When the Market Defies All Logic, it’s Time to Take a Deep Breath: My Observations as Real Estate Broker

The new Real Estate Bubble has arrived.

By Melissa Terzis, Realtor, Washington, DC, for WOLF STREET:

My phone doesn’t stop ringing. I’m a Washington DC Realtor staring down a spring market with a couple dozen buyer clients on my roster. It’s not a secret that the pandemic shifted real estate in ways almost no one imagined. Initially, when world shut down in March, I was still working. I had just a few clients but they had seriously high intent. The sellers also had high intent, because no one wanted people in their house just for fun. The market was pretty efficient. The tire kickers saw themselves out the side door and everyone who was left wanted to make a deal.

Things have changed. Several times things have changed, but it only intensified with each chapter. Every time we think we reached a new low, the desirable housing inventory drops lower and more buyers appear. Everyone is back out there again, with masks, gloves and 2.75% interest rates. The Real Estate Bubble 2020 arrived!

Buyers have forgotten what they used to want, what they used to require before they would buy – walkability, proximity to restaurants and public transportation. No more “I’d just die if I moved to the suburbs.” Now everyone is moving out of the city, in some 2020 version of white-flight. Where no one wanted a pool a year ago, now everyone wants one.

Equally as mind-blowing is the fact that some of the ugliest houses that had no showings and no offers just a year ago, are flying off the market. Agents are reporting that some such homes have had over 130 showings and 25 offers – within a matter of 3-4 days.

How did the wish list of the past decade experience such whiplash?

I’m always so surprised how much people live in “today.” Today there is a pandemic. Today we don’t want to live in a city. Today there are sub 3% interest rates. Therefore, today, I must buy a home.

What happens tomorrow though? I have several friends who have already had their two doses of the vaccine. It’s coming for all of us.

When I ask people why they are moving out of the city, the expectation of working at home indefinitely tops the list. I’m willing to believe some employers will embrace the ways of work from home as a viable alternative. Arguments can easily be made that working from home increases productivity by eliminating the opportunity for water-cooler chatter, as well as reducing rental costs for office space.

But not all workplaces lend themselves well to working from home.  Not all employees will want to do this forever. Some people actually enjoy the human interaction. After several years of this, we may begin to see yet another lifestyle shift, where we learn just how much people require that human connection. We may also see employers adjust salaries of employees who formerly lived close to work and have relocated to a more remote area with a lower cost of living.

What about the cities from which people fled? Living in New York City has long been considered a huge accomplishment thanks to Frank Sinatra. “If you can make it here you can make it anywhere.” What about Los Angeles? People aspired to move to these cities for decades and then abandoned them in a flash.

Last year, the DC Real Estate Market saw a steady increase in demand for houses. The initial months were slow as mostly everybody bowed out of the market as mentioned. By early summer, what we lost in a spring real estate market had finally arrived. What would have occurred in March and April just shifted to May and June. As everyone realized this wasn’t just a few weeks that the world would be offline, they started making plans for new living environments.

Many employers at the front end of the pandemic were telling employees that working from home would continue for the foreseeable future and this made people comfortable enough to pull the trigger on selling their city house and moving to a country house.

There was no August slowdown like in years past. The pace continued unabated through fall and when I thought we would get a break, that there would be peace on Christmas Day, I was also wrong. I received 11 showing inquiries to see homes on Christmas. Then I knew we were in trouble. This unrelenting demand will see its day.

When the market begins to defy all logic, it’s time to take a deep breath. Things only change when there is some sort of panic.

We’re in January. Month 11 of the Pandemic. As houses hit the market in neighborhoods no one glanced twice at last year, the buyers are out in full force. Two dozen offers on a 1970’s center-hall colonial with no discernible upgrades in a neighborhood where houses like this historically sat for 2-4 months before selling? I don’t believe it.

I could be convinced this is legit if houses that were highly valued during normal times became even more highly valued. That’s not happening. Some of the highly desired neighborhoods are just cruising along, business as usual. It’s houses that no one wanted a year ago escalating $100,000 or 20% over list price that scare me.

I worked for a National Builder until 2007. I lived 101 version of this class. We all failed. The 201 version has more twists and turns. No mortgage fraud but a pandemic. The same handwriting is on the wall because it’s still the same teacher.

What should you do if you want to buy but you want to be smart? Here are my suggestions:

One, look critically at the house you want to buy. Don’t just go back 90 days like an appraiser would – go back two years. See what the neighborhood homes have been selling for. Is the underlying value there or is this just an inflationary pandemic bubble?

Two, save money and don’t buy at the lowest interest rates. Does it mean you wait until they get back to 6%? No. You only need ¼ point increase and suddenly, a bunch of people exit the market. Sellers get less traffic, less offers and everyone’s expectations realign.

Three, go where people aren’t. In most markets, I tell clients the best way to protect yourself is to go for a house that’s been overlooked by others, maybe sitting on the market a few weeks/months and needs some work. You can make a good deal on homes like these. Right now, the DC Real Estate Market is delivering amazing value on condos. Very desirable condos are sitting on the market right now.

I’m not saying not to buy. But be smart about it. Stay away from bidding high on houses that suddenly fell into favor. Buy something that has been in consistently high demand in the past. Look back years and decades to get a gauge on the demand – not just months or weeks. And look ahead years as well, because living for today and making panic-induced investment decisions based on what’s happening today is something you will have to live with for a while. By Melissa Terzis, Washington, DC, for WOLF STREET.

