Nick Gerli Profile picture
Feb 22, 2023 9 tweets 3 min read Read on X
Mortgage Applications to buy a house just collapsed to an index level of 147.📉

That's the lowest level of buyer demand in 28 YEARS.

Lower than anything we saw in the 2008 Crash.

Down 41% from last year.

(Source: Mortgage Bankers Association)
1) Collapsing Mortgage Demand is a huge problem for the US Housing Market.

Because despite all the reports of "cash offers", they still only represent 29% of home sales.

The other 71% still require a Mortgage to complete the transaction.

(Source: NAR)
cdn.nar.realtor/sites/default/…
2) Why is Mortgage Demand collapsing so much?

Because both Home Prices AND Mortgage Rates are way too high.

Creating a situation where the monthly payment for a homebuyer (Mtg+Tax+Insurance) is now over $2,500/month.📈

In the 2006-07 Bubble it peaked at $1,400/month.
3) And Income Growth has NOT kept up with these increase in the cost to buy house.

Right now the House Payment / Median Income Ratio is 40%.

Meaning the typical American family CANNOT AFFORD to buy a house. ❌

This isn't a "choice". It's simple math.
4) Which makes the propaganda being spewed about a "recovery" in the Housing Market absolutely laughable.

Nothing in the fundamental data supports a recovery.

In fact, quite the opposite when you consider a Recession and increased foreclosures are likely on the horizon.
5) The default rate on FHA loans is going up fast right now.

Currently it's visible in the 30-day default rate.

But soon it could spread to 60 and 90-day defaults, which would be what triggers foreclosure filings.
6) Higher foreclosures is one thing which would trigger an inventory spike and lower prices.

Another is if the 14 Million Americans who own vacant homes decide to sell.

If only 5% of the owners of vacant homes sell and cash out, that would DOUBLE Homes for Sale.
7) As the old adage goes - "Something has to break".

The current state of the US Housing Market with:

1) Near record high prices.
2) 7% Mortgage Rates.
3) Sellers refusing to cut the price.

Will not last. Something will break.
8) The easiest thing to "break" is Home Prices. We're already seeing this among Home Builders.

When Builders cut the prices by 20%, the buyers come back.

Sellers of existing homes will start to catch on as 2023 progresses.

• • •

Missing some Tweet in this thread? You can try to force a refresh
 

Keep Current with Nick Gerli

Nick Gerli Profile picture

Stay in touch and get notified when new unrolls are available from this author!

Read all threads

This Thread may be Removed Anytime!

PDF

Twitter may remove this content at anytime! Save it as PDF for later use!

Try unrolling a thread yourself!

how to unroll video
  1. Follow @ThreadReaderApp to mention us!

  2. From a Twitter thread mention us with a keyword "unroll"
@threadreaderapp unroll

Practice here first or read more on our help page!

More from @nickgerli1

Jul 3
The difference in cost between buying a house and renting has reached the highest level on record.

Today, your monthly payment for buying a house is $2,800/month.

While the typical rent is $2,049.

The resulting $750 premium to buy means that many would-be first-time homebuyers are content to rent and wait out the market.

Which helps explain why the housing market in 2025 has remained sluggish, and why home values are now dropping in most states on a month-over-month basis.Image
1) A quicker way to understand this reality is by comparing how much the cost to buy has increased v the cost to rent over the last 5 years.

Mortgage Payment: $1,481/month --> $2,801/month (+89%)

Rental Rate: $1,517/month --> $2,049/month (+35%)

So the cost to buy has increased by more than 2x faster than the cost to rent since the pandemic started.
2) Something people often forget is that in the 2010s, and early stages of pandemic, it was actually cheaper to buy a house in America than to rent.

This was due to artificially suppressed mortgage rates in the 3-4% range, plus relatively affordable home values coming out of the last housing downturn.

This scenario propelled much of the strong homebuyer demand we saw in the U.S. from 2012-2021.

Now, the situation is different.
Read 10 tweets
Jul 2
The reason no one is buying houses right now is because U.S. housing market affordability is literally at the worst level in the past 35 years.

Today, an American making median income needs to spend 39.7% to afford the monthly mortgage, tax, and insurance payment.

The long-term norm is 29%.

And during the depths of the last housing crash, it became as cheap as 22%.

For a rebound in the housing market to take place, this Mortgage Payment/Income Ratio needs to get cheaper, probably closer to 30%.

To get there, home values need to drop 15%, and mortgage rates need to drop 1.5%.Image
1) I don't think people realize just how far off we are from buyers returning to the market.

