When will the US housing market improve?

Everyone wants to know.

Some, of course, think it never will. To those I say, good luck, let me know where to contact you, in that cave on the hill where you’re going to hide out until Armageddon (or until the asteroid hits Mars …).

Well, this is an easy question to answer … if you’re a genius.

Which he is.

Jonathan Miller tells you all you need to know (although, to be fair, in this case he shares his geniusness with Fannie Mae PMI Chief Economist David Berson).

Mr Berson has put together a chart that compares “purchase” mortgage activity (you know, when you buy a home) with “all” mortgage activity (refinancings, home equity loans, purchases).

What’d he find out?

In the period 2004-2006, the value of “all” activity was significantly higher than due to home purchases, alone. This was contrary to the norm.

Looking At Refinance Mortgages: An Early Warning Indicator Of House Price Risk? – By Jonathan J. Miller, Matrix

Since non-sale transactions drove the mortgage business over this period and were not transactions driven by buyers and sellers haggling over price, it likely placed the housing mortgage market at greater risk.

You can see the 2004-2006 period were all transactions were well above purchases providing an early warning to the mortgage market problems we are seeing now.

The main reason (in my opinion – geniusness defined) that we’re having trouble now is money was too cheap and non-accountable.

Prior to 2004, although home prices were increasing rapidly, low inventory, available credit, and eager, able and willing buyers drove the market.

Those things will continue, after we get rid of all this dead weight.

Or, after the asteroid hits …

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