There’s Always The Park Bench
Guess what? US home prices are at record highs.
Oh, you already knew that? I was just making sure. Brian Luke was just making sure.
Brian works at S&P Dow Jones. In the index department, where he's head of commodities and also head of real and digital assets. On Tuesday, he spent his morning penning some perfunctory color to go along with the latest update on the nation's marquee gauge of house prices.
"For the second consecutive month, we've seen our National Index jump at least 1% over
Part of me assumes that prices will only go up more dramatically when rates finally do come down, but that just seems too obvious at this point. It’s to the point, buyers who require mortgages may not even be able to get in the game even if prices were flat and rates went down.
Anecdotally, we have seen strong sales in both volume and price in my neighborhood, but I can only assume that the buyers all work at Nvidia given the selling prices.
“Part of me assumes that prices will only go up more dramatically when rates finally do come down, but that just seems too obvious at this point.”
Exactly.
Lower rates can have a large effect on monthly payment on the way down, as they did on the way up. Taking rate from 7% to 6% cuts payment by 11%, from 6% to 5% cuts payment by another 12%, each move increases qualified buyers hence demand . My assumption/guess is that lower rates will also bring more supply to market. No idea which effect wins out.
Data point – in my city, median household income is about $80K, with two bedroom apartments in the range of $1700 to $2200/month excluding the extremes. So median households can afford rents – and we’re considered a rent-burdened place.