How Surging Home Prices & Rents Hammer the Real Economy.

Home prices that rise faster than wages – as they have done for years now – are not a free lunch for the economy. And now there is no good way out (9 minutes).

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  75 comments for “THE WOLF STREET REPORT

  1. Bobber says:

    I’m concerned about the wealth concentration and generational aspects of the problem. When assets inflate for one generation, they cause problems for the next generation. This creates societal strife and resentment.

    I just heard Powell say that wealth concentration is not the Federal Reserve’s responsibility, yet it was the Federal Reserve that intentionally inflated asset prices to create a wealth effect. How can you not take responsibility for a problem you created?

    • MaggieD says:

      “How can you not take responsibility for a problem you created?”

      Almost literal de facto racketeering predation and the legitimization of criminal behavior in the post-Great GOP Bush Recession pivot to economic fascism – being institutionalized by the amoral kleptocracy plutocrats and their trumpFilth political capos.

      • Ppp says:

        Sounds like a prescription for a revolution. Let’s get together with Wolf and plan it. Don’t be shy–U.S. already snoops on this site. We’re all in it now!

    • Unamused says:

      =>How can you not take responsibility for a problem you created?

      Blame your critics for causing the problem.

      If that doesn’t work, blame your victims for having moral defects that made them victims.

      If that doesn’t work, pretend that it’s what the voters wanted and recruit weak-minded nobodies to parrot your slogans and phony arguments.

      If that doesn’t work, deny that there’s a problem and muddy the waters with unrelated issues.

      If that doesn’t work, buy up all the media outlets, make your minions talk about anything else so the public never hears about it, and fire anybody who brings it up.

      If that doesn’t work, start up and investigation, smear the investigators as incompetent and/or radicalised and/traitorous, make it drag on for a couple of years, and have a flunky issue a four-page summary that says nothing and claim victory.

      =>I’m concerned about the wealth concentration

      It’s God’s will. He rewards his friends, no matter how ruthless/lying/vile they are, and punishes his enemies, namely, people who complain that the rich are ruthless/lying/vile, in contradiction to God’s will. Religion has long since been substituted for morals, so at least the religious will buy it, especially if you can rent some cut-rate TV preachers to back you up.

      Consultants are available to help you with these issues although they tend to be expensive, but you can always cheat them by promising more work in the future. Don’t sign anything and make sure none of them are wearing a wire.

      • Greg Gerner says:

        +1,000. Unamused’s comment should be required reading in every school, college and graduate school (Econ Department, B School and Law School) in the land.

      • kitten lopez says:

        xxxxxxxx….etcetera, etcetera!

    • Ed says:

      Well on the other hand, when my daughter, an only child, inherits my wealth she’s got her retirement funds delivered on a silver platter. She and her husband make a good living and go out for fancy dinners and nice vacations to the point I never could. I was too busy trying to pay off the house and accumulate a retirement fund. I didn’t have any inheritance. So I guess that tempers the generational thing … unless medical bills ravage my wealth.

      • RD Blakeslee says:

        My experience is a little different.

        Not all, (but some) of my children are wealthy by way of their effort and talent, but the rest are not wealthy, although they have worked hard and honestly.

        All of them have been told that I understand that their generation has put up the cash to finance my generation’s retirement and the only thing I can do to “fix” it personally, for them and me, is to see to it that I husband my wealth as best I can and bequeath it to them, as compensation for their contribution to our lousy national retirement system.

        • RoseN says:

          As usual in America, some do very well, and others are treated like dirt. I feel sorry for hard working people who aren’t lucky enough to have parents with endowments.

        • James Meek says:

          That has nothing to do with cash. If some people are going to stop working,the others must do the work. It makes no difference in the end whether the “cash” comes from return on the investments of Social Security funds or from current Social Security tax payments, or from interest on privately held bonds, stock dividends, stock sales or downsizing from McMansions and selling them off for huge profits. The ultimate underlying economic reality is that the support of retirees is pay-as-you-go.

