In Part 2 of a three-part series, Reventure Consulting explores why current home-buying demand has already peaked, and is set to decline in the coming months.
Most of the home-buying demand over the last year has come from high-earner, high-credit score households converting from renters to owners. These households have good jobs and haven’t been as impacted by the K-shaped economic recession, allowing them to get a loan and purchase a home even in uncertain times.
The problem is that there is a limited supply of these high-earner buyers. At some point soon the burden of home-buying demand will shift to lower earning, lower credit score households. This is where the Housing Bubble will burst.
Strict lending standards and increasing prices will make it very hard for these low and middle-income households to participate in the home buying spree, which will deprive the housing market of demand.
Moreover, the US Home Ownership Rate is already at an elevated level of 65.8% (historical average of 64%). Just how much more runway does the Housing Bubble have when such a high percentage of households already own their home?
In Part 3 of this series we will investigate how Prop Tech is accelerating the current Bubble and will likely also accelerate the crash.
Watch Part 1 of this Series: https://www.youtube.com/watch?v=VZfFM3Hcnz4
WSJ Article on Mortgage Originations and FICO Scores: https://www.wsj.com/articles/the-mortgage-market-is-roaring-but-lots-of-people-cant-get-a-loan-11617355802
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0:00 Peak Home Demand
2:47 Home Ownership Rate
5:08 65.8% is High!
6:32 K-Shaped Recovery
8:50 Hypothetical Economy
11:41 760 FICO Scores
14:33 Who will Backfill the Demand?
16:54 Three Fundamental Factors
19:45 Interest Rate Fallacy