who lost their houses to foreclosure, frozen credit markets so money wasn’t available to most, and lenders straight-arming the entire mortgage market—was a drop of 19%.
If the same fall happened, that would bring the median house back to 363,933. That would still be almost 13% higher than the median price at the end of 2019.
Unlike after the Great Recession, lenders have been far more careful. There aren’t massive waves of foreclosures waiting to happen. No investment banks are sitting on worthless derivative financial instruments that will bring them down.
Instead, the current conditions will put a floor under housing valuations so that even though they will lose some value, it might not be all that much.
First, the country still has a chronic shortage of homes—a gap of millions of units—as not enough have been built in the last 15 years to keep up with needs. Homebuilders could try to address that, but they can’t sell off the homes they have now fast enough, so planning on construction of many more going into next year doesn’t make sense.
That puts a big damper on supply, which will help to keep prices from utterly crashing. So will the Federal Reserve’s actions to fight inflation because they involve quantitative tightening. The Fed looks to reduce its balance sheet holdings of bonds, which it had been buying to inject more money into the economic system. Those bonds include the ones backed by mortgages and put together by the so-called enterprise lenders, Fannie Mae
FNMA
When these bonds hit the markets, that drives down the price for them because there’s suddenly too much supply. When prices on bonds drop, investors want effective higher interest rates for them because they don’t want to buy something that’s losing overall value. The interest rates on the mortgage-backed securities, or MBSs, are signals to real estate lenders, who boost mortgage rates.
Even though rates dropped recently, they’re still at close to 6.6%, rates not regularly seen since 2008. That adds a lot to monthly payments, making the houses, which are still expensive, even harder to afford.
It’s a punishing set of facts that is likely to keep more people as renters rather than seeing newly formed families buying homes and beginning to build some personal wealth.
by Calculated Risk on 11/26/2022 08:11:00 AM
The key report this week is the November employment report on Friday.
Other key indicators include the 2nd estimate of Q3 GDP, the September Case-Shiller and FHFA house price indexes, October Personal Income & Outlays (and PCE), the November ISM manufacturing index, and November vehicle sales.
Fed Chair Powell speaks on the economic outlook, inflation and the labor market on Thursday.
9:00 AM ET: S&P/Case-Shiller House Price Index for September.
This graph shows graph shows the Year over year change in the seasonally adjusted National Index, Composite 10 and Composite 20 indexes through the most recent report (the Composite 20 was started in January 2000).
The consensus is for a 14.4% year-over-year increase in the Composite 20 index for September.
9:00 AM: FHFA House Price Index for September. This was originally a GSE only repeat sales, however there is also an expanded index. The 2023 Conforming loan limits will also be announced.
8:15 AM: The ADP Employment Report for November. This report is for private payrolls only (no government). The consensus is for 200,000 jobs added, down from 239,000 in October.
8:30 AM: Gross Domestic Product (Second Estimate) and Corporate Profits (Preliminary), 3rd Quarter 2022. The consensus is that real GDP increased 2.7% annualized in Q3, up from the advance estimate of 2.6% in Q3.
9:45 AM: Chicago Purchasing Managers Index for November.
10:00 AM ET: Job Openings and Labor Turnover Survey for October from the BLS.
This graph shows job openings (black line), hires (purple), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.
Jobs openings increased in September to 10.717 million from 10.280 million in August.
10:00 AM: Pending Home Sales Index for October. The consensus is for a 5.0% decrease in the index.
1:30 PM: Speech, Fed Chair Jerome Powell, Economic Outlook, Inflation, and the Labor Market, At the Brookings Institution, 1775 Massachusetts Avenue N.W., Washington, D.C.
2:00 PM: the Federal Reserve Beige Book, an informal review by the Federal Reserve Banks of current economic conditions in their Districts.
10:30 AM: (likely) FDIC Quarterly Banking Profile, Third quarter.
