Home Buyers Sapped by Soaring (but Still Low) Mortgage Rates, Sky-High Home Prices

“The budget of many prospective buyers was dealt an abrupt hit”

How will home sales be impacted by the toxic combination of sky-high home prices that even on a national basis exceed the crazy levels of the prior bubble, and mortgage rates that have soared nearly a full percentage point since late October, to nearly 4.4%?

That’s what everyone wants to know. The industry was hoping that soaring rates would trigger panic buying to lock in current rates before they go even higher. But the opposite seems to be happening.

It takes months between looking at a home and closing the sale. The home sales data reported so far covered home sales that had been negotiated before the rates jumped. But more immediate data, such as home viewings, writing offers, and pending home sales, do not look promising.

The National Association of Realtors today released its Pending Home Sales Index for November. It dropped to 107.3 (seasonally adjusted annual rate), the lowest since January. It’s down 0.4% from November a year ago.

The index, considered a leading indicator for existing home sales, tracks the number of contracts that have been signed. From that point on, it usually takes one or two months before the sale closes and gets reported as a “sale.” So this is not exactly a bright spot for home sales going into 2017.

“The budget of many prospective buyers last month was dealt an abrupt hit by the quick ascension of rates immediately after the election,” explained NAR chief economist Lawrence Yun. “Already faced with climbing home prices and minimal listings in the affordable price range, fewer home shoppers in most of the country were successfully able to sign a contract.”

Similarly, the Redfin Housing Demand Index for November, which is based on Redfin customers requesting home tours and writing offers, dropped 7.3% from October, to a seasonally-adjusted level of 94, the lowest November in the data series going back to January 2013.

Compared to October, on a seasonally-adjusted bases, 7.6% fewer potential buyers requested tours, and 8% fewer wrote offers. While that doesn’t represent a “plunge off the chart,” it doesn’t speak of enthusiasm either:

The number of homes on the market in November dropped 10% year-over-year. Redfin chief economist Nela Richardson explained, “Nationally, new listings were at a standstill, as sellers paused to assess market timing.”

But the Housing Demand Index varied widely from market to market.

For the Los Angeles area, the index plunged 26 points in November from a year ago, to 83. It had been lousy for much of the year. On a monthly basis, touring homes was down 12.8% and offers plummeted 25.5%. Redfin real estate agent Alec Traub:

“Rising rates are putting off some buyers in Los Angeles, as is the uncertainty of a new presidential administration. But the real kicker is the fact that prices here are at or, in some instances, above 2007 peak levels, so you have a lot of buyers concerned about a potential bubble. These folks are taking more a wait-and-see approach, rather than jumping in.”

At the other end of the spectrum is Oakland. The index soared to 125 in November, up from 99 in October, and up from 91 last November. On a monthly basis, home tour requests jumped 12.5% and offers soared 62.7%. Redfin real estate agent Dylan Masella:

“Now that rates are finally rising, some buyers feel that if they do not buy now, they will not be able to afford a home in the East Bay as prices continue to rise. What was supposed to be a slow autumn has turned into a market full of unprecedented activity.”

But Oakland is special. It attracts housing and office cost refugees from San Francisco just across the Bay. That has had an impact: According to Zillow, the median home value has skyrocketed 117% since early 2012, from $300,000 to $650,000. But it remains far below San Francisco’s $1.132 million. A similar situation is playing out in commercial real estate.

So people and companies are moving across the Bay, not only from San Francisco, but also from hot-spots in Silicon Valley, to escape these crazy prices. The biggest company so far to make the trip is Uber. It acquired the iconic 1929 Sears building in Oakland and filed an $8-million building permit to renovate it. Uber plans to move its corporate headquarters into it. About 2,000 to 3,000 people will occupy the 380,000 square feet.

Of note: Uber’s footprint might not be getting much smaller in San Francisco. It’s developing a 423,000-square-foot campus in the city’s Mission Bay area for about 3,000 to 4,000 employees. Uber currently occupies about 500,000 square feet in downtown San Francisco.

It boils down to this: National averages paper over vast differences between local markets that have their own unique dynamics.

And a mortgage rate of 4.4% is still very low, by historical standards.

It took the Fed’s reaction to the 2001/2002 recession to push mortgage rates below 6% for the first time ever, which triggered Housing Bubble 1 and set up some of the building blocks for the Financial Crisis. And it took the Fed’s reaction to the Financial Crisis to push the rate below 5% in 2009 for the first time ever, and after years of QE and ZIRP below 3.5%. These rates triggered Housing Bubble 2. We’re keeping our eyes fixed on how this one is going to end.

It’s now happening in San Francisco, San Jose, New York… and cracks appear even in Seattle’s crazy Rent Boom. Read…  Even Single-Family Rentals Sink in Once Hottest Markets

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  79 comments for “Home Buyers Sapped by Soaring (but Still Low) Mortgage Rates, Sky-High Home Prices

  1. william says:

    Housing Bubble 2 never reached the volume of home building and volume of home sales as Housing Bubble 1. There will a lower level of fall-out from the potential current Bubble Burst, or it will resume it’s expansion in 2017 and proceed driving prices upwards!

    • Wolf Richter says:

      Home building this time around has been focused on multi-family… a huge historic building boom in the major cities around the country. Tower after tower after tower… and mid-rise developments too. Check it out. It’s a miracle to behold. Crane counting has become a mainstream sport.