          It’s amusing how many people think it’s horrible for later generations to support them in retirement through tax payments, but perfectly all right for them to support them by having to pay outrageous prices to buy their homes or buy their stocks or bonds to have in turn some retirement income source.

          Note that for more than 30 years now the baby boom generation has been paying into Social Security significantly more than needed to fund the system on a pay-as-you-go basis, and the investment of this in government bonds has had the indirect effect of reducing interest rates on corporate bonds — a stealth gift to the private sector.

        • Bankers says:

          @ James Meek. Pay-as-you-go is a bit of a misnomer in real terms, actually I think it confuses because as you surely know it does not mean a person pays their way as they go, instead it is a mutualised system where people are expected to pay for other people, and then in turn be paid for by yet other people. I am not sure about you but I see a lot of room for moral hazard in that arrangement.

          If we look back at the history of the ever burgeoning role of government finance we find that central to its appearance, and hence power in the economy, was the sale or reclamation of public welfare to or by the public.

          So there you have access to the financial-political window that has expanded to hold so much influence on economic and social activity in so many countries.

          It could be said that this centralised management has its drawbacks, that it promotes unfair leverage to a small sector of society, that it promotes careless investment based on unrealistic or unaccountable financial guarantees, that it disconnects or interferes with a closer personal management of own expenses and of family organisation and conveyance.

          If you put it in “someone’s” corporate or government or generational hand to be able to buy and control and profit from a sector, say housing, they likely will. If it is made that when someone walks into a world that is fully owned and where to shelter yourself and have a home is prohibitive or entails endless undue cost, then that is asking for trouble as well as being counterproductive – as one is towards others so will others be towards you, and the system being what it is, there is now always someone with a deeper pocket able to outdo the next or pit sides against each other for own eventual profit.

          That is competition for you, it should not be grossly unfair though, and that does not means over-regulating everything, just not introducing the means that allow that unfairness to prosper.

        • James Meek says:

          @ Bankers,
          Though I mostly agree with the points you make, I think you have not quite fully grasped the point I was trying to make, namely that the underlying economic reality, that is, the reality of how economic resources are allocated, when the obscuring factor of “money” is placed aside, is that nearly everything retirees consume in a given year must be produced by the people who are not retired in that year. The only question is how the goods and services produced in that year are going to be apportioned between retirees and workers.

          Innumerable people who will go on and on about how grievous the burden will be on workers in the future if Social Security taxes need to be raised to provide retirees with reasonable standards of living, standards which could have been financed if the interest rates on the Social Security Trust fund bonds had not been forced into negative after-inflation territory by the FRB’s serial bubble-blowing. But most of the same people see nothing wrong with the workers having to finance a cushy retirement for those people who have made enormous profits in real estate and stocks whose only basis is exactly that same FRB bubble-blowing.

          The excessive amounts workers must pay for housing, whether they rent or own (and any investment assets they wish to purchase to eventually fund their own retirement) due to the FRB’s bubble-blowing are in essential effect a tax levied on workers to fund the capital gains to which the upper and upper-middle classes have become, essentially, entitled.

          My point is that we hear and read quite frequently how awful it will be for workers to need to pay a few percentage points more FICA tax in the future to support retirees dependent on Social Security, but very little about how awful it already is for them to pay far more percentage points for a place to live, in support of retirees having far greater “wealth” brought into being only by the Fed-bubbles.

      • Malthus says:

        Are she and her husband in the medical quack profession?

      • Crazy Horse says:

        There is a simple solution to the problem of generations inheriting wealth when they don’t deserve it.

        100% Inheritance Tax

        When you die you can’t take your Ferraris, homes in St. Barts, mistresses etc with you. Why should you be able to pass them on to your rotten kids?

        Lets put all inheritances into a common pool and distribute them equally to all citizens at an age when they may have become responsible adults— say 24. Bill Gate’s kid and the drug dealer from the ghetto all deserve an equal start in life. Think of the surge in innovation and entrepreneurship if the most competent or ambitious had the seed money to realize their dreams (or blow it). Instead the wealth falls into the hands of a .001% class of worthless eaters who put it into criminal hedge funds to mismanage for the benefit of the fund officers.

