Market Convulsions

Yesterday as I cycled away in the gym a news story about local property tax increases flashed across the screen. Local residents who were interviewed made comments to the effect that taxes now felt like a mortgage, and residents don’t feel like they really own their homes anymore. Tennessee property taxes are some of the lowest in the nation, ranking at #40 for most expensive. When bulls speak about rising property tax and insurance they act as if these issues are confined to the coastal states. That is simply not the case.

The National Association of Realtors published an article in May of last year which details where insurance is the most expensive by state as well as how much it could increase. Some of the states in the top 10 for most expensive will likely surprise you:

No surprise of course if you regularly read this column that Florida took the top spot. The big storms and disasters got some press over the past year, but floods in places like Arkansas and Kentucky barely saw the light of media day. If you live in the middle of the country, you are constantly at risk for tornado and flood damage. I remember my very first trip driving to Austin and getting caught in a blinding rain in Arkansas where the entire highway was flooded. Folks were hydroplaning all over the place. It wouldn’t be the last time I feared for my life on that trip. Our infrastructure is severely aged. If only we had spent all that COVID money doing something about it.

From taxes to insurance, folks are getting hammered which we discuss here often. It’s bizarre how those who live in affluent and insulated communities have no clue just how bad it has gotten. According to a recent NerdWallet study, 57% of Americans live paycheck-to-paycheck. Depending on who you ask some think this number is lower or higher. The disagreement seems to be around how one defines paycheck-to-paycheck. Regardless, if you are not in the top 10% then likely any increase to expenses causes stress especially as inflation has ravaged households.

Speaking of housing bulls, I taped my second debate this past week with one of the most vocal ones out there, Logan Mohtashami from HousingWire, which is partly why this missive is a bit late. My sincere apologies but I used the opportunity to really try and reach his followers. Despite his lack of social graces on social media, Logan and I agree on more than we disagree on when it comes to the housing market. What we do disagree on though is very important. Logan uses the 80s housing market as his base case and believes we will jump the affordability hurdle with dual incomes. I reminded Logan that we had women joining the workforce en masse during the late 70s and 80s which is how the housing market survived during that time period.

Logan also believes high-paying jobs are going to materialize out of thin air. At the moment, we have the highest number of multiple jobholders who are working two part-time jobs to make ends meet in the history of the series.

Every bull I have talked to cannot answer the labor question. I too would love to see the missing men from the workforce rejoin such that our productivity increases.

At the moment however for a variety of reasons we either don’t have the jobs for them or the incentives to entice them.

If you are a frequent listener to America This Week, you will hear that there is a carrot coming on this front from the current administration. How long will that take though? The unaffordability crisis has gotten out of control. When looking at the ratio of median home prices to median income, we have reached levels that are not sustainable.

If we had the jobs to support these home prices, I would not spend most of my waking hours trying to educate folks on just how unaffordable housing has become. I promise that the moment I start to see this turn, I will be the first to let you know.

Meanwhile, for those who don’t have to worry about such things, it’s getting dicey out there as the stock market wobbles.

As discussed, the superprime buoyed home prices last year, but as they watch their portfolios decline, they are not going to be as inclined to continue to do so.

For today’s post I want to focus on the recent revelations about the credit scores of our student loan oxen and how that will be a drag on home prices. Additionally, I will discuss the downstream implications if the Republicans get their way and end the Payment Supplement program at FHA. For those who watched the markets convulse last week I will detail my thoughts around the action in the treasury market and what that could mean for mortgage. And, finally, I will share which housing markets were hot in February versus those that were not.