It's not a matter of a rate cut or two.

It's a matter of home values correcting significantly, and some type of mega Fed rate cut and/or recession bringing Mortgage Rates into low 5% range.
2) To see my point, look at this matrix showing the U.S. Mortgage Payment / Income Ratio at different levels of home price correction and mortgage rates.

Today's affordability rate is 39.8%.

To get to the long-term norm, around 30%, it would facilitate a 15% decline in home values and mortgage rates dropping to 5.3%.

And that simply gets us back to normal affordability.Image
Read 13 tweets
Jun 27
Home builder inventory over the last 40 years.

Only other times it was this high: 2022, 2008, 1991.

All are either recessionary scenarios or near recessions.

This is ultimately good news for homebuyers. It means cheaper prices are around the corner. But potentially bad news for builders, and those who bought near the peak of the bubble.

There could also be an economic spillover in terms of construction job losses and downturns in regional economies most exposed to home building.Image
1) And this is more a story about the South in the U.S. than anywhere else in the U.S.

In the South, there are now 311,000 new builder homes for sale.

That's the highest level on record, even eclipsing the heights of the 2006-07 bubble.
2) The graph for this is quite shocking.

Many people I speak to in the housing market still think there's a "supply shortage". And that "we're not building enough".

But the data in the South, and parts of the western U.S., suggests we could be in a home-building bubble reminiscent to what we saw in the mid-2000s.Image
Read 9 tweets
Jun 26
No one is buying new homes that are under construction or permitted.

Months of supply for both is sitting between 15-20 months, which is basically the highest on record.

Meanwhile - completed spec houses have a decent sales pace of 3.6 months.

Meaning extremely weak demand in the future for builders. Any short-term success on sales is simply being driven by having lots of completed inventory and giving mortgage rates buy downs/cutting prices on completed homes.

The long-term outlook, measured by sales pace for Under Construction/Permitted, says demand is fundamentally weak.

And that the Housing market will continue to get cheaper. (which is good news for buyers)Image
1) Consider that the Months of Supply for homes Permitted but not Started is literally the highest level on record.

Meaning basically no one right now is willing to enter into a sales contract for a home to be built.

That says a lot about the current state of demand.
2) Meanwhile - Months of Supply on houses Under Construction (14.8) is at 2nd highest level on record behind only the 2008 housing bust.

Back then, months of supply for under-construction houses went to 18.1.

A further indication of how weak demand is right now.
Read 9 tweets
Jun 25
The housing downturn is broadening.

With over 60% of U.S. counties experiencing monthly home value declines in May 2025.

That's one of the highest percentages going back almost 3 decades.

The only other two times in the last three decades when this many counties reported a monthly drop, according to Zillow, were 2022 and 2008-2012.Image
1) This indicates that the U.S. housing correction is no longer just a Texas and Florida downturn.

In fact, over 30 states showed a monthly contraction in May 2025 according to the Zillow data.
2) What remains to be seen is if this budding correction is more like the "flash correction" in 2022 when mortgage rates spiked.

Or the extended housing downturn that took place from 2007-2012, which lasted five years.
Read 5 tweets
Jun 24
The housing market is definitely slowing.

Especially condos.

With the condo months of supply on the market hitting 6.7 months in May 2025.

Highest level since the 2006-12 downturn.

Single-family supply is now up to 4.4 months. Image
1) It wouldn't shock me if condo inventory keeps climbing to levels not seen since the last housing bust in 2008-09.

Single-family will also likely keep increasing in future months.

Don't be surprised if condos are at 8+ months of supply by year end, while single-family is above 5.
2) In the depths of the last downturn, single-family supply go to 10 months and condo got to 14.

Unlikely we see a repeat of that.

However, we don't need to for prices to drop meaningfully.
Read 7 tweets

Did Thread Reader help you today?

Support us! We are indie developers!


This site is made by just two indie developers on a laptop doing marketing, support and development! Read more about the story.

Become a Premium Member ($3/month or $30/year) and get exclusive features!

Become Premium

Don't want to be a Premium member but still want to support us?

Make a small donation by buying us coffee ($5) or help with server cost ($10)

Donate via Paypal

Or Donate anonymously using crypto!

Ethereum

0xfe58350B80634f60Fa6Dc149a72b4DFbc17D341E copy

Bitcoin

3ATGMxNzCUFzxpMCHL5sWSt4DVtS8UqXpi copy

Thank you for your support!

Follow Us!

:(