Huge Headwinds for Housing: Price, Rising Mortgage Rates, Supply


Supply of existing homes is at 19-year (all-time) low according to the NAR. Those are not the only headwinds.

Earlier today I noted Existing Home Sales Drop 3.6% as Supply Hits 19-Year Low. But supply is not the only issue affecting home sales.

Median Sales Price Existing Homes

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​Graph from Y-Charts, anecdotes mine.

Since January 2013, the median sales price of existing homes has risen by $76,200. That's a percentage increase of 44.7%. The BLS does not count this as inflation.

Average Hourly Wages

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If you were struggling to afford a home in 2013, it's likely an even bigger struggle today.

Mortgage Rates

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As shown by Mortgage News Daily, Mortgage Rates are on the rise. From 2014 to 2016, falling mortgage rates added a small tailwind to housing. Since September 2016, mortgage rates offer a small headwind.

With each quarter point jump decreases affordability by about 2.5%. Meanwhile prices have been rising substantially.

Unequivocally Negative

In regards to the Recent Rate Spike, Mortgage News Daily says the "current trend in rates is unequivocally negative." Emphasis by MND.

Hurricane Spike

Existing home sales spiked in November to the best rate in years. That spike is partially an artifact of the hurricanes. Recall that new home sales are recorded at signing but existing home sales at closing. The average closing time is 45-50 days or so. Factoring in the length of time it may take to buy a home, the November spike is right on time.

Civilian Employment

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Many analysts cite jobs as a strength. But jobs are a lagging indicator.

Moreover, the year-over-year percentage increase in employment peaked in October 2014.

Other Headwinds

  1. Trump threatens to start a global trade war.
  2. Student loans remain a huge problem for millennials.
  3. The stock market is clearly in bubble territory. If the stock market breaks hard, so will home sales.

Point three is a huge warning sign and a trade war very well could be the impetus for a major correction in the stock market.

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Mike "Mish" Shedlock​

Comments (6)
No. 1-6
Mike Mish Shedlock
Mike Mish Shedlock


For retiring boomers looking to move rising asset prices help. True, Millennials have few assets


People are obvious to the asking price they only base their purchase decision on their monthly payment. Thus the artificially low interest rates along with mortgage interest deductions stimulate demand and therefore inflating prices. I think the market and housing are going to continue until? No one knows but it can go on a lot longer than you would imagine. I think new housing supply is constrained due to labor shortages so people aren't selling their existing homes as a result.


I'm really surprised by the low inventory number. I would expect a big jump in retirees trying to sell their homes in high property tax areas after the new tax code.


Millennials have on average 16,000 in revolving credit card debt where average Apr is 15%.


No question, 9 yrs of record low rates is big reason for housing price recovery. But also the last 9 years very little supply has been added. The new home start/completion chart is stunning...we are still at the BOTTOM of former recessions (80's, 90's, '01). So very little new supply has been built. And labor costs are rising and Mexican immigrants who are 50% of the construction labor force are not immigrating in large numbers to the USA anymore. So net-net...hard for supply to rise.


Not to mention Millenials aren't exactly the tradesmen generation. If they can't build a home on facebook, it's not likely to get built. Most of the people involved in building my current home were over 55 and even 60.

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