Look, it's an appraiser, it's a podcaster, it's a chart maker. It's Jonathan Miller!
I wrote this post a few hours before the third presidential debate and since the topic covers foreign policy and the first two debates (plus the VP debate) had only scant mention of housing, I didn't think I'd get anymore insights on what our policy makers think is happening in the housing market. Both parties clearly see no bonus points in bringing up a complex subject that won't score any points (and only happens to be our nation's largest asset class).
So I am asking the question - Why are housing prices rising in the DMV (and the US)?
Housing trends are a local phenomenon but credit is national. This pattern is happening across many markets and is seen in NAR's existing home sale stats. There are 3 metrics that can be used to tell the story: Prices, Listings and Contracts.
Prices - they're rising now because...
Inventory is plummeting faster than contracts are being signed...
Yet signed contract activity is generally flat....
Falling inventory is connecting the dots between flat sales and rising prices because:
1. Sales and inventory are not offsetting: Any improvement in sales is not enough to offset the drop in inventory so the cause MUST be something else.
2. It's an election year and sellers are waiting to see what happens - even though neither candidate is better for housing
3. All sense of urgency has been removed because Federal Reserve's QE3 initiative will keep interest rates low through early 2015.
4. Sellers become buyers (or renters) after they sell and many can't trade up because credit remains as tight as it was in 2008.
5. Low rates are keeping mortgage lending tight - Make banks more risk averse, less margin of error.
I never imagined I'd be saying that tough lending standards are causing housing prices to rise - not just in the DMV - but nationally. Conventional wisdom says that tough mortgage lending standards keep the market low and slow. However mortgage rates have fallen so sharply over the past year, they are keeping sales in check but supply limited which forces prices to rise.
And that's really not debatable.
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