![]() For these reasons, most potential homebuyers are running the numbers at sellers' asking prices and the numbers don't work, so they're not buying. Why should the typical mortgage payment double if the city is losing population? It shouldn't. There are few long-term constraints to supply in Austin, and Los Angeles is losing population outright. Los Angeles Mortgage Payment on Purchase (Bloomberg) interest breakdowns, it's a quirk of the amortization process). This is the situation for Los Angeles, which in contrast to Austin has lost population since the pandemic (ignore the principal vs. Of course, Austin proper has gotten very built up, but this data includes Austin's far-flung suburbs, many of which are mostly farm/ranch land. ![]() But 20% is a lot less than 2.55x, which is how much more expensive mortgage payments have gotten. The job market in Austin has done well - as far as I can gather the median income is up a solid 20% or so since pre-Covid - largely due to the boom in tech companies moving people there from California. But is this in line with economic fundamentals?Īustin Mortgage Payment on Purchase (Bloomberg) For a buyer looking to buy the median home with a 20% down mortgage, they've seen an unprecedented rise in the monthly payment they would be required to make over the last 2 years because of:įor example, this is the situation (credit to Bloomberg) for the Austin, Texas metro as of this fall. And with the FOMC meeting this week bringing a 50 bps hike and indicating the Fed's intentions to keep rates higher for longer, it's clear to me that the Fed's policies are designed to throw cold water on the housing market. Of course, homebuilders have some of the lowest PE ratios in the market, but if their earnings turn to losses with the housing bust, then investors won't be happy. Home Construction ETF ( BATS: ITB) nearly cutting its YTD losses in half since the October lows, and the SPDR Homebuilders ETF ( NYSEARCA: XHB) not far behind. But investors in homebuilders are partying like it's 2006, with the iShares U.S. If you read between the lines, the words of Fed speakers this year tell you even more- they're likely happy that home prices are beginning to fall back to fair value. But for the Fed chair to admit that the pandemic housing boom was a bubble that is now popping really has no precedent. Due to how much their words can move the markets, Fed speakers are known for almost comical amounts of euphemism in their speeches and interviews. housing market pandemic boom was a "bubble" and that the housing market is now going through the "other side of that". ![]() Specifically, Powell openly said that the U.S. ![]() But what was less widely reported at the time was Powell's thoughts on the housing market. The speech was less hawkish than feared, and the stock market cheered when he failed to push back on the recent rally. Speaking from the Brookings Institution a couple of weeks ago, Fed Chair Jerome Powell covered a wide-ranging variety of monetary policy topics. ![]()
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