Tuesday, July 20, 2021

3 Charts That Show This Isn’t a Housing Bubble

3 Charts That Show This Isn't a Housing Bubble | MyKCM

With home prices continuing to deliver double-digit increases, some are concerned we're in a housing bubble like the one in 2006. However, a closer look at the market data indicates this is nothing like 2006 for three major reasons.

1. The housing market isn't driven by risky mortgage loans.

Back in 2006, nearly everyone could qualify for a loan. The Mortgage Credit Availability Index (MCAI) from the Mortgage Bankers' Association is an indicator of the availability of mortgage money. The higher the index, the easier it is to obtain a mortgage. The MCAI more than doubled from 2004 (378) to 2006 (869). Today, the index stands at 130. As an example of the difference between today and 2006, let's look at the volume of mortgages that originated when a buyer had less than a 620 credit score.3 Charts That Show This Isn't a Housing Bubble | MyKCMDr. Frank Nothaft, Chief Economist for CoreLogic, reiterates this point:

"There are marked differences in today's run up in prices compared to 2005, which was a bubble fueled by risky loans and lenient underwriting. Today, loans with high-risk features are absent and mortgage underwriting is prudent."

2. Homeowners aren't using their homes as ATMs this time.

During the housing bubble, as prices skyrocketed, people were refinancing their homes and pulling out large sums of cash. As prices began to fall, that caused many to spiral into a negative equity situation (where their mortgage was higher than the value of the house).

Today, homeowners are letting their equity build. Tappable equity is the amount available for homeowners to access before hitting a maximum 80% combined loan-to-value ratio (thus still leaving them with at least 20% equity). In 2006, that number was $4.6 billion. Today, that number stands at over $8 billion.

Yet, the percentage of cash-out refinances (where the homeowner takes out at least 5% more than their original mortgage amount) is half of what it was in 2006.3 Charts That Show This Isn't a Housing Bubble | MyKCM

3. This time, it's simply a matter of supply and demand.

FOMO (the Fear Of Missing Out) dominated the housing market leading up to the 2006 housing bubble and drove up buyer demand. Back then, housing supply more than kept up as many homeowners put their houses on the market, as evidenced by the over seven months' supply of existing housing inventory available for sale in 2006. Today, that number is barely two months.

Builders also overbuilt during the bubble but pulled back significantly over the next decade. Sam Khater, VP and Chief Economist, Economic & Housing Research at Freddie Macexplains that pullback is the major factor in the lack of available inventory today:

"The main driver of the housing shortfall has been the long-term decline in the construction of single-family homes."

Here's a chart that quantifies Khater's remarks:3 Charts That Show This Isn't a Housing Bubble | MyKCMToday, there are simply not enough homes to keep up with current demand.

Bottom Line

This market is nothing like the run-up to 2006. Bill McBride, the author of the prestigious Calculated Risk blog, predicted the last housing bubble and crash. This is what he has to say about today's housing market:

"It's not clear at all to me that things are going to slow down significantly in the near future. In 2005, I had a strong sense that the hot market would turn and that, when it turned, things would get very ugly. Today, I don't have that sense at all, because all of the fundamentals are there. Demand will be high for a while because Millennials need houses. Prices will keep rising for a while because inventory is so low."

Monday, July 19, 2021

Real or fake? The pros and cons of artificial grass for your yard

Published Date 7/15/2021

It was back in 1966 when the Houston Astrodome installed the first artificial turf in an athletic field, and the word "astroturf" was heard. As much as you think of all fake grass products bearing that name, however, that was a brand name — like Kleenex or Coke became synonymous with their genres.

The use of artificial grass today has transcended brand names and found its way into the residential markets in a major way — especially in the western U.S., where a never-ending drought, excessive heat, and water usage are big concerns.

You could think of artificial grass as a carpet for your yard, but it is much more than that. Made to look like real grass, its appearance has become more and more convincing with each succeeding decade. The types of artificial grass include nylon (considered the most durable, long-lasting but also the most costly — good for high traffic areas, but not great for kid or pet play). Polyethylene artificial grass is considered a good mid-range option for an artificial law. It's soft, and pleasant to the touch. And the polypropylene variety is the least expensive but also the least durable — best used on putting greens.

You can install fake grass anywhere natural grass might go, including front and back lawns, swing set areas, around swimming pools, roof decks, entertainment areas and putting greens. It is, however, wise to understand the advantages and disadvantages of installing it. Artificial turf is nearly maintenance-free (no mowing, fertilizing or aerating are required), evergreen, very realistic (sometimes almost TOO perfect), long-lasting, and needs no watering. To top off all these pros, it's just plain gorgeous. Always green, always perfect, and pretty worry-free.

The first disadvantage is the up-front expense. According to Family Handyman's Elizabeth Heath, however, professionally installed artificial grass costs between $5 and $20 per square foot. It's costly. You can save money by installing it yourself, but the initial cost is still high.

Another disadvantage is that because it is basically plastic, it gets really hot unless you cool it down with a hose prior to people walking or playing on it. And while higher-quality artificial grass looks and feels like the real thing, it tends to be more abrasive than real grass.

Environmentally, it saves on water consumption. But it's also difficult to find a recycling center that will accept old artificial turf. Studies have also shown that artificial grass can emit toxic gases, especially when hot, releasing metals and micro-plastics into the air and water supply.

Synthetic lawns are easy to clean, but not maintenance-free. Clean up stains right away, using a mild household detergent, and pick up solid waste as soon as possible, hosing down the area pets use most frequently. To maintain its pristine look, rake the lawn with a soft, non-metal rake to preserve the lift of the fibers.

Source: FamilyHandyMan | TBWS

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