The Most Splendid Housing Bubbles in America: Nov. Update

A pandemic of house price inflation.

By Wolf Richter for WOLF STREET.

House prices jumped 7.0% across the US, according to the Case-Shiller Home Price Index released today. Other indices have indicated similar price surges. House prices are going nuts despite a terrible economy. They’re being fired up by low interest rates, $3 trillion in liquidity that the Fed threw at the markets, fear of inflation that drives people into hard assets, work-from-home that causes people to look for a larger place, the urge to-buy-now before putting the current home on the market, and a shift from rental apartments and condos in high-rise buildings to single-family houses. And condos, as we’ll see in a moment, are not universally hot.

Los Angeles House Prices:

House prices in the Los Angeles metro in September jumped by 1.3% from August and by 7.7% from September last year. They’re now 12.9% above the peak of the totally crazy Housing Bubble 1, have nearly doubled (+93%) since early 2012, and having more than tripled since January 2000 (+209%):

The Case-Shiller index was set at 100 for January 2000 across all 20 cities it covers. Today’s index value for Los Angeles of 309 means that house prices have surged 209% since January 2000. This makes Los Angeles the most splendid housing bubble on this list.

For Los Angeles, the Case-Shiller Index provides sub-indices for condos, and for high-, mid-, and low-tier segments of houses. In the low-tier segment (black line) – where people can least afford price increases – prices shot up 10.2% from September last year, having nearly quadrupled since January 2000 (+280%). During Housing Bubble 1, the low-tier surged the most, and during the Housing Bust, it plunged the most, -56% from peak to trough. High-tier prices (green line) have risen 7.6% year-over-year and are up 186% from January 2000:

The Case-Shiller Home Price Index avoids some of the distortions inherent in median-price and average-price indices because it is based on “sales pairs,” comparing the sales price of a house that sold in the current month to the price of the same house when it sold previously, and it does so going back decades. Today’s release for “September” is a rolling three-month average of closings that were entered into public records in July, August, and September. So that’s the timeframe we’re looking at.

San Diego House Prices:

The Case-Shiller Index for the San Diego metro jumped 1.8% in September from August and was up 9.5% from a year ago:

This is “House-Price Inflation”: Loss of purchasing power of the dollar.

Because the Case-Shiller Index compares the sales price of a house in the current month to the price of the same house when it sold previously, it tracks how many dollars it takes over time to buy the same house. In other words, it measures the purchasing power of the dollar with regards to houses. This makes the Case-Shiller Index a measure of “house-price inflation.” And that’s all this really is – the loss of purchasing power of the dollar with regards to houses.

San Francisco Bay Area:

House prices in the five-county San Francisco Bay Area – the counties of San Francisco, San Mateo (northern part of Silicon Valley), Alameda and Contra Costa (East Bay), and Marin (North Bay) – rose 1% in September from August and 6.0% from a year ago. The index has more than doubled since 2012 and nearly tripled since 2000:

But condo prices in the five-county Bay Area fell for the fourth month in a row and are down 2.3% from a year ago, and are back where they’d first been in March 2018. Condo prices in San Francisco itself have fallen much further amid a historic all-time record condo glut, with the median price down 12.8% year-over-year. But the Case-Shiller Index covers a vast area around the Bay, including those where San Francisco refugees are moving to, and some of them are seeing rising condo prices:

Seattle House Prices:

The Case-Shiller Index for the Seattle metro jumped 1.2% in September from August and 10.1% year-over-year. It has more than doubled since 2012 and exceeds the Housing Bubble 1 peak by 46%:

New York Condo Prices:

Case-Shiller’s area for its New York City index includes numerous counties in the states of New York, New Jersey, and Connecticut “with significant populations that commonly commute to New York City for employment purposes.” This area is far more diverse than Manhattan by itself. Condo prices in this vast metro have essentially been flat since September 2017 and are down 2% from the peak in October 2018:

Portland House Prices:

House prices in the Portland metro jumped 1.3% in August from September and 7.6% year-over-year and have doubled since 2012:

Miami House Prices:

House prices in the Miami metro rose 1.0% in September from August and by 5.6% from a year ago. The index is getting closer to its ludicrous Housing Bubble 1 high, lacking just 7.4%:

Tampa House Prices:

The Case-Shiller Index for the Tampa metro jumped 1.4% in September from August, and is up 7.5% year-over-year, and has thereby surpassed its prior crazy bubble peak of 2006:

Washington DC:

House prices in the Washington D.C. metro jumped 1.0% in September from August, and 7.0% year-over-year but are just a smidge shy of their Housing Bubble 1 peak:

Boston House Prices:

House prices in the Boston metro jumped 1.5% in September from August and 7.7% year-over-year:

Denver House Prices:

House prices in the Denver metro rose 0.6% in September from August and 6.0% year-over-year. Beautiful Housing Bubble 2, but not much of a Housing Bubble 1:

Phoenix House Prices:

House prices in the Phoenix metro soared 1.9% in September from August and 11.4% year-over-year, the hottest house price inflation of all the markets on this list of Splendid Housing Bubbles. But the index remains down 4% from its Housing Bubble 1 peak in 2006:

Las Vegas House Prices:

House prices in the Las Vegas metro rose 0.8% in September from August and 5.4% year-over-year. But they remain down 12.6% from their ludicrous Housing Bubble 1 peak:

Dallas House Prices:

The Case-Shiller Index for the Dallas metro – the counties of Collin, Dallas, Delta, Denton, Ellis, Hunt, Johnson, Kaufman, Parker, Rockwall, Tarrant, and Wise – rose 0.9% in September from August, and 2.6% year-over-year, the coolest house price inflation on this list of the most Splendid Housing Bubbles:

Dallas is also the last entry on this list, with house prices having “only” doubled since 2000 – meaning house price inflation of 100% in 20 years. The remaining cities in the 20-City Case-Shiller index have experienced house price inflation of less than 100% over the past 20 years and didn’t make the cut.

Work-from-anywhere, unemployment crisis, oil bust, people chasing a cheaper less crowded place to live, the land rush to buy homes. Read… I’m in Awe of How Fast Rents Plunge in San Francisco, New York, Boston, Los Angeles, Other Expensive Cities. Rents Decline Even in Houston & Dallas. National Average Turns Negative

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  268 comments for “The Most Splendid Housing Bubbles in America: Nov. Update

  1. 2banana says:

    Housing, the stock market and college costs have not even had a hiccup in this terrible economy.

    How disconnected parts of the economy have become from reality.

    “House prices are going nuts despite a terrible economy…”

    • Lenz says:

      So its just a mania? or are all fiat currencies devaluing in unison with one another vs hard assets as the government steps in to fill the demand void that has cratered from private industry?

      so are we getting deflation or not?

      • Pasha says:

        Fiat currencies are devaluing in unison with one another vs hard assets;

        Take a look at The Los Angeles Case-Shiller Home Price Index peaks for all housing types in 2006 and in 2020.

        For example, when you price them in ounces of gold, they’re actually cheaper. Even though the y-axis for Case-Shiller is not based on $10,000 my point is still valid.

        2006 2020
        Home Price oz. Au Home Price oz. Au
        $340,000 400 $380,000 201
        $280,000 329 $315,000 166
        $280,000 329 $315,000 166
        $240,000 282 $285,000 150

        Au $/oz. $850 $1,894

    • Shiloh1 says:

      Anything the government directly or indirectly subsidizes will increase.

    • Thomas says:

      I’m a 32 year real estate veteran. The gutter level current mortgage rate is a danger sign to anyone looking just beyond the housing market horizon. It might seem reasonable to rationalize that your payments might be below or close to rents but consider this. What happens to the value of your $500,000 (+) home if interest rates rise by just one half of a point? Say 3.5% or 4%? Rates still below what had been healthy economy rates. Suddenly fewer buyers will qualify for higher priced homes. A slow market be omes a buyers market. Think about it.

      • Walter Ego says:

        What happens to the value of your $500,000 (+) home if interest rates rise by just one half of a point? Say 3.5% or 4%?

        Depends what’s causing the rise in rates. If it’s a stronger economy overall than wage growth and lower unemployment will lead to more demand.

        As an experienced real estate investor you should know that what crashed a real estate market every time is speculation. If you’re seeing a lot of it in your market market be careful.

        • Petedivine says:

          Get real…look around you. The economy is definitely not growing and new unemployment claims was over 709K last week. I’ve never seen numbers this high.

      • Bart says:

        The question Thomas is when and how much interest rates rise and if rising rates are even possible given the ramifications beyond housing. I get your point though, people buying for a low payment and then a job loss and or a move and not enough cash to bring to the table to sell.

        PS, in general, are mortgages today non-recourse?

      • Trung says:

        I’ve been pounding the table for years about this happening. I’m glad there is another genius out there like me.

  2. Sporkfed says:

    I blame HGTV.

    • Old School says:

      I have noticed on some of the episodes of HGTV that they are tearing out granite counter tops to install quartz. Its their money, but gee whiz is it so hard not to have the latest thing.

      • Lisa_Hooker says:

        I’m getting quotes to replace my quartz with unobtainium. It’s the next thing. Don’t be left behind.

      • roddy6667@yahoo.com says:

        Next year they will tear out the quartz countertops and install some made of unobtainium.

      • Anthony A. says:

        We are going back to Formica counters since it’s “back to basics” around here!

      • Tony22 says:

        Great time to get a very very low cost used granite countertop. Talk to your local counter man and offer cash.

      • hikusar says:

        Granite countertops were a fad mistake. They’re hard to keep clean. Literally no one has the mental capability of resealing them annually to prevent water and other liquids from seeping through cracks and staining the countertop. I’ve seen 50 year old tile counter tops that still look decent with minimal maintenance, even with a lot of use.

        Bonus: Busy granite countertop patterns make it difficult to find small objects you drop on the countertop. If you really want to flaunt your wealth, get marble countertops that need to be resealed every 3 months!

        • Wolf Richter says:

          hikusar,

          “They’re hard to keep clean. Literally no one has the mental capability of resealing them annually to prevent water and other liquids from seeping through cracks and staining the countertop”

          You’re confusing granite with marble, a common mix-up.

          Granite is an ancient hard rock (age measured in billions of years) that when polished is like glass, and is non-porous. You can clean countertops with Windex. Granite countertops will last thousands of years in perfect condition without re-sealing unless you break them.

          Marble is a soft relatively young limestone (age measured in millions of years) that is fragile and porous and needs lots of maintenance, including re-polishing from time to time, and re-sealing.

        • Lynn says:

          Wolf, the more exotic natural granite that is “grained” and has a lot of crystalline structure does collect “stuff”. I cut my own countertops out of large exotic scraps- an installer’s mistake. Some of this stuff just has a lot of grain and tiny cracks throughout. While technically, mine don’t stain easily (or at all) over time oils do seep in, even with sealant. This leaves a slightly darker color which sort of saturates throughout the piece. I gave up and just applied coconut oil to the whole thing.

    • Bobber says:

      You can blame them for environmental waste as well. Every time they walk into a perfectly functional kitchen, the lady says “this has to go”, as though kitchens are part of the wardrobe. I shiver to think how much of the environment is wasted because of peoples’ need for “style”. What’s wrong with something that performs its function well?

