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.

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More from @nickgerli1

Mar 27
NY Fed is estimating that 9 million borrowers are now in default on student loan payments.

And that credit scores could drop 75-150 points.

Could have a big impact on housing market. Image
1) If someone's credit score drops from 760 to to 590, that is going to have a big impact on their ability to borrow.

Particularly if they're interested in buying a house and taking out a mortgage.
2) During the pandemic, student loan payments were paused, and negative credit reporting from missed payments was paused.

The result is artificially high credit scores across the US population.
Read 13 tweets
Mar 24
It’s beginning to look a lot like 2008.

At least for home builders.

I took this picture outside a home building site 45 min north of Tampa.

They had over 20 vacant spec houses completed for sale. And are advertising 0% down mortgages to try to move the inventory. Image
1) here’s the Zillow snapshot of all the homes for sale. All of these homes were completed and move-in ready. Image
2) what’s interesting is that the builder agent told me they were going to start converting these homes to for rent.

I’m guessing it’s because they want to start on the next phase or construction, and they simply can’t do that with 20+ for sale.
Read 14 tweets
Mar 22
Biggest inventory growth markets YoY.

Listings up 40-60%.

5 of the top 11 are California. Image
1) Overall inventory levels in California's housing market are still fairly low.

With only 0.6% of all the houses across the state listed for sale.
2) However, such sharp YoY increases in inventory indicate that a shift is taking place. More sellers are coming to market, while demand is still very low compared to pre-pandemic levels.
Read 6 tweets
Mar 18
People are fleeing Austin, TX in droves.

The city lost -13,500 people to outbound migration in 2024.

The biggest drop the city has ever experienced.

This outmigration has now caused Austin's housing market to collapse. With home prices down -19.5% over the last two+ years. Image
1) In Travis County, which covers Austin and some surrounding areas, domestic migration was running +14,000 per year at the pandemic peak in 2020.

And has now reversed course to -13,500 per year in 2024.

That's almost a 28,000 net downward swing in movers.
2) Some of these people leaving Austin head to the nearby suburbs like Williamson and Hays County, others are going back to California and New York.

The result is a vacuum in housing demand that is resulting in massive spikes in for sale and rental inventory.
Read 12 tweets
Mar 16
Markets in Florida with the most price cuts to start 2025:

Punta Gorda - 41% price cut rate
Cape Coral - 39
North Port - 37%
Tampa - 36%
Naples - 36%

Most of these markets are experiencing their highest price cut rate in at least a decade.

A clear signal of a market downturn.Image
1) Here's Punta Gorda.

Price cuts up to 41% of all listings. Long-term average: 25%. Image
2) Cape Coral.

Current price cut rate: 38.7%.

Long-term average: 27%. Image
Read 9 tweets
Mar 14
Tampa, FL is now losing people for the first time in its history.

The city lost -11,000 people due to domestic migration outflows in 2024.

Meaning that more Americans left Tampa than moved in. This was the biggest migration loss in Tampa's history going back to the early 1990s. Image
1) We're specifically talking about Hillsborough County here.

You can going back to 1991 that the only other two years that were negative on migration were 2006 and 2007, at the peak of the last housing bubble.

The loss in 2024 was 3x worse in % terms. Image
2) Lower domestic migration explains a lot of where Tampa's housing market has slowed considerably over the last year.

Many Americans are now moving out of the Bay Area due to high housing costs, climate risks, and RTO mandates.

While the in-bound pace has slowed.
Read 10 tweets

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