OK, it’s getting a little crazy: Massive shifts due to working from anywhere and the Pandemic. But some of those shifts started well before the Pandemic. Read... “Exodus” Havoc: Rents Plunge in San Francisco, New York, Boston, Washington DC, Seattle, Other High-Cost Cities, but Soar 50% in Newark in 18 Months, with Double-Digit Jumps in 20 Cities

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  277 comments for “When the Market Defies All Logic, it’s Time to Take a Deep Breath: My Observations as Real Estate Broker

  1. Ron says:

    From my observation people are like cattle just follow the herd just another cycle in real estate bubble watch out when eviction moratoriums expire sad day black rock will be waiting patiently

    • ZestStat says:

      The real question is – If this is really a housing bubble II and say it burst 2/4 years down the road and at the same time the economy goes down and unemployment rate increases, will people be able to afford houses that they have bought?

      • 2banana says:

        They can’t afford them now.

        But will demand bailouts and declare they are victims in a few years…especially after a drop in the market.

        And the cycle continues…

        • timbers says:

          They can’t afford them?

          Are you sure? All indications are, they can afford them. Could be missing something, but am not seeing any indication of lack of affordability or defaults. I suspect a very large amount of home demand is being fueled by cash buying, not loans.

          Maybe the real hidden disaster is the prospect of homelessness when the govt ends it’s making landlords house folks for free, even as those landlords have to pay taxes on their property that the govt confiscated.

          On the other hand, maybe that will never end.

        • RightNYer says:

          timbers, not a chance, in my opinion. Cash buyers are not the ones driving this, not with 30 year fixeds at 2.75%.

        • GotCollateral says:


          Yeah… people who care aout 2.75 about aren’t cash buyers… they are 30Y death contract buyers…

          Better hope they can strip the copper and heavy metals before they walk away… lol

        • Lynn says:

          I think Timbers is right. Have been outbid by cash buyers, some of whom never stepped foot in the door until possession of the home. I see homes listed for cash buys only.

          Some of them may have reverse mortgages which make cash available. Others may be corporations who have gotten acquisition loans and paid cash out of those funds. Others may be offshore LLCs or personal “bird dogs”.

        • timbers says:

          So what are the indications folks who have recently purchased can’t afford what they are buying?

        • Cash buyers are who realtors advertise for TV

        • Jeff says:

          Is there any evidence to support the “can’t afford them” statement?

    • FDR says:

      Ron, It’ll be more than BlackRock. Try Blackstone, Bain, Cerberus, GS, MS, BAC, vulture capitalists, etc.

      And Joey Biden, the Congress & the courts will let them do it.

      Be bye ? neo-fascism and welcome neo-liberalism then rinse and repeat.

  2. Sephen C. says:

    Great advice, Melissa.

      • Cocomaan says:

        Love the writing style, too. This had me hooked from the get go.

      • Cas127 says:


        Yes, thank you for the post…would like to see more if you have the time (Wolf spoils us).

        “Two, save money and don’t buy at the lowest interest rates. Does it mean you wait until they get back to 6%? No. You only need ¼ point increase and suddenly, a bunch of people exit the market.”

        To me, interest rate dynamics are the most massively misunderstood factor among home buyers.

        Since 2002 or so, Fed actions have sliced mortgage rates from maybe 6.5% to 3%…more or less resulting in a doubling of new/existing home prices (so really doing nothing for monthly affordability).

        But interest rate changes work in reverse too…so if our debt crippled gvt is ever forced to allow interest rates to rise, the number of qualifying homebuyers will rapidly evaporate…unless home prices *fall* (leverage gutting the finances of yet another generation of owners).

        To a certain extent people have learned from Bubble 1.0 (my general vague sense is that pre C19 transaction volumes nationally were maybe 50% of the Bubble 1.0 peak…I would like to get your sense too…) but C19 has created a frenzy of its own (per your own experience).

        You highlight the “now-ism” mindset of many buyers…do you think that many buyers have any clue of what *rising* interest rates (even by smallish amounts) would do to their home values?

        • RightNYer says:

          “To me, interest rate dynamics are the most massively misunderstood factor among home buyers.

          Since 2002 or so, Fed actions have sliced mortgage rates from maybe 6.5% to 3%…more or less resulting in a doubling of new/existing home prices (so really doing nothing for monthly affordability).”

          Yep, and that’s why it frustrates the hell out of me when people like Yellen say “We’re trying to keep rates low so homes remain affordable.” They’re either stupid or lying. Janet Yellen is not stupid, so she’s lying.

          Low interest rates benefit NO one other than existing homeowners, as they can raise their prices and keep the monthly payment the same for the buyers.

        • Wow, thank you! That’s really nice of you.

          I contacted Wolf years back when I found that what he was saying meshed with my own sentiments. It’s tough being in this business and watching this frenzy. I’ve gone from trying to protect my clients at all costs to giving them all the information, giving my opinion and letting them decide.

          People did learn a bit from Bubble 1.0 but there is a general lack of accountability too. I had someone who wanted to sell a few years ago who couldn’t get her money back out. She was a pretty high ranking professional in her late 30’s. She kept saying, “I’m single, I don’t know why my agent let me buy this house.”

