Well now this is an interesting graph that came from my most recent Market Outlook email from Charles Schwab.
The article is a good read albeit not terribly uplifting. They are referring to stocks but I think one line sums it up best:
Our advice to clients can be summed up in a single word: caution.
If you look at the home sales over the last 26 years, are there any interesting patterns?
The last 2 years have had the highest rate or existing home sales in the past 25 years. Moreover, the number of new homes has also set a record and the supply has increased steadily for 5 years.
Record levels of sales and supply. What is driving that increase in homes?
Has there been a big increase in population? Or perhaps people are abandoning their old homes in Wisconsin to buy a shiny new home in San Diego? Or perhaps there is a glut of new homes that will have a hard time finding someone to live in them...
Housing is consistently a cyclic industry, with building booms followed by busts. The last few years have undeniably been a boom...
MARKET OUTLOOK
The consumer, who rode the now-subsiding swell of easy money, could face shoals ahead. Home builders are already starting to feel pain. One of the more popular affordability indexes, the National Association of Home Builders/Wells Fargo Housing Opportunity Index, recently posted its largest eight-month drop in history. The index measures the percentage of homes sold that are affordable to families earning the median income during a specific quarter.
The share of our income now devoted to spending on “essentials” is at an all-time high of 55%.1 There has also been a sizable swell in the inventories of both existing and new homes (see graph below).
