The housing market is on fire as home prices continue to rise, even as lumber costs come down. A quick look at the data behind this housing market suggests a strong consumer behind the demand, which leads us to believe a meaningful price correction in housing is unlikely.
During the last housing bubble (2008 financial crisis) mortgage-related liabilities rose to as high as 80% of total consumer liabilities. Today, despite the surge in housing activity, mortgage liabilities represent just 72% of consumer liabilities. Consumers, despite spending more for homes than in the past, are maintaining an overall conservative balance sheet with controlled leverage.
Big picture: Housing price increases may start to slow, but without an external macro catalyst we think they are unlikely to meaningfully decline. This data point, along with rising basic consumer good prices (e.g. groceries) suggests to us inflation isn’t going away anytime soon.
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