    • timbers says:

      Then why is Powell still in monetary stimulation mode? Why has Powell been in monetary stimulation every second of every minute of every hour of every day of every week of every month of every yet he’s been at the Fed?

      • rhodium says:

        While I favor the dems as well, don’t forget yellen played the exact same game as bernanke, greenspan, and now powell behind her. It didn’t seem to matter that Obama was the one who appointed her. I find it much more believable that they are just clueless academics (although bernanke’s smile always unsettled me as if he knew something more). There are perhaps a number of bankers over at goldman and j.p. that understand how this whole system is designed not to protect the economy, but to help them time the markets and acquire assets ever faster. Financial repression is terrible, but I think in line with Martin Ford and Andrew Yang along with others, that it’s been the effects of technology reducing aggregate labor demand and spurring large profit margins in certain business sectors that is mostly driving wealth inequality and income stagnation for most Americans. Interest rates will stay low because debt has replaced true income in a suicidal deflationary bent economy, and QE will not stop over the long run so long as the government keeps running massive deficits as stimulus. One thing I am convinced of is that currently our lower and “middle” class cannot fund the government, not simultaneously with a functioning consumer economy, but even as QE continues to pump money into circulation to combat deflation, it will simply flow to the rich ever faster and straight into assets that everyone else will find harder and harder to afford for themselves. At some point there will be major political upheaval over this.

    • Rowen says:

      I think the problem is dual-pronged. The first is easy monetary policy, but the more important issue is the lack of antitrust enforcement. Because the government refuses to enforce antitrust laws, the financiers are able to use easy money to gobble all practically every sector to the real economy via vertical and horizontal merger.

      What we consider “hyper”inflation is probably actually surplus profit from the lack of competition.

      • Bobber says:

        Trump went after trade, so you’d think he would go after anti-trust enforcement as well, but he’s not. Mergers are huge job and innovation killers. If he wants the economy and jobs to grow, anti-trust enforcement is the way to go.

      • Saltygolden says:

        This is a good observation and not talked about enough. Most people (born 1955- 1980’sish) grew up in a wildly different world from a market concentration standpoint. Yet, we still all know folks that worked for on of the baby Bells or whatever that retired with great pensions and other sweet retirement benefits. What if the old monopoly raj was applied to present day business? One can only imagine what we’d wind up with..

    • According to Powell nothing is his responsibility, not the dollar, not fiscal policy, (not the stock market?) This is a person who needs to apply for a gender neutral drivers license.

  2. Howard Fritz says:

    Karl Marx called renters the petty bourgeoisie because their wealth was tied to the state’s protection of their property.

    In theory renters provide a much needed service, to those without the capital to purchase a home.

    However those rent payments gobble up discretionary spending therefore we need asset deflation. Even though that causes other people’s wealth to vanish.

    Therefore we’re locked in gridlock?

  3. Guido says:

    My understanding is that baby boomers form some 33% of the population. With a huge chunk of them set to go away in the next few years ( a 1946 baby would be 73 this year) and a relentless building boom, we are looking at an excess supply of places to live/rent and a fixed supply (unless immigration is opened up hugely to increase occupancy). This should be deflationary. This would lead to wealth destruction. Unless Fed comes into rescue the housing, stop the wealth destruction, and pull the economy out of the stuff that is sure to follow wealth destruction, I don’t see how charade is sustainable.

    • nicko2 says:

      You just provided the solution, immigration. The new Dem admin in 2020 will surely restore normality.

      • gary says:

        Yes, despite all the [feigned?] complaining, immigration is only going to ramp up in the future. Too much depends on it.

        And this is NOT partisan.