          I don’t know, I figure by the time you’re single and have a pretty high ranking job that maybe you learn how to take some accountability? So there is that group of people out there who don’t take any of the blame themselves if they were involved in it.

          Pre-bubble in this area wasn’t 50% of the transaction volume. For the last 6 months of 2020, DC and surrounding counties had $37,822 homes listed and $32,857 sold. Avg Days on Market was 26 days.

          Same counties and same months in 2019 – 31,468 listed in 2019, 27,844 sold, Avg Days on Market 36 days.

          Tiny increases in rates don’t affect home values, just that feeling among some buyers who were at the fringe and now feel like they can’t buy. What I think will happen is that if rates tick up 1/2 or a full point, you will see less crazy. For example, right now houses aren’t appraising like they once were. Lots of appraisers can’t make these numbers work (a point I forgot to mention in the article!) If rates tick up, people won’t be as willing to kick in cash if the house doesn’t appraise, thus, prices won’t escalate as high.

          All in all, I’m prepared for another year of barely seeing my kids until this slows down.

        • Wolf Richter says:


          I should have pointed this out earlier: Melissa has been an author and commenter here since at least 2015.

        • Jeff says:

          RightNY: you know that those low interest raters help more than just homeowners, right? They help any person/business already holding real estate, plus any business that wants to take out a loan… That’s a pretty big group.

          The group that is helped the most is those that have first access to the money at the very low rates. They can go out and buy assets before their value increases due to the cheap money floating around. That group certainly does not include anybody posting here!

          I’m certainly not saying that it’s right or how an economy should be run.

        • RightNYer says:

          Right, but we’re talking about homeowners here.

    • Swamp Creature says:


      You sound like an honest person in addition to giving great advice. Something rare in the Real Estate community in the Swamp.

      • Loving what I do helps. Also, wanting to sleep through the night with a clear conscience helps too.

        • Tony says:

          Hi Melissa. I’ve been a reader at wolfstreet for eight years or so. First time posting, from what I recall.

          Great article. Thank you.

          The main reason I posted:

          No offense and with all due respect…
          Take in less work and spend more time with your kids/family. Just do it. I know it’s difficult to resist the extra money and we sometimes convince ourselves that we’re doing it for our family, anyway. Meaning, the extra money will benefit our family.

          The truth is, there is a cost of not being able to do everything we can with our family. The short-term effects seem negligible. The long-term effects have consequences. Missing moments, quality time, influence of you on their personality and development.
          Money can be made ANY TIME.
          Moments are gone forever.

          I’m a bit of a hypocrite, because I get the call to make money and rather than spend time with the family, I take their time away from them and give it to the client so that I can make more money. Somewhere in the back of my head I think, “I’ll make it up to them.” You and I both know that never happens.

          My New Year’s resolution is to take on less work and spend more time with the family. It is off to a rough start due to commitments that spilled over from 2020. However, when the call comes in to take on the extra client, now, I check my schedule rather than assuming I will find a way to cram them in.

          I’m on track to work 30 hours a week starting in the second week of February. That’s down from min. 76 hours a week the same time in 2020.

          Like I said, with all due respect. Thank you, again. And may God bless you and your beautiful family. (Saw the “We Didn’t start the fire” video) :-)



          Mr. Richter, I’d like to take this opportunity to thank you for the fantastic work that you do.

          You’re one of the few media sites that I still read regularly.
          I’d also like to thank those who post here. One of the very few places where it’s not crazy town.

          Thank you. Thank you. Thank you.

          God bless you all.

        • 91B20 1stCav (AUS) says:

          Melissa-great article!

          Tony-so very-well-said. How many years ago did the late Harry Chapin pen his classic ‘Cat’s in the Cradle’? Then, as now, all verity, no balderdash…

          may we all find a better day.

        • Hi Tony!
          I wasn’t able to grab a reply from your comment so I hope you see this. Thank you so much!

          The kids keep humming Billy Joel songs which I consider a win! I can’t believe you found that. ha!

          I agree. 2018 and 2019 were years I missed a lot. Every year that passes though I get better at it, and now have enlisted help. It is truly amazing how fast it passes.

          And to 91B20 – I heard a podcast with a Realtor mom who said she heard that song “Cat’s in the Cradle” and started crying in her car. And then I listened to it and totally get it as well. I had a mother who didn’t work and it was something she felt she missed after all the years passed and my brothers and I moved on to our own lives. I just may have over-corrected the working thing.

  3. timbers says:

    “Equally as mind-blowing is the fact that some of the ugliest houses that had no showings and no offers just a year ago, are flying off the market.” …….Very much seeing this in my community. Less desirable homes on busy roads made difficult to get/out of ones driveway, homes lacking curb appeal or downright ugly, are going under agreement like the Peacock homes were 8 months ago. Way fewer peacocks on the market. Listings in my community were about 200 at any given time now at as bout 75. The Zillow decided my home went up just 3% last 30 days down from original 4.4%, they always change the figures but lately changes are mostly going up at faster and faster rates.

    • Zillow tends to be less reliable than Redfin. But both will jump based on the day. I’ve screenshot their values for an upcoming listing I have because I want to see how the listing price will affect the estimate. But even the CEO of Zillow sold his house at a much lower price from his Zestimate several years ago.