      • Frederick says:

        If you REALLY want to see a boatload of cranes come to Istanbul Never seen anything like it The city is growing in every direction but south and thats only due to the Marmara Sea getting in the way

      • Mike B says:

        As it happens, I’m an architect working in multi-family & hospitality in the Washington DC area and I can personally attest to this. In my 30 years in this business I have never seen so much new construction and re-construction in this city. And what’s also notable is how wide spread it is. From the bell tower at the Old Post Office (trumps latest excrescence) you can see the tower cranes all the way to the horizon. from Alexandria / Arlington to the West, Tysons Corner and Bethesda to the North. Silver Spring and New York Ave to the East and the waterfront / Navy Yard to the South. I was over 40 sites when I gave up trying to count. It’s nuts.

        Also, having seen this road show before I DON’T have a good feeling about how it’s all going to end :( Time to move to the north shore of Oahu and grow weed & pineapples for the rest of my life ;)

    • Keith says:

      It doesn’t have to reach the levels of 10 years ago. The fallout will be much greater. The levels of debt are higher and the levels of income and employment never recovered. 10 years ago was a shot across the bow. A faint warning of what is to come. The laws of finance can be ignored for awhile but now they have been ignored for way too long. Foreclosures and defaults will be much greater than 10 years ago. The chaos in the cities will be unlike anything we have witnessed in our lifetime. Asset prices have been artificially inflated and demand has been borrowed from the future. Once demand starts to evaporate, asset prices will correct and this includes housing. They will go much lower than most anyone could imagine.

      • jerry says:

        Hey Keith you are right.

        Here in the UK house prices were never allowed to correct fully, instead the government lowered interest rates and enticed first home buyers to borrow their lives away and even ponying up the deposit for them. Of course this pumped up demand and house prices. The shot across the bow you spoke of spooked me so I sold up and got out of the London area and moved to the midlands where I now live mortgage free. I worked with a guy that had a £150’000 mortgage interest only, he was 52 years of age on an income of £35k and there are many baby boomers in this situation. I believe house prices will collapse by 50% or to 2000 levels.
        People think I am nuts but if you look at Japan there demographic cliff happened before ours. House prices there are still over 50% down today than they were when they peaked in 1992.

        Folks need to wake up NOW. The system should have collapsed already. The only reason it has not is because every western CB is cheating. They are expanding the money supply, buying bonds and equities. Think about it, Japan CB owns nearly 10% of all Japanese equities, so whats their end game? Are they going to buy them all up? How are they going to get out of these positions? Or are they going become a communist state when they have bought them all, its nonsense. If you look at history and it is crystal clear on this point, when a government starts debasing its currency the end or collapse is not very far away. I think you will begin to see sovereign defaults in the near future. The whole of Europe is hopeless. Historically when a country has a debt to gdp ratio of over 100% they default. With any luck this will be the collapse of socialism in Europe. Oh that’s after after the civil unrest and violence of course.

        • nhz says:

          Similar situation to Netherlands and probably much of North-West Europe and Scandinavia. The housing bubble from the nineties was never allowed to deflate, maybe because they already knew that the economies would crater in that case due to the epic mortgage debt buildup (around 2001, already …).

          In Netherlands average home prices declined 15-20% after 2008, which is nothing compared to the more than 1000% price runup in the previous 15-20 years. Averages are at new time highs now, although – just like in the US – the local situation varies strongly. Hotspots like Amsterdam have surpassed previous bubble peaks, but other areas have seen smaller gains and many of them are still a bit in the red compared to the last top.

          Main difference with US: due to crazy low rates (currently about 1.6% for 10-year fixed and 2.7% for 30-year fixed; and in Netherlands half of that is paid by taxpayers because of mortgage tax deduction) and expectation of continuing support for home debtors from ECB and national governments, home prices are still rising and total mortgage debt is starting to rise again as well (but at slower pace than in the nineties and the period up to 2008).

          The Dutch bubble should have collapsed around 2000 when the market was already totally crazy, but it is still alive and kicking. I don’t think anyone can predict when this madness ends. Home debtors are a big chunk of the voters in most of Europe. If politics lets them eat cake, the game is over for our current establishment. This might well end with the ECB buying up all mortgages, or providing a ‘free put option’ for home owners similar to what the Dutch government does :-(

        • bob says:

          I agree there is no end game being articulated. If the goal is socialism, I wish they’d admit it so i can plan accordingly. Bad things can happen is we plan for capitalism but wind up with socialism, or vice versa The Fed has done a lot more damage than good by making its end game unclear.

  2. Cyrus says:

    One question, given a lot of statistics come from real estate associated organizations, and given the fact that even the ones from government might be fudged as government has been doing probably the past 15 years, should I trust them?

    I’m really a real cynical view towards a lot of statistics from media, from government, and real estate associated organizations. Should I be, or am I losing opportunities due to my cynical views?

    For example, on Zillow, when I look at the number of homes sold for under $300K in SF Bay area (these are homes actually sold; as you know records of homes sold is required by law to be public), then I find about 29,000 of them sold for under $300K. But if I listen to the media, then I should hardly find any home sold under that price.