        • Paul Goldsmith says:

          immigration is not the problem…it is the assimilation of immigrants who do not want to become citizens…without citizenship you will have the tendency for a more lawless society as those who obey the laws and pay their taxes inevitably detest those who do not…then there is the decline in societal habitation which leads to civil war…

      • John Taylor says:

        Immigration is a way of reducing the cost of labor by increasing it’s supply.
        I don’t think our problem is a high cost of labor – it’s a high cost of living.
        We have tent cities building in many places, and in Seattle they are allowing them to become permanent like the favelas of Brazil. Our country is becoming third world fast, and inviting ever more of the hard working but desperate poor will only accelerate that process. We need to look hard at the reasons for wealth disparity and rapidly rising cost of living. We need to break up monopolies and make it easier for small business to compete without getting bought out or targeted and destroyed.

        • Jack says:

          John Taylor

          You start that by “ VOTING”. Every single adult eligible voter in the US “ must vote “.

          But NOT vote the Two major parties. For those two are ( beholden) to

          – Foreign Powers!
          – Large Corporations

          To return the land to the people who actually matter, the citizens,

          You need more independent representatives in the House of Commons and the senate.

          Failure to see this through in the next ( bleak, rapidly closing window that is left to salvage the US) , Will result in what occurred to all hegemonies in History…

          It will become history.

    • Sporkfed says:

      There are a lot of houses that should be torn down and a lot that
      are in areas with no demand for housing. Low rates have created
      malinvestment from coast to coast. We should have been repairing
      infrastructure not installing granite countertops.

    • roddy6667 says:

      You are right about the Boomers retiring causing a glut of homes on the market. As they downsize or die (the ultimate downsizing), too many homes come on the market and cause prices to drop. This was predicted 40 years ago. However, the artificially low interest rates caused prices to skyrocket. The reversion to the mean will be a bitch.
      Also, the stock market will go through the same gyrations. As the Boomers take money out of the market for retirement, it will help deflate this bubble.

      • Harrold says:

        Its location location location. Some housing markets will crater, some will increase in value. I suspect those markets with jobs will increase, those that don’t have jobs, will decrease.

        This has been going on since the 1920’s when 80% of the population didn’t need to live on a farm.

  4. raxadian says:

    If prices rises but people don’t get wages raised enough to afford the new prices, then you have a problem.

    That’s the easiest way I can explain why inflation is a huge problem. Unless you get me a few hand puppets?

    Did the Muppets or Sesame Street evee explain inflation?

    • Guido says:

      The Cookie Monster eats it.

      • RD Blakeslee says:

        Gingerbread houses, to mix fairy tales instead of metaphors …

      • raxadian says:

        The cookie monster is inflation? Yeah why not? Then Big Bird is hope and Elmo is a Tesla investor…

        Then who would Wolf be? I know, he is Rene the Greed since he is the only sane man surrounded by crazy!

        Happy Fools day!

  5. NotBuying says:

    Funny you mention the decline in new construction as I am now a prospective buyer after seeing many new homes with price cuts and long periods of time on the market. The listing agent I am dealing with (through my realtor) has shown his hand saying he will negotiate if I buy a currently built unit, I am looking at units in a town home community. Now that he has shown his hand, shouldn’t be very hard for me to talk them down on their price for a unit in an ideal location on the property as well as custom design options. That and mortgage rates have been dropping like rocks. Down 16% since dec 2017 is more ammo for negotiations as far as I’m concerned.

  6. Rcohn says:

    San Francisco and some of its suburbs has by far the highest ratio of housing prices to incomes of any part of the country.
    If Wolf is correct about there being no way out, then San Francisco looks to face stagnation and other real problems in the future.

  7. tom says:

    Bring back the good ole days. Run those mortage calculators at 13.5 – 15%. I can remember doing a refi. because we could lock in at 10%.
    We were convinced it would never drop below 10%.

    2nd buildings…work equipment loan rates back then….ouch.

    My last 2 backhoe purchases were at 0%.

    • Bankers says:

      Worked out about the same as now in terms of ratio of income using figures in

      But you had maybe five or ten years of very high rates in the 80’s then less. Try ( to see how the lower percentiles are paying the cost here though.

