Chart of the Week - US Housing Better and Worse
- Callum Thomas
- Oct 4, 2022
- 1 min read
Housing Market Risk: The US housing market is both better and worse than pre-financial crisis. On the one hand debt to income ratios have come down a lot — meaning less leverage and therefore less likelihood of negative equity, defaults, credit stress, and systemic risk to the banking system.
Borrowers also have a greater likelihood of having fixed their interest rate, with much less exposure to variable rates this time around.
However — house purchasing power goes down as rates go up. Regardless of mortgage stress, this mathematical fact naturally acts as a sinking lid on house prices.
This is particularly interesting when you realize US housing market valuations have surpassed the extremes of the subprime bubble. So maybe we see less stress given less leverage, but we still likely see a material correction as rate shock meets stretched valuations. At the very least this will act as a clear headwind to growth/confidence.
Key point: US housing market is less leveraged, but more expensive vs pre-08.
NOTE: this post first appeared on our NEW Substack: https://topdowncharts.substack.com/
Best regards,
Callum Thomas
Head of Research and Founder of Topdown Charts
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This is a very insightful breakdown of the current housing market. The contrast between lower leverage levels and historically high valuations paints a much clearer picture than headlines alone. Many people focus only on mortgage stress, but purchasing power and affordability are equally important factors that can influence market direction. I especially appreciate how the charts simplify a complex topic into something easy to understand. Just like investors carefully evaluate different assets before making decisions, consumers compare quality and value when buying akhrot price in pakistan. In both cases, understanding the underlying fundamentals is what leads to smarter choices. Thanks for sharing this valuable perspective and data-driven analysis!
So maybe we see less stress given less leverage, but we still likely see a material correction as rate shock meets stretched valuations. Slope Rider
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