8:30 AM ET: Personal Income and Outlays, October 2022. The consensus is for a 0.4% increase in personal income, and for a 0.8% increase in personal spending. And for the Core PCE price index to increase 0.3%. PCE prices are expected to be up 6.2% YoY, and core PCE prices up 5.0% YoY.
10:00 AM: ISM Manufacturing Index for November. The consensus is for 50.0%, down from 50.2%.
10:00 AM: Construction Spending for October. The consensus is for 0.3% decrease in spending.
All day: Light vehicle sales for November.
The consensus is for 14.9 million SAAR in November, unchanged from the BEA estimate of 14.9 million SAAR in October (Seasonally Adjusted Annual Rate).
This graph shows light vehicle sales since the BEA started keeping data in 1967. The dashed line is the current sales rate.
2:00 PM: the Federal Reserve Beige Book, an informal review by the Federal Reserve Banks of current economic conditions in their Districts.
8:30 AM: Employment Report for October. The consensus is for 200,000 jobs added, and for the unemployment rate to be unchanged at 3.7%.
There were 261,000 jobs added in September, and the unemployment rate was at 3.7%.
This graph shows the job losses from the start of the employment recession, in percentage terms.
The current employment recession was by far the worst recession since WWII in percentage terms. However, as of August, all of the jobs had returned and, as of September, were 804 thousand above pre-pandemic levels.
Demand to buy houses is falling more sharply than for flats, in a reversal of the pandemic-era “race for space”, as sky-high mortgage rates hammer affordability.
The number of inquiries from prospective buyers has dropped by 47pc for houses since the mini-Budget in September, compared with a 42pc slump for flats, according to the property website Zoopla.
The biggest plunge in demand for houses was in the South East, where inquiries tumbled by 52pc. The decline for flats was 45pc. In London and the West Midlands there were also large falls in inquiries for houses for sale.
The biggest gap in demand between houses and flats was in the North East, with slumps of 33pc for houses and 11pc for flats.
Agreed sales for houses have been 16.5pc lower this month than they were during the same period in 2019, compared with a 1.6pc drop for flats, according to separate data from TwentyCi, an analyst.
Mortgage rates spiked following the market backlash to the mini-Budget in September. Before then, the average five-year fix was 4.75pc, which then peaked at 6.51pc on October 20, according to analyst Moneyfacts.
Now, the average five-year fixed deal has fallen below 6pc. The sharp rise in the cost of borrowing has severely limited how much would-be homeowners can offer, dampening demand for more expensive properties.
The average house costs 35pc more than the average flat, which is the largest gap since records began in 2005, according to Capital Economics, a consultancy.
It marks a turning point in the property market. The market for flats, particularly those without outdoor space, slumped during the pandemic as houses with more space soared in popularity.
Prices for detached houses have increased by more than a third (30.4pc) in the past three years, while for flats they have risen by just 13.6pc during the same period, according to the Centre for Business and Economic Research, a think tank.
Richard Donnell, of Zoopla, said: “The demand for flats has been weaker than houses over the pandemic so demand has less far to fall.”
Karl Thompson, of CEBR, said he expected prices to fall more sharply for houses than flats over the coming months.
He said: “Alongside the race for space, improved affordability driven by low borrowing costs and government incentives may have brought many otherwise prospective flat buyers into the more expensive market for houses during the pandemic, exerting particular upward pressure on house prices.”
Mr Thompson added: “Sharply rising borrowing costs and a move of workers back towards urban centres may currently be causing a particular blow to house prices, in a market that has further to fall.”
Andrew Wishart, of Capital Economics, said the preference for space “may be softening a little” as workers are increasingly expected to be back in the office for two to three days a week.