    So, if the home prices are really as high as claimed, then what are these 29,000 homes sold for under $300K?

    • Petunia says:

      I don’t know about California but in Florida you see home sales of $1 often. These are transfers from husband to wife or owner to a trust. Usually low selling prices suggest houses in really bad shape or the bad part of town, a flip, or a sale from parents to children where the lost value is a gift.

    • walter map says:

      “am I losing opportunities due to my cynical views?”

      You need to replace your burned-out bullshit detector. If you’re doing RE go for industrial grade and pick the armour option.

      “But if I listen to the media, then I should hardly find any home sold under that price.”

      Welcome to the Post-Fact era. The news media is legally entitled to lie. No, really:


      Your only real recourse is to get rich enough to hire a research staff and to throw parties for RE agents with drinking problems.

      • Cyrus says:

        “To throw parties for RE agents with drinking problems.”

        I really like this idea :).

    • Wolf Richter says:

      What century where those homes sold?


      • Cyrus says:

        Hi Wolf; Zillow posts homes sold in the past 18 month I think, or was it last 24 months. So, they are recently sold homes and not homes sold in 19th century :).

        • Wolf Richter says:

          The reason I was asking is this:

          There are only about 400-700 total home sales in San Francisco per month (SF isn’t big). Despite what Zillow lists, there aren’t really any number of sub-$300K homes for sale. But let’s assume just for the fun of it that there are 5 sub-$300K home sales per month. So those 29,000 sub-$300K home sales shown on Zillow would have taken 5,800 months, so about 483 years, which would take us back to the year 1533….

          I’m of course just showing that these types of Zillow numbers are to be enjoyed with a grain of salt ;-)

        • Cyrus says:

          That was just my attempt at humor; I wasn’t questioning what you had asked.

          But I was referring to the whole bay area rather than just San Francisco; this is what I look at


          If you go to the above page, and click on the “Listing Type”, you will see 25K as “Recently Sold”.

        • Wolf Richter says:

          Cyrus – Yeah, that’s a huge area … looking at the map on the linked Zillow page, maybe 8 counties, from Petaluma in the north to past Gilroy in the south, and almost to Stockton in the East. There are some cheaper cities in this area, that’s true, plus lots of small towns, plus a number of rural and agricultural areas, some great wine areas, and some areas where you’re essentially out in the sticks. So yes, you could find a number of under-$300K homes in this area. But that’s not San Francisco :-)

        • DanR says:

          Believe it or not, many Americans probably confuse the Bay Area with San Francisco.

      • Cyrus says:

        If you even limit it to just San Francisco as I have done below, you still get 506 homes sold under $300K:


        My point here is that real estate organizations, media, and government, by feeding people fake news herd them all into a buying frenzy. “Oh, my god even a 100 feet shack in San Fran is a million, let’s buy before it gets to 10 million”. That’s why I don’t trust all these statistics. I think reality on the ground is much different than what is painted. However, their fake stats do have the consequence of raising the price since there are those who are fooled into buying a very overpriced house, and patting themselves on the back that they won the bidding on that stupid shack.

        Oh, and in case of Canada this herding of people into buying is much more effective since in government of Canada is completely in bed with those who are doing it.

        • Anon says:

          As far as I know, Canada does not have 30 year fixed rate mortgages unless you can get one from the Bank of Mom and Dad (i.e. your rich parents). A 25 or 30 year loan would see its interest rate reset after 5 years. I don’t know what happens if the property has dropped in value and the borrower is no longer considered qualified.

    • Patrick Wilson says:

      what defines Bay area?

  3. Petunia says:

    I recently watched a documentary on a minimalist movement popular among millennials and retirees. They are really scaling back on stuff they don’t use and reducing their foot prints massively. One of the sub groups is something they call 333 which has to do with wearing only 33 pieces of clothing in any 3 month period. The movement deals with smaller living areas, less property, and extreme mobility. Some are backpacking thru life with what they can carry and a cell phone.

    The implications of a movement like this gaining popularity, as it seems to be doing, are enormous to the housing and retailing world. What surprised me the most is the comfort level people have with the idea. People seem to be tired of the stress of maintaining all the stuff.

    • Frederick says:

      Simpler life is a much better life in myexperience anyway I just bought some land and plan to build a small hotel and live in part of it as well as plant fruit and nut trees a garden and some chickens Im planning solor power for the pool pump Theres a movement towards self sufficiency and simplicity no doubt for me anyway

    • BrianC says:

      I have linked this blog before:

      There is movement to live with less. I can see it with the children of my business partners. Over half of them don’t own cars for example. (Ages from late 20s to late 30s.)

      I always thought no car living was an East Coast thing, so was surprised to find more and more folks here in Portland OR that don’t own a car.

      It’s also a generational thing. My last client was located in downtown PDX and probably 1/3 of the employees under age 40 didn’t own a car. They had made a choice to live close to down town. Including families with children…

      One of the IT guys had downsized into a ~500 sq/ft studio apartment. Tired of owning a house and dealing with stuff. (He’d moved up from Florida actually.)

      I can sympathize, after dealing with my parent’s estate and ~60 years of accumulated stuff…

      • nhz says:

        I see the same in Netherlands, and even though there are good reasons for not owning a car apart from the general “less is more”, I wonder if maybe this is often out of necessity because the young generation cannot afford to own and use a car (high cost in money and time, other priorities?), and now tells themselves that they don’t want it.