      • Anthony A. says:

        Yeah, and most women don’t even cook anymore!

        • VintageVNvet says:

          not so fast AA:
          Don’t know much about your environment, etc., but the only woman I know who doesn’t cook is my 90 yo mil, who has two daughters who are loving the opportunity to cook for their mom, and share with any of the family around them…
          Even a (4.5 yo) grand niece is really getting into it with her grandpa, a former pro chef, etc., now retired and loving the opportunity to cook with his grandchild…
          Of course, I don’t know ”most” women, only a couple of hundred IIRC, so maybe should just consider my self fortunate that my retired chef spouse continues to love to cook.

        • MavenACTG says:

          Brutal! But nesting is a thing, I guess. Keeping up with the Jonses. Maybe sick consumerist culture taken to an extreme.

          I don’t know if I have granite or quartz or whatever countertops. I just know I moved from an s-hole Studio in a bad part of town into a 1-Bedroom that’s much nicer. That’s enough for me who is used to barely having anything.

        • Anthony A. says:

          VVN, you are a lucky man! Restaurants are FULL nightly around here so I know those women are not at home cooking!

        • josap says:

          Hubby cooks. He hasn’t asked for a new stove – yet.

      • polecat says:

        Slightly off thread:

        I nabbed a $25.00 slab of formica (affixed to 2 glued -3/4″ dense particleboards, to form a 11/2″ base) from the local Restore outlet, and proceeded to fashion a combo hat/coat rack/room divider screen above, with open firewood storage cabinet below.
        Said formica surface actually looks like polished granite .. with both matt and shimmery sheen incorporated within the laminate, simulating both quartz & mica .. and was completely blemish free. The unit is better than anything manufactured, as it suited to our prticular household needs.
        I my point is that I had created a unique piece of ‘furniture’ utilizing both new and used/salvaged elements. Fun to build, and highly functional as well. Had it been offered as a store item, it easily would have cost double, or even triple the price of materials alone.

        The labor however, was ‘cheap american’ ..
        ‘;]

      • Shiloh1 says:

        Speaking of ‘environmental’, granite off-gases radon and adhesives for gluing the countertops to cabinets off-gas VOCs. Cutting, drilling or sanding stone yields silica particles.

      • pbfurn says:

        Bobber,

        I totally agree. Having said that, you are just a curmudgeon. (sarc)

      • SuzeB says:

        Agree. The amount of waste with home re-selling is mind-blowing. I’ve heard of sellers putting in entire new kitchens ostensibly to sell their home and the buyer tears it all out – wifey or realtor didn’t like it or it doesn’t meet their ridiculous standards. Thanks to copious marketing in the last decade or two, the masses now believe they are entitled to “luxury” at any cost. It’s your god given right!

        Consumerism run amok. Planet shmanet! Who cares about the planet when you can tear out a perfectly functional but perhaps “outdated” (the horror!) kitchen and install a gleaming, cool and clinical white and gray kitchen that looks like it came from a spa or urgent care center? Gotta keep up! Be like everyone else or what will the neighbors think? Or better yet, outdo those darn Joneses across the street!

    • 728huey says:

      I have been checking out a few real estate gurus’ websites, and nearly all of them have said they have been making more money than expected due to the HGTV effect, where newbie investors see these flipping shows on HGTV and spend more money than the should on fix and flip properties.

      • Lynn says:

        You should see what “flippers” are paying for crap houses with major, major structural and safety issues around here.. 1940’s electrical, severely sunken slab foundations, old “renovations” removing structural walls, grow houses with extra drywall recently applied right over the moldy stuff. I even saw a mock perimeter foundation comprised of cement basically just troweled right over post and pier.

        • Y says:

          Saw a friend bought such sunken foundation foreclosure and put a wall and pillar underneath. I don’t know if that will cure the problem. How can new buyer find out this structural defect?

  3. Memento mori says:

    If you believe inflation is in the cards, what better investment than a house.
    First you get a 30 year mortgage at unbelievably low rates that you certainly will pay back in inflated dollars then on top of that value of the house goes up protecting you from said inflation, double whammy indeed. The best time to buy real estate is alway five years ago.

    • Sam says:

      The ‘time to buy’ is when no one wants anything to do w/RE.
      When [not if] rates rise, there will be epic write downs.
      Not as drastic as the 80’s, though everything goes in cycles.

      Patience Grasshopper….

      Addendum – recently noticed an abundance of existing entry level ranch design (3bd/2bth) thats seen no activity past 60 days. Adjacent ‘hood is Macmansion developments near Nike & Intel operations
      An anomaly, or something else unfolding?

      As always, may the sun & wind be at your back.

      • QQQBall says:

        Nah, not if you are geo-arbitraging you sell for $400/sf and buy for $100/sf. Its a K-shaped recovery. If you have a reliable job/income stream, you can get a lot of house for a very low monthly payment. in some instances, the annual mortgage payment is less than past yearly property tax payments.

    • David G LA says:

      ? What are inflated dollars?

      • hendrik1730 says:

        Toilet paper.

      • Tony22 says:

        One example using a metric that everyone can appreciate:

        The 2020 dollar that buys you a tiny candy bar versus a 1970 dollar that bought you 20 larger candy bars.

      • Shiloh1 says:

        People who had 15 year fixed rate mortgages originated from the mid-60s to mid-70s rode the inflation wave from mid/70s to mid-80s.

    • GotCollateral says:

      Yeah, only if you think no one will ever have to pay rent and their mortgages ever again… lol

      • Memento mori says:

        I think more people will rent as real estate becomes more expensive.
        But this is the major trend our society is evolving to, you don’t own anything anymore, just pay a monthly fee, like your phone bill.
        Once we rent everything for a monthly fee, private property will cease to exist.
        That is by definition communism by subterfuge. For the plebes only.

        • p coyle says:

          but on the plus side, we will be happy once we don’t own anything.

        • GotCollateral says:

          And with one bullet in the head of the owner… you can easily transfer from renter to owner… and the scheme you layout falls apart… as it always has… lol

        • Thomas Roberts says:

          Memento mori,

          That sounds like feudalism, as for house prices it will depend on location. After the pandemic ends there could be massive layoffs, especially, for those working from home, and the question will be where will people move? Anywhere a significant number of people move away from will see a massive drop in house prices. There is also a lot of people who are about to enter retirement age who might try to offload houses. There also has to be enough money and credit for house prices to jump.

        • roddy6667 says:

          I live in China, where everybody owns their own home. And don’t believe what you read on the Internet about owning land. In China you have the right to exclusive possession and sale, just like in any US condo, association, Planned Unit Development, co-op, or HOA. This agreement has a set period. When this is up. the city can buy you out or it rolls over. It’s just another type of Eminent Domain.
          I don’t see many countries where this “communist” type of ownership exists.

        • Volvo P-1800 says:

          Makes me think of Doctor Zhivago.

        • Thomas Roberts says:

          roddy6667,

          Most people are referring to the Soviet Union. As for China, the local governments in China can take back land at any time to resell and they usually pay those living on it, little to nothing. Alot of people rent and even when you do buy property, the building developers almost always bought it as a, usually 70 year lease. None of those leases have ever expired yet, so no one knows what the end result will be when those leases expire.

        • Chris Herbert says:

          For the creditor class who own all that private debt. Pretty sure they aren’t communists. Pretty sure they are almost 100% capitalists. The fabled One Percent!

    • Old School says:

      I do agree with you on the 30 year mortgage as that is not a natural interest rate and could only exist at these rates with government subsidy.

      A lot of people don’t realize they are using more leverage than wall street if they are only putting 3 – 5% down. I don’t really know how I feel about leverage on a house. There are pros and cons, but when you are young you don’t have much choice usually.

      In my parents day it was all about paying the house off as quick as possible. They bought one house. Paid it off in ten years and have been living without a house payment for 55 years. Taxes are now about twice what their house payment was 65 years ago. Their cable bill is 3 times their original house payment.

      • Lisa_Hooker says:

        I recall my father’s $107 home payment for everything – PITI. In the 60’s, contract not mortgage.

    • Old School says:

      The Fed certainly is propping up the risk taking. Anyone that put 5% down in these areas got 100% plus year over year paper return on investment, just like it works on Wall Street. Got to know when to take profits if you are a speculator.

      • Gdawg says:

        When to take profits? We call that a home equity loan. A mortgage is a non recourse loan in many states — if you default they can only take the home and nothing else.

        • Lisa_Hooker says:

          Second and subsequent mortgages, e.g. HELOC, typically have full recourse. You’d have to take your profit to another country before default.

        • Cas127 says:

          Lisa,

          Good catch regarding deficiency judgments on defaulted mortgages.

          One really big question that is rarely addressed.

          During the housing implosion, about 8 million home “owners” defaulted (out of about 50 million with a mortgage, out of 75 million SFH total).

          What ever happened to those potential 8 million deficiency judgment obligees?

          Lenders always want their damn money back and are not lazy about angling to get it…but there was very, very little commentary from 2008 to now about all those deficiency judgments.

          (Not to mention the fact that those 8 million households almost certainly couldn’t get another mortgage with a deficiency judgment against them outstanding).

        • Wolf Richter says:

          There were too many (millions), it just wasn’t possible, and these defaulted borrowers didn’t have assets to go after, and so banks essentially gave up. They just didn’t have the resources. And the political will had turned against them.

          But in the regular course of business, when banks have only a small number of defaulters, they’ll take them to court following the foreclosure sale if there is a deficiency.

    • Engin-ear says:

      “If you believe inflation is in the cards, what better investment than a house.”

      If you are an investor then you’ll need to run more or less complex financial simulations to decide every single investment in housing.

      If you need a house to live, the biggest question is whether you plan to live in it for the next 10 years. So, unless you are a house flipper (gambler), the question of buy/rent boils down to you capacity to commit to no mobility/upsizing for at least 5 (better 50) years.

      • MavenACTG says:

        World’s only getting faster. The only people staying still are the retired or the people who never leave their small communities and stick close to their families.

        I can’t imagine owning a home ever. Lifelong renter. If I do get some type of permanent residential asset, it better have wheels.

        • 728huey says:

          You’re better off owning a duplex or small apartment building and doing house hacking where you live in one of the units and rent out the rest of them and have the tenants pay your mortgage.

        • Jeff says:

          You know there is more than one way to put a roof over your head.

          I myself got out of the stock market and retired at 47, mostly due to my 6 rentals. Thus, I’m a fan of people who choose to rent.

    • roddy6667 says:

      Yeah. Buy now at the peak and ride the crash into a life of being upside down in your mortgage. Every day you will see homes much nicer and larger than yours in better neighborhoods for 30-50% less than what you owe. But you can’t sell. You can’t even move to another state to take up a lucrative career advancement. You just have to sit there and make the payments. What better investment than a house?
      Been there and done that.

