Is The Housing Sector Is Strong?
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November Market Outlook
Now, there is chatter we are close to the end of the Fed rate hike cycle and a number of predictions and assumptions are being made whether rate hikes will continue or pause, and for how long.
Why is this so important? Because the Fed’s drive to slow the economy thereby slowing down inflation comes at a price. The price is fear, instability, and job loss. Which in turn creates volatility as markets react to economic reports without the stabilization of a Federal Reserve buying mortgaged-backed securities and treasuries. There is also evidence of this in the yields of short-term treasuries verses long term. The short term three-month and the two-year Treasury bills have yields higher than the longer 10-year note, creating a so-called inverted yield curve. When that happens, it highlights investors are more worried about the economy in the short-term than long-term.
Let’s double click on that… investors are more worried about the economy in the short-term than the long-term. Housing is long-term, typically. I will concede there are flippers and short-term investors, but, for most, housing is long-term. The most recent median homeownership rate is 13.2 years, that’s an increase of 3 years over the last decade. Thirteen years seems pretty long-term… and investors are more secure about the economy long-term.
I want to break housing down into four buckets this month: supply, demand, affordability, and credit availability. The housing sector is strong, well-funded and able to withstand short-term volatility. While critics continue to generate fear around instability, crisis, bubbles, foreclosures, and more, our job as real estate professionals is simply to support reality with facts.
For more information on the Denver real estate market please reach out to Cherish McClure.