Hey welcome to the second half of the year. It’s been a couple months since my last update so I’ve got a bit to catch up on here with you.
Last update I did at the beginning of May we had 1,280 existing single family homes on the market which was like a 30% jump over April. Today we have 1,629 single family existing homes for sale in El Paso County. The way the MLS tracks inventory is a little different so for historical context lets look at the bigger picture. MLS wide all single family homes and patio homes together we have 2,998 active listings. The last time we saw these levels of inventory was September of 2015.
What was that like? The median sold price in September of 2015 was $240,000 at an interest rate of roughly 3.825%. Ah yes, the good old days. Today we’re sitting at rates around 7% with a median sold price in June of $499,000. This is actually insane because at the end of the ripping roaring market in June of 2022 we set our previous record of $495,000 and then came off as much as 55k off that in the following months. Affordability as we knew it is nowhere to be found that is for damn sure.
For a side by side the 2015 scenario with 20% down would give us a mortgage payment just over $1,100 and the June 2024 scenario is closer to $3,000 a month. The 20% down 9 years ago was like 48k and the 20% today is basically 100 grand…
Inflation eh?
Back in the day I did a little comparison on how much gold it took to buy a house. Gold is a weird buoy that kind of floats a top all the bullshit monetary policy. In September 2015 gold cost around $1,150/oz. Today it’s about $2,385. So in 2015 the median house here cost around 209 ounces of gold and today it costs exactly 209 ounces of gold…weird yea? Nice illustration of the power of using real estate, metals and other assets for hedging and the reason that wealthy people do not hoard cash.
This illustration is overly simple. Yea the cost of a house in terms of physical gold is the same as it was 9 years ago and that does a good job of reflecting the slide of the dollar’s purchasing power. However it does nothing to account for the strain that many people, most of whom have mortgages, are feeling every month.
In 2015 the median household income in El Paso County was around $60,000. That means that approximately $13,000 of that would go to a mortgage or just under 25% of the annual income.
Today the median household income here is right around $85,000 based on last available data which was 2022. And the median mortgage is running around $36,000 a year, roughly 42%. People are feeling that.
And so the inventory is starting to pile up as entry level buyers are being pushed out. Yet somehow the median price continues to creep higher on diminishing sales volume. At some point the whole supply exceeding demand thing is going to be a factor.
June 2024 saw 1,208 sales
June 2023 1,505
June 2022 1,887
June 2021 2,134
June 2020 2,023
The last time we had a shittier June in sales volume was June of 2012 that brought us 1,034 sales. So yea prices keep rising but the sales activity is diminishing. Doesn’t feel right.
Meanwhile we have the VA that has extended its foreclosure moratorium through the end of 2024 which is keeping who knows how many properties off the market. Locally June 2024 saw 39 foreclosures which is down from 2023 and 2022. Not to mention the years in which we had a foreclosure crisis. If you see people offering coaching online for how to get rich off flipping foreclosure be extremely fucking careful with this stat in mind please! Chances are that just like in the gold rush the guy selling the shovels will make more than the guy digging…
I don’t think anyone living can say they’ve lived through what we’ve seen in the last 5 years before. God willing the next 5 years bring some relative boredom but for now that seems unlikely. Let’s look at some indicators that may give us a hint of what’s to come.
Unemployment bottomed out at 3.4% and has now risen to 4.1%. The politicians are quick to highlight that this is remarkably low, which it is. What they will not highlight is that unemployment goes up very quickly and comes down rather slowly.
Unemployment is one of those ugly things that reinforces itself. For every high paying job lost there are several lower jobs that go away with it. For now we’re not really seeing anything overly concerning but when we do see it generally it’s kind of like a rug pull.
My favorite thing to rant about, the yield curve, is not good. The inversion between the 10 year and 3 month yields is now in its 21st month and this makes it the longest yield curve inversion on record. Economists tend to say that the longer and the deeper the yield curve inversion the harder we get boned at the end of it. So right now we’re set up for potentially the hardest boning we’ve had in 100 years.
I know, I know. Debbie downer. Negative Nancy. Been wrong for literally years now. The options here are kind of limited though. We can keep pushing record highs on the stock market, the housing market, on gold, on everything. And eventually we will reach a point of hyperinflation. Or we could allow for the market to blow off steam, crash and recover. But what scumbag politician wants another 2008 on the record right before an election?
And so we kick the can down the road. Right now in what is supposed to be a ripping economic expansion we have a Federal budget deficit of almost 2 trillion dollars a year. Our interest payment on our national debt alone matches our defense budget, which in itself is absolutely legendary. How long can this be sustained is something we will all figure out together.
For me as always I’ll give you the same advice. If you’re looking at the long term and you need a place to live then buy a house. If you’re treating real estate as a short term investment and you’re buying it at retail value life may teach you some painful lessons. But that’s always true and just because the last decade or so has been forgiving of short sightedness does not mean the next one will be.