Location Strategy Top 10 Chartbook

The chart below shows the potential forecasts for inflation, based on current rates. None of them show CPI reaching the Fed’s 2% target.

Households increasingly rely on plastic to maintain their spending.

Hiring? Candidates are still searching for remote work.

The rapid rise in rates has more than doubled monthly mortgage payments from pandemic lows, significantly denting affordability.

The change in rates has dramatically impacted affordability; two years ago $2,500/month could afford a $760K house - today it’s $452K.

Mortgage demand is up slightly. Despite the rise in rates, mortgage applications edged up 0.9% last week. Purchase activity is down 26% YoY unadjusted.

This shows the surge in the percent of loans under 3%, and also under 4%, starting in early 2020 as mortgage rates declined sharply during the pandemic. Currently 23.3% of loans are under 3%, 61.3% are under 4%, and 81.2% are under 5%. The percent of outstanding loans under 4% peaked in Q1 2022 at 65.3%, and the percent under 5% peaked at 85.6%. This is very different from the housing bust, when many homeowners were forced to sell as their teaser rates expired and they could not afford the fully amortized mortgage payment. The current situation is similar to the 1980 period, when rates also increased quickly. All of these low interest rate mortgages is the key reason new listings have fallen sharply.

Here is a graph of the year-over-year (YoY) change for several rent measures since January 2015. Most of these measures are through May 2023, except CoreLogic is through April and Apartment List is through June 2023. These show rents having peaked and now in solid decline, with the exception of the owner’s equivalent rent – the only measure that does not use actual transactions, but relied on by both the BLS and the Federal Reserve for guidance on housing inflation.