He said: “The sharp rise in mortgage rates has led to a big jump in the cost of buying with a mortgage, so prospective buyers determined to get on the ladder will have to economise on space in order to afford to buy.”
by Calculated Risk on 11/25/2022 10:38:00 AM
Today, in the Calculated Risk Real Estate Newsletter: Case-Shiller, FHFA House Prices Indexes and Conforming Loan Limits will be released on Tuesday
Brief excerpt:
Last week, the National Association of Realtors® (NAR) reported that median house prices were up 6.6% year-over-year (YoY) in October. This is down from the peak growth rate of 25.2% YoY in May 2021.
Last month, Case-Shiller reported that the National Index was up 13.0% YoY in August, down from a YoY peak of 20.8% in March 2022.
The median prices reported by the NAR are for the most recent month only, so the prices are very timely. However, the prices can be distorted by the mix of homes sold.
Case-Shiller is a repeat sales index (they compare the current price of home to the previous sales price), and it a three-month average. So, the most recent report (for August), was actually for homes closed in June, July and August.
Although median prices can be distorted by the mix and repeat sales indexes (like Case-Shiller and the FHFA) are more accurate measures of house prices, the median price index might provide earlier hints on the direction of prices.
The following graph shows YoY price changes for the NAR median house prices, Case-Shiller National price index, and the FHFA purchase-only index (Fannie and Freddie loans only).
Most of the time, the NAR median price leads the Case-Shiller index, and even though the Case-Shiller September index will show a solid YoY gain, I expect house price growth to decelerate further in coming months and turn negative YoY soon.
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First-time buyers face being locked out of the market next year after Virgin Money became the latest bank to stop lending to borrowers with small deposits.
The lender has “temporarily” pulled all mortgages requiring a 5pc deposit and Help to Buy deals for new borrowers.
Mortgage choice for first-time buyers has shrunk by more than 40pc since the mini-Budget in September caused interest rates to soar and nervous lenders to shun “riskier” borrowers – the number of deals requiring a 5pc deposit has fallen from 283 to 159.
The mortgage market has calmed in recent weeks, with some lenders now reducing rates for borrowers with bigger deposits, but now house price falls loom.
Homeowners with small deposits are most at risk of negative equity and widespread forecasts of double-digit price falls in the coming years are expected to force first-time buyers into a credit crunch.
Samuel Mather-Holgate, of mortgage broker Mather and Murray Financial, said 5pc was a “wafer thin layer of equity” in a falling property market.
He said: “I would expect to see the end of these types of mortgages for the next 12 months. Considering some economists think the worst-case scenario could be a fall in house prices of up to 30pc, I am surprised that 10pc deposit mortgages are still available.”
First-time buyers who can still get a mortgage will pay a premium. The average borrower with a 5pc deposit will pay 6.36pc for a two-year fixed deal, up from 5.54pc at the beginning of October, according to analyst Moneyfacts.
Rates for first-time buyers have fallen slightly in recent weeks, down from 6.59pc for a two-year deal at the beginning of November, but are still significantly inflated when compared with the same month last year, when the average rate was 3.22pc.
Gindy Mathoon, of broker Create Finance, warned other lenders would likely follow suit in withdrawing from the first-time buyer market.
Mr Mathoon said: “This shows Virgin does not have confidence in the market and expect a bleaker outlook especially around house prices.
“We’ve seen interest rates decrease over the past few weeks, which has probably seen borrowers reignite their desire to purchase a home as funding has started to become cheaper than it was six to eight weeks ago.”
A Virgin spokesman said it was “monitoring market conditions closely” and existing borrowers could still remortgage with a small down payment.
Wealthy London homeowners are being forced into becoming “accidental landlords” as the market slumps.
Agents have reported a jump in high-end London rental supply as sellers give up on sales and move their properties on to the rental market as a result of the post-mini-Budget mortgage chaos.
In the first two weeks of November the number of London rental listings jumped by 15pc year on year, according to Chestertons estate agents. Across its 10 central London offices the jump was 16pc.
Katinka Hill of Chestertons said: “This is the first time this year that we have seen stock rise year on year. A lot of it is coming from the sales side – vendors whose properties are not selling, or who are holding out for a better price.”
