Lyn Alden is probably my favorite Macro Analyst, as she is clearly brilliant and also very articulate and objective.
I HIGHLY recommend following her on Twitter and on any podcast she happens to hop on.
Last week, she was on one of my favorite macro podcasts – MacroVoices – and I also recommend that, as Lyn provides an excellent overall macro outlook for the world economy.
She Loves Bank Stocks – Which Is Fascinating!
What I found particularly interesting was that she loves bank stocks right now.
That was fascinating because so many banks almost went belly up during the 2008 recession. As a result, many people are expecting a repeat during the upcoming recession.
When the host reminded Lyn about that, she said something like: “We all need to stop viewing the economy through the 2008 lens.”
She then listed all the reasons why banks are so much healthier now – more reserves, better positioned, much stronger loan portfolios, etc.
Anyway – her comment about not viewing everything from a 2008 perspective prompted this blog – as EVERYONE IS VIEWING THE HOUSING MARKET THROUGH THE 2008 LENS – AND THEY SHOULDN’T.
I have blogged many times about how different conditions are now compared to 2008, and those reasons still stand. This blog – This Ain’t 2008 – is a great example, and I recommend reading it.
The reasons “this time is different” include: (1) much stronger underwriting guidelines/no bad loans to go belly up; (2) much tighter inventory; (3) fewer speculators/flippers; (4) homeowners have record levels of equity; and (5) housing normally does well in recessions.
For today’s blog, I am going to focus on inventory and recessions again.
Far Tighter Inventory: 4 Million Listings in 2007; 700,000 Listings Now
In 2007, just prior to the 2008 recession, there were 4 million homes on the market. I want to say that again: there were already 4 million homes on the market in 2007, PRIOR to the recession in 2008! Today there are only about 700,000 listings, per Barry Habib.
In addition, it is extremely unlikely that inventory will ever catch up to 2008 levels because (1) existing homeowners do not want to sell and give up their very low fixed-rates; and (2) a foreclosure onslaught is very unlikely because underwriting guidelines have been so much stronger and homeowners have so much equity.
But again, current pre-recession levels of inventory are less than 20% of 2007’s pre-recession inventory levels and that alone should be enough to convince anyone that this time is truly different!
I would remind every nervous homebuyer about this single statistic over, and over, and over, and over…
I might add one more factor here too: Demographics: the number of buyers hitting peak homebuying age is at record highs right now; while that same demographic was at record lows in 2008.
Housing Normally Does Well in Recessions; 2008 Was the Exception
YouTube is littered with analysts insisting that we will see a housing crash during the next recession because of how much it crashed during the last recession – in 2008.
BUT – 2008 WAS THE EXCEPTION!
In almost all other recessions, home prices either held steady or improved in response to falling rates. I explained all this last year in this blog: Good News: Recession Coming Soon!
Surge in Referrals, Pre-approvals & Contracts
We have recently seen a massive surge in referrals, pre-approval requests, contracts, and locked loans. So much so that it is shocking even us, as we rarely see this much activity this EARLY in the year.
We are not alone too, as we are hearing similar news from many of our friends in the business. So perhaps that is why Redfin recently published this article: The Housing Market Has Started to Recover.
The author points out that buyers have acclimated to higher rates and that inventory remains very tight to the point where we are seeing bidding wars!
In response to all this, here is my question: what will happen when rates fall another 1% and spring buying season heats up?
Buyers in the market now might be wise to pull the trigger sooner rather than later, as rates will drop and demand will surge that much more.
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