      Also saw your comment above – there is indeed a lot of cash in the market, but with rates this low and prices going up 10% a year, it’s like a -7% interest rate to finance. That’s enticing for people. And yet, so very problematic.

    • Kurtismayfield says:

      Sales in our county are down at a similar ratio. There just isn’t inventory.

  4. Shiloh1 says:

    If one thought it is 2007 again and could sell to take their chips off the table and buy back in 3 to 4 years, renting or doubling up with someone in the interim, fine.

    But if the dollar gets blown up that won’t work. Better to have physical something – and have it go down than paper or digital cash if we go Weimar. Caveat is don’t buy in high property tax locales with big unfunded government pension liabilities, like Chicago metro.

    Am I missing something here?

    • SBG.1 says:

      I’m in a situation where I re-located out of the Chicagoland area for contract work several hours south of Chicagoland. Still have the house in Northern IL (basically 60+ miles directly west of downtown (Loop).

      Tiny house (little over 1100 sq. ft. living area). But it’s got “Location, location, Location” going for it, as well as the the old “$100k house in the $300k neighborhood”.

      This location (now) has multiple high speed internet access (3 different vendors). And major shopping/services (Costco; Meijers & Jewel; commuter rail; Lowes; Regional medical center; etc.)are less than 10 minutes away.

      Only these days, it’s $200k+ in a $600k++ neighborhood. I haven’t been living there for the last 2 years, so I’ve got some work to do there.

      Not listed yet. But was up there 2 weeks ago moving stuff out. Literally had a realtor stop and do a cold call while we were there loading up the truck. The marketplace is absolutely crazy.

      Now, I’m finding I can list “As Is” and according to everybody I talk to, it will be sold for serious money in under a week. It’s nuts.

      I did find out one thing which was very interesting. A lot of interest is coming out of Chicago & near western burbs. There’s a lot of folks who have 4 concerns: 1) Safety (don’t feel safe any more in Chicago); 2) Taxes & government (self explanatory); 3) Internet access (see above); & 4) Schools.

      IMO, it’s just a flat out crazy market out there. But it works for me.

      • rj not in chicago says:

        I left ILL ANNOY a bit over 4 years ago and never looked back – Saw that Madigan vacated the speakership in the ILL ANNOY house after 36 years of reign. Makes me wonder if there is any hope or if anything will change going forward. Given the flood of folks leaving ILL ANNOY due to the 4 concerns you list above- me thinks not. I don’t miss the 20 k a year in taxes my wife and I paid on a nice but not great home in South Elgin – My current mortgage here in CO is about the same amount as was the case for taxes only in ILL ANNOY and much better living out here. Why anyone remains in ILL ANNOY is just beyond me. I do miss the Cubs, the food and the symphony – beyond that not so much.

    • Lynn says:

      upkeep and taxes.

    • Heinz says:

      “Am I missing something here?”

      No, you are spot on about high property tax hell hole jurisdictions. New house buyers will be over a barrel in coming years as their taxman doubles down.

      If I eventually decide to buy a property I may be tempted by a promising one that meets most of my criteria (including affordability) but if it is inside city limits of most towns and cities that fact is an immediate deal killer.

      Even when new Biden administration eventually contrives a bailout of badly run urban areas it won’t alleviate need for them to impose more and more taxes on ‘sacrificial lamb’ property owners to keep insolvency at bay for longer.

      Bear in mind that in this current feeding frenzy housing bubble the moonshot listing prices and overbidding buyers will lift property taxes higher (based on market values) for years, at least until air comes out of bubble. That could take many years.

      • joe2 says:

        You bring up the elephant in the room – future taxes.

        My property taxes have doubled in the last few years. I pay more in local taxes and fees than federal income taxes. Federal tends to tax on income but locally they tax on ownership which is more of a wealth tax. I saw a rumor of a national property tax which is the foot in the door of a Federal wealth tax.

        I think taxes will be a bigger concern in the future than interest rates.

    • ElbowWilham says:

      My brother lives in a far north suburb of Chicago (lake county). His taxes are now almost as much as his mortgage. He is getting out.

  5. Joe in LA says:

    I don’t think this is complicated. The Fed expanded the money supply by over 25% since March, and most of that money went to people holding stocks. Now, stocks may or may not crash, but it’s sensible to park some of that free money in something other than stock. Housing is one option — even it’s over-priced, it will always be worth something, which is better than can be said for, for example, Doordash stock.

    • Dan says:

      Maybe so, however the property could be worth a lot more than the mortgage if the market goes down a lot….., and that can stay for a long time…and if the neighborhood deteriorates because of foreclosures, then you might not want to stay there yourself. Having to chase prices is always difficult because you can be forced to buy high; renting does not always work so well, because the landlord may want to sell at the end of the least. Prices can continue to go up, and if prices go down because interest rates go up a lot, then waiting doesn’t help since you are payments go up with increased interest rates (unless you are paying cash).

      • This is exactly right. In 2007, many people didn’t want to hold on to their houses. If they took new jobs and needed to move, didn’t want to be landlords, or as you said – the whole neighborhood turns into foreclosures, some people will always need to sell.