      • JayG says:

        Aaand while you’re waiting for the 20% drop in 5yrs, houses would have appreciated 40%. Aaaand when the market drops and you’re trying to deploy that dry powder, no bank will give you a loan bc housing is now “risky” and you have to compete with all of the deep-pocket investors at the courthouse steps who are itching to get into vast SFH rental. This idea that you’d be able to swoop in for a deal when we’ve been under-building for 10yrs and boomers have another 20 before dying en masse, is a pipe dream.

        • Lisa_Hooker says:

          Oldest Boomer is 74. They’re starting to die en masse right now. 18 years worth.

      • Ethan in NoVA says:

        Buy a new house then walk away from the bad deal.

        Like people did during the last crash.

  4. Dano says:

    All I want to know is when and how does it end…

    • jim monet says:

      It all ends when lockdowns have forced everyone into default, while the CBs run out of things to buy with free money.

      • Engin-ear says:

        – “while the CBs run out of things to buy with free money.”

        The way out is found for CB buying:

        material things are finite,
        services are infinite (based on self-regenerating worker’s time) – whether useful or not.

        • gary says:

          Engin-ear:

          “services are infinite”. Yes I think you are onto something. I made a similar comment a while back.

        • Anonymous says:

          Let’s see:

          I form a startup to lend my engineer buddies’ time to big tech @$200/hr., say fifty of them.

          Then, issue $20M AAA rated bond back by future income stream.

          Sell the bond to the FED.

          Divvy up the proceeds among us, close down the shop.

          Everybody happy. Right?

    • Satya Mardelli says:

      It’s always a supply/demand imbalance that moves the markets. Whether it is stocks, bonds futures, forex, housing, etc. It matters not the market. Right now in Phoenix it’s more of a lack of supply that started the price increases. Then Covid strikes, WFH becomes the rage and now every Realtor in town is practically begging people to list their home because of a surge in buyers moving in from Cali. Now its a refusal of homeowners to sell their property coupled with a overnight doubling of buyers and voila- instant bubble. Home builders are slow walking their developments, no starter homes here, just big ass 4/3 and 5/3 homes with hefty price tags.
      So to answer your question ” when will it end?” My guess is it will end when the supply and demand equalize. That could take awhile. I don’t see a collapse though, more of a boom/plateau. The underwriting standards are fairly high and the buyers are serious buyers with an intent to occupy the home unlike the last RE boom/bust.

      • Beardawg says:

        SATYA

        I concur. Most Buyers are qualified in a traditional sense but there’s just nothing out there for sale.

        Defaults/foreclosures will be nothing like 2008-2011. As such, any price correction, with interest rates at perpetual ZERO, will be minimal even when supply does begin to meet demand.

        • BuyHighSellLow says:

          A couple in SoCal just bought a $1.5M home.
          They earn somewhere between $240k and $280k per year, before taxes.
          This couple has a little over $100k in student loans and an additional $30k in credit card debt.
          Payments on the cars are $800 for another two years.
          Down payment came in the form of $250k “loan” from family.
          Bank needed to see nine months of payments in their bank account, so they raided their 401k accounts.
          They will be spending $200k to remodeled the home as soon as they can refinance and cash out equity when the six month requirement is up.
          Daycare cost is in the $1,800k/month range and it will go up as baby gets older.
          Property taxes are in the neighborhood of $1,300/month.
          Lifestyle choices include(d) international trips, wine clubs, and takeout from “nice” eateries.

          How do I know all of this? Because they must have a need to confess, in the hopes that everyone they kniw with is also drowning in debt.

          These are the kind of “credit-worthy”, “qualified” people who are buying properties that banks are all too happy to underwrite loans for.

          Good luck having to make a $12k nut every month – and I don’t care how low interest rates go – that’s a prison sentence I won’t sign up for no matter how crazy the housing frenzy gets.

        • Cdzrocks says:

          BHSL,

          It’s almost like they perceive no risk in buying a home. The National association of Realtors must be estatic there commercial propaganda has so throughly entrenched in purchasers minds.

          Funny how I hear many Chinese buy property with the same mindset knowing the CCP will backstop any housing market failures. What could ever possibly go wrong? :) I guess Americans can take solice in the fact that contractors would mix cardboard into their concrete that will fall apart in 3 years or less. Although I don’t want to give them any ideas

      • Old School says:

        If you are retired you can still find cheap housing in rural areas if you are familiar with the state (NC). Got to do your due diligence to make sure you are in low crime, low tax and good cultural fit. Newish mobile homes are well built and will last at least 50 years. $70,000 or less depending on age. Small brick ranches were well built in the late 50’s and 60’s and can be found for around $100,00. Usually you can find the above on a 2 acre lot 30 miles or so from metro area.

        • VintageVNvet says:

          Good Start OS:
          Middle/later part of the last crash, (middle of ”nowhere/flyover”), a friend was paying cash at the courthouse steps for 2/1 small houses in our county seat, putting in another $2-5 rehabbing, then either renting and refinancing, or selling for $25-30K…
          Similarly, in SWFL, in 08-09-10, I saw waterfront houses, good ol’ ranches, on canals, but with dock and ”sailboat water” to the GOM going for less than 30% of their high $$$ in 05-06,7?..
          This crash appears to me to be hugely distorted by the pandemic/work from anywhere, etc., and it only suggests to me that the time to bottom will be a bit more than last time.

        • Petunia says:

          V V,

          Unlike the last crisis which was an employment and credit crisis, the next one is one of political corruption and ineptitude.

          People are not leaving CA because they have lost their jobs, they are leaving because they are overtaxed and over regulated. Chicago will become the next Detroit due to high crime, crazy real estate taxes, and dumb governance.

          The bottom is falling out all over the place. Sometimes it’s a whole state, sometimes a whole city, or it can be more local, like a certain section of town. It is different this time.

      • Jeroen says:

        Boom/ plateau, is that wat Fisher said about the stockmarket in 1929?

        • w says:

          Hey Petunia,totally agree.Grew up in n.w. Burbs of Chicago,ex. Is in west town of Chicago.Bankrupt,leftist,pro-looters are terms coming to mind.Lightfoot just today came to crap agreement with citycouncil on More taxes!! Property taxes,I believe will go up,because they do not pay emough!?Gas taxes hiked and some other goodies so they didnt have to cut city jobs.I wonder how Equitable it will be to the struggling homeowners and small holder landlords????

      • Engin-ear says:

        “It’s always a supply/demand imbalance that moves the markets.”

        Well said!

      • sunny129 says:

        @ Satya Mardelli
        The growing disconnection between assets bubble including housing prices and the reality which is being brought slowly by descending 2nd Covid spike is unnerving to say the least!

        Every one here, thinks there will be a ‘soft’ landing unlike in 2008. No chance of collapse blah, blah. Same thought was prevailing in 2006-’07!

        There will be at best K shaped, not V shaped. How many businesses and Jobs are going to be lost permanently? How many sectors of the Economy will come back to pre-covid levels by next spring/Summer?

        Every one and his uncle think Vaccines are “here’ and pandemic will be story of the past by spring/Summer?fall!?
        REALLY?
        Watch the Economy and the mkts for the next 8-10 weeks!

        Compare the level of DEBT ( private/public) now vs 2008. Fed(CBers) have been kicking the can year after year. This year’s deficit is over 3 Trillions! MMT will take care of it, right?

        2nd stimulus NOT in sight. Even it comes it will be small and not effective until March. Global Economy is already tanking.

        More will join the unemployment in the 8 weeks! More renters will homeless. More defaults and bankruptsies!
        Covid infections, hospitalizations, mortality & morbidity increasing by weeks if NOT days! GDP could be negative for Q4 ’20 and Q1 ’21.

        However housing industry will be barely get affected right? I am NOT that hopeful. The problems in global Banking industry which brought us GFC, NEVER got addressed, just masked with more debt. The ticking time bomb just got bigger!

      • Cas127 says:

        Golly, it is like the “technology” necessary to build sub $200k houses (big wood boxes basically) has been lost to the American mind.

        So little to no extra housing supply despite an extra 10 million looking for work.

        Incredible rigidity is destroying the American economy.

    • Yancey Ward says:

      The when is easy- it ends when you die.

    • Lisa_Hooker says:

      “In the grave, my boy, in the grave.” – Mr. Natural

      • MavenACTG says:

        I’m waiting for the graveyard plot bubble. Then you know things are messed up.

        • Cas127 says:

          Well, there’s been a run on refrigerated mobile morgues in NYC and El Paso.

    • It ends when the people trying to end America finally succeed…

  5. I live in the Dallas area and my house has gone up about 73% in the past 11.5 years, however after taking into consideration the amount of things I needed to fix (new windows, HVAC, roof deductible, plumbing repairs, pool pump, etc.), and after considering sales costs when I sell soon, the increase is really “only” 30%. Raw math that is only about 2.6% per year. Still better than wasting money on rent over the past 11.5 years.

    • Zantetsu says:

      Maybe better than renting, maybe not. Depends on what you would have done with the down payment money that you have invested in the house instead of a different type of investment.

      • gary says:

        Zantetsu:

        I don’t agree with your outlook. The “different type of investments” have their own problems.

      • Happy1 says:

        If rent and mortgage are equivalent, and the down payment is small, there are very few scenarios where renting makes more sense. And you do eventually pay off a mortgage and own a home, with rent, it never ends.

    • RightNYer says:

      Ultimately, I buy houses to live in. If I make money on it when I sell, great, if I don’t, well, I still had a place to live.

    • Cas127 says:

      Don’t forget the high TX property taxes paid, which may or may not have been deductible.

      And the mandatory insurance costs if you had a mortgage.

  6. Rosebud says:

    Won’t find a dog or marijuana plant suffering homelessness.

    I knew a guy. He smoked marijuana for his medical condition, and he had a beautiful golden retriever. lived in his van with the dog. His nurse felt sorry For The Dog, and bought it from him. Lol. Let’s not give the guy a place to live, so he can take care of his dog. But this was 6 years ago, and some things have changed.. But more like a rotation of people through the system. He’s dead.

    This is about house inflation. And you get this bizarreness because home is where the WiFi is. Did you read about the woman taking a bus two hours to a place to charge her cell phone? Electricity and WiFi. And heat, that’s about it. And a fear of Kraken. Which is fear of homelessness, but this is code. fairly deep political code, considering the people involved and what they are doing.

    • Beardawg says:

      I have no idea what this has to do with housing prices.

      • JJ says:

        I think it had to do with reefer…

      • p coyle says:

        dogs and plants, apparently, can afford to overspend on housing and therefore drive up prices? that was my take.

      • VintageVNvet says:

        dog,
        If and when you are ”un housed” (the current PC version of homeless,) you will know what it has to do with housing prices and availability, and I speak from long experience in residential real estate and the construction industry, and having been on the streets a bit in my wilder younger days…
        These cycles of RE markets first came to my attention in 1956, when dad had no work for six months to the day, right after buying 3 properties, then leaped right back to work into the beginning of the next boom.
        That one was due to the let down from the Korean war IIRC, but, no matter, fact is that these cycles have gone on for eva,,, and the actions of the federal bank have just made them worse and worse, and will continue to make them worse and worse until the whole shebang falls apart, which, as has been said on Wolf Street many times, eventually it must.
        When will it end? Never IMHO, just have various lows and highs and timings, mostly local as commented earlier; so, basically, watch carefully where you want to buy, and keep your powder dry.