She added: “The turning point was definitely everything that happened after the mini-Budget.” Some landlords are writing clauses into lease agreements saying that they will conduct sales viewings during the tenancy, Ms Hill added.
David Mumby of Knight Frank estate agents said: “The rise in supply in the prime lettings market [of the most expensive properties] is certainly a result of the uncertainty seen in the sales market.”
Although the higher end of the London sales market is less dependent on mortgage borrowing than, for example, the first-time buyer sector, the financial turmoil of the last two months has brought a major blow to sentiment among wealthy sellers.
Market valuation appraisals (a lead indicator for listings) for properties that will let for between £1,000 and £5,000 per week were up by 17pc in October compared with at the start of the year, according to Knight Frank.
Very high house prices in proportion to earnings mean the capital’s housing market is particularly exposed to the pressures of higher mortgage rates, which ballooned in the wake of the mini-Budget.
Even before the turmoil, London house prices had already begun to fall. Month on month in September, the average London property lost £3,206 in value – a 0.6pc drop since August, according to the Office for National Statistics.
This was based on sales that were agreed several months earlier. High rents are a further draw to the buy-to-let sector for wary sellers.
Average rents on newly let properties in London’s priciest postcodes were up by 17.8pc year on year, according to Knight Frank.
A mortgage relief scheme buried in the Autumn Statement will provide a lifeline to struggling families and potentially soften house prices falls, experts have said.
The Treasury is to extend support for low income homeowners struggling with high mortgage costs. People on universal credit will now be able to apply for a loan from the Government to help meet repayments after just three months of difficulty, rather than nine.
The Government is also abolishing the “zero earnings rule” that currently applies. Previously, only those who were out of work could take out support loans under the scheme but now people in work and claiming universal credit can apply.
The changes are expected to help thousands of homeowners, with the Government earmarking £365m to lend under the scheme over the next five years.
Charlie Lamdin, of estate agent BestAgent, labelled the changes a “mortgage bailout” that could help support property prices, as fewer borrowers would lose their homes.
Over 23,000 mortgage holders have taken out loans under the scheme as it stands, according to data from the Department of Work and Pensions. That number is likely to rise in the coming years as these reforms broaden access and the economic downturn pushes more mortgage holders into trouble.
The Office for Budget Responsibility (OBR) expects average interest rates on outstanding home loans to hit 5pc in the second half of 2024. Meanwhile, real household incomes are expected to shrink by 7pc over the next two years and half a million jobs will be lost, prompting more people to claim universal credit.
David Hollingworth, of broker L&C Mortgages, said the reforms to the Support for Mortgage Interest (SMI) scheme, which take effect next spring, would allow families to get support “much sooner” and reduce the risk of repossessions.
Mark Dyason, of broker Edinburgh Mortgage Advice, said the changes were a significant “giveaway” for low-income families, adding: “I’m surprised the Government isn’t shouting it from the rooftops.”
Simon Gammon, of broker Knight Frank Finance, said: “It is important to understand the mortgage interest is not being waived, merely delayed.”
The loan will need to be repaid, usually when the homeowner dies, sells the property or transfers ownership.
Some brokers said the Government was “kicking the can down the road”, as families would eventually need to repay the loan, at which point they could fall into greater hardship.
House prices are predicted to fall by 9pc over the next two years, the OBR said last week, as soaring mortgage rates trigger a downturn in the property market.
Suburban House And A Sold Sign. (Photo by H. Armstrong Roberts/Retrofile/Getty Images)
Our crazy, volatile house prices hurt first-home buyers who buy near the top of the market and last-home sellers who have to sell near the bottom of the market.
Millennial first-home buyers who bought at the top of the recent boom will be hurt the most by falling house prices but those aging Boomers who will have to sell their homes in the future near the bottom of the market in order to pay for unexpected expenses like medical, assisted living, nursing home or other living expenses, will also be hurt.