        Don’t take me wrong: I see much positive in ‘less is more’ especially when we start talking about properties like homes and cars that have a huge cost for the environment (land use, building materials, heating etc. etc.). But look at smartphones and the young seem to attach a huge importance to owning the latest and greatest iPhone, instead of something less than 5% the price that will perform very similar for the average person.

        I went from a 800 sqm2 home + office in the nineties (17th century mansion, so it didn’t require any new building …) to a 100 sqm2 apartment now; it means a lot less worry about stuff although the monthly cost is quite similar. I also don’t own a car but probably have to buy one in the near future, because public transport is disappearing almost completely in my part of the Netherlands and car rental services probably never will mature because almost everyone owns a car.

    • West says:

      Maintaining “stuff” is stressful. It doesn’t matter that I ask families to NOT give Christmas gifts, we came home from the holidays loaded to the gills! Another purge is in store in the new year!

      Feels as liberating as losing that 20 lbs that dropped my waist 4 inches.

    • economicminor says:

      I am getting to that older stage where taking care of property is becoming a real chore. I live in rural southern Oregon on wooded acreage. It isn’t so much the chore but my ability to do the work is diminishing and my wife and I love to travel. And whoever wrote about being self sufficient that isn’t doing it has no idea how much work is involved in maintaining such an existence.

      I have 5 kw solar and battery back up that is big enough to run my wells and refrigerators but there is maintenance in everything. Fruit trees need spraying and pruning plus then you have to preserve the fruit. Gardens are worse dealing with the soil and fertilizers and weeds. and canning or freezing or drying the excess so you have some left for winter. And water systems don’t just work once you put them in. Emitters get clogged, sprinklers quit going round.. And they freeze so you have to vacate them and the irrigation pumps before winter.

      Houses and out building all need paint.. And leaves and grass grow and that has nothing to do with making an outside income to support everything else. If you are wealthy and could afford to hire people, you can’t find them when you need them. Better get Trump to open up that border IMHO. We need people who will work.

      So many people come here to live their dream of rural life and self sufficiency and last a few years and sell out and move back to where life is much easier.

      On top of all the above it takes knowledge and tools. Lots of tools. Hoes and rakes and mowers and weed eaters and chain saws and a small tractor and pole saws and pruners and shovels, lots of different shovels, and pipe cutters and and the tools and knowledge to repair everything … we are all getting older and tired and weaker and the younger generations don’t want to live like this for the most part.

      It isn’t for the unskilled or the weak and especially not for those academics who read it all in a book. Good luck with that.

      I am to afraid to downsize but getting to old to keep it all up. It will all end like so many others when my health fails.

      • Keith says:

        What about downsizing and community living. Own your own property but grown things your neighbor or neighbors don’t have. Trade among yourselves. Smaller property, smaller house, less work.

        • economicminor says:

          Nice idea except that Oregon land use laws have so restricted this kind of development that they virtually don’t exist. Which means a PUD on a golf course in Nevada, California or Arizona. Or worse IMO Sun Cities type developments. Not exactly the self sufficient lifestyle that I have developed for myself here.

          I have thought that small relatively self sufficient 10 or 20 family farms would be a nice way to end my life but haven’t found where any exist (not 10-20 acres each but total). It wouldn’t need lots of acreage but would have to be rural so there could be a few animals, chickens, sheep or a pig or two (animals recycle all the vegetation into nitrogen) and a large community garden, community work shops and community buildings of all sorts of activities but between the Dept of Environmental Quality, Water Resources, State Planning zoning laws these types of communities are not legally allowed here and as far as I know, anywhere, except within a city limits and that makes the land and taxes to expensive for this kind of use.

    • Harbor says:

      The ‘tiny house movement’ plays into this. There is even a tv show based on it. Tiny houses are typically less than 250 sq ft and more likely less than 150 sq ft.

      My travels across America have shown me many places with dirt cheap scenic real estate for next to nothing for an acre.

      Can I put down my Tiny house and solar panels, plant my crops and live the simple life???

      No way. Most counties have minimal square foot requirements (above 500 sq ft) and require sewer hook ups and electricity. Not to mention the building codes (foundation) etc, environmental impact, etc. Tens of thousands to get started, not that the law will allow you to even start.

      So while I could very easily live the simple life, it is simply not permitted by parasitic civil servants.

      We want a sustainable world, yet its the corrupt administrative infrastructure that is keeping people locked in cities like slaves.

      And no Wolf, we all don’t want to live in San Fran!

      • nhz says:

        There was a tiny house movement 10-15 years ago as well (I still have some books from that era). It died out after a few years as it proved mostly hype; and probably also because you make more money owning the maximum home in todays e-con-omy ;-)

        If RE is dirt cheap there often is a reason for that. Just look in Europe today, in many of the less developed/wealthy countries all the relatively attractive RE has surged in price over the last 10-20 years, bought up by rich individuals for investment purposed. Dirt cheap nowadays usually means bad access (far from airport/highways), no services that these buyers expect (shops, hospitals, entertainment), high criminality or a strong dislike of foreigners, bad weather, generally unattractive location etc. etc.