      The whole point of Wolf’s post though I think is to make clear that once cost of rent/ownership (whether by high rates and lower prices or by high prices with lower rates) becomes excessive it calls for a readjustment that will be expensive. You can only lower rates so much to add fuel before you hit stagnation around the zero bound, or you can shake out the market by allowing a bust. The trouble is that when housing becomes a prime investment ( for rent, for price increase, for financial service) and not a home you are going to end up with some kind of monopoly of ownership going on pushing prices to max whichever way you dice price and interest. Add in wage stagnation for one of many reasons and it all has its limit.

  8. Rcohn says:

    I do not understand San Francisco housing at all
    As examples
    The median price of houses in Palo Alto is 3.1m while the median family income is $137,000.

    In Short Hills NJ the median price of houses is 1.37m , while the median family income is over $230,000) highest in the country)

    Now I understand that Palo Alto benefits from Prop 13 and a property tax rate of ~%1.1 on new property and Short Hills suffers from a tax rate of almost %2.5, but this still can not justify a ratio of housing prices/ income of over 22 in Palo Alto versus a ratio of ratio of 6 in Short Hills

    • Just Some Random Guy says:

      The median income earner doesn’t buy a house. The median income earner rents. Only the higher end earners buy. If I had to guess, I’d say the median income of home owners in SF is $350K+

      And $350K for a married couple both working in mid to senior positions in tech is quite easy to do. $200K income including salary, bonus and stock is a dime a dozen in SF.

    • SocalJim says:

      There is nothing unique about Palo Alto. The same pattern occurs in a number of zip codes in the Boston, Los Angeles, Orange County, San Diego, DC, and New York City areas.

    • Lion says:

      I know of very few city locations in Southern California where property tax is 1% or there about. Example: our basic Prop Tax is 1% but with various county and local bonds added in, the actually rate is 1.8%. I think if One calculated property tax by Sqft., Californians probably pay more than most other areas in the country ?

      • David G LA says:

        Rates are 2-3 percent in some states. Plus you have to factor in Prop 13. So, no, many Californians do not pay more property taxes (as a percentage of the home value).

        • Lion says:

          My point was that many/most Californians pay a high amount of property tax. And a high rate if compared to square footage. And everyone where I live pays a whole lot more than the 1% Prop 13 rate. The politicians figured out how to get around Prop 13 decades ago. Concerning Prop 13, I’ve never agreed with the inheritance hand me downs and investment benefits.

          I’d love to pay in California the amount per square foot I pay in Texas.

    • GSW says:

      1) Rampant NIMBYism and zoning yourself into scarcity.
      2) Geography; Short Hills is west of Manhattan, which equates to the Farrallons in SF. NY has terrific mass transit relative to the Bay Area, and land in all four directions. You can take 750k and pop down into a good suburb with great schools and a manageable train ride; that’s impossible here due to both geography and 1) above.
      3) Prop 13 limits supply so people can’t move or are busy handing down their sweet tax basis to their next generation. Prop 13 needs to go, its one of the classic reasons people look at the Boomers as the generation that completely rigged the deck. Just as they start getting into their prime earning years, they walk right into Prop 13. Amazing.
      4) Consistent influx over the last decade of people laundering money in the CA real estate market from China. Politicians and the media will never actually reveal just how many shell companies, LLCs and faceless suitcases of cash sucked up properties up and down CA the last 7-10 years. But it’s significant.

      Palo Alto is its own animal. The Atlantic article below is titled “Why Chinese People Buy So Many Homes in Palo Alto”

      • SocalJim says:

        In Moraga, you can get a nice 50s ranch home for around 1M. Moraga is a nice place to live. The train ride to SF is reasonable.

    • Guido says:

      To get a median income one starts with a population or a representative of it. This population includes those whose skills have stagnated or those that are too old to move. My guess is that these people bought a long time ago and now are staying put. Their incomes are probably setting the median number. They’re not buying or selling with those incomes. The ones buying lately might be the newer people that are in the higher income bracket. That can explain the million dollar homes.