    • MavenACTG says:

      So if I decide to start living out of a car, I should spend some of the savings on rent towards a chronic chronic consumption?

      I tell ya, the stuff does allow you to put up with a whole lot, including four years of insane politics. However, murders productivity.

    • b says:

      Dur,did she not think of a B.K./Mc.D.,or library/community center?

    • Lynn says:

      Yeah. If the percentage of people who are homeless increases as much again as it did in the last recession then everyone is going to have a problem. Except the dogs. Most homeless dogs who are still with their people look pretty happy to me. The people- not so much. Twice as many homeless people won’t potentiate anyone’s carefree enjoyment of resources.

  7. Brady Boyd says:

    I’m not sure Seattle is having a housing bubble. Inventory is very tight. The economy is great. If there is one part of Seattle that could be argued is in a housing bubble will be on the north side by Everett. The 787 production is moving to South Carolina so all those jobs and supporting job will disappear so that area could implode.

    • RightNYer says:

      I’d love to know your basis for saying Seattle’s economy is “great.”

      • Cj says:

        It’s a boom town for car enthusiast movie makers, who like to display their restored classics cruising the entirety abandoned downtown of Seattle. The cars look beautiful roaring through empty tunnels, floating by forgotten and boarded up business and malls. The homeless left last, but there is nothing left downtown for them. I filmed my video in March but have seen many of them on youtube by now

    • Lance Manly says:

      Wow, I just had a flashback to 2006

      • sunny129 says:

        +1

        Most every one here, has a some kind of ‘rosy’ outlook on housing and the economy which has to support it in the coming months. Been in the mkt since ’82.

        Every day Indexes are zooming with no real concern of the economy on the ground. I get an unsettling of approaching ‘an ice berg’ soon and a replay of titanic and 1929 together!
        I hope I am wrong!

        • BuySome says:

          Check out the Harry Dent interview on Kitco. Lands like a cocktail shaker tossed into a dry crowd, the running and screaming always comes after the oohs and awes.

  8. Paulo says:

    Very very good article. In particular the 1st paragraph laid out so many of the fundamentals of rising house prices. And yes, a good house is an excellent hard asset, and while there might be dips and dodges going forward, the trend as long as I have owned a home is ever upwards, and housing value has kept pace with inflation. I bought my first home at age 24, and 40 years later…….

    Of course the rise also reflects the decline of currency, but is all relative.

    Besides, a person has to live somewhere and if a mortgage payment is close to rents, buying is a no brainer.

    Resisting the temptation to trade up and refi, will set a working man/woman up for life. Of course this also depends on your taxation area, but that factor should have been figured in at the beginning.

    My son just closed on a home, in Campbell River (Vancouver Island). It is one house up from an unobstructed waterfront view, and has an excellent view itself. Being single and stretched with the purchase, wary of the economy, he will finish off the basement suite and rent the upstairs out for Jan 1st. For now. The rent will cover the mortgage and most of the taxes. He has another home which he also rents out. That rent also covers the mortgage and taxes. This place includes 3 acres of riverfront and near Dad. Son is 36. In twenty years he will be 56 and the homes will be paid for, by the renters.

    Today’s market is different than the 08 bust. I no longer hear about liar loans and insane flipping. Speculation. It might be impossible to get into a ‘top tier’ market, but there are many many good places to buy that are affordable.

    • Memento mori says:

      I don’t think you could find a house in BC that the rent will cover your mortgage and taxes, and I challenge you to find a listing not now, but within the last 15 years that meets such criteria.
      BC prices have been beyond bubble the last 20 years mainly supported by money laundering activities from China and they are completely decoupled from any reality of rent vs price metrics.

      • JK says:

        Memento, I was looking for properties around Mission, Agassiz with a little land. Forget it. Very overpriced. Awhile back I read about the Chinese sending out their money with BTC and converting it and buying homes. Some are empty shacks. Yesterday there was an article of wealthy Americans scrounging for 2nd passports. I’m one of them, but not a wealthy American! I love BC, Canada, but overpriced, but as long as the money is there the prices will be supported.

    • qt says:

      This time is different.

    • sunny129 says:

      @ Paulo

      ‘Today’s market is different than the 08 bust”

      The structural problems which brought us the GFC, NEVER got fixed just covered with more debt on debt along with financialization of most of the economy, with a lot less going towards productive economy on an organic basis.
      For examp: BA spends 43 Billions in buy-back shares(’09 – ’19) , but spends NOT a dime on fixing the festering problems of 737 Max.

      This is NOT 2008, true but there was no C 19 infecting over millions and over 1 millions deaths world wide and 230, 000+ counting in America.
      2nd spike of the virus has just begun! The amount DEBT 2-3X over the value of the collateral asset both in private and public sectors.

      Global DEBT over GDP is 255+Trillions/ 100 Trillions ( 25-30 T more since ’09) 50% or more of Corp Debt is close to junk grade.

      Deficits and Debt don’t matter right.
      MMT might take care of Public debt. What about private sector debt? unless the coming new Secy of State might recommend buying STOCKS ( she said on record!) also in addition to all Corp debt, right?

      Interesting weeks, ahead!

    • Cas127 says:

      “ever upwards”

      In the 2008 implosion (“brought to you by ZIRP 1.0”) 8 million households (out of 50 million with a mortgage) defaulted.

      That isn’t ever upwards.

      Wait until you see what ZIRP 2.0 hath wrought…

  9. timbers says:

    “House prices jumped 7.0% across the US, according to the Case-Shiller Home Price Index released today.”

    The internets say my house is rising 2% per month. That about matches my observations of sales and new listing in my neighborhood.

    Like I’ve been saying for years, real estate is NOT going to decline unless the stock market declines.

    And the stock market is not going to decline unless the Fed’s recently acquired power of QE is taken away from it and interest rates are normalized.

    Just like I said long ago we a Debt Jubilee is needed and would benefit the economy. Guess what: We’re living a defacto Debt Jubilee, it IS benefiting the economy, and formalizing and legalizing a Debt Jubilee further benefit the economy.

    Just like I said we can’t win a trade war against China because China has options. Guess what, we lost our trade war against China.

    • Wolf Richter says:

      You know that you’ve got a problem if home prices rise 2% a month,right? Because wages don’t rise 2% a month. They might not even rise 2% a year. So after a while of these kinds of house prices surges, demand at these prices collapses.

      • Tony says:

        Even worse is crazy rapid increases in home sale prices with average rents decreasing.

      • interesting says:

        I friend just left a job after 24 years and his new job pays him $1 less /hr, accounting for inflation, than I made in 1986…….with 3 years experience.

        Real wages have gone nowhere for decades. RE is completely out of reach for the average person in Socal.

        • roddy6667 says:

          The purchasing power of the American middle class has backslid to 1967 levels.

      • RightNYer says:

        Right, and that’s the ultimately problem with the government’s inflation numbers. It excludes so much that we don’t have a choice on, like housing, education, health care, and groceries. Upper middle income people can generally deal with it, but it doesn’t do much for the true middle and lower classes who can buy cheap gas (to not drive anywhere) and cheap LCD TVs.

        • Happy1 says:

          I agree with this, government inflation stats vastly understate inflation for the most important things.

          But you do have a choice with education. The educational costs for my children (public schools K-12, inexpensive state and private schools for college, all children successfully employed) has been a fraction of some of my colleagues, literally 700K less in one case.

      • MonkeyBusiness says:

        That’s what banks are for Wolf. With their fancy derivatives and custom Excel spreadsheets, in theory nothing is too expensive!!!

      • Bobber says:

        I have a feeling that investment gains are, in addition to wages, a significant driver of housing sales at the higher end. I’ve been sitting in a chair the past few weeks watching my brokerage account rise reliably like the morning sun (yet, there is no good reason for this), and this stock market success has me thinking about upgrading my housing situation. If people “earn” cheap money in the stock market, I think they aren’t afraid to take additional risks in the housing market. In my case, absent stock market gains, buying an overpriced home would be the last thing on my mind.

        • Lisa_Hooker says:

          Sell some Amazon or Tesla, pay the taxes, buy a multi-million dollar home for cash. Repeat for some cars and maybe a boat. Stock market only goes up and there will always be a buyer. Scares the hell out of me.

        • RightNYer says:

          Bobber, I suspect there are many in your boat. But that actually illustrates well the artificiality of it all. People aren’t selling those stocks to get the money for these housing upgrades; rather, the paper wealth gains causes them to spend OTHER money they have. But of course, if there was any significant amount of selling of these stocks, prices would plummet. So the “wealth effect” is that everyone’s wealthy and should consume only works so long as no one is selling.

        • Cas127 says:

          NYer,

          “So the “wealth effect” is that everyone’s wealthy and should consume only works so long as no one is selling.”

          Excellent point too rarely made.

          Ties in with how marginal pricing of stock shares creates a false impression of what true mkt cap is.

        • Happy1 says:

          Resist that urge!

        • RightNYer says:

          Cas127, exactly. I’ve had that argument with coworkers about valuation. The fact that someone is willing to pay $1 million for 1% of a company (valuing it at $100 million) doesn’t mean that you’ll find someone willing to pay $20 million for 20%.

          Your point about marginal pricing is a good one. If there are 10 million shares outstanding, if the volume in a given day is 20,000 shares, the price is only a function of what sellers and buyers for those 20,000 shares were willing to sell for and buy. We have no idea what the holders of the other 9,980,000 shares would require to sell THEIR shares, and how much the other buyers in the theoretical “buyer pool” would be willing to pay.

        • Wolf Richter says:

          To buy the whole company, you might have to pay $140 million — a 40% premium. Slack jumped 38% today after rumors emerged that Salesforce is in talks with it to acquire it.

          The more demand for the shares, the higher the price. If you want to buy 20% of the shares of a company, the price is going to soar. Look at the Buffett announcements.

        • RightNYer says:

          Wolf, correct, but that’s generally in the case of a smaller company for which you’re paying a premium for control.

          I doubt any large institutional investor would want a majority stake in Tesla, for example, at current prices.

        • Wolf Richter says:

          The majority of Tesla’s stock is already owned by institutional investors and Musk :-]

          To see the largest institutional owners, and their percentage ownership, click on the link and go down to “Activist 13D/G Investors”:

          https://wolfstreet.com/stock/tsla

        • RightNYer says:

          Yup, but do we know what they bought in at? Haha. Even if a State Street thought it was overpriced, how much could they realistically dump without driving the price down?

      • w says:

        Exactly correct!1)Not only do many wages Not keep up with Real Inflation,but they are reduced in the form of less 401k matching,loss of paid sickdays,less overtime,smaller or no bonus,higher insurance deductible/copay/drug prices,hours reduced-take your pick.It is also not just the home prices,but now the propertytax assessor thinks you are made of $ so of course assessments go up on top of actual property tax rate hikes due to shrinking biztax base and maybe less tourist$.While home prices have gone up in many parts of many markets,I noticed a trend toward buyingup of the cheaper homes several years ago. And strong sales in pricier,but not necessarily the Mcmansion homes.Bifurcated home market like the rest of the economy.