        I recall entire neighborhoods that were closed down, squatters living in houses, people leaving overnight. It was insane. This time the stakes feel higher. Prices are so much higher in some areas since the last bubble.

        • Yaun says:

          I am not so sure that ‘prices being higher than last bubble’ has a true meaning. House aren’t the only thing for which this statement holds. M0 also is a lot higher since last crisis. If you measure prices in ounces of gold, something which resembles a stable monetary unit much better than 1 USD, prices do not look like in a bubble. They were in a bubble in the 60s and the early 2000s when you had to pay more than 500 ounces for the average house, but right now they look quite ok in relation to historic averages (~170 ounces).

        • Da n says:

          You are right to raise the alarm of what can happen when prices go too far one way or the other.
          Seems like two big factors are money supply/interest rates/availability of credit and psychology;; and then if there is an external event, that can be be a big factor or a change in psychology for no obvious reason or it is attributed to a reason, without that even being the reason.

        • NBay says:

          “squatters”…I hate that term. Really de-humanizing.

          When I was homeless, early 80’s, I slept in my PU camper shell, when finally thrown out of a rat ridden dump, with no heat or hot water. Before that was technically homeless for years in a bread van, but that was completely my choice in order to have money for other stuff. I managed to make it kinda comfy, and had no trouble finding friends from work who would let me run a power cord to it and use the bathroom for $25/mo. Cops didn’t care back then (70s) Even lived at work for a while, which made calling in sick hard.

          Both seemed safer than an empty house would be, although I didn’t know where any were, and never looked. Luckily no kids, but I think it’s probably a lot worse situation to be in if one is a homeless mother, and that changes things a lot.
          Mothering instinct is strong.

    • FDR says:

      Have you ever tried selling a condo, apartment complex, or a home when credit markets tighten due to over leverage, buying high, a loosy goosy Fed.

      But we have the Lone Ranger, Superman, or some super hero I think the latest one is named Jerome Powell who just received another coded message from the banksters requiring more digital money injected into the economy, ergo Janet “Cobra Helicopter Drop” Yellen.

      MMT for the poor, working, and middle classes. The rich already got theirs and first money recipients is always better per Minsky.

      Guaranteed income, a debt jubilee, endless wars, 900 military bases across the globe, 400 ship USN, faster and stealthier jets, yada, yada, yada.

  6. Dan says:

    I don’t know Melissa except that her words of caution seem wise. What I would question or even take issue with is her idea that increases interest rates will stop this bubble…..yes and no….small increases in interest rates could fuel the bubble as people worry about further interest rate increases and rush to buy; second a fix-er-upper…..good luck with that…at least where I live, because of the hot market, people are getting their properties ready for sale, and tradespeople are very busy….one contractor I know has a one year waiting list for renovations. My advice might be to try not to move if you can help it.

    • timbers says:

      Interest rate increases are Illegal. Jerome has banned them as has Europe.

      • David G LA says:

        Denmark just launched a 0% 20 year mortgage.

        • Dan says:

          I find that amazing; is that for residential real estate?
          Maybe I can get one of those where you only have to pay the zero percent interest.

        • David G LA says:

          Residential. If you take a 10 year it’s -.5 – they pay you to borrow the money.

        • Wolf Richter says:

          David G LA,

          What you failed to mention were the fees. The article you linked talked about them further down, but you probably never read that far. FEES is how banks make money. So NO, Danes to NOT get paid to borrow. This is from the article:

          “In reality, the Jyske mortgage borrower in Denmark is likely to end up paying back a little more than they borrowed, as there are still fees and charges to pay to compensate the bank for arranging the deal, even when the nominal rate is negative.”

        • Juanfo says:

          There has to be a catch. There always is. No free lunch and the conservation of energy.

      • Cas127 says:

        Talking about the very concept of higher interest rates will soon get you banned from Twitter, Facebook, Google, and your over-leveraged neighbor’s BBQ as a domestic terrorist…

    • California Bob says:

      “… small increases in interest rates could fuel the bubble as people worry about further interest rate increases and rush to buy …”

      That’s my take, too. To think I was tickled when I re-fi’d my house at 3.25% (30yr fixed) a few years ago (that WAS the bottom about 10 years ago).

  7. tom16 says:

    My equipment should be parked in the shed, I should be in the office/shop
    doing updates or maintenance. Nope, will be digging all next week.
    Demand is crazy. The retirements keep coming, and the replacements are….???

  8. ZestStat says:

    This article is so damn to the point and 100% accurate. We are currently in the market to buy a house (1st-time buyer). We put offers on 3 houses in the last 15 days and we were over-bid on every house by several buyers by not just 15K or 20K but like $40k to $50K. Every house that we saw are getting sold easily for more than 40K/50K/60K above the asking price.

    Second, to the author’s point – we literally have walked away from showings just by seeing the number of people waiting in line to “see” the house. People are just going nuts and running after a 2.5 or 2.75% interest rate and superficially inflating the value of houses and the neighborhood houses. On the other hand, the agents (sorry no offense!) have been pushing buyers to offer way over the asking price, just so we (the buyers) can make it in the top 2 or 5 on the list. And unfortunately, people are falling for it without considering whether it is really worth to pay that extra 50K/60K for the house.