        Agree about your gripe with the parasitic government. My country is an excellent example of this – while agricultural lands costs 2.5-4 euro/sqm2, if you are allowed to build on it the price magically surges to at least 400 and sometimes even 1500-3000 euro/sqm2; the difference is pocketed by local government and well-connected friends from the RE/financial mob.

        We now have a new “experiment” with self-sufficient building on two locations in the country, where you have to provide all your own services (no electricity, water, sewage, access road etc.). For this privilege the government lowers the price to just 40 euro/sqm2. They know that people need more land to be self-sufficient, e.g. for a waste processing pond. You also are required (!) to grow your own vegetables there = more land needed.
        Why does the government still increase the cost of the land by 1000% while doing absolutely nothing for that? Just because they can … and I don’t doubt there will be other fees and taxes in a few years, when people are stuck there. Probably these experiments were allowed because many local governments in my country are stuck with huge amounts of land that they were hoping to sell at outrageous profits, but after 2008 sales crashed so they are trying to tweak their business model ;-(

        Years ago I looked into sustainable pre-fab homes; the US had some nice designs and at the time even China was also looking into this, the idea was putting the whole DIY home in a shipping container for transport to US or Europe. The designs looked great (including solar panels etc.) but the trouble is all the local building rules. The nail in the coffin was that the total cost multiplied several times because of the cost for the land, all the required connections to the grids with associated government fees, the huge amount of paperwork and the expensive modifications that would be required due adhere to local building codes.

        Being sustainable is very difficult indeed in the developed world; sustainable, self-supporting citizens is the last thing our governments want while IMHO it should be one of their first priorities (so we can ditch government almost completely …).

      • economicminor says:


        I have also seen the deserted areas of the US where houses are cheap. There is an efficiency of scale and economics that make these places less desirable. Groceries and health care is often a really long way away. Which means when you need to repair or get repaired anything it costs a lot because of the time it takes to go get or have a repair person come and analyze and then return with the proper parts.

        That lifestyle may be ok for some but most people are much more social and like some sort of civilization. Though there are a few places in between like Hurricane NV and Moab UT, even Cedar City UT and Sandpoint ID.. There are some small towns everywhere but that doesn’t mean that their real estate is cheap or their taxes. Pretty much is determined by their economic base. The better the services and economy, generally the higher the cost of living there.

    • jerry says:

      George Carlin Talks About “Stuff”



  4. Chicken says:

    People will cut back if they discover they’re being taken advantage of. Robots will be forced to work without pay.

    • nhz says:

      more likely in the future if you need something done that you cannot do yourself you will have the choice between hiring a worker and hiring a robot, at a hefty fee. Most robots that do real work will probably be prohibitively expensive to own for normal citizens.

  5. Cyrus says:

    Millennials really have to live with less; life instead of getting better has become much more difficult.

    I am a software engineer, and have to put weeks to learn new stuff, on my own time and for free, or I’ll be out of job. I have to work for so many hours to have a job, and then give it out in taxes, rents, health care, etc.

    My dad worked probably a third of how hard I work, and he was buying property after property, and his life was fun. Honestly, if my dad worked as hard as I do, back then, he would have easily been millionaire or multimillionaire, and he had only finished high school, and no college education.

    • Chicken says:

      It’s a lopsided system and we had a great chance to level the playing field, the democratic party blew the opportunity for their own selfish agenda.

    • NotSoSure says:

      Yeah, I am a software engineer as well and there’s not a day that has gone by where I didn’t wish that the industry would crash spectacularly.

      Software Engineering = Extreme Rat Race.

    • Petunia says:

      I was a techie as well, spent all my time working and commuting. My mom used to ask me why I couldn’t find a good job with time off. She found it hard to believe I had a good job.

      • Cyrus says:

        Yeah, I think going to the field of software engineering was one of the worst decisions that I have made. You have to keep updating yourself on a daily basis, or they’ll kick you out in no time. Every year there are at least a dozen of very complicated new technologies that I either have to learn, or kiss my job good bye. On top of that working till 7-8 PM is normal, and even working on the weekend, not to get paid, but so that you would not fall behind others in your team is just normal. Tech is only good for major shareholders of the likes of Google, Apple, Facebook, Uber, etc.

        • nhz says:

          I worked in tech in my own company (mostly hardware development plus a bit of software) and made good money compared to most people of my age, but I’m still behind many people from the boomer generation who had very modest jobs like basic high school teachers (with their stellar housing bubble profits, gold-plated government incomes/pensions etc.). As you mentioned, most of the money you make is taxed away.

          But I don’t think having to invest in your ‘career’ is unique to software engineering, it applies almost everywhere nowadays (maybe with much of government as the exception). Careers no longer exist, people have to switch all the time; and there is no way you can get decent pay in a new type of job if you don’t invest a lot of time/money in it first. It gets worse because our generation probably has to keep working almost until we die, unlike the previous generation. Much will be changing during all those years, jobs will come and go and it will be tough to keep up.

          Even trying to get a government job with its excellent pay and other conditions will no longer work, because even if you would want that the government now offers very little fixed contracts, most of these go to “well-connected” individuals. The existing high-pay jobs are for the boomer generation and it will take years before they are replaced (and their jobs might disappear altogether).