    • Lance Manly says:

      “The greatest shortcoming of the human race is our inability to understand the exponential function.”

      Albert A. Bartlett

      • Lisa_Hooker says:

        I would add the mistaken belief that all random distributions are Gaussian and symmetrical.

        • VintageVNvet says:

          lease a,
          Fill me in please,,, are not all Gaussian distributions symmetrical?
          Thought that was the definition of Gaussian distributions as opposed to Gaussian functions??
          Not to say there is not tons of confusion out there regarding all kinds of math, statistics, and other similar kinds of ”conventions,” including time, etc., etc. to and including infinity, eh?

        • Lisa_Hooker says:

          @VV – You got me. Lots of distributions are symmetrical. I used Gaussian as an easily recognizable name, shouldn’t have. The human error is to assume symmetry for aggregated events. (See Kurtosis risk and Taleb distribution.)

      • Tony22 says:

        He was talking about population growth, especially versus resources, which shrink arithmetically. All the exponential debt in the world doesn’t create new resources, it just makes them more expensive.

        Love his bathroom analogy: “A two bedroom house can get away with one bathroom…but not a ten bedroom house. The earth is the bathroom.”

    • Trailer Trash says:

      “We’re living a defacto Debt Jubilee”

      I don’t see any homeless people celebrating. Hours-long lines of people waiting for food aren’t celebrating much either. Looks to me like only the billionaire class are living it up. The millionaire class may be partying today, but only because they are too blind to see they are next on the chopping block.

      Real estate only goes up? Detroit and Camden NJ residents hardly agree with that idea.

      • Cas127 says:

        Pretty sure Philadelphia also de-annexed fair chunks of its jurisdiction because a shrinking economy depopulated so many areas that it wasn’t cost effective to provide police/fire/trash.

  10. Poor but Educated Millennial says:

    It is done on purpose. If Fed wanted to save economy, they could mildly change things that will prevent a crash. But indeed they wanted to crack the walnut with a bulldozer. Simply by eviction ban. Forclosure ban, low interest rate for everyone, …. Again on purpose!

  11. Hernando says:

    How ‘bout that delinquency and forbearance rates? What of the landlords without rent? How ‘bout 10% (at least) unemployment.

    Ask yourself, “would I feel safer buying 200,000 dollars worth of platinum today or 200,000 dollars of land?” That settles my mind.

  12. Yancey Ward says:

    I just look at everything and see crack up boom.

    • Wolf Richter says:

      “crack up boom” and “bubble” are kind of the same thing. Just a different metaphor :-]

      • Yancey Ward says:

        I make this distinction:

        Late 1998 through March 2000 wasn’t a crackup boom- it was a bubble. The economy itself was still fundamentally whole even if the stock market was a joke, and when the bubble imploded, the wreckage was almost completely contained to the destruction of fake companies.

        This market feels fundamentally different to me- when it implodes, it will be 2008-2009 on steroids. We have completely hollowed out the economy and even the philosophical underpinnings of the system. I am reminded of a phrase I first heard during Ken Burn’s documentary on the Civil War- we are in the “age of shoddy”.

  13. Bob says:

    Wolf, if you want to see some insane pricing in housing look at the coastal areas of Orange County.

  14. Jon W says:

    We were doing the central London dual income thing before COVID. Lots of fun for sure, but as we got older we realised that you can’t actually win that game. You are basically competing with multi-generation inherited wealth at best, and the casino finance guys at worst. We got close to buying a shoebox ex-council flat with a whole bunch of problems. I’m so glad we didn’t.

    COVID made us realise that it’s time to get out. We will trade off career prospects for better cost of living numbers. Even if we dropped an entire income there are a whole bunch of places we can live much better than we were in London. And other people we know are doing the same, which means that we don’t even have to say goodbye to all our friends.

    I sort of suspect this is going to be a big effect of this misplaced attempt to boost asset prices as a way to ‘save the economy’. Folks like us who were already feeling like it was rigged have an easy decision now. They will drive the best and brightest out of high productivity jobs.

    That’s going to smash their GDP per capita, which in a sane world would be the actual thing that matters. No doubt they’ll try to boost asset prices even further to compensate so they can squeeze more out of those who remain. It’s going to be a mess.

    • tom15 says:

      That is why we are still swamped and hoping for an extended fall
      so we can keep the machinery in the field going.

      So far mother nature has blessed us with a mild fall.

      The phones keep ringing, the chicago folks keep coming.

    • FedUp says:

      ^
      This. Ultimately, could afford here. Hate this place (Insert major metro name).

      Own some land. Looking into well and septic. After a home is there, will gladly move and take income drop just to have space from dogooders, excessive regulation, and most important… space from people who are incredibly close minded and judgmental, but think they aren’t based on what side they’re on.

  15. People need more space (distancing);
    so they move to the suburbs, or farther.

    Single-Family housing is soaring because
    people can’t tolerate housemates anymore.

    Shared Housing in Seattle should be worth nothing,
    given the eviction moratorium, drug abuse,
    squatting, property damage, violence,
    Covid-19 fears, and general lawlessness.

    10 or 20 years from now,
    the pendulum will swing the other way.

    • Lynn says:

      The violence isn’t necessarily any less in the suburbs. Or rural, especially rural. Not anymore. It’s just different.

  16. MCH says:

    The Ads I see today; Amazon Prime, How to Retire in Costa Rica, there was an ad for a condo, lending tree, and one for clothes.

    Odd I don’t remember looking for dog type clothing or housing lately.

    • Lisa_Hooker says:

      The web 2.0 advertising brokers just fill their frames with whoever is paying at the moment. Doesn’t have to be targeted.

  17. historicus says:

    Werent we just talking about how rents in San Fran were plummeting?

    • Bob says:

      Housing prices are way stickier than rents. Rich people have a lot at stake(and a golden parachute), so they hang on to loser assets through temporary stuff like a pandemic, because they can’t bear to take the raw end of a deal or admit they suck at finances(a small 10m loan from my father at 18, otherwise I’m a bootstraps story!).

      • VintageVNvet says:

        Thanks for the last phrase bob,,,
        Made me laugh to the point of almost choking on my current liquidity position!!

  18. Old School says:

    Wonder how we would have survived without the Fed keeping stable prices over the last 20 years?

    • Lisa_Hooker says:

      Remember when mortgage rates were higher than home price inflation? ;-)

      • Bobber says:

        At least we are near the end of this ponzi. 2.5% mortgage rates are being advertised on my feeds. You can’t go any lower than that. It costs 1-2% just to issue and service a loan, then you have at least a 1% default risk.

        Steadily reducing interest rates will be a thing of the past from here on out, and this WILL take out that incremental demand from first time home buyers.

        • Mr. House says:

          Rates will remain low until no one else has any money left to compete with those who wish to own everything.

  19. Dave says:

    Adjusted for wage growth in absolute numbers as well as affordability in terms of mortgage rates and in most places housing is way up from the lows but is no where close to 2005 2006 levels.

    There are exceptions, but for the most part it is not as severe a bubble at this point as last time.

    The odd thing that gets me right now is I see in some micro markets where people want to buy because of Covid some homes are fetching 20% more than they could in January.

    Why would anyone commit to a long term price by purchasing an inflated value house based on a short term pandemic that will be over in a year or so?

    • Matt says:

      I am purchasing a home a Denver suburb. The inventory is insanely tight. Only one or two properties in the school district for sale each week. They usually immediately go under contract.

      I could wait and maybe prices go down. But meanwhile I am stuck in a 650sqft studio in the city having to wear a mask to go anywhere for the foreseeable future. In the grand scheme of things I am not gonna care that I paid 20-40k more for a place 15 years from now. That is only a couple months of my income.

    • Lisa_Hooker says:

      Fear and Greed.

  20. Crush The Peasants! says:

    Is there some element of loan qualifcation fraud going on? Not the blatant NINJA type stuff, but where the banks’ going-by-the-books screening process is missing substantial risk?

    And under a Biden administration, I expect we will see the flood of Chinese and H-1B buyers resume.

    • Jay G says:

      Why is it that people think that liberals are somehow more amenable to selling out the country? No one mandated that any of the Fortune 500’s had to be greedy and betray their country. Nor did Americans have to choose the Chinese item that was 15 cents less at WalMart when you had the option of buying American.

      I work in tech, and I assure you that none of my H1B colleagues are making a slaves wage, these people are not competing with Americans for jobs in skilled tech. We’ve tried. There’s a lot less paperwork and Americans cost the same. It’s simply a matter of education and drive. At this point the middle of the country treats ignorance as some sort of virtue, and thinks of universities as places for liberal indoctrination. And these immigrants and foreign investors are buying properties in nice places (cities) where people in red states claim they’d never set foot in anyway. How do you educate and employ Americans when they think that exploration, problem-solving, and being open to ideas and facts is “liberal propaganda”? It’s truly hopeless.

      • Trailer Trash says:

        “Nor did Americans have to choose the Chinese item that was 15 cents less at WalMart”

        Americans didn’t choose Chinese items, Walmart did. I lived in Walmart’s backyard (Northwest Arkansas) in the 90’s when the Clintons moved to the White House. It was just about that time that Walmart removed the giant “MADE IN AMERICA” banners from the front of their Springdale flagship store.

        Walmart’s strategy was simple: they ordered their vendors to cut their prices to Walmart. Vendors responded, “We can’t without moving to China”, and Walmart said, “Better hurry”.

        Our Dear Leaders certainly are not going to take the heat for wrecking the manufacturing base; much better to blame the victims, tell them it’s their own fault for not buying stuff that is no longer made here.

      • Old School says:

        Very biased view of the world you have there. My son-in-law lives in rural town in red state. Bachelor degree in computer engineering, masters in electrical engineering and passed navy nuclear certification program. My daughter has bachelor in electrical engineering and spanish. Both very successful working in the utility sector. It’s a much more stable employer than tech. They have the big home and nice cars and like the rural lifestyle.

        • FedUp says:

          ^
          That’s most of my family (Close minded, but think they aren’t because they’re on one side of the nonexistent aisle).

          Because only people with incredibly low IQs know how to grow wheat, raise pigs, work structural steel, etc, etc.

          Mike Rowe said the dirtiest secret of dirty jobs were how many of the people on the show were multimillionaires.

          But I guess if they don’t look or talk like Gates or Jobs they’re not worthy of learning from.

          Both Jay and C the Peasants fall for the rhetoric.

      • Jesse says:

        I work in tech and I’ve personally seen instances of H1B used to hire foreigner relatives, friends and/or for roles that easily could be sourced from US talent. It’s definitely abused in my opinion/experience.

      • Lynn says:

        I’m a leftist, not a liberal, and completely agree with the foreign investors thing. We have a wave of new homelessness coming up and should be discouraging or penalizing foreign investment in our housing stock. We don’t need more empty “investment” housing. We need deflation of housing prices.

