Today is Halloween here in the U.S. A time for trick-or-treating, gorging on candy and sweets, scaring the heck out of your kids, and otherwise enjoying the beautiful fall season. Our neighborhood is having a party tonight, and I can’t wait to celebrate with our friends and family.
But for the housing market, the latest figures look downright spooky! They suggest that the surge in prices driven in part by the boom in investment purchases is rapidly subsiding.
I’ve chronicled many of the challenges housing faces, from tighter mortgage standards to fearful buyer psychology to high levels of student loan debt — but the charts I’m about to share with you should really hit home.
First, there’s the quarterly homeownership rate that the Census Bureau tracks. As I mentioned earlier, it just sank to 64.4 percent in the third quarter. How bad is that? We haven’t seen the percentage of Americans owning their homes this low since 1995:
Second, there’s demand for mortgages used to buy homes (as opposed to refinance existing debt). You can see from this chart below that purchase application volume just fell to the lowest level since 1995. That’s almost 20 long years ago!
Third, there are house prices themselves. You can see in the following chart the massive, initial bubble in prices from the mid-2000s … and the second “Echo Bubble” the Federal Reserve’s policies helped inflate over the past few years.
But you can also see that year-over-year price growth is rolling over again — yet another sign of fading momentum in the housing market!
Bottom line: There’s been a lot of crowing from the likes of Ben Bernanke, Janet Yellen and present and past Fed policymakers. They can’t stop talking about how their benevolent interest rate and QE policies actually help Main Street America, rather than just Wall Street fat cats.
But is there any evidence whatsoever of that being the case in housing or mortgages, the single-biggest market the Fed itself said it was trying to help?
Heck, Janet Yellen talking about the success of Fed policy regarding housing reminds me of George W. Bush landing on the USS Abraham Lincoln aircraft carrier in front of a “Mission Accomplished” banner in 2003. He was wrong about Iraq then, and Fed apologists are dead wrong about housing now!
I’m not trying to make this Halloween any scarier than it already is by pointing all this out. But facts are facts as sure as pumpkins are pumpkins.
Until next time,