    Third, again as the author stated – houses that might have sat for weeks or months on the market in a “normal” environment are getting sold in days in the “as-is” condition by either potential buyer or companies that have enough cash sitting to repair and resell the house.

    Lastly, partly the buyers are to be blamed for driving the house price to go higher when we know or should know the real house value based on historical prices and also other factors (neighborhood, schools, proximity to metro/major roads, etc.)

    I wish good luck to all the buyer who has paid are will be paying way over the asking price on the house and hope that house retains that value for a longer period when they decide to sell the house after 5/7/10 years.

    • Old School says:

      Real Estate is local as they say. In boom times a high end house 3% down is the way to ride the bubble up if you dare. If stuff hits the fan a very modest paid off home in a tight knit community is a way to survive nearly any financial calamity.

      • RightNYer says:

        Yeah, the problem with that is that there are so many new buyers moving in that I’m not sure anything is “tight knit” anymore.

        The experience ZestStat noted is what I’m seeing around here too. Just goes to show that manic buying is just as much a thing for single-family houses as it is for Bitcoin, TSLA, and the like.

      • Cas127 says:

        It really is funny that a very large number of Americans, who never in a million years would consider becoming high leverage interest rate bond speculators, immediately become exactly that…so long as the riverboat gambling is wrapped around a house.

        And, yeah…people will always need someplace to live…but it isn’t like increased new housing supply is utterly impossible.

        • Jay Goldberg says:

          > but it isn’t like increased new housing supply is utterly impossible.

          Disagree on this. Despite the well-understood economic concepts of supply and demand, we continue to underbuild and add regulatory hurdles at the behest of entrenched homeowners.

          I suspect this will get worse as even suburban areas fill with “city folk” who envision themselves escaping cities and leaving density behind and and those already in those suburban areas screeching at town hall meetings.

          Throw in SFH investment firms, and you’ll now get even more money working to combat building. Once a company owns 80% of the SFH rental stock in a municipality, why allow new entrants into the market by allowing building and redevelopment.

          Think about your own experience with gov’t in your life. Do you expect regulations to be made more lax and taxes to go lower? I think not.

        • Cas127 says:


          Broadly agree with you, but as housing inflation becomes more obvious, abusive, and concentrated, political pressure will build to intolerable levels and unprecedented access to communications tools (like the internet) will sooner or later help to puncture the balloon.

          Even CA, one of the bastions of overpriced housing, came close to enacting pro supply measures last yr.

          And, if not, major employers will pull up stakes…see CA (again) and NYC.

        • joe2 says:

          Don’t forget the Federal government and increased immigration and potential infrastructure projects. They have not been active players in building yet but some in the new administration want to diversify suburbs forcefully regardless of local zoning boards. Remember federal waterways and grazing lands?

          The system under analysis is always bigger than you first think.

        • NBay says:

          Agee, especially on the “increasing new housing supply” part. Plenty of big suburban homes around me could easily be duplexes, good way for someone to become a downsized landlord instead of turning to HELOCS or worse yet, reverse mortgages.
          Getting really really sick of that looong Tom Seleck ad, never liked his persona, anyway.

        • NBay says:


          Have a meaningless but ironical story about entrenched wealthy homeowners, and their pettiness.

          A resident of Fountaingrove, a super high end very extensive woodsy hilltop area (in 65 I hunted pheasants or just hiked, up there) recently built up (early/mid 90’s to early 2000s) in S Rosa, CA, filed lawsuit against the city for building a firehouse near him…”it ruined the ambiance crap”.

          2017 fires swept through and destroyed most all of Fountaingrove, along with the firehouse the city built anyway. I could care less about Fountaingrove, but unfortunately down on the flats the fire jumped 101 and wasted the middle class neighborhood of Coffee park and burned an old folks trailer park. People died.

    • Thank you for reading & commenting.

      I struggle with this issue with buyers. I am laying it all out now – telling them that to get the house they need to do the following…and that’s basically waiving all the contingencies. And if they aren’t comfortable with that, then we should look at houses that have been on the market. They say, “But that’s overpriced, the seller isn’t being reasonable.”

      Well, today someone may offer less on a house and the seller says no. But in a week, they may panic and accept. It’s all about timing. I’m in the midst of a negotiation now where I said, “Just because your client wants $40,000 more, doesn’t mean he’s going to get it.” The agent said, “Well he had an offer higher than this and he said no, so I know he’s going to say no.”

      Fine, I said. Just present it like we’re obligated to do and let’s see if today is the day he drank his Come-to-Jesus juice.

      • Cold in the Midwest says:

        Great article Melissa. The only item I’d add is there is a thin line between “I’m not saying not to buy” and “this is not a good time to buy – you are better off to wait.”

        I used to live in Denver and I remember a brief period when demand in that market was so strong sellers would not permit any inspections of the house. You buy it – you’ve bought it – done deal. No thanks. That is an unreasonable risk IMHO.

        This tree will not grow to the sky. There will be a day of reckoning for the people who are now paying premium+ prices.

        • RightNYer says:

          Yeah, if someone gives me a condition like that, I assume they’re trying to screw me. Same with someone selling a used car who won’t allow my mechanic to take a quick look at it.

      • Lisa_Hooker says:

        Exactly. A recent buyer with no contingencies may discover that paying two mortgages is more painful than originally anticipated. Becoming a landlord and leasing ties up a sale, and houses don’t rent well month-to-month.