  9. Just Some Random Guy says:

    Oh boo hoo Milenials once again. Waaahh wahhh wahh. The poor babies have the sadz they can’t buy a house. Womp Womp.

    Here’s a crazy idea kidz: Eschew the $20 sandwiches and $8 coffees every day and you’ll afford a house. And the $1000 phone, and the lates i-everything, the $300 jeans, eating out evert night, $15 craft beers, Uber and Lyft everywhere instead of the bus.

    But no man. That’s like hard and stuff. Easier to whine about it and vote for Bernie.

    Give me a break

    And yes Wolf, I know you’re not a milenial, but you’re giving these spoiled brats a voice and encouraging their destructive behavior.

    • Wolf Richter says:

      No one mentioned millennials until you did. This was about the economy overall, and economic growth, not about a generation. However, there was a prior WOLF STREET REPORT that dealt with the issue you’re alluding to :-]

      • Just Some Random Guy says:

        Well you kinda implied it didn’t you? The current generation’s home price appreciation is hurting the next generation.

        Who is the next generation? Drum roll please……

        • Wolf Richter says:

          There is NOTHING in this report about a generation, ANY generation. You’re making this up. You didn’t even bother to listen to it before commenting nonsense.

          A prior WOLF STREET REPORT — “Who Wins in a Housing Bust” — discussed the beneficiaries of a housing bust, because you cannot slice bologna so thin that there is only one side to the slice, as I said.

          That segment wasn’t about generations either, but about those, regardless of generation, who are working for living, and want to buy a home with the fruits of their labor, namely dollars that gain purchasing power when home prices slide.

        • Rcohn says:

          Is is estimated that there are 75 m boomers and 83 m millenials. So there are easily enough millenials to buy the houses of the boomers. Well not quite .Because millemials have not achieved sufficient wealth and many are not yet in their peak earning years and because houses have escalated in price so much, supply of houses is going to outstrip demand in coming years.

    • Bobber says:

      You’d have to give up a lot more than coffee, jeans, and phone to buy a house at today’s prices. I think you fail to recognize what’s really going on.

      Workers at the bottom 90% of the income scale have seen their wages stagnate relative to asset prices, and this has been going on for decades. The moves are huge and very evident. Meanwhile, cronyism and corruption run wild at the top.

      Talk about coffees and jeans completely misses the target. This is about what people are getting paid for their hard work, versus what rent seekers get for sitting on their arses. The little things people spend their money on today has nothing to do with it.

    • Weary Patience says:

      I am a “millenial” and do not eat $20 sandwiches nor drink $8 coffee. I have a cheap phone, a used laptop, hand me down jeans, eat out maybe once a week, don’t drink much, never used Uber or Lyft (never will) and live in an area without public transit like buses so cannot take advantage of those services.

      However, even living frugally and carrying no debt while making an OK salary for the area I live, trying to budget for a house that is “appreciating” at 5-12% a year for the last 7 years in this area is basically impossible. I could “swing” a payment and be under 30% DTI but looking at total cost of ownership and amount paid over 30 years it’s a raw deal and I am not ignorant enough to fall for it. Prices on entry level housing are insane right now; paying way too much for what you get.

      The problem is there are always larger fools to put 0-3% down because it is “cheaper than rent” thus cranking up prices on starter homes to the point that they cost considerably more per sqft than “luxury homes” in the area.

      It sucks and people deriding entire generations because of crap they read in the news media is tiring.

      • noplacetolive says:

        Spot on.

      • JohnnySacks says:

        Thank you, 100,000 avocado toast and boom, you’ve got a way to compete with cockroach house flippers for your starter home in Boston. Just like that. Or there’s hundreds of apartment towers going up where a 380sf studio will cost you $2700 month. Only 500 avocado toasts.
        Burn it all down to the ground and piss on the ashes.

