Economy: New home prices, Mortgage rates, delinquency rates, Dow
SubPrime mortgages caused the last recession (07-08 financial crisis). Much of it was a self-feeding cause and effect somewhat led by a 5 year rapidly increasing cost of Housing (especially new homes). 45% rate of change over 5 years; 227k up to 329k.
Interest rates at the time were considered fair, and decreased from 7.25% to 6.25% during the 5 year run up. Mortgage delinquency rates were stable between 2-3% and began to trend higher just as housing costs were peaking. (delinquency rate data lags 6+ months). As Housing peaked and delinquencies climbed, Wall street took noticed and began to fall. This is when the snowballing effect picked up. Stocks crater, corporate layoffs ensued and that fueled more delinquencies and falling housing prices. It took 5 years for homes and Wall street to fully recover to their previous highs.
Below charts from 2013 to present:
An impressive 5 year 55% increase in New Home prices, mostly in just the past 2years. Until recent years,New home prices had slow growth with interest rates between 4-5%. As soon as the Fed’s printed more money and interest rates fell to 3%, New Home prices skyrocketed in historic fashion. Now with interest rates above 5% and some above 6%, I would expect home sales to drop and prices to come down. Delinquency rate has been hovering around 2%, but this data is delayed 6 months. I also assume we will see this increase some. The main question is, will there be a similar action/reaction moving forward with Wall street and other financial markets?
Interest rates at the time were considered fair, and decreased from 7.25% to 6.25% during the 5 year run up. Mortgage delinquency rates were stable between 2-3% and began to trend higher just as housing costs were peaking. (delinquency rate data lags 6+ months). As Housing peaked and delinquencies climbed, Wall street took noticed and began to fall. This is when the snowballing effect picked up. Stocks crater, corporate layoffs ensued and that fueled more delinquencies and falling housing prices. It took 5 years for homes and Wall street to fully recover to their previous highs.
Below charts from 2013 to present:
An impressive 5 year 55% increase in New Home prices, mostly in just the past 2years. Until recent years,New home prices had slow growth with interest rates between 4-5%. As soon as the Fed’s printed more money and interest rates fell to 3%, New Home prices skyrocketed in historic fashion. Now with interest rates above 5% and some above 6%, I would expect home sales to drop and prices to come down. Delinquency rate has been hovering around 2%, but this data is delayed 6 months. I also assume we will see this increase some. The main question is, will there be a similar action/reaction moving forward with Wall street and other financial markets?
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