Predicting Pivot Points

Mortgage rates, home prices and a handful of charts for your enjoyment.

I hope you all had an awesome long weekend filled with turkey, family, and fun. Personally, I found it a little difficult to put the laptop away entirely and not jump into charts or headlines here and there. But common sense generally prevailed and I was able to mostly unplug and relax. There’s quite a bit of data dropping this week including initial claims and Q3 GDP. New home sales in October were already a huge whiff this morning and there are clearly serious problems in the housing market.

Many of these housing issues we’re now dealing with come as a consequence of years of credit masters monkeying with the cost of capital and investment groups like BlackRock BLK 0.00%↑ bidding against people who planned to actually live in the dwellings. The horrendous housing affordability problem is a real tragedy because, at least for my wife and I, the primary catalysts for major changes in our wealth building over the last decade or so have been linked to changes in our shelter expenses. This is what I said 18 months ago when rates were creeping higher:

The more people priced out of home ownership, the harder it is to have a functioning housing market. - ya boi, April 2022

We are now at that point where the housing market is no longer functioning. For a solid deep dive on what is currently happening in housing, I’ll defer to Amrita Roy over at

The Pragmatic Optimist

:

If you are a homebuyer, expect to pay $20K extra in down payment (assuming 20% down payment). And your monthly mortgage payment would go up from $990 to $2200, an increase of 122% over the last 3 years. 

Full read here:

The US Housing Market is in a gridlock. What happens next? Part 1

My take? It ain’t pretty out there

Housing affordability has become yet another topic of argument between the generations. We could bicker over “who had worse” until we’re blue in the face, but there is no doubt in my mind that the market can’t function with 2023 prices at 2000 borrow costs.

At the end of the day, it doesn’t matter what the age is on your driver’s license - if you’re a home owner - I hope you like your house; cause unless there is a change in rates/price, odds are now youse can’t leave…

Then again, all of this reminds a little of this chart that I shared earlier this year:

I suppose housing affordability is only a problem if you’re using the wrong measuring stick….

Suggested read

Life Without Ceilings

My Current Read On The Ponies

Anyway, Happy Monday! If you’re not thoroughly depressed and you’re still with me, let’s jump into some of these charts. With Monday’s session now at a close, I wanted to share what I’m focusing on for the remainder of this week. That measuring stick I mentioned above? The Dollar!

I have to admit, I’m a bit surprised the dollar index $DXY didn’t put up more of a fight at the 200 day moving average (103.6) last week. It seems as though the test of 103 is upon us. Should that fail, 101 could well be in the cards. While this is just the dollar against a basket of other shitcoins fiat currencies, the dollar is struggling against real assets as well. As the temperature in the hot tub begins to slowly climb, so too do the hard assets we all know and love.