The reason the housing market boomed was because …
1. Record low interest rates (Self Explanatory and the FED will raise them sooner than originally thought.)
2. The rent moratorium (Drove up the price of rent beyond that of a mortgage because the price of folks not paying their rent had to be passed on to new renters) This incentivized buying, not renting.
3. Mortgage forbearance (Folks didn’t have to make full mortgage payments keeping them in their homes) This allowed people to stay in their homes rather than sell them for the equity.
So mortgage forbearance and the rent moratorium is mostly coming to an end this month. Moreover all the money that should have been going to rent and mortgages got spent in the general economy, creating the boom we have right now. Folks will still be charged for the rent and mortgage they missed out on during the pandemic and we are likely to see evictions skyrocket! Suddenly the folks gaming the system will have ruined credit and leans placed against all their property. The housing market may dump. And money that was being spent in the economy will go back to paying rent and mortgages. Moreover building materials have skyrocketed yet these builders are under contract to produce at a certain price. A lot can go wrong here.
And I didn’t say anything about enhanced unemployment benefits ending yet, which will tighten the screws even more.
Anyway for all these reasons the FED has not raised interest rates … they’re just not telling us this is the reason. They got to keep money flowing when all this calamity happens.
When all this ends folks will be booted out of apartments and you will see an increased amount of people selling their homes. Money that was flooding purchases in the non home & rent market will draw back. Building materials will be more abundant lowering the price and the market for these material will be more competitive as many have expanded to produce more. This will have a chain reaction throughout the economy. So be careful about buying home builder and building material stocks when everything gets turned off later this month. This includes steel!
Food for thought Economics 101
And if you don’t think folks aren’t gaming the system, remember the case study of the EBT glitch in Louisiana. Whereas stores were raided when the balances went black on their cards and when everything came back online full Walmart shelves were emptied and carts abandoned in the grocery store isles. (See YouTube)