The Last Chance Of Freedom : Housing Finance Watch and Inflation Watch

Wednesday, July 27, 2022

Housing Finance Watch and Inflation Watch

Purchase rate lock volume and Home Price Appreciation (HPA) continue to decelerate
Volume for 2022 week 29 came in below 2019's level by 2%.
The Fed will need to hold the course on rates and quantitative tightening, as rates at the 6% level are needed to slow year-over-year HPA to 4-6% by the end of 2023.
No cash out volume is now at its lowest level of the 2019-22 period due to rates having more than doubled (+2 7/8 ppts) since the beginning of 2021.
The 10-year old seller’s market continues
Modest purchase volume declines, in spite of a cumulative 39% increase in constant quality HPA since January 2020
Historically tight supply
The work from home revolution
Arbitrage opportunities due to metro & regional price differences
Cash-Out Refi.
Relatively low historical nominal rates (5.54% as of 7.25) and negative inflation adjusted real rates, along with supply constraints, a home equity wealth effect from monetary stimulus, and the Work from Home revolution will continue to fuel historically high HPA until later this year
HPA is expected to further slow to 6% and 4%-6%, respectively, for December 2022 and 2023
Demand Pull Inflation
While in the midst of the most rapid slowdown in Home Price Appreciation (HPA) since the bust of 2007-2011, demand pull inflation continues to exert a strong influence on general inflation.
Demand pull inflation is when aggregate demand in an economy strongly outweighs the aggregate supply causing prices to go up.
Consumers must cut non-essential spending. 