Barry Ritholtz is one of my regular reads when it comes to housing. As with any “expert,” I take everything he says with a grain of salt, but I appreciate that he backs his positions with data and has a solid track record and a lot of industry respect.
If you’re interested in a detailed, deep analysis of the housing market, this week Ritholtz is going through five aspects of it, and “looking at the Housing Recovery meme, challenging the assumptions and data that make up that argument.”
Parts of it get pretty dense, but most of it is accessible if you sit down to read it. (I tried skimming and that didn’t work very well. It requires a quiet place.)
The series, which still has two more days, is worth a read for sure.
Monday: “Debunking the Housing Recovery Story” specifically, shadow inventory.
[W]e have heard from Housing Bulls as part of their recovery thesis that the decrease in inventory of homes for sale is a net positive. I would argue that the massive supply of homes in the Shadow Inventory make this judgment premature.
Tuesday: “Home Affordability Reality Check”
Regardless of the fact that homes are off 35% from their peaks, and mortgage interest rates at record lows, buyers have an insurmountable hurdle. For most potential home buyers, the NAR Home Affordability Index is a meaningless data point. Lacking any down payment and having restricted access to available mortgage credit, homes may be theoretically affordable — just not to them.
Today, Wednesday: “The Problem With Home Prices“
And therein lies the rub: Real Incomes have been mostly flat the past decade; this is making it challenging to grow into a full blown housing recovery. Without real income growth, the purchasing power of potential buyers remains flat.