Looking at the subsection of housing development stages seems to indicate that the real estate market is currently fueled by the demand created from 2020's liquidity boom.
Data Source: FRED
Charts: https://imgur.com/a/6X629Se
(Chart 1)
While permits have returned to 2019 levels (chart indexed to Dec-2019) and seem to fluctuate with an expectation of interest rates being cut by the latter half of 2023. Is there more front-end demand destruction to come?
As developments complete, permits fall, and the potential for sticky inflation could extend the timeline of high interest rates – will housing find a new bottom? Will high interest rates keep buyers from buying the new inventory while construction demand slows?
(Chart 2)
30Yr premiums are at a 15 year high with risk being priced into the market. Homebuilders appear unshaken from the height of the priced risk as building continues with pent-up demand being tapped.
The median house price ballooned 48.6% in 2 years from Q2-2020 to Q4-2022. While Q1 2023 showed a price fall of 8.9%, was this the popping of the real estate bubble?
My opinion is we have more to see.
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