House prices are naturally prone to booms and busts because the demand for houses can rise and fall a lot faster than the total number of houses can rise and fall. The total supply of houses increases extremely slowly because it takes longer to make a house than anything else people buy.
Although house prices are prone to booms and busts, our government policies make the booms and busts much bigger than they would be naturally. Instead of smoothing out the natural instability in house prices, our government policies make housing booms and busts a lot worse.
Hopefully, the many Millennials who bought their first houses in the last two years don’t end up like the many Gen-Xers who bought their first houses in 2005, 2006 and 2007. Many of those Gen-Xers were set back a decade financially when the value of their first houses tanked and they were soon underwater owing a lot more money on their houses than their houses were worth.
Those Gen-Xers did nothing wrong. They just happened to hit the first-home buying stage of their lives at the wrong time. They just happened to fall in love, get married, start a family or otherwise get serious about buying their first house near the top of a real estate boom.
Many of those Gen-Xers lost their houses, especially if they lost their jobs in the Great Recession. Many other Gen-Xers made their mortgage payments on time despite being severely underwater for many years. As recently as a few years ago it wasn’t unusual to see houses selling for about what the sellers originally paid for their houses more than a decade earlier, and that’s not accounting for inflation. In real dollars, they were selling their houses for around 25% less than they paid more than a decade earlier. That hurt.
Some Baby Boomers had the same thing happen to them if they bought their first houses near the top of the Savings & Loan real estate boom in the late 1980s.
Current home owners often feel good about skyrocketing house price, that is, until they have to buy their next house. They may make a ton of money on the house they’re selling but they have to pay a ton of money for the house they’re buying. Crazy high prices don’t help you when you’re buying and selling at the same time.
And erratic house prices are bad for the economy. When house prices unexpectedly increase to unsustainably high levels, home owners tend to save less money and spend more money than they would otherwise. Those skyrocketing house prices are great for the economy, at least for a while.
But then when house prices fall, home owners tend to save more and spend less than they did before the boom. The economy shrinks more during the bust than it grew during the boom. The economy ratchets down and home owners end up with less wealth just because house prices jumped up and then down. Not all recessions have a real estate bust but all the worst recessions have real estate busts, for example, the Great Recession.
In addition to hurting the economy and first-home buyers who buy at the top of the market, unstable house prices hurt older home owners who have to sell at the bottom of the market.
It turns out older folks tend to view their homes like emergency savings accounts. Ideally, they’d like to live in their houses forever and then leave them to their kids or family when they pass on.
Those who sell toward the end of their lives do so primarily to pay for unexpected life emergencies like medical expenses and nursing home care, or because they lost their spouse and their spouse’s income (for example, they now only get one Social Security check a month), and they need to sell their house to get money to live on. Most retirees don’t have a $1,000,000 in IRAs and 401(k)s.
Home equity is the largest part of the typical 75+ year old’s net worth. The Federal Reserve’s last Survey of Consumer Finances was in 2019 and it found the median net worth of households headed by people 75 years old and older was only $255,000. Their median home equity was $118,000, or nearly half of their total net worth (46%).
If that life emergency happens at the top of a real estate boom, all that house price volatility works out great for them.
But if that life emergency happens at the bottom of a bust, it just makes things a lot worse for them during one of the most difficult times in their lives. Those last-home sellers have less discretion on when they sell than first-home buyers have on when they buy.
Those who have to sell their houses near the bottom of the market due to illness, or the death of their spouse, make far less money than they would if house prices had increased more sustainably over the years without such huge price booms and price busts. Their Gen-X and Millennial children may have to pitch in more time and money to help mom and/or dad replace the lost home equity.
The huge volatility of house prices devastates first-home buyers who buy at the top of the cycle but that huge price volatility also devastates older folks who have to sell their homes at the bottom of the cycle.
Boomers, Gen-Xers, Millennials and Gen-Zers should first work together to eliminate the many government policies that destabilize their house prices and family wealth.