        Just so you know, for some people that 15 cents or dollar they save on several items enables them to buy food which they would otherwise be unable to. Yes, really. People are not lining up for several blocks at food banks or living in tents for the fun of it these days. And for others it enables them to pay rent or their mortgage so that hopefully they won’t have to live in a tent in January.

        One can only hope that someday more people will have that choice to buy something that benefits a local small or family manufacturer.

  21. Dave k. says:

    Interesting thing about home prices. Recent new purchase, and also refinance of existing summer home. Refinance is for a lower rate, dropping my payment about 250 monthly. I’ve bought houses since 2000, and now more than ever qualifying is much more stringent. While some people will surely be in trouble, they aren’t giving everyone loans like before.

  22. David Hall says:

    In 2006 the US minimum wage was $5.15 an hour. In 2020 the US minimum wage is $7.50 an hour.

    The median price of a single family home in Washington, D.C. recently surpassed $1,000,000.

  23. Winston says:

    Mmmmm… property taxes.

    • Minutes says:

      Yeah I’d prefer slower growth in home prices as someone who isn’t moving and would rather not get killed on property taxes because of a bubble.

      • Yort says:

        I’m up about 79% on a house built new 10 years ago, yet if I include all the upgrades, maintenance and the property taxes, I’m down about 9% total over those 10 years. Houses are consumables over the long term, and at best a sort of forced savings vehicle.

        To be honest it seems like houses are zero sum as they go up in value, yet unless you plan to substantially downsize or live in a van, when you sell you still have to buy another house that has most likely also risen just as much in value. Plus with property taxes high in some areas like my own, you never own your house, you constantly rent even when you have no mortgage. And many houses where I live have seen their property taxes double in the last 10 years, rising $1,000 to $2,000 extra a year on $400 to $800k valued homes. It gets extremely expensive to property tax “rent” your house when property taxes are rising 8-12% a year and incomes are only rising 3-4%. So many people, to their future retirement detriment, re-finance and pull out “free equity” to make up the difference. As long as one never plans to ever retire, I guess that works long term???

        • Lisa_Hooker says:

          Yort, thank you for pointing out that “homeowners” “rent” their land from the Government. That fact is not mentioned often enough.

        • Yertrippin says:

          As mentioned earlier in the comments, that’s a main reason Costa Rica, Nicaragua, Thailand etc. retirement ads are appearing with no apparent connection. They are targeting people who have yet to realize they are screwed. Tech knows your situation and future moves before you do. At least within an acceptable margin of error. Better get in quick on those tropical deals too. They are filling up fast with ever increasing RE prices prices due to the early “I’m totally screwed” adapters. America’s only retirement plan for many… leaving. Van living outlawed in 3..2..1.

        • VintageVNvet says:

          nah yrt,
          Best deal currently is to go to the back of no where in USA,,, AKA flyover country, and pay cash for a small home or ”homestead” of the kind with enough dirt to grow almost all of your food,,, and the rest will be distributed directly by the future guv mints who have to do it to at least pretend to keep up with FDR’s wonderful system that made folks continue to vote democratic for eva in those areas…
          Other than that,,, if you have any ”mechanical ability” best bet is to live ”on a boat on the hook” somewhere outside USA, while still getting your SS payments regularly into your bank account,,, spend nothing outside your CC, and pay it off every month so as to pay NO interest, etc…
          Grandpa did it for years, intent on living on his SS of $100/month, and still saved enough capital to move to the southern Rocky Mountains and buy an adobe for his last 10 years or so.

      • Lynn says:

        Funny how they market increasing home prices as a boon for all homeowners.

  24. Tom Stone says:

    Eviction and foreclosure moratoria are ending 1/1/21 and the conservative estimate is that we will see 5.8 Million Americans become homeless.
    This will affect quite a few aspects of daily life for every one, and not in a good way.
    if you are buying a home in this market you’d be well advised to be really careful about where you buy…

    • C says:

      Might depend on Two senate run off races in GA!

      • C says:

        Sorry Wolf in advance. I hope I haven’t violated terms. My only point is more government cheese will have an impact on asset value!

    • w says:

      There is No Way the moratorium will end in the middle of winter!Even if it is a state by state extension such as the ones occurring in IL.Additionally,just today I saw that utilities extended their disconnection moratorium because they care So much about their customers!Debt will be used as a forceful leverage on people to do what they do not want to,like maybe take an unproven,dangerous vaccine.

  25. MiTurn says:

    Off topic, but I really appreciate your charts Wolf. They make the data more accessible, not something easy to do.

    You outta copyright them!

    :)

    Keep up the great work/service.

    • Wolf Richter says:

      Everything on my site is copyrighted, including the charts. See the © notice at the very bottom of the page. People can republish my stuff only with permission. But lots of people just steal my content and republish it anyway :-]

  26. Ron says:

    Most people have no common sense only waypoint of this messis default everyone will start over everything will lose 90 cents on the dollar history repeats be prepared roaring 20 s rich never suffer they are prepared good luck

    • MonkeyBusiness says:

      Most people will lose 90 cents to the dollars. The rich won’t. Then they’ll sweep in and pick up everything 10 cents to the dollars and everyone will be a renter. People will no longer own anything. Everything else they supposedly “own” will be on the cloud, where ownership can be easily revoked.

      Welcome to the American Dream!!!

      • Yort says:

        The wealthy “Rentier Class” is cannibalizing the bottom 80%, and with the help of the central banks, soon to be the bottom 95% of American society. “Rent-to-own”
        applied only to poor people in the 1980s (and was shunned by the middle class as a joke), but today nobody thinks much about “Rent-to-own” on almost any discretionary product and/or service.

        For example, Lululemon has a program called “AfterPay”, which allows addicted LuLuLoopy consumers to buy a pair of child labor $100 exercise tights utilizing four installment payments. Whaaa? And this works, even when the founder Chip Wilson had to step down after supporting child labor publicly….whaaa?

        “AfterPay” is appropriate as most consumers will still be paying “AfterLife”…=D

    • VintageVNvet says:

      from what my grand father said, many many ”rich folks” jumped out of windows or found other ways to do themselves out of life from the first major crash of the SM to the last Ron…
      Some, as you say, just ”partied on dudes and dudettes” as has been done by some during all the crashes i have experienced since 1956.
      And as has been said by some sage or another, ”you can’t control what happens, but you can control how you react to what happens…”
      Many folks at all socio-economic levels came out of the crash formerly known as the Great Depression OK, and some even better than they had been.
      This one will take over as the ”Greatest” depression sooner or later IMO, but, as Wolf has made very clear to me,,, that depends hugely as to how much, when, and IF the guv mint continues to intervene, and continue the ”extend and pretend” for another round/decade.
      Bee very interesting to see,,, hope I can stay kicking for at least a few more years!!

  27. Martha Careful says:

    So many things, economic or otherwise are built more and more with distorted, manipulated or incomplete factual certainty, Housing valuation, as a discretionary process, is not unlike presidential/election forecasting, i.e., very open to interpretation. The pandemic is a game-changer within a world of inaccurate modeling and forecasting. Nonetheless, current valuations seem frothy and exuberant and unsustainable, yet, fewer people are looking at future value in anything, ignoring risk and debt and focusing on immediacy, believing that any bet in any casino is a sure deal, backed by government bailouts and rescues, and moral hazard extremism.

  28. Heinz says:

    One glance at these Wolfstreet charts of Case Shiller Index growth for these cities shocked me into one conclusion: this is indeed a housing bubble on steroids, and we are near a peak.

    This is hockey stick economics, with an inflection point around 2012.

    If you go along with this ‘psychosis of the masses’ belief that house prices can inflate much longer then you must believe in unicorns too.

    As was once famously said, people go mad in herds and recover their senses slowly, one by one.

    Although lots of folks with skin in this exhilarating housing game can rationalize until the cows come home just how these nosebleed house prices can be justified– I would ask them just one question: Does gravity still work if you should fall down or can you float in the air indefinitely?

    • Bobber says:

      Be careful. Financial prices are man-made, not natural forces like gravity. If desired, the Fed can print money to keep asset prices high. The question is – will they? If they do it, we’ll undoubtedly see increased wealth concentration, more scamming, and decreased standard of living for the middle and lower classes.

      Financial policies and related social effects are chosen. Unfortunately, the current financial leaders view our financial system as a game, and they choose to play three at once – Russian Roulette, “Who Wants to be a Millionaire?”, and “Screw Your Neighbor”.

      • Heinz says:

        That’s an interesting thought, that man-made constructs like finance and economics can defy natural law.

        Fools always think ‘this time is different’. They can ignore the real world but they will never escape the consequences– even if financial elites try to keep juggling plates in the air longer.

        There is no such thing as a free lunch, resources are always scarce on the planet I live on, and trees do not grow to the sky.

        • MonkeyBusiness says:

          It’s not just an interesting thought. It’s partly reality. Covid19 is a natural phenomenon, and our stock markets are partying like there’s no tomorrow.

          “This time it’s different” works both ways, both on the long and the short.

          The only way to win … is to not play. You’ve lost out on some monetary gain, but you also escape the moral quandaries.

        • Bobber says:

          I don’t think you get it yet.

          Your debt (which is somebody else’s asset) can be wiped away by simple decree from a group of “leaders”. There is no natural law preventing that. Debt are simply contracts developed by men, and they can be extinguished by men.

          The government can take your earnings through decisions about taxation. They can take zero, 10% or 90%, unimpeded by the winds or the shape of the galaxy.

          Men in power can decide to expand the money supply by 50x this year. That would destroy the value of your past efforts (i.e, your savings), but they may feel some swindler deserves the fruits of your labor more than you do.

          In short, your financial success is what people in power decide it should be. The only natural law applying is that humans tend to get fed up when treated badly, and they revolt at some point. They can vote people out, they can stuff money under the mattress, or they can cut off some heads. These are a few natural behaviors that can impact a financial system. But even these natural behaviors are not guaranteed to surface over a lifetime. For example, over a billion people can’t vote in China, because that’s the way a few leaders dictate it.

          Capitalism, socialism, communism. These are all just ideas that are forced on people when “leaders” find them convenient.

        • Bobber says:

          Don’t get me wrong. I hope you are right and there is a reversion to the mean. But I fear we are witnessing a gradual silent shift from capitalism to psuedo-socialism, complete with never-ending money printing, interest rate repression, high inflation, and high asset prices. Our universal basic income checks will be deemed to compensate us for the lack of competition, opportunity, and mobility in society. Under that scenario, there is never a reversion to the mean, just a continued departure from it. Why? – because the powers that be want it that way.

          The financial industry knows that this paradigm shift is taking place, but they aren’t complaining. They are benefiting from it.

        • VintageVNvet says:

          Thank you Bobber for a concise and thorough summary of the reality of life, today and almost always from my extensive reading of history and the best of herstory, so far…
          While long ago I lost an extensive argument with a first cousin (once removed) that the only real measure of progress was the ability of millions now to hear the music of Bach, Mozart, etc., etc., as good or better than the dozens/barely hundreds of their era,,,
          IMO the dearth of progress toward a true democracy based first and foremost on an education system devoted to actual clear results, rather than political correctness, etc., is signaling the possibility or even probability that our species will soon be replaced on this planet by another species much more adaptable toward a true democracy, rather than the kind of ”representative republic” and all the corruption from that system now evident,,, in which USA and many others find their country ”stuck” today…

      • Trailer Trash says:

        The Fed can print Federal Reserve Notes, but they can’t print trust in them. Once trust evaporates, it’s hyperinflation time.