      • Heinz says:

        Buying at or above asking price with no prudent contingencies in the deal is abdicating all transaction negotiation control to seller.

        That is batsh*t crazy.

        A sad commentary on the madness of crowds.

        • Ethan in NoVA says:

          The desperation.

          Just tax empty houses hardcore. Isn’t something like 18 million homes empty as they are held for investment, vacation homes, etc? Tax the snot out of em and force their return to market.

    • ShutUpMouth says:

      Same. Been renting the same apartment for 11 years, finally paid off all our debt and saved enough for a down payment and then prices shot through the roof. Now we’re back to watching the real estate party from outside the windows again. Technology, we could probably find something at the peak of our budget, but we don’t wanna overleverage, so we’re gonna sit it out some more.

      About 3 months back we did a tour via Redfin for a SFH in a shitty neighborhood near the 101 freeway (LA Area) and the seller was asking $525K for a 3bd 1.75ba even though the master bedroom’s floor was completely water damaged there was standing rancid water in the master bath shower. He explained the rear patio had been thrown together by an amateur and anytime it rained the water cascaded right through the sliding door into the master suite. In his words, the entire patio area needed to be redesigned and rebuilt. He didn’t even bother to rooter the standing water before listing the property!

      On the way out, I told the Redfin agent du jour that the seller was asking way too much and he lowered his voice and said, “Oh yeah, he’ll never get what he asking,” then virtually in the same breath thanked the owner on the porch and said, “It’s a great property, it’ll go fast!”

      Property went pending within a few weeks, then back on market, then pending again, and ultimately sold for $555K, $30K over asking with all that damage. Yay, Fed policies!

      • Lynn says:

        You would think they’d at least spend $40 on sandbags.

        • Cas127 says:

          In CA, even the sandbags (and sand!!) are incredibly overpriced.

        • Lynn says:

          I’m in Ca. I suppose some can’t do it themselves and need to pay a couple hours labor on that. But for a $555K and a $12,000 – $16, 650 commission you would think the RE agent might want to grab a shovel or shell out a deductible $120. I mean, just as a matter of pride if nothing else.

    • roddy6667 says:

      You are buying at or near the peak. Prepare to go underwater in your mortgage in the next few years if you buy. You won’t be able to sell your home. If you get offered a once-in-a-lifetime career opportunity, you can’t take it because the house will be a millstone around your neck. Buying now will make you one of the people holding the bag.Been there, done that. Won’t do it again.

      • Cas127 says:

        Yes, apparently the widespread, summary financial executions of 2009-2012 did not make enough of a lasting impression.

      • RightNYer says:

        Roddy, agreed. Obviously, I don’t have a crystal ball, but I see something very different here than with the stock market.

        Right now, stocks and houses are at highs because there are more people who want to buy than sell. That doesn’t necessarily say anything about volume.

        As prices continue to rise, the pool of sellers becomes smaller and smaller because of greed (they don’t want to miss out on any gains), and as the concentration of assets held by the wealthy rises, the pool of people who NEED to sell drops, so volume can remain low.

        That said, I suspect that this phenomenon is much more pronounced with stocks than with real estate, meaning that there are a significant percentage of home owners who will need to sell (and a dwindling pool of buyers) once the right set of conditions manifest themselves.

        When this happens, the housing market crashes. I’m staying away from anything at these prices.

      • Turtle says:

        “I’m not saying not to buy. But be smart about it.”

        I’m no expert but do feel that I can perceive what is and is not reasonable with regard to prices. I say do not buy now in a place like Southern California. Families earning $70K are buying homes at $700K. And in many cases that is for 2 beds and 1 bath draped in power lines. Come on now.

        Are industry folks saying “buy now or be priced out forever” again, like in 2007? Really, I want to know.

        • Young Buck says:

          Yes they are Turtle. I got my real estate license in September as a side hustle and haven’t done anything with it yet. Every broker and lender that came in to speak parroted the “houses only go up” stuff. I was surprised when the teacher said the real estate market is cyclical and will come down.

    • QQQBall says:

      Bidding on 3 houses in 15 days is sign of mania in and of itself. No offense intended.

      • ZestStat says:

        We liked all three houses and they fit all the criteria that we were looking for. Even though we did bid for 3 houses, we bid at the asking unlike other folks who are dying to pay 50/60K more for those houses. Eventually, all the 3 houses went on average 55K over the asking price.

    • Ian says:

      May I ask where you have been looking? Thanks.

  9. kevin says:

    Trillions in stimulus is coming whether you like it or not.
    The others such as the BoE, BOJ, ECB, PBoC, even the SNB will all have to follow suit, quietly or otherwise.

    Despite whatever mess is now happening to the US of A, the market behavior is telling us the USD is, and will still be, accepted as the world’s reserve currency for the foreseeable future.

    When the unit you are measuring everything against is debased; everything will go up in terms of the sticker price. Its like everyone used to be measuring their d**k lengths in inches (say average of 8 inches :)
    And suddenly, the unit of measurement switches to cm, and everyone’s d**k lengths now “inflates” to a BIGGER number 20 ! lol.