    • economicminor says:

      Cyrus, and for all, The doing with less idea is something that is going to be more and more of an issue going forward. There is a problem with exponential growth in a finite system. People love to have children. Yet doubling the population will mean less space and fewer resources per capita. That is just the math.

      Not only does that mean half as much space per person but it also means we have to either become twice as efficient with our use of resources or double our resources. Can you compute twice the pollution into our waterways and oceans and how that will affect us all.. Not counting the amount of shit we will produce and have to be treated.. All the while we spend our precious profits having endless wars instead of building up our infrastructure to accommodate the future needs.

      As a species I don’t see us being as intelligent as we think we are.

      • nhz says:


        Some would say: there is just one real pollution problem: people. They have a point, but the real problem is culture. We can have 10 billion people on this planet, but only if they live a modest life and not if they all demand the American lifestyle.

        In Europe we get bombarded with warnings about declining birth numbers and shrinking population. But it isn’t allowed to happen, and it is the main official argument of Merkel and her ilk for opening the EU borders to the migrant hordes (I don’t think it is the real reason though for this policy, nor is it about caring for those migrants). I say: bring it on!!

        Less people would be bad for all the Ponzi’s that are going on like the housing and pension bubbles, and for those who count on getting richer every year and retiring early with a wealthy lifestyle from a normal government job. But these Ponzi’s need to end anyway, and apart from that I only see advantages …

        In my country some of the last bits of nature (maybe 5% of total area, and none of it is ‘real’ nature nowadays) are being crushed for more investment properties, big ugly vacation homes that sit almost on top of each other and spoil the environment and the views for everyone else. A tiny elite reaps the benefits and the rest of the population gets to enjoy all the downside, including probably paying for all the debt when this bubble finally bursts :-(

        We have to grow up fast, otherwise there will be an extinction event and some wiser species will replace us.

  6. West says:

    (In Florida), last summer we put an offer for $440k for a house listed at $450k with over 300 DOM. I had the financing lined up and ready to go, when the seller backed out and said they would relist next year for $475k.

    We feel that we will buy this house next year for $420k, as the market here can barely support any prices above $400k with rates in the 4.5% range. The seller is going to wish they had taken their opportunity to sell.

    • Frederick says:

      That is very possible My mother made the same mistake in 1982 ended up taking 20percent less Keep your powder dry and be patient in my opinion for what its worth

    • Mark says:

      I really hope you’re right. I’ve been saving 30-40% of my post-tax income for a home/condo down payment for the last few years now. We’re there. It’s tough to keep putting off buying while watching prices run away from you 10-20%/year, but I do believe we’ll be able to buy at a reasonable price on the other side of a correction in the next few years. Prices can’t go up like this forever, it’s exasperating.

  7. Chicken says:

    Was there ever a time in history when Joe Sixpack croaked, he was able to leave enough for his wife to survive? (I’d say it’s less likely if he’s stuck being a renter.)

    If yes, that should be the benchmark.

    Democratic party is still talking down on any prospect of growth, I understand their unspoken ulterior motive is environmental.

    • Sean says:

      Stuck being a renter? Why the stigmatism with renting? I rent because I don’t want to buy at the top of the market and every month that passes I save more of a down payment. I also have no debt and a very healthy retirement account. Surprisingly there are renters who are good with their money. Big house with a huge mortgage doesn’t equal success. I know a lot of people who are in debt up to their head who don’t have two nickels to rub together.

      • jerry says:

        You might want to re position your healthy retirement account!
        Most pension schemes used a model that had factored in a 6 to 8% yield which was traditionally the norm but in this ZIRP, NIRP world pension funds have been unable attain those levels so they have come up short. Here in the UK it has been claimed that pension funds a over 600 billion in the hole. Also this only what they are admitting to now!! Please also consider many countries make it compulsory for pension funds to purchase government bonds!!! Who in their right minds would own Spanish, French, Italian bonds and think that they were safe. In the US many municipal pension funds are collapsing and this should be a trend you keep your eye on. When governments are this broke they will raid pension funds.

        • nhz says:

          At least if you have a government pension, the government will first bleed all the other citizens dry to make sure you get the promised gold-plated pension ;-(

          In my country many self-employed people who had private pension insurance etc. have seen their nest egg disappear almost completely over the last 10-15 years. My pension will be just 2% of the amount that was promised (most of what I paid has been stolen in the form of outrageous fees and “losses”) and there is nothing I can do about it.

          Private sector employees have seen some hits to their pensions, but these are still exceptions to the rule and the pension cuts are more like a few % at most, nothing major yet. There have been discussions about our pension system for years (it is considered one of the best funded in the world), and every year again the pension funds and politicians come up with new tricks to avoid serious cuts while making the problem worse in the long run.

          Of course government itself still assumes 7-8% yearly yield for their own pensions. Government employees still retire at 52 here, although the official retirement age has been 65 for many years (shifted to 67 a few years ago and expected to be around 70 pretty soon). Young government employees now pay higher contributions for their pension, but this is fully compensated so effectively the taxpayer is paying again.

          Just like with the housing market, it is difficult to predict how long this Ponzi can continue, but probably much longer than most people imagine.

        • economicminor says:

          6-8% was based upon exponential growth in a finite system with no normal cyclic corrections so the accountants invented Level 3 so they could hide the under performing assets. When the SHTF and all those swimming naked are exposed when the tide does actually go out, what do you think we’ll see? It isn’t IF but WHEN..

