Wednesday, May 18, 2016

This ugly chart will show you why the Fed has to raise rates.


This is the chart for mortgage applications for the past few months. Most people would look at this chart and freak the hell out. It looks seriously ugly.

When I look at this chart I see nothing but inflation looming hard. Yes kids, I am no longer in the deflation camp. You see, this chart looks this way not because people don't want to buy houses. This chart looks this way because there are almost no houses to buy. There is no amount of low rates now that will fix this chart.

People keep expecting an echo housing bubble, but I can assure you - whats happening in the rental market will make this seriously unlikely. The rental market is so tight that cities all over the Bay Area are talking about rent controls. It's sort of alarming to see, because I've lived in a rent controlled building and know the real world consequences of that.

Builders are having such a hard time finding land to build on, that yesterday I noticed in the city next to me they were building condos on an old car lot. This is the second time I have seen this. They did it on a plot in my city. I don't know what they are going to do when they run out of car lots that were taken out early in the recession.

All I know is that when I read about the housing market now, almost all of the articles talk about shortages. In the next year I predict people are going to start hyperventilating about it in a serious way. And if this economy starts to move at all - this is going to be crazy.

Houses or condos can be built quickly. Finding the land....... not as much. I've always looked at land as dead money. You could wait a decade to move it. In the past two years has been amazing for people who owned vacant land. In the whole time I've lived in the Valley I've never seen it like this.

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