        So far Dear Leaders have destroyed the public’s trust in politicians, establishment media, election results, medical experts, vaccines, virus numbers, virus control policies, police, crisis management, and each other. Federal Reserve Notes can’t be far behind.

  29. Mad Dog says:

    Bought my 3 BR Colonial in a nice suburb of DC in 1999 for $315. Added 100k over the years (20) to fix all the things that were broken when we bought it (as is) and fell apart (maintenance) after e bought it. So we’re up to $425 as a basis for the house. Now based on the tax assessed value and the Comps in the area we could sell it for $695 as is (We still haven’t fixed everything that was wrong when we bought it). Now add the depreciation of the purchasing power of the dollar in the 20 year period (50%) and add the costs of selling and moving and guess what. We haven’t made a dime on this house, even though we bought in a good neighborhood at a good time. We paid off the mortgage and have a nice place to live. That’s something to be thankful for. But as far as making money, forget it. That same goes for most residential housing if you figure in the costs listed above.

    • SocalJim says:

      Now, if you would have spent 315K in Manhattan Beach, CA, or Newport Beach, CA you would be looking at more than 2M without any improvements. In Santa Monica, CA, you would be at 3M. That is lot value. You have to be careful where you purchase.

      • kitten lopez says:

        now you’re full on gloating, Socal Jim.. YOU be careful where you gloat and to whom. aside from practically begging for a cosmic beat down, it’s not very attractive or kind. this is what your one other beer friend is for. (it’s lonely at the proverbial “top,” Jim)

  30. dr spock says:

    Interest rates are so low compared to the inflation rate that it truly has paid to go deeper and deeper into debt. The staircase down in interest rates over the last 35 years has been a site to behold, but then again, we lost massive amounts of good paying manufacturing jobs and gained massive numbers of cheap H1-B workers and others. And if you complained about this, the maestro said: “It’s not the job that counts, but your buying power”. If the staircase continues down and we get below zero interest rates, I truly believe we have entered the 21st century’s version of feudalism.

    • Lisa_Hooker says:

      But, Sire! If you take yet another eighth of the grain we may starve!

      • Yort says:

        LOL…makes me think of the scene in the movie “Hustle” where the uber wealthy aristocrat says “Release the “peasant (implying Pheaseant)” while taking a double barrel shot at the poor old man forced to run past her oceanfront mansion. At least something funny comes out of the greatest era of inequality since the monarchy robber baron age, although 90% of the population isn’t laughing…

  31. Sir Eduard R. Dingleberry III says:

    Average looking house down the street in Seattle suburb just sold for 1 million and a for rent sign immediately went up. With 20% down the mortgage would be around $4,200/month. Rent is probably $3,200/month. So either a guy paid $200K for the privilege to lose $1,000/month or rich people don’t know what to do with their money.

    • Lisa_Hooker says:

      Probably sold a few hundred Amazon, paid taxes, bought house cash, rent is cash flow positive.

      • Sir Eduard R. Dingleberry III says:

        Probably. It’s not a bad move for the buyer. But it’s a bummer for “normal” buyers. The Fed could stop this by letting interest rates go up even 1/2% but I have no idea when that might ever happen…

    • Crush the Peasants! says:

      Betting on continued appreciation. Losing $12,000/year on rent when the value goes up $60,000/year may look good on paper.

      After three years of an assumed 6%/year appeciation (and yes, you can’t spell assume without a-s-s), with a sale of the home assuming 6% RE commission, a rough back-of-the-envelope calculation says a bit over an $83,000 profit. EZ Munny!

      • Lisa_Hooker says:

        Numbers get worse fast when the lessee stops paying rent. Evictions are unpleasant. So are empty houses.

    • Sam says:

      Chinese (laundered) money supercharged Vancouver BC housing prices years ago. The locals cashed out and moved to the ‘burbs.
      There were ‘hoods where houses stood empty, never occupied.

      The process repeated in Victoria (West of Vanc.) as entry level pricing points spread many miles from dwtn epicenter. Similar to Bay area (example: Auburn, Roseville, Walnut Creek) price expansion.

      Wolf has a better handle on Bay Area housing costs.

    • SocalJim says:

      This is defective logic. Currently, the property will be cash flow negative. In a handful of years, it will be breakeven. In the future, it will be massively cash flow positive and the mortgage will be seasoned so a lot of amortization will happen. When you model real estate returns, this is part of the calculation. You can not ignore rent and amortization increases.

      • Sir Eduard R. Dingleberry III says:

        Wow. Yeah you’re mostly right. I guess the numbers are big so they seem scary. It used to be that you bought a house and expected your mortgage to be more than rent for the first 5 years. Then after that the rent would be more than the mortgage. If rent for this house increases from $3,200 to $4,200 by 2025, that model will still hold true. I think it’s a little off though. Rent will probably take 10+ years to get that level.

      • VintageVNvet says:

        Also cannot ignore ”maintenance” of all kinds SocalJ:
        My first and still most correct mentor in Socal RE market since ’32 made clear to me by visits to some of his properties from SB to SD that the long term ”residual” was mostly a function of inflation and keeping up with the regular maintenance as soon as any problem came up…
        Not sure of his net worth when he finally kicked that old bucket, but he went to anywhere in the world by first class air when ever he wanted, up to his last few months…

      • Even without the rent variable this is how mortgages work. The first few years you build very little equity. Renting then turns a cash flow negative into a tax loss tangible? But if you could buy a home, and make enough on rent to pay the mortgage home prices would be even higher. Despite the uncertainty. In the current milieu, rent control, and forebearance, nobody wants to go to court and probably can’t get a date set. The system is frozen. If the stock market has a trading halt or holiday, (while Fed reliquifies investors) and you could buy shares at the last closing price you might consider that a gift. RE is working on the same principle, buyers hoping that when the market opens it doesn’t go the wrong way.

      • Lisa_Hooker says:

        As rents ratchet up fewer and fewer folks can afford them.

  32. Phoenix_Ikki says:

    What do you call a bubble with no end in sight? The new normal. Tired of looking at things through a rational perspective when the market forever lives on hopium and cheap money. Looks like the house humpers that bet on market forever going up will have more time to brag about how right they are.

    • A says:

      On a serious topic, one thing made me laugh: your comment “house humpers.” Thanks

  33. We only have the Case Schiller on LA, inside the numbers, high tier is up 19% from Bubble 1, while low and Condo and mid are up around 12%. The losses from Bubble 1 to GFC lows are -57% low, -42% mid and condo, and -32% high tier. The gamma to the delta? Mid and High track closely. You’re much better off if you own a mansion, or you want to sell one.

    • Wolf Richter says:

      I think part of this is that at the high tier, there is less forced selling since many of these people have enough resources to wait a few years if the market collapses. They put the house on the market, and if they cannot get a survivable price, they pull it and wait. At the low tier, that’s where much of the forced selling and foreclosure sales took place during the housing bust.

      • BrianC says:

        Wolf, dont you think the matched pairs methodology skews the data to over-sample the home flipping economy and thus distorts price data upward? There’s no way case-shiller is tracking upgrades. In San Diego for example, prices are up but they are only up 10% yoy on very large lot suburban homes. Everything else is closer to 5% in the suburbs and flat in the city proper.

        • Wolf Richter says:

          I don’t see that issue in the methodology. But the Case-Shiller does not track new home prices because it needs a sales pair… meaning at least a second sale. And it only tracks condo prices in a few cities. Also, it only tracks 20 metros. Some of the most important metros are not included, such as the Houston and the San Jose metros. Those are limiting factors.

          The CS is less variable than median price indices — meaning, it didn’t rise as much during Housing Bubble 1 and it didn’t fall as much during the housing bust.

          Median price indices, on the other hand, are skewed by a change in the mix. For example, during the housing bust, high-end homes stopped selling and owners just hung on to them. But lower-end homes were the ones that ended up massively in foreclosure and forced selling, and so the mix shifted to include many more lower-end homes, and their share increased, and that change in mix pushed down the median price, though the actual price of houses sold didn’t drop that much. Some happens in the opposite direction when high-end homes are suddenly selling in larger numbers and change the mix.

          This is a good excuse to post my favorite chart on explaining how median prices are skewed by changes in mix. Median price is the price in the middle — half sell for more and half sell for less. In this tiny market, 9 houses sold in April 2019. Then 7 of those 9 houses sold again in April 2020. All 7 homes that sold, sold for the same price (no price changes), but the two low-end homes didn’t sell. So the mix changed with the low end falling out, and the median price rose though actual prices remained the same.

          The Case-Shiller, by using sales pairs of the same house, avoids those distortions:

        • BrianC says:

          Thanks for your response below Wolf. Just to clarify my point with an example: A house in a very nice coastal area was recently sold as an estate sale after the owner lived there for 40 years. It needed considerable work at time of sale and was priced to move quickly. New owner buys the obsolescent home at what would be considered below market level and pays all cash. They then put $100k-$200k into the home to bring it up to modern standards and actually made it look quite nice. The upgraded home is significantly improved despite no new construction permit and no change in the square footage. It’s relisted at $400k over the previous transaction cost 12 months later. It then sells close to asking after significant marketing efforts. For Case-Shiller, that is still considered a ‘sales pair’ and that home increased in value by roughly 25%.

          In areas where home flipping like this is rampant, these quick turn-over situations dominate the Case-Shiller data set, which could lead to a significant distortion.

        • Wolf Richter says:

          The Case-Shiller attempts to take this kind of thing into account, though your example is an outlier — the median duration of home-ownership is about 13 years, not 40 years — and an index will never fully represent the outliers.

          This is too complicated to explain here, but read the methodology:

          https://www.spglobal.com/spdji/en/documents/methodologies/methodology-sp-corelogic-cs-home-price-indices.pdf

  34. Rosebud says:

    Sometimes I post on a housing blog. not as much as in the past, which was often. It became carefully watched, and still is today. if you are intent on reading homelessness to game, you gotta follow the real pain.

    The other day I agreed with Cortez. That he is coming. And that to many Obsidians, he’s gonna change everything. Cortez has quickly ruined his new land, y’see and doesn’t want to restart. He’d rather take over your neighbourhood. Which is to say, he doesn’t want gold, he wants buildings. Housing is his currency lust… And he’s bought off the insiders. They are in on it.

    People make fun of me and mock my nuttiness, by they are Aztecs and I am Dog Quintana Roo, Michuocan, and play the guitar left paw. I bark at the Moon.

  35. Martha Careful says:

    Mishmash hodgepodge Fred tinkering:

    (a) Personal income per capita, Dollars, Seasonally Adjusted Annual Rate (A792RC0Q052SBEA

    (b) Median Sales Price of Houses Sold for the United States, Dollars, Not Seasonally Adjusted (MSPUS)

    a/b ?

