S&P Dow Jones Indices today released the latest results for the S&P CoreLogic Case-Shiller Indices and the news is ALL good!
- Prices are up! (a 5.5% gain)
- The default rate on mortgages are still low with household debt at manageable levels.
- The demand for housing continues to exceed supply and the banks are happily extending more and more credit.
- We are told that the demand for housing is currently outstripping supply and inventory levels are very low.
But reading the analysis, reproduced below, has me scratching my head.
NO mention of the drivers?
No mention of technological advancements, the improvements in profitability, the continual enhancement of infrastructure, population growth and changing household demographics.
The only mention of credit is the throw-away comment that “financing is available”…..
Please understand the “The Effortless Advantage” as defined by classical economist David Ricardo. It explains how our economy functions in response to the Economic Drivers, as we teach them at Calnan Flack. The Drivers ensure that the Boom Bust Cycle must perpetuate.
There is NO housing Bubble (YET!)
Our study of history tells us that what is occurring is EXACTLY what has happened in EVERY cycle since the 1800’s.
Let history be our guide and the Calnan Flack Economic Cycle Action Plan shape our framework of investment thinking. We are still in the early stages of this current cycle and there is plenty of time for it to run. NOW is the time to be selecting quality growth assets to leverage to your investment advantage.
Speak to the team at Calnan Flack to find out how we can help you.
“As home prices continue rising faster than inflation, two questions are being asked: why? And, could this be a bubble?” says David M. Blitzer Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “Since demand is exceeding supply and financing is available, there is nothing right now to keep prices from going up. The increase in real, or inflation-adjusted, home prices in the last three years shows that demand is rising. At the same time, the supply of homes for sale has barely kept pace with demand and the inventory of new or existing homes for sale shrunk down to only a four- month supply. Adding to price pressures, mortgage rates remain close to 4% and affordability is not a significant issue.
“The question is not if home prices can climb without any limit; they can’t. Rather, will home price gains gently slow or will they crash and take the economy down with them? For the moment, conditions appear favorable for avoiding a crash. Housing starts are trending higher and rising prices may encourage some homeowners to sell. Moreover, mortgage default rates are low and household debt levels are manageable. Total mortgage debt outstanding is $14.4 trillion, about $400 billion below the record set in 2008. Any increase in mortgage interest rates would dampen demand. Household finances should be able to weather a fairly large price drop.”
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