    • Edward E says:

      I’m pretty worried about the environment. Frogs singing in the afternoon on Christmas day at 2,200 ft in the Ozarks, geez. Traveling this country all I see is unhealthy forests, I know what to look for, it’s just getting worse all the time. 100 million trees croaked in CA, 300 million+ in TX, well that doesn’t even scratch the surface of what I’ve observed.

      • GSX says:

        Edward E – Trump and his ilk wont fix it. You are posting fake news LOL :) Those tree’s will be Yuge!! Too bad Trump is on the wrong side of what concerns most US folks –


        • Edward E says:

          Yeah, I’m a blatherskite who needs to take a break, even the National Forest Service said so. My grandfather and an uncle had careers in the NFS, one a pilot. The NFS bigwigs think controlled burns all over the forests are effective preventive measures against various tree borers. Nonsense, they burn off the leaf litter and needles on the forest floor which causes the soils to dry out that much more during drought years, stressing and making trees more vulnerable. Real winters are effective against tree parasites, as are healthy trees with abundant sap.

    • Edward E says:

      And, I highly recommend building a home with a Steelmaster Quonset hut design home or similar. Climate change is getting hard on homes in many areas. I’ve went around and looked at old Steelmasters and they look spectacular as they approach even 75 years of age. Very low maintenance, very durable, wind rolls right over.

  8. MarkinSF says:

    Those Oakland numbers are amazing. What’s worse for me is that my wife was begging me to buy in Oakland back in 2009-2011 but I was convinced that the so called “shadow inventory” was about to be unleashed and the market would be flooded with even cheaper houses to buy. But even back then we made offers that we were outbid on. The last 5 years have been difficult to live down. Even as I write this and peruse the listings I notice that much of the very undesirable areas have shot up by 200 to 400%. Houses that were going for $80k are now listed at $300-$400k. Areas that were absolutely urban blight now feature houses for sale @ $600-$900. If the tech juggernaut is a tidal wave that lifted all boats (houses) I wonder if the tide will ever recede.

    • polecat says:

      Anyone know if there are, and how many, Expat Chinese are buying on that side of the bay … ??

      … perhaps it’s a ‘red’ tide … ‘;]

      • MarkinSF says:

        Definitely a big part of it; at least when I was looking. At every open house you could the phrase “all cash” in one Chinese dialect or another. And there are Chinese realtors catering only to overseas clients. But there are also tons of professional jobs that have been created here; Tech, solar & finance.

  9. Rhonda says:

    I personally think rates will come down again. I would like to refinance but have been waiting for God to give me the sign to go ahead with it. Trusting him to give me the green light. There is no reason for rates to be raised our economy is not in good shape. Our debt in this country is going to be greatly affected by what the Feds doing. They have know idea what they are doing.

    • economicminor says:

      The reason for rates to rise has to do with the unrecognized risk that is everywhere. When interest rates are low, people/corporations can paper over mistakes and misallocation of resources. Keep them low long enough and the mal investment becomes a giant monster that eats up all the productive profits. To many factories are build. To many mines are opened. To many live on future incomes. To much money goes to those who do nothing and this leaves those who produce with less. Less to pay the growing debt with.

      The way that this gets fixed is when the monster eats all the profits and the system goes into collapse/default… The raising of interest rates is the sign that the beginning of this is happening. Those with capital see the risk and wanting to be paid for it.. It doesn’t have anything to do with god or what is best for We the People. It is just the cyclic system trying to right itself.

      • jerry says:

        “There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency system involved.”
        – Ludwig von Mises

        • economicminor says:

          Which is where the entire western world civilization is headed. Catastrophe! But first interest rates will rise as will dumb things such as trade wars and more attempts to manipulate (manage) the economies.

          The FED would have to really go to buying everything in sight to keep the interest rates low heading into trade wars and totally corrupted government leaders who’s ethics are no better than hyenas.

      • bob says:

        Yes, people are learning that a default premium serves a purpose. The Fed is trying its best to make it not so.

  10. Greatful again says:

    Monthly costs or Mortgage+taxes+insurance is how many people evaluate purchasing a house. I just sold a house that the new owner is paying about 55% of what the monthly rent was costing her. It went pending 2 weeks after I listed it. Yes, it’s the low end of the market. But there are quite a few to chose from in this catagory. Fly over country has a lot of decent houses in the $150k to $200k range.

    • walter map says:

      “Fly over country has a lot of decent houses in the $150k to $200k range.”

      Flyover country has lots of houses you can live in for less than 60k. And if you’re in love, and like to work, you can make it a proud home.

      The pursuit of happiness, of wealth, of riches, is an illusion for most people. Wisdom lies in real books, and knowledge, and understanding, and peace, and contentment. Because you’re certainly not going to find those in NFL football, or rushes at the malls, or idling on the Stevenson already way late for work.

      Know the moment. The little ones are finally asleep, the fireplace is stoked, and we do have brandy, don’t we? I’m not listening. Deal with it.

      • bob says:

        A lot of people can’t stand sitting still, because they don’t like to think creatively. They’d rather focus on a distraction.

