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New Home Sales Jump As Average Prices Drop Third Most Ever
Reports of the housing bubble's demise were greatly exaggerated.
Or at least that's what a simplist
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Interesting to look at the mortgage insurers (e.g. RDN ESNT MTG NMIH). YTD they have slightly outperformed the SP500, and underperformed other insurers only moderately. Meanwhile, other real estate sales-exposed stocks like brokers and homebuilders have underperformed by quite a lot YTD. Does this suggest market expects a large decline in home sales volume, but not a similarly large decline in house prices?
That’s a good observation. It’s hard to imagine many defaults when so many people are sitting on record levels of equity. The equity buffer at this point for most homeowners is to the point where even a significant decline wouldn’t put many people in the red.
The mortgage insurers benefit from a combination of regulatory action, underwriting and reinsurance to make sure that for their journey looks a lot less like the trip they took from 2006-2009. A deep recession may still test them on earnings, given that folks that buy PMI may not have a lot of extra cash laying around.
H-Man, a recent financial article discussed vacation homes being purchased based upon the amount of rental income that would be generated. That smacks of the same logic that was used in 2007 to finance a home — your assets increased via the purchase, so you qualify.
Maybe not as pervasive as back then but when a former waitress owns $10 million in vacation homes, you get the point.