I. Woohoo – Rates Fell!
The 10-Year Treasury yield fell a “whopping” 4 basis points (4/100th) this morning…and the mortgage industry cheered (even though mortgage rates barely budged).
Why cheer for a minuscule improvement? Rates rose 3/8% this month on top of already high rates – so even the tiniest reversal from this trend is very welcome news.
II. California’s Weather Is Beyond “Extraordinary.” (Why It Will Save California)
I know a young couple making $700,000 per year in CA who could work anywhere because their computer science skills are so marketable.
They refuse to move though because they are “happy to pay the good weather tax” (about $60,000 per year). This same couple bought a veritable “shanty” of a house in San Mateo for $2.2 million because they “could not afford to buy in Palo Alto.”
CA agents often tell me I make fun of CA too much – so today I am sharing a graphic that shows just how extraordinary CA’s weather is. People who haven’t lived here don’t fully understand, and those who have lived here their entire lives take it for granted.
This post on X displays a map of the U.S. showing that the CA coast is the ONLY place in the entire U.S. (and most of the world, for that matter) where the weather is in the temperate 65-to-87-degree zone YEAR-ROUND.
As someone who plays in that weather every single day when I am in CA, I can attest to just how wonderful it is.
I love Texas, and everything about it, but CA’s extraordinary weather is why the state will likely never collapse into the abyss like so many critics keep telling us.
A lot of people are willing to pay extra to live in it.
III. Homebuyers – Please Stop Waiting for Prices to Fall! You Might Be Waiting…Forever (While Prices Rise)
2008 lives in every “crash bros” head. They’re all 100% convinced the market will at least correct again, if not crash.
The crash bros on X include Melody Wright, Vlad the Inflator, Nick Gerli, George Gammon, and Michael Burry (of “The Big Short” fame) – who predicts a major crash every three hours, give or take.
These guys have all been repeatedly wrong now for about four years, but they refuse to give up.
That would all be well and good IF they were just sharing opinions and NOT getting in the heads of so many potential homebuyers – who are waiting for a correction that might never come.
And – it is not me saying that. It is Morgan Stanley!
Graham Stephan just posted this excellent video, setting out the points made by Morgan Stanley:
- The housing market is not going to crash; it will instead just go through a reset, and buyers will accept the new “more expensive” normal.
- The “lock-in effect” of mortgages below 5% (held by 70% of homeowners) will keep supply constrained (and thus prices high), as those homeowners do not want to sell.
- Yes, demand is very low, but supply constraints offset that low demand.
- Building constraints (zoning, higher labor costs, green mandates, fees, etc.) will continue to keep supply down.
Long story short: Morgan Stanley says prices will stay elevated due to constrained supply and limited seller pressure.
Stephan also reminds us that Zillow, Realtor.com, CoreLogic, and Fannie Mae are predicting relatively flat conditions as well – with no crashes on the horizon.
Whether Morgan Stanley is right or not is not my point.
My point is that nobody knows for sure, and that waiting for prices to fall or trying to time the market is often a fool’s game because NOBODY knows what will happen.
In addition, there are too many other variables at play – beyond supply and demand – that could tilt the market in either direction.
A stock market crash or a recession, for example, could bring rates way down – and bring millions of buyers back into the market – and push prices way up, despite a softer economy.
In addition, the government or the Fed could flood the economy with cash again via artificially low rates, excessively loose lending standards, excess stimulus, or Quantitative Easing (asset buying by the Fed) – and that would push up home prices as well (like we saw during COVID).
I have blogged numerous times about the cost of waiting, frequently mentioning the couple that was trying to get a “deal” in a very hot Oakland neighborhood – only to miss out on offer after offer while prices doubled.
That was an extreme case, but not unusual in direction.
My point and Graham Stephan’s point is this: If a buyer sees a home they like and they can make the numbers work, they should buy it and not worry about timing the market…ever. It rarely works, and the crash bros are wrong more often than right.