More sustainable house price increases would mean if Boomers have to sell in their later years they aren’t punished as much financially for having a death or sickness in the family in the wrong year. Similarly, Millennials wouldn’t be punished as much financially for falling in love, getting married, or wanting to start a family, and buying a house in the wrong year.
And our overall economy would be much larger if we had more sustainable house price increases. The U.S. would be permanently richer because housing busts can reduce economic growth for years.
It’s true that home owners tend to like it when house prices increase crazy fast but Boomer home owners should realize they may have to sell during any bust that follows unsustainable house price increases. The older they are, the more likely they’ll have to sell during any bust that follows.
More stable house prices would lead to more stable American families of all ages.
It’s too late now to stop the recent boom in house prices but we can decide now that in the future we want more sustainable house price increases and more sustainable family wealth creation.
Suburban House And A Sold Sign. (Photo by H. Armstrong Roberts/Retrofile/Getty Images)
Our crazy, volatile house prices hurt first-home buyers who buy near the top of the market and last-home sellers who have to sell near the bottom of the market.
Millennial first-home buyers who bought at the top of the recent boom will be hurt the most by falling house prices but those aging Boomers who will have to sell their homes in the future near the bottom of the market in order to pay for unexpected expenses like medical, assisted living, nursing home or other living expenses, will also be hurt.
House prices are naturally prone to booms and busts because the demand for houses can rise and fall a lot faster than the total number of houses can rise and fall. The total supply of houses increases extremely slowly because it takes longer to make a house than anything else people buy.
Although house prices are prone to booms and busts, our government policies make the booms and busts much bigger than they would be naturally. Instead of smoothing out the natural instability in house prices, our government policies make housing booms and busts a lot worse.
Hopefully, the many Millennials who bought their first houses in the last two years don’t end up like the many Gen-Xers who bought their first houses in 2005, 2006 and 2007. Many of those Gen-Xers were set back a decade financially when the value of their first houses tanked and they were soon underwater owing a lot more money on their houses than their houses were worth.
Those Gen-Xers did nothing wrong. They just happened to hit the first-home buying stage of their lives at the wrong time. They just happened to fall in love, get married, start a family or otherwise get serious about buying their first house near the top of a real estate boom.
Many of those Gen-Xers lost their houses, especially if they lost their jobs in the Great Recession. Many other Gen-Xers made their mortgage payments on time despite being severely underwater for many years. As recently as a few years ago it wasn’t unusual to see houses selling for about what the sellers originally paid for their houses more than a decade earlier, and that’s not accounting for inflation. In real dollars, they were selling their houses for around 25% less than they paid more than a decade earlier. That hurt.
Some Baby Boomers had the same thing happen to them if they bought their first houses near the top of the Savings & Loan real estate boom in the late 1980s.
Current home owners often feel good about skyrocketing house price, that is, until they have to buy their next house. They may make a ton of money on the house they’re selling but they have to pay a ton of money for the house they’re buying. Crazy high prices don’t help you when you’re buying and selling at the same time.
And erratic house prices are bad for the economy. When house prices unexpectedly increase to unsustainably high levels, home owners tend to save less money and spend more money than they would otherwise. Those skyrocketing house prices are great for the economy, at least for a while.
But then when house prices fall, home owners tend to save more and spend less than they did before the boom. The economy shrinks more during the bust than it grew during the boom. The economy ratchets down and home owners end up with less wealth just because house prices jumped up and then down. Not all recessions have a real estate bust but all the worst recessions have real estate busts, for example, the Great Recession.
In addition to hurting the economy and first-home buyers who buy at the top of the market, unstable house prices hurt older home owners who have to sell at the bottom of the market.
It turns out older folks tend to view their homes like emergency savings accounts. Ideally, they’d like to live in their houses forever and then leave them to their kids or family when they pass on.
