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Proprietary Data Insights Top Stock Searches This Month
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Underwater If, at the beginning of 2022, you bought the five stocks investors have been searching for most, according to our proprietary sentiment indicator, Trackstar, you’d be underwater today. By how much? Let’s say you had spread $10,000 evenly among Tesla (TSLA), Apple (AAPL), Eversource Energy (ES), Amazon.com (AMZN), and the artist formerly known as Facebook, Meta Platforms (META). You’d have roughly $6,190.72 today, good for an on-paper loss of $3,809.28. Put another way, you’d be sitting on less cash than it took to make your initial investment. The Homeowner Equivalent When you have a mortgage with a higher principal than your home is worth, you’re underwater too. As The Juice noted in September, a vast majority of homeowners are not underwater. They’re sitting pretty with their homes paid off or locked in at low interest rates they secured in the good old pre-2022 days. But 8% of people who took out a mortgage in 2022 are underwater, compared to less than 1% who commenced a home loan in 2021. Source: Black Knight Mortgage Monitor Break it down by location, and Colorado Springs and Honolulu lead the pack with more than 30% of 2022 mortgages underwater. In Virginia Beach and the California cities of Riverside, Bakersfield, San Diego, and Stockton, more than 20% of 2022 mortgages are underwater. Another metric to keep an eye on is delinquencies.
If the underwater epidemic (among a subset of 2022 buyers) butts heads with a persistent rise in delinquencies, we might have a problem. |
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Housing |
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Throwing Money Away… on a Mortgage?
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Key Takeaways:
If you’re one of those new 2022 homeowners who, presumably, bought a home for a record price and took out a mortgage with a 5%, 6%, or even 7% interest rate, you have to be questioning your decision. Especially if you’re underwater. Even if you plan to refinance if and when rates come meaningfully down. Even if you expect home prices to eventually rebound and make new highs. There’s still a sinking feeling about owing more on your loan than your home is worth. You’re throwing your money away… on a mortgage. In hindsight, renting might have been the better option, even at record prices. You could’ve made the most of that by moving from one rental to another as prices started to drop heading into summer. Source: Zumper While rents are still up year over year, that growth continues to slow. According to Apartment List, rents decreased between October and November in 93 of the nation’s largest 100 cities.
Nationwide, rents were down 1% in November, bringing the national median to $1,356. To spend no more than 30% of your income on rent, you need to earn $4,520 a month, or $54,240 annually. This pales in comparison to the $98,100 salary you need to comfortably afford to buy a median-priced home in America. As of September, it cost $888 more per month to buy a single-family starter home nationally than to rent it. Similar story if you focus on the trio of notoriously expensive West Coast markets: Southern California, Northern California, and Seattle. Source: Essex Property Trust According to Essex Property Trust, a real estate investment trust with properties primarily in these three parts of the country, it’s 2.3x more expensive to own than it is to rent there. Makes sense then that only 16% of Americans in a recent survey think it’s a good time to buy a house. Source: John Burns Real Estate Consulting
The Bottom Line: As we detailed in Monday’s Juice, home ownership might never be affordable again for large swaths of the population. That said, as the market continues to cool – as in, both interest rates and home prices come down – people priced out of real estate in 2022 might be financially ready to take the plunge into home ownership. It’s the classic iteration of the American dream. You save your money as a renter until you’re ready for the down payment, monthly payments, maintenance costs, and all the other costs home ownership entails. On the bright side, if you save, save, and save some more, only to realize you still can’t comfortably afford a home, at least you have a stack of serious cash to invest in the stock market. |
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