    • GSW says:

      I’m not a millenial; but I’ll take the bait and play point/counterpoint:

      If you are still bashing them and defending Boomers like they actually worked for all they have managed to squeeze out of the lemon, and comparing it with spending on toast and iPhones, you’re lost.

      They timed the biggest demographic and economic rigged deck in history (i.e. China was still a mysterious place called The Orient, Europe was a pile of rubble thanks to the greatest Generation and there was no such thing as global competition) and then gutted the entire system on their way up with complicit lapdog politicians on their side.

      Now that they’re old they will all go back to their hippie ideals that they protested for (“don’t touch my Social Security! Medicare for all sounds great!”), then shelved for a few decades while they embraced ruthless capitalism and off-shored the middle class in search of market gains, or slid into a cozy Caltrans/BART/CHP/Muni/take your pick job where they could spin the overtime/pension wheel with no oversight and retire at 53…oh and lets slip Prop 13 in there to make sure that when we sit at retirement BBQs at age 53, we can complain about how bad the schools have gotten, it’s almost like they aren’t properly funded!

      But Jerry balanced the budget, don’t glance at the ticking time bomb sitting off balance sheet.

      They’ll sit back with a drink in their hand (probably in Arizona where their padded CA pension goes further) and reminisce on how hard it was attending Berkeley debt-free financed by a part time summer job at a pool once they got back from Woodstock and were done ‘finding themselves’, and then fire off one of the “Oh these kids have it easy with these low interest rates; when I bought my Victorian in Nob Hill in 1981 for $75,000, interest rates were high..” strawman specials. Because how many all-cash overseas offers were they up against to buy a starter home?

      Just leave the bills neatly piled up on the way to the grave, and admit that timing is everything, and the Boomers had a royal flush.

      See, two can play the generational grenade launch game.

      • Jon says:

        Spot on

      • kitten lopez says:

        WOW…that’s epic and BEAUUUUTIFUL and keep going because you’ve gotta seed this town with the new “HOWL” scream poem so needed for today and now and always KEEP GOING.
        you’d better come to this meet up whenever it happens, GSW, or i’ll find you and twist your ear til you come correct and show up ready with your teeth sharpened and your ears cleaned of wax.

        i’ve been challenged to do a series of fast drive-by topless shots in the many streets of san francisco by my new photographer friend who’s doing shots of my pants for me. i said “let’s not waste the energy and let’s do something wrong and fxck you so we don’t waste our time on just boring stuff” and this is what he came up with as a love letter to our town.

        and i’ve gotta do it because i’m terrified but i owe a whole lot to this town and my defiantly natural and 52-year old tits are a small tiny price to pay to keep the freak flag flying, no matter how small a scrap it has become.

        so you keep going, too. this town is very much a give and take experience whether you want it that way or not. it’s always the pretty one in the relationship.


  10. DR DOOM says:

    As a student of history I know that Keynes toward the end of his life captiulated to the old dead guy from Edinburg on the Silent Hand Of The Market place. The young will always displace the old,even if they are forced to cry havoc. Analysis is entertaining but we will not see the silent hand move till it has done its terrible deed.The doctor’s prescription is neither a lender nor borrower you be and Pay your wealth forward to the next generation if you see value and stewardship,have a single malt and keep all that you love close and safe. Good night and good luck.

    • RD Blakeslee says:

      “… Pay your wealth forward to the next generation …”

      Amen! (Can’t afford the single malt – settle for Dewar’s.)

      • DR DOOM says:

        I lost a bet that I could tell dewars from a speyside single malt.The doctor pretty much blew his street practice license on that bet. Reading Wolf report along with a dewars is all top shelf from my point of view.

  11. fred flintstone says:

    Taking the average home price in 1956 of 11,700 and multiplying by roughly 9 for the cost of living means 105,300 should be the cost today……but adjusting for the increase in the average size from 1000 sq ft to 2500 sq ft means that housing should be at 263,000. Its at 189,000. So the cost has declined over the past decades. In fact some homes have improvements that were never a part of a home in 1956. No bubble……except that the brats want everything handed to them. I’am sick of zero rates on my hard earned money. Zero rates so the business community, millennial’s and big spenders can have this generational party put on by my savings. We are teaching an entire general to spend instead of save…no capital… America. The mal-investment in the markets will destroy us.

