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Members of D.A. Davidson & Co.

Housing Market Update: Slowing but Not Collapsing

Contrary to what you may be reading in the news, "Housing market update: slowing but not collapsing: from what I can see, the worst that can be said about the housing market is that it is cooling off.  ...If anything, it might just be the case that prices got a little too exuberant towards the end of last year and have now come back down to a more reasonable level.  [When looking at the] index of housing affordability, you find that it is still the case that the average family has an income that is more than sufficient to qualify for mortgage big enough to buy a median-priced home using conventional financing. Prices are up and mortgage rates are up, but so are incomes, and the economy is in pretty good shape. All things considered, homes are still "affordable," only much less so than they were a few years ago. looks to me like rising prices are the logical result of a scarcity of supply coupled with relatively strong demand. This can't go on forever, though. Prospective home buyers are being gradually squeezed by rising prices, a scarcity of supply, and a decline in affordability. Higher prices signal a relative scarcity of housing (with local zoning codes to blame in many areas, unfortunately), and higher prices are slowing housing activity in general by making it harder to afford a house. But there is no reason to think that prices are going to collapse, unless of course the whole economy collapses. The housing market is cooling off, but not about to collapse." 

(dated July 31, 2018 by Scott Grannis, Chief Economist for Western Asset Management from 1979-2007, via