The housing market is driven by the balance between supply and demand. Supply cannot be increased significantly quickly, so the only way for the booming housing market to slow is if demand drops. And the most likely causes for a drop in demand are either a major geopolitical development – such as Russia invading Ukraine and the US and its NATO partners deciding to respond militarily – or a recession.
Since World War II there has been a consistent pattern of the Federal Reserve hiking interest rates to control inflation and thereby triggering a recession. With the Fed finally acknowledging in late November that inflation was not transitory and committing to end its bond buying spree and also raise interest rates, will it be able to avoid a recession? Can this time be different?
“The virus is unpredictable. People’s responses to the virus are unpredictable. It’s not a garden variety business cycle by any means,” said Donald Kohn, a senior fellow at the Brookings Institution think tank who served as Fed vice chair from 2006-10. “It’s much harder to peer into the future and know how to calibrate your monetary policy.”
Bernard Baumohl, chief global economist at the Economic Outlook Group, a forecasting firm, was more blunt. “The Fed has a hellishly difficult task right now,” he said. “There is absolutely no history for the Fed to lean on to deal with this kind of inflation.”
Most economists predicted last spring that high inflation would be temporary, pointing to the supply chain problems caused by restarting the US and world economies. But some economists warned the $1.9 trillion COVID aid bill enacted last March risked fueling longer-lasting inflation by pumping too much money into the already recovering US economy.
By last June even I was writing: “Should inflation prove to be more persistent than the Fed expects, then it is likely that the Fed will have to start to increase interest rates sooner and move them up more quickly than it currently expects. And mortgage rates would follow.
The Fed’s two goals of price stability and maximum sustainable employment are known collectively as the “dual mandate.” In explaining its policy of keeping interest rates low – in part by buying large quantities of Treasuries and Mortgage-Backed Securities, the latter helping to keep mortgage rates low – the Fed refers to the still high level of unemployment.
I have to admit that I struggle to understand how low interest rates, which boost asset classes such as stock prices and real estate, are helping to boost employment. Lower interest rates benefit those who own assets which appreciate.
I would like to see the Fed start to reduce (taper) its bond buying, while encouraging Congress to focus on removing barriers to employment – by providing increased child care allowances, for example. In other words, deal directly with the problem rather than hoping that benefits will trickle down somehow.”
The city’s new housing-production plan, Housing Lynn: A Plan for Inclusive Growth, has been approved by the Massachusetts Department of Community Development (DHCD).
The five-year plan was submitted to DHCD after it was approved by the City Council on Sept. 7 and the Planning Board on Oct. 12, after months of work and input with community members.
The approval allows the city to meet its affordable-housing needs, while also allowing for preferences in many state-housing grants and infrastructure programs.
The city has never had a comprehensive housing plan and now joins 168 other Massachusetts communities with approved housing-production plans that are making an effort to solve the state’s affordable-housing crisis.
Mayor Jared Nicholson said this approval by DHCD is another step in the right direction: “It continues the momentum that we have witnessed over the past few years during the development of the plan to address one of the top issues our residents face,” said Nicholson. “The preparation of the Housing Lynn plan relied heavily on feedback from Lynn residents and a detailed review of market conditions, and as we look towards the implementation of the recommendations, we expect that to continue. We know how important these recommended actions will be to supporting growth that benefits the whole city and the impact they can have for cost-burdened residents.” (more…)
The formula for calculating the property tax is actually very simple: take the $ amount of the previous year’s Tax Levy, add 2.5% for Proposition 2 1/2, and also add any New Growth (such as new construction or a condo conversion). This figure is the new tax levy. To this figure is added debt service – the Principal and Interest payable on the town’s debt. – to produce the total Tax Levy.
Here are the numbers for Fiscal Years 2021 and 2022, remembering that FY 2022 runs from July 2021 to June 2022. (more…)
After increasing somewhat – albeit from a very low base – in the first several months of 2021, the seasonal drop-off after October after was just as sharp as in prior years – and again this is a reduction from a low level. 2022 is starting off at a seemingly impossible even lower level.
Single Family Homes
The % decline is almost irrelevant. More relevant is the months of supply shown.
Inventory now has less than 1 months’ supply overall and is only over 1 month – but still far below the 6 months deemed to reflect a market in equilibrium – at prices over $1.5 million.
Friday’s storm reminded me of a story told to me some years ago by an older neighbour, who said that the typical male went through three stages in life:
1. When he got together with other males of the species they talked about women and sport
2. When they got together they discussed their ailments
3. When they got together they discussed estate planning
In somewhat similar vein I offer the three stages of snow removal:
1. Dressed in full winter gear, snow shovel in hand, out he goes to tackle the snow – feeling great about doing something so healthy and invigorating
2. He buys a snow blower – same feeling, less chance of a heart attack
3. He hires somebody to clear the snow while staying warm indoors.