    • Ed says:

      fred flintstone – You make a great point. It is weren’t for interest rate manipulation by the Fed and irrational demand for larger houses by fat baby boomers, the cost of housing should probably be closer to zero right now, and ultimately will go to zero in the long run. Technology and international competition has already driven the cost of necessities to near zero and energy and housing will be next.

      Nobody needs a 2,500 sq ft house, and the younger generation is catching on to this idea. This explains the enormous growth in high end rental units in cities. I’m beginning to see similar high end multi-family buildings in the suburbs at a fraction of the cost which should steal the population growth from big cities. Prices should start to collapse at the high end of the real estate market and slowly trickle down to the low end as the country falls into recession.

    • Weary Patience says:

      I like the median house to median income ratio to look at affordability and or overpriced. Historically long term it’s been a mid 2’s ratio and now it is around 4x. That indicates some bubbly to me. Locally it isn’t as bad, a mere 3.5-3.6x but the stuff you get for your dollar on the low end is not good. Bad area, far away from employment, needs lots of work, etc.

    • Seen it all before, Bob says:

      The average price of a 2500 sq foot home in the US is 189K? Really?
      That’s $75 per sq foot.

      Please send me the addresses of where your kids are buying these houses at that price.

  12. Art says:

    Slumlords here in Santa Rosa CA definitely want all of the pie.

  13. Scott says:

    Rising population and low unemployment certainly creates demand for housing, but prices can only rise if there are more buyers ready to buy than sellers ready to sell. Therefore housing prices are constrained by wages.

    Of course, unintended consequences are are real and government-associated lending (Fannie Mae, Freddie Mac), Federal Reserve policy, action by bank regulators, investor action (buying properties, non-conforming loans), and even the fear of rising prices (market momentum) create or contribute to additional price increases and ultimately, asset bubbles.

    Contrary to the deep desire by some for a vast conspiracy to be responsible, pay for unskilled or low skill labor has been stagnant for years due to immigration, displacement by technology, and offshore competition. This is unlikely to change.

  14. Gorbachev says:

    Money is a commodity like all else.If

    there is too much around they won’t pay you

    too much for it.

    As far as wages go.If they allow wages to catch up

    to where they should be ,that would eat up all

    the excess money.This would cause interest rates to rise fast

    and we can’t have that. 2020 is coming up fast.

    • Kye Goodwin says:

      Gorbachev, I’m still a long way from understanding money, but one thing I think I’ve learned, is that money is NOT A COMMODITY. Money is something far more abstract and less physical than any commodity. Money doesn’t just accumulate and flow like real physical stuff, it also appears out of nothing and disappears into nothing in great quantities every day. We would rather it didn’t. People want currency to be like gold but it isn’t any such thing.

      For example, bank lending creates money by a process of double entry book keeping . The new money doesn’t always create demand and stimulate the economy. It might, for example, be used to pay off existing debt, in which case it effectively disappears again, but take the case of a house seller with no mortgage selling to a buyer with a new bank mortgage. If the seller takes the money they got for the house out into the economy and spends it on goods and services then this is stimulative to the economy as a whole. The buyer on the other hand has their ability to spend diminished far into the future because of their loan payments. Bank lending brings future demand into the present with the consequence that future demand is diminished. But don’t the monthly mortgage payments to the bank create demand? Not really, because the bank is not constrained in its lending under normal circumstances by any other factor than its ability to find eligible and willing borrowers. There’s always plenty of money for lending if there are wise loans to make, so paying back bank debt only keeps the bank from going broke but doesn’t otherwise encourage them to make more loans.

      I won’t even get into the other major category of money from nothing: the regular government creation of new money. No gold mines have to be opened. Its just keystrokes.

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