Oktay Kavrak, CFA
Communications & Strategy @ Leverage Shares
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Homeowners are now spending a whopping 40% of their income on mortgage payments 🚨This is even *higher* than the housing bubble that popped in 2008.The median payment is now $2,700 a month.Affordability is at an all-time low.But...- Those that locked in low rates aren't selling- First time 'would-be' buyers aren't buying- Inventory is still lowSo don't hold your breath waiting for the crash.
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Osman A Ciftci
Senior Data Scientist and Tech Lead at Shell - my posts/comments are my own and dont reflect my employer's views
6mo
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Oktay Kavrak, CFA great visualization! Thanks for sharing! Do you think the start would be when new projects/jobs start to decline due to high rates?
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Geoffrey Lenart
Senior Marketing Manager-Analyst
6mo
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Shouldn't this chart be relabeled? Two terms have mixed together. Homeowners and home buyers are assumed to be same and they mean very different things as of today. Homeowners for the most part have 3.25-3.5% mortgages. Homebuyers are looking at 7% mortgages. Let's see this chart when we look at only home owners. 2nd point. In 2005-2008, the percentage of home owners holding adjustable rate mortgages was much higher than today. With only a very small % of home loans ready to reset in terms of interest rate as of now, affordability doesn't move.
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Kristofor Paulson, Applied Economics
Economics Instructor; Strategic Thinker, Problem Solver, Statistics Textbook Author, Excel Junkie, Personal Finance Coach, Public Speaker, and Seasoned Investor.
6mo
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With the Fed going to raise rates again, mortgage rates will increase and further exacerbate the problem. The reason for the non selling is that if a family does sell, the quality of house they could get if they repurchased is not as good. For example if I resold my house, purchased at about $180,000 and worth about $230,000 - commission (say 6%) doesn't leave much. Taking out a mortgage for a a purchase of a new house to cover the difference, doesn't make sense. My credit Score is about 820 across all three scores. New home buyers, unless all cash is paid, are going to wait until the Fed levels off, does not raise rates anymore or lower them. Probably into 2024, my best estimates.
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Anthony McAuley
Controller at Division 3 Concrete Corp
6mo
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own my home at 4% never going to sell . Your assumption is correct inventories are tight for residential. But the local governments figured out a way to screw you anyway. 4 months after I purchased my home they came out and reassessed it at 10k of full current price and my taxes went up 2k. This slimebag government we have in place will find anyway possible to take your money. In NY its taxes for nothing in return.
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Jahmaine A. Reimann, IMC, ACSI
Wealth Management & Global Tax Planning for European Executives
6mo
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Spot on Oktay. The "low rate lockers" seem to have reconfigured the dynamics of a conventional American credit cycle. Meanwhile, US homes have recovered over $3 trillion in losses and hit a record of $47 trillion on the back of low inventory, as sellers refuse to budge and would-be buyers are priced out of the market.
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David Youngblood
6mo
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People just aren't going to move for a long time. I cannot see a world where someone moves locally and abandons a mortgage rate that is 300 basis points (or more) below market rates.
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Kevin Cassidy, CFP®
Financial Advisor at Veritas Wealth Management - Helping people reach their goals through personalized, achievable, savvy financial planning.
6mo
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Geoffrey Lenart picks at a great point: the chart is *homebuyers*, not *homeowners*. This is just the people currently buying a house. The trend direction isn't great, but there are several major differences to before. There are currently fewer buyers and sellers. The market will adjust, some possible ways: More inventory comes online, people start buying lower end houses to afford the payments, people accept the higher mortgage assuming they'll be able to re-finance in the next few years at lower rates, people take on fewer services that usually went along with buying a house (mow own lawn, less premium channels, etc). We don't have to treat every new data point like the tip of an iceberg. Have you seen a chart of number if homeowners who own their homes outright? You won't, because that's good news, record highs.
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Alex Hooker
6mo
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Absolutely eye popping. I do think a crash is inevitable but to your point it will be in slow motion because of inertial structures from low rates. This is probably worse for the economy than a quick flush and then being able to rebound.
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Jelmer Kattevilder CFA CAIA CIWM WSETDip FWS
Portfolio Management | Investment Advisory | Alternative Investment | Wine Entrepreneur
6mo
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So if it jumped to 40% while many locked in low rates and labour markets generally stable, there would be a significant portion of people well above the 40% too. That soft landing of the general economy seems quite crucial for this to hold up
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