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The Market Bull – November 6, 2018

The major averages closed with small gains on little real news pending the mid-term election results. The Chinese are once again talking about negotiating an end to the trade war with tariffs set to hit 25% come January 1st.

Las Vegas joins Los Angeles as another significant real estate market to report troubling results. On the heals of an 18% decline in Los Angeles area sales. Formerly hot Las Vegas reports that inventory for sale has exploded with a 52% gain from a year ago as sales fell 8% in October. Sharp jumps in inventory for sale is usually the first sign of trouble with real estate markets.

Black Knight’s recent Mortgage Monitor report showed some interesting details regarding the current state of the real estate market nationally. Rising interest rates as the 30-year loan approaches 5% has pushed affordability to a decade low. As the payment to income ratio hits 23.6%.

The monthly house payment for an average priced home has jumped $190 per month since the beginning of the year, an 18% increase. California, far from the median is the least affordable market in the nation with a median income ratio of 39% to afford the average home. For the record the previous peak in this ratio was 56% in 2006.
While the data is interesting comparing median to average is something of an apples to oranges comparison. As an example based on FRED data using new home prices, the median income to house price ratio shows that it was about 3-1 in 2006 compared to 4-1 currently, at the national level.

Data on California shows that the median income to median price ratio was about 4-1 in 2006 and nearly 5-1 currently. All that said while the size of the bubble can be argued, it’s existence can’t. the Federal Reserve’s decision to solve the problems caused by too much debt with even more debt. Aside from being illogical and deeply flawed are about to come back to haunt it.

Read More: Least affordable in a decade.

Standard and Poors 500 Index closed at: 2,755.45 up 17.14
NASDAQ finished the day: 7,375.96 up 47.11
Gold ended trading at: $1,227.80 down $4.45

This is Caleb Lawrence Registered Investment Adviser Scotts Valley Drive and Willis Road in the Scotts Valley Plaza, Suite 202, Scotts Valley, Ca, 95066.

Rebroadcasts, additional writings, and other entries are also available on my Blog at www.clinvestments.com

Advisory services offered through Caleb Lawrence Registered Investment Adviser Inc.

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