      • DH says:

        Well, I think it may be a bit presumptuous to assume that you have it all figured out, when a monk may look at your life and criticize all of its fripperies. ;)

        I’ve personally lived everywhere from an old farm house in the middle of the woods in Indiana to the middle of town in West Hollywood California, and I’ve enjoyed aspects of all of it.

        While my life has turned out better financially than I expected (at least for now,) my wife and I frequently discuss how we’d be equally happy if we lost it all, because it’s all just a mindset, and I think that allows us to feel free. Granted, I am generally averse to debt, so that probably helps. :)

        • economicminor says:

          “how we’d be equally happy if we lost it all, because it’s all just a mindset, and I think that allows us to feel free”

          What a COS that statement is. It is one thing to be young and say such things but what money does is gives us not only freedom but the security against the inevitable crisis and chaos that plagues us through out our lives. Those without money have no freedom. I have lived in poverty and I never want to go back there. Never!

          Those who live with no money, live on the streets and either beg for money or food or drugs to make their days seem more bearable. You can think it romantic or peaceful but you obviously have never actually been there.

          If you have your youth you can at least work. Those who get old and lose it all are just (add whatever word you like that is negative). There are NO golden years with out assets and income.

        • economicminor says:

          Ever hear the saying that it takes money to make money… Having none means you just exist if you are lucky. Otherwise you work for the company. And these days, you are even luckier if you even get full time work.

        • DH says:

          economicminor, I’m certainly not talking about the extremes of starvation and homelessness, so I apologize if I offended you with such an implication, and “lose it all” was a short-sited and lazy description. I was simply referring to the framework of my life and Walter’s above, meaning I’ve also been happy in a less expensive and “simple” rural life.

        • economicminor says:

          Thanks for the reply. I have lived most of my adult life in rural southern Oregon where life is simpler in some ways. It has been good to me. I have done well here. It isn’t easy though for most to make a decent living. I am lucky in that I am a jack of most trades and was able to build my own and repair my own.

          I don’t think any reasonable person would want to be homeless yet we have growing populations of homeless people all over this country. It does bother me as you probably could tell by my reply. Seems like we have plenty to do but neither the incentives or the respect for labor well done any more. At least not from those with the power to make things better.

          Joking about it just doesn’t seem right. Sort of like don’t wish for anything you really don’t want. Certainly don’t say you might want it. Thing is, it is way to easy to go from a comfortably smug middle class lifestyle to homelessness. And there are so many it appears to be beyond our society’s ability to do anything about. Some cities are trying to ban them.. ha ha.. good luck.

          Most people just act like it doesn’t exist or that it is the homeless’ fault they are homeless. Which I’m sure is true in certain cases but not for all. I have actually stopped and talked to some. Lots of vets with mental health issues or disabilities beyond what the VA will help with, lots of families who lost a job or had one of them get sick beyond what minimal insurance they had would cover. Some just bad luck at trying to play the speculation game and lost. Some are addicts which is a mental health issue and our society really doesn’t want to deal with them.

          Sorry I got on to you.. It is my issue not yours. Although homelessness is an economic issue as it costs us all time and money and the country loses their productiveness. So sad we just can’t deal with some issues at all.

        • DH says:

          Oddly enough, I too am in Oregon, and I understand your concern about the homeless. My best friend is heavily involved with the homeless down in Los Angeles, and I’ve worked with him on it in the past (but I haven’t done enough.) It’s a very tough situation.

          Just to be clear, I wasn’t joking about becoming homeless. I was simply saying that, even though my life is extremely comfortable in the “big city” at the moment, I’ve lived in enough situations to appreciate a simpler life style, should that ever come back to me, because I never know what the future holds. I really just meant that we’ll remain positive if we ever loose all the “stuff,” rather than “loose it all,” but I should have chosen my words more sympathetically. I certainly appreciate my current lot in life. Cheers.

    • nhz says:

      yes … in my country renting (outside the government-subsidized social housing market) is 2-4x more expensive than owning due to countless government subsidies and guarantees for homeowners. This also means sky-high home prices, but all buyers assume that prices will keep going up so why worry?

      One Realtor in my area is advertising very basic homes with only the monthly cost, which is even cheaper than renting in the heavily subsidized social housing sector, go figure! It helps that Dutch mortgage rates are at 400-year lows thanks to Mario and his mob (1.6% for 10-year fixed; effectively 0.8% because of tax deductions).

      And here as well you can sometimes rent houses for far BELOW the cost of owning, but those are always extremely expensive homes where e.g. the owner is temporarily living abroad but doesn’t want to sell his home. These are always temporary 1-year contracts, so after 1 year you have to look for something else again – probably something most of the people who are interested in such homes (and can pay the high rent) do not like.

  11. Brian says:

    December 28, 2016 “Financial Lockdown… ATMs Went Dry”: 3 Police States Banning Cash to Control the People

    The rush to create a cashless society is on. Why? Because it will be the ultimate measure of control. All of your money will then be in banks, and courts have ruled that “your money” in banks is not really yours, but is under the control of the banks, who, basically, can do with it whatever they wish. If, for instance, the banks introduce negative interest rates, you cannot withdraw it as cash. Think on that a moment. In essence, they could legally steal your money by the simple measure of creating negative interest rates.


  12. Cyrus says:

    An interesting video (Warning) to Real Estate investors in Australia:


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