OVERHEATED MARKET AWASH IN CASH – OR SIGN OF THE TIMES?
A close friend of mine bought a home in Scottsdale, AZ, in November for less than $1.1mm.
She visited the home a couple of times, played a bit of golf, swept the patio, made a few improvements – and listed the home for sale last weekend.
She got multiple offers on the day she listed, and all of them were “All Cash.”
Most interesting though is that the offer she accepted was for almost $1.7mm.
My friend was delighted but also alarmed because that level of appreciation might signal an overheated market.
But does it?
IT’S JUST THE GROWTH IN M2/MONEY SUPPLY
I blogged about this in May, pointing out that asset prices always increase with the money supply.
And because the money supply grew 26% last year, asset prices were bound to climb too.
The Scottsdale offers discussed above are cases in point.
All of the offers were made by “boomers” whose investment values very likely climbed substantially because of the increase in the money supply.
And, as a result, they were all able to comfortably make all-cash offers.
This is just a great illustration of why and how money supply increases push up asset values.
PURCHASES DOWN 18% YEAR OVER YEAR
The MBS Highway reported today that purchases are down 18% year over year.
This is partially because inventory is down but also because the % of cash buyers is way up year over year (from 15% to 23%).
Analysts measure purchase volume by looking at purchase money mortgage applications, but cash buyers don’t apply for mortgages.
So, when the % of cash buyers increases, it can mislead market-watchers into believing the number of purchases is falling more than it actually is.
FALSE MAILERS/WE DON’T SELL INFO/COUNTY RECORDS
Our borrowers frequently receive mailers with our mortgage bank’s info prominently displayed, making our borrowers think the mailers are from us.
They are actually from slimy call-center lenders that create mailers like that to intentionally mislead borrowers.
This is a quick reminder to ignore those mailers (or to tell your clients to do so), as lenders using such tactics should hardly be trusted (needless to say).
This is also a reminder that we never sell any borrower info to third parties, and that third parties get their info from county/public records.
Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167
