January 2021





You won’t read this in the paper.

The  RMLS stats from December are in. Let’s get started.

Possible Pivotal Point

As of a week ago, buyer activity is following the same path as 12 months ago. Buyer numbers were strong and then leveled off most recently, just like last year. The leveling off last year may have been weather related. Remember the cold, ice and snow in late January and early February. Our current leveling may have a different cause.

War has always put a lid on national economic activity including the housing market.  War could develop in Ukraine sparked by Russia. The Ukrainian developments will have an effect on our markets including the housing market.

Remember the Persian Gulf War which started with the Iraqi invasion of Afghanistan in August 1990. We and many allies jumped into the conflict January 16, 1991. The war was over by February 28,1991. 

Patrick Tyler and Richard Stevenson reported July 30, 2002 in the NY Times

https://docs.google.com/document/d/1VRjLlEyyfq93yr1HczywTzZcACMAk-0qnWVmXH-webU/edit (click this link to read)

that James A. Placke, a former senior diplomat specializing in the Persian Gulf and now a senior associate of Cambridge Energy Research Associates, said  ”When weapons start going off in the Middle East, markets generally go down, gold prices go up, and oil prices shoot to the moon,” he added, ”and I expect that this is the short-run pattern that we can reasonably anticipate.” 

I suspect when Russia invades, we will have the same result. Markets will fall, gold will rise and oil prices will quickly rise.

”I am firmly of the school that the Iraqi invasion of Kuwait precipitated the American recession in 1991,” Professor Cooper said. I am sure the invasion of Russia into Ukraine will also precipitate falling markets if not an all out recession. 

And oil is involved with the Ukrainian/Russia conflict today. Russia is a major world oil supplier as well as gas to Europe. 

The graph below shows how the national housing inventory levels were affected by the Persian Gulf War. The Gulf War marked the peak of inventory levels for more than 10 years earlier and the peak of inventory for next 10+ years. Rising inventory levels are equivalent to falling demand. When demand falls, inventories rise and home prices drop. 

Monthly Supply of Houses in the United States (MSACSR) | FRED | St. Louis Fed (click this link to see a much better version of the graph)


As the inventory level (a ratio of listings over sold homes) rises, there is an eventual cause for home prices to fall. The Persian War period was so short that the overall effect on home prices was only about $5,000 according to the graph found on this link: https://fred.stlouisfed.org/series/ASPUS

If the war had lasted longer the effect on values would have been greater.


The Russia/Ukraine conflict seems like a nearly identical situation as the Persian Gulf War although, just for the record, I am not claiming to be a historian. Just using my limited common sense here. 

Am I missing anything here? Please feel free to let me know. 

What are you seeing that I may have overlooked?

The main difference today …. it seems to me the potential for a major all out war with longer duration and greater consequences  exists with the current situation than the Persian War.

This current conflict  has a much greater chance than the 1991 Persian War to slow our housing market and damage home prices for a longer period of time. 

But what does happen, as usual, time will tell. 🙂

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