Those who sell toward the end of their lives do so primarily to pay for unexpected life emergencies like medical expenses and nursing home care, or because they lost their spouse and their spouse’s income (for example, they now only get one Social Security check a month), and they need to sell their house to get money to live on. Most retirees don’t have a $1,000,000 in IRAs and 401(k)s.
Home equity is the largest part of the typical 75+ year old’s net worth. The Federal Reserve’s last Survey of Consumer Finances was in 2019 and it found the median net worth of households headed by people 75 years old and older was only $255,000. Their median home equity was $118,000, or nearly half of their total net worth (46%).
If that life emergency happens at the top of a real estate boom, all that house price volatility works out great for them.
But if that life emergency happens at the bottom of a bust, it just makes things a lot worse for them during one of the most difficult times in their lives. Those last-home sellers have less discretion on when they sell than first-home buyers have on when they buy.
Those who have to sell their houses near the bottom of the market due to illness, or the death of their spouse, make far less money than they would if house prices had increased more sustainably over the years without such huge price booms and price busts. Their Gen-X and Millennial children may have to pitch in more time and money to help mom and/or dad replace the lost home equity.
The huge volatility of house prices devastates first-home buyers who buy at the top of the cycle but that huge price volatility also devastates older folks who have to sell their homes at the bottom of the cycle.
Boomers, Gen-Xers, Millennials and Gen-Zers should first work together to eliminate the many government policies that destabilize their house prices and family wealth.
More sustainable house price increases would mean if Boomers have to sell in their later years they aren’t punished as much financially for having a death or sickness in the family in the wrong year. Similarly, Millennials wouldn’t be punished as much financially for falling in love, getting married, or wanting to start a family, and buying a house in the wrong year.
And our overall economy would be much larger if we had more sustainable house price increases. The U.S. would be permanently richer because housing busts can reduce economic growth for years.
It’s true that home owners tend to like it when house prices increase crazy fast but Boomer home owners should realize they may have to sell during any bust that follows unsustainable house price increases. The older they are, the more likely they’ll have to sell during any bust that follows.
More stable house prices would lead to more stable American families of all ages.
It’s too late now to stop the recent boom in house prices but we can decide now that in the future we want more sustainable house price increases and more sustainable family wealth creation.
Historical market trends infer that a good World Cup performance by the England team usually correlates to a boost in house prices.
By comparing and contrasting historic housing market trends Barrows and Forrester were able to come to this conclusion.
The level of inflation-adjusted house price growth across the English market and how this rate of growth differed depending on England’s previous World Cup performances was analysed.
Failing to qualify for the World Cup
According to the date, the most muted housing market performance was shown during the years the team failed to qualify. This was the case in In 1974, 1978, and 1994.
During years in which England didn’t make it to the World Cup, there was an increase of just 0.8% on average,
Whereas years, where the England team has made it to the initial stages of the tournament and into the last 16, house prices, have increased by an average of 2.8%.
In years where England has reached the quarter or semi-finals of a World Cup, house prices have increased by an average of 5.3% since 1970.
If England makes it to the final
In 1966 England achieved victory, making this scenario the best example to determine what success could mean for the market.
England’s ‘66 success was followed by positive house price growth, but values increased by just 3.6%. This is 1.3% less than price growth for a quarter or semi-final elimination.
England’s top property performers since the last World Cup, include North Devon with house prices up by 60.3% since June 2018, Rochdale (+49.2%), Tameside (48%), Oldham (46.6%), and Cotswold (+45.9%)
Managing director of Barrows and Forrester, James Forrester, commented: “If England enjoys success at this World Cup, historic trends suggest it could be good news for homeowners with house prices likely to rise by a good chunk should they make the finals stage of the tournament.”
“Of course, regardless of England’s on-pitch ability, back at home we’re dealing with a tricky economic situation and cannot rely on the positive sentiment of a good World Cup run to help stimulate the housing market.”
“Having said that, Gareth Southgate himself could have done a better job at handling the economy compared to some of our most recent ministerial offerings and so maybe he is the man to help keep house prices buoyant.”
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