    At some point, per capita income won’t be able to support the purchases of homes that are valued too high, thus, one can assume that wages are about the explode dramatically (bawhahahahw)

  36. Joe in LA says:

    There is a Wile E. Coyote over-the-cliff quality to this. While it’s exciting that mortgage rates are low, that also means that housing is as expensive as it will ever be absent wage increases that support inflation. As with bond prices, unless Fed rates go negative, there’s just no more up for the balloon.

    I still think 0% is the last stop on the road to deflation.

  37. Sparky in LA says:

    Wolf, great blog and I love reading your posts! The charts are excellent and make the information very accessible. Thank you!

    I’m curious what has fueled housing bubble 2 since it started in 2012? (The super low interest rate, trillions in liquidity from the Fed, etc. are all relatively recent; the bubble started 8 years ago.)

    • Wolf Richter says:

      QE started in late 2008. Interest rate repression was part of it. Mortgage rates weren’t as low as today, but they hit record lows at the time. Also in 2012, private equity firms started buying 10s of thousands of single-family homes to rent out, explicitly encouraged and supported by the Fed to save the banks, and this concentrated buying had a huge impact on the markets were this took pace.

      And there were some other factors, including low prices that caused people to buy, either to live in or as rental.

      • Sparky in LA says:

        Thanks, Wolf, for the reply.

        I followed up to read a few articles about private equity firms purchasing single-family homes — that was a huge realization…and shocking to learn how Wall St turned foreclosed homes into rentals :(

        Wish I knew what was happening in 2012…

    • In 1929 the stock market crashed 89 percent from top to bottom. Today the stock market is at least 10 times more overvalued than the summer of 1929. People are looking for a place to make money without running the risk of losing all their money.

  38. 8_mile_road says:

    So, does anyone believe the housing market is going to collapse? I would consider a “collapse” if there is a 30-50% housing price drop from current prices.

    I have enough saving to put down a mortgage in Sacramento, CA. However, I can only afford a house in 300K due to my limited income (I am a government employee, FYI).

    What are your opinions? I might put my savings into gold (either ETF or physical gold) and preserve my purchasing power instead.

    • gorbachev says:

      Stay away from gold etc. It is being overtaken by bitcoin
      an other ether codes as an alternative currency.Housing is usually okay
      but make sure you can afford property taxes maint and other
      related costs.

      • sunny129 says:

        If both Georgia Senate seats go to Dems, watch out for gold, as the spending under Dems expected is lot higher. Gold remains an insurance for the ongoing debasing/devaluation of purchasing power of the uS $!

        Housing other than for personal living, now is also big risk against the C-19 primary, secondary and tertiary damages being inflicted against the Economy for the next 4-6 months.

    • Bobber says:

      There’s very little risk to buying a house or condo if the monthly payment is well within your means, the purchase eliminates a rent payment, AND you can stay in the property for 5-10 years.

      There may be even less risk if you put 3% down with an FHA mortgage. I believe you can walk away from the home and mortgage (in many states) if prices drop 30-50%. Jingle mail was common in the last RE debacle.

    • 300K wouldn’t buy you a garage where I live.

    • Lynn says:

      IDK. I sure hope so. I have had 5 RE agents tell me they think I should wait to buy, 2 of them were selling agents. If you do buy then beware. I’ve seen some newly painted outrageously crappy shells of houses going for far too much money.

  39. Patrick says:

    Depreciation, interest, higher insurance cost, lower cashflow, time and money opportunity cost, maintenance cost, less asset liquidity and final nail in the coffin is the possibility to work from home make those new ugly subdivision even more unattractive. Oh and I almost forgot getting stuck with it for years in a downmarket if I have to move out.

  40. Stonedwino says:

    We have triplets in college, Seniors now. We ditched the big house when kids were Sophomores in High School and have been renting since. Plowing it all into tuition and schooling, while renting, looking at the housing market as it is now, first of all I’m happy to be renting (spending more than I would monthly) owning a home, but there are so many more pitfalls to being a home owner now that, I’m really cool with the renting thing…I have this gut feeling there’s going to be some good deals on homes in the next couple of years.

  41. Sunny129 says:

    This might be slightly off subject but related C-19

    British PM Mr, Boris Johnson has been re-infected and in isolation.

    Apparently he did have full fledged infection, was in ICU ( on ventillator!?) but recovered suucessfully. Doesn’t he have antibodies developed to protect from re-infection (assuming same strain) for at least several (6?) months? Apparently NOT so!

    What gurantee a Vaccine could us the immunity/anti bodies?
    Even as a MD, this puzzles me!
    It appears too much hype instead of no fact finding questions are being asked!

    • gorbachev says:

      Just in quarantine. Had close contact with others

    • Wolf Richter says:

      Sunny129,

      My understanding is that he got “exposed” — meaning contact with an infected person — and went into isolation for that reason. But I could not find an references that he has been “re-infected” and has Covid again.

      From the Telegraph:

      “But why is the Prime Minister having to self-isolate given he has already had Covid and should, as he suggests, have some level of immunity to the disease? The answer is partly medical but mostly to do with public health messaging – and setting the right example.”

      • Sunny129 says:

        Is there a evidence that he has ‘ani-bodies’ by serum tests?

        Just exposed does mean, prone to get. Did ge re-tested? Same strain or a different one? Lot of questions, still out there.

        Same goes with the vaccines in the news. No complete data published. They are yet to be PEER reviwed by any known respected institutions.
        The expected ‘side effects’ could be mild, moderate and in a few cases, same severe symptoms of covid. Most of the docs want to wait a year before all the side effects get expressed, over the months. God forbid, any one death from any of the vaccines brings a big question, back in the public arena!

        • sunny129 says:

          “As scientists try to ensure the US reaches a 70%+ vaccination rate (the cut-off point at which herd immunity is believed to kick in) a group of doctors just warned that public health officials and drugmakers need to be “transparent” with patients about the potential side effects of vaccination, and ensure precautions are taken to ensure patients don’t skip their follow-up visit.

          This is a top concern for Dr. Sandra Fryhofer of the American Medical Association, who warned that the side effects might deter many of her patients from receiving the follow-up shot. Dr. Fryhofer expressed her concerns during a virtual meeting on Monday with the CDC and representatives from various vaccine makers

          “We really need to make patients aware that this is not going to be a walk in the park,” …
          ZH

    • It is a novel virus, you can reinfect. This an issue with the vaccine, how long will it last? There is also concern it could cause your immune system to self destruct. There are mutations of the strain which are more infectious, infection is the problem not the death rate, that is pretty much fixed. Nothing has fundamentally changed since March, except a lot of disinformation. The real question is how do you get people who won’t eat GMO food to accept a GMO vaccine?

      • sunny 129 says:

        +100%

        No one authority ( including Dr.Fauci) is addressing these questions.
        Quanta airlines already requires vaccine before boarding their planes!
        Commercial interests are overriding safety questions. MSM is also complicit!

        • sunny129 says:

          “There is no information about safety. None. Government agencies like the Centers for Disease Control (CDC) appear to have two completely different standards for attributing deaths to covid-19 and attributing side effects to covid vaccines. If these vaccines are approved, as they likely will be, the first group to be vaccinated will be the beta testers. I am employed by a university-based medical center that is a referral center for the West Texas region. My colleagues include resident physicians and faculty physicians who work with covid patients on a daily basis. I have asked a number of my colleagues whether they will be first in line for the new vaccine. I have yet to hear any of my colleagues respond affirmatively..”
          Gilbert Berdine, MD, via The Mises Institute

          What The COVID Vaccine Hype Fails To Mention
          ZH

    • nodecentrepublicansleft says:

      From what I’ve read, Covid-19 can mutate and people have been re-infected. If true, it’s another reason the anti-mask / anti-common sense / anti-science crowd is dragging the rest of us down (again and again and again).

      Dealing with this isn’t rocket science but some folks are snowflakes who’d rather die than have somebody tell them what to do briefly. Suicidal….

  42. Cas127 says:

    The word “volume” has zero hits in this thread.

    In CA, Sept sales volume was up 14% yr over yr but down 6% yr to date.

    https://journal.firsttuesday.us/home-sales-volume-and-price-peaks/692/

    So there is a transient spike in demand, spiking prices on Ltd supply…but the longer trend is fewer sales (natural, as rising prices lead to vanishing demand)

    I wonder what national volumes look like.

    At near max ZIRP.

  43. BuySome says:

    Well the air outside is frightful, but the rates are so delightful. You never know which way to go, when the green paper drops like snow. But I thought it was all gonna be Defer-Rent to infinity this time.

  44. Daz says:

    There’s a housing collapse every 10 years. We’re 2 years over due thanks to Fed position on interest rates.

  45. Home prices double every 3 to 4 years when the Chinese buyers shows up. Americans haven’t a clue what the Chinese can and will do to a housing market.

    • Sam says:

      Toronto & Vancouver were case studies of price Disconnect/Distortion when Chinese money entered the RE mrkt.
      Meanwhile, Calgary & Edmonton RE implosion continues unfettered. Comparable to OK/W. TX

    • Lynn says:

      It’s at the point that it’s a national security problem if you look at the physical results of that. Puts potentially as many people out of homes and thoroughly demoralizes a country as much as a few bombs would. And with less repercussions.

  46. Would like to see more on the dynamics of new housing vs existing, and how homebuilders set prices, and what effect that has? Is it diluitive? In SD this election the county supervisors has flipped to blue after many years. The outgoing group held the nogrowth line which most voters seem to support. Interesting to see if more projects are approved, what kind of projects. The last major project rejected did not contribute enough to ‘affordable’ housing advocates. For political reasons this board might see an advantage in bringing new voters into the county who are aligned with their views. County has been on housing lockdown for a long time.

    • Lynn says:

      I think most politicians in both parties are invested in RE, even on a local level. Definite conflict of interest.

  47. malibu says:

    I like to use the Las Vegas 08 market as the measuring stick for when RE hits close to its peak. Las Vegas ran up 55% + or – in 1 year. Which RE market will it be this time? I don’t know. I do see housing listed and gone in 1 or 2 days in coastal Socal. A house listed on Zillow had 2 people out front in hours. In 89 the Japanese Imperial Grounds was worth more than the entire state of California. The Japanese RE market went up 100% in 1 year. Yes the entire country. Coincidentally the Naz went up 100% in 1 year. Good luck predicting RE crashes!

  48. Spencer B Hall says:

    Rentier capitalism is in full swing.

  49. JamesF says:

    In the past I have come out saying we weren’t in a total housing bubble, well many months have gone by while prices have continued to rise. We are clearly in a bubble, a dangerous one that keeps getting bigger. Before my objections were that many places in the USA didn’t see the first bubble in prices. That is not true this time with many smaller cities seeing prices rises as well.

    I also keep seeing experts on Wall Street saying the market will go higher, we are just beginning our roaring 20’s with many years ahead for higher and higher profits.

    We can’t keep this up, consumer household debt is at an all time high. We have less employment to pay for this debt. On a wold stage in places like Europe they are facing even a worse crisis than we are with many small business completely gone forever Watch out.

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