By Erik Sherman
There’s always a pull to the past, even though, as everyone knows, prior investment results don’t guarantee future performance. To that end, RMB Capital produced a short new video in which partner and portfolio manager Ann Guntli went through some of the key issues.
As she noted, concerns about another housing crash have been growing as mortgage rates rise and demand slows (because mortgage rates are rising and pricing pressure, while starting to ease in some places, still leaves homes extremely expensive on the whole). But the fundamentals are different today.
First up, pointing to data from Realtor.com, Guntli noted that houses were on the market one day longer than the year before. Not a big increase, but it’s the first time that’s happened since June 2020.
Next, RMB’s graph of Federal Reserve data showing mortgage debt service payments as a percentage of disposable personal income (as a reminder, what’s left after taxes). Even with higher rates and house prices, the number is under 4%, which is the lowest since at least 1980. At the peak of the GFC, the figure was more than 7%. Remember that until the runup in housing prices, people were buying for years with low mortgage loans.
Inventory of homes is at historically low levels, which is probably a big reason why home prices haven’t dropped to pre-pandemic numbers. “On a positive note, the credit quality in mortgage originations is in much better shape than in the 2006 to 2008 housing bubble.” Widespread defaults are less likely than before…
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