PodcastNational Housing Market Outlook

Mortgage Market Metrics with Barry Habib

Dean Wehrli
Shelly Chen

Dean Wehrli

Shelly Chen

May 19, 2021

Truly the jack of all trades, Barry Habib has done everything from producing a Broadway show to acting, singing, and being one of the brightest minds in real estate—particularly when it comes to the mortgage sector. In this podcast, Barry Habib of MBS Highway explains the inner workings of the mortgage market. Please keep in mind that this episode was recorded in mid-April, a little over a month before it was uploaded. Barry’s insights, though, are timeless.

Featured guest

Barry Habib, Founder and CEO, MBS Highway

The Drivers of Interest Rates

  • Start with the simple: increased economic activity leads to inflation, which results in higher mortgage rates.

  • The massive stimulus pumped into the economy is good for the short term but will cause a drag in the long term. High levels of debt decrease economic activity, which lowers rates.

  • The Fed is buying treasuries and bonds in an effort to continue economic activity without pushing the inflation button too much. This is being done to prevent a quick dive into a recession.

Analyzing Affordability (the Right Way)

  • You might see headlines like, “Home prices have increased 10% while incomes have increased by only 4%. Therefore, this market is becoming increasingly unaffordable.” This is a flawed interpretation.
  • A 10% increase in housing costs does not require a 10% increase in income to maintain the same level of affordability. A 10% increase in a housing payment of $1,000 is $100. Assuming an existing income level of $5,000, an extra $100 needed for the increase in payment is only a 2% increase in income.

A Look into His Crystal Ball

  • Interest rates will go down again in the coming years, and home values will continue to increase.
  • A recession is likely to occur in 2022 or 2023.
  • If passed, the $15K tax credit for first-time home buyers will add undue stress to the housing market, which is already oversaturated with buyers. Right now, we need more homes, not more buyers.
  • Barry does demographics too. For instance, he sees even higher levels of buyers in the coming years, since there was a spike in births 33 years ago. 33 is the median age of first-time home buyers.

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About The Author

Dean Wehrli
Dean Wehrli
Dean helps housing sector clients figure out not just what might work and what might not, but why.
Shelly Chen
Shelly Chen
Research Analyst II, For-Sale
Shelly is responsible for working on various research projects as it relates to residential for-sale, including supporting our Burns Home Builder Analysis and Forecast report.

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