    I reckon almost all investible asset classes whether its real estate, bitcoin, equities or collectible art will naturally be pressured higher since they are all measured against this USD. Add in some FOMO & YOLO ingredients, plus folks “seeing” relentlessly rising prices and viola! …you get the famous Shakespearean witches’ brew of “Bubble Bubble, Toil & Trouble!”

    • RightNYer says:

      How do you figure that the market is telling us that the USD will still be accepted as the reserve currency? From what I understand, most manic buying of real estate here is coming from Americans, unlike the periods in the past 10-15 years where much of the condos in places like Manhattan, San Francisco, and Miami were bought up by foreign investors.

      The fact that the dollar has dropped 10% against the OTHER currencies which are being debased makes me think that the market is NOT accepting that the U.S. should still be the reserve currency.

      • Joe in LA says:

        I wouldn’t make too much of that 10% drop. The whole world is risk on, so the dollar just isn’t in demand compared to March.

        • RightNYer says:

          But that’s precisely how the loss of reserve currency status begins. It doesn’t necessarily happen overnight.

      • VarAway says:

        US$ a 10% drop against OTHER currencies?
        Does that include against the € ?
        I must have missed something…..
        Please elaborate, thank you

        • Joe in LA says:

          DXY is at about 90, it peaked at 102 in March. And sure, that includes the Euro.

        • CRV says:

          Depends on your time line.
          But looking at a daily graf of Eur.USD:
          At the last long term peak in jan-2018 1€ bought 1.25 $$.
          At the latest low in march 2020 1€ bought 1.06 $ (dollar got 15% stronger).
          Today 1€ buys 1.25 $$ ($ got 14% weaker against €).

          Against gold the € dropped 40.3% and the $ 36.5% from jan 2018 till today.

          With other words. Gold bought in jan 2018 will buy you roughly between 35 and 40% more stuff than $$ or €€ you held during that time. It’s not wise to hold long term savings in fiat currencies. Even houses do better, although lack liquidity and come with taxes and maintenance costs.

    • Ad Damian says:

      I’m sorry, but the US is looking more and more like the falling Roman empire. The elite seems completely out of touch with everyday problems of average Americans. The trillion dollar deficits, the skyrocketing debt, the joblessness, the devasted industrial production … It seems that the Google, Facebook and other monopolies are the only thing that keeps up the appearance that there is something that America is able to produce (if I don’t count the mind-boggling billions going into the production of weapons, military airplanes and other war related products).

      Someone said that debt is not a problem when you have your own mint … but this 30 trillion of debt is just … Well, it’s not going to last another 30 years.

  10. timbers says:

    Melissa, would like to add your point about the dogs selling like hotcakes took the words out of my mouth that I have been noticing the past month or two in my area.

    • The appraisers here are even missing the prices. If the appraisers can’t even get to the contract price, there is really something wrong.

      • Whatsthepoint says:

        Melissa- former appraiser here- when the appraisal misses, are prices being negotiated or does the buyer have to cough up more $$ at closing? Also if people are selling “city” homes to move further out, who’s buying them? Finally, do you see much cash out refi money as down payment on the new purchase, taking advantage of low interest rates all around?

        • Cas127 says:

          “if people are selling “city” homes to move further out, who’s buying them?”

          Yep…this is a very, very good question.

        • People are coming in with cash. I haven’t seen a ton of price negotiation, and most buyers have to waive appraisal to get a contract accepted on a house that’s in demand.

          There’s definitely a shift. The condo market is dead. There are basically no buyers for one bedrooms and studios, where that used to be the entry level way into the city. All these developers who started making condos even smaller, cutting down to tiny kitchens because “the buyer of this place is going to eat out 6 nights a week” – that market is dead. Literally everything changed – overnight.

          I have had clients bid over ask and when I send them comps prior to us writing up the offer, I will tell them, “This may not appraise.” In most cases, if they don’t have the cash, the parents do. For people who plan to live in the houses a long time, they seem not to mind.

        • RightNYer says:

          Melissa, does this mean that many buyers are Millennials borrowing cash from their Boomer parents, which parents are flush with cash because of the appreciation in their stock portfolio (the “Wealth Effect”)? That’s what it sounds like.

          What do you make of people buying with cash when cheap money (2.75%) is available?

        • Anthony A. says:

          @RightNYer, I bought a house in 2010 with cash here in Texas for my daughter to live in for two reasons;

          1) the time and price was right as houses were selling for 50% of last purchase price, and,

          2) this was one way I can gift my daughter part of Dad’s future inheritance so she doesn’t have to wait until I am gone. (she needed it then)

          Maybe some parents are currently doing the same for the new Millennials too?

        • Lynn says:

          I’ve seen people online complaining that some buyers were investors posing as people “who just wanted to move here”. No idea how prevalent that is.

    • Heinz says:

      Yes, and beachfront properties in Arizona are selling quite well, I hear.

  11. Bob Hoye says:

    Good review.
    Following comments have some key points, as well.
    In May-June 2007, the Yield Curve and Credit Spreads began to reverse, suggesting a contraction.
    That would hit the whole boom.
    On this mania, the Curve gave an “Alert” in early December, and in extending the trend is giving a “Warning”.
    Spreads are still trending to La-La-Land.

  12. Seneca’s Cliff says:

    I can’ t understand those that lack the patience or insight to not bid houses up $50,000. Do these people have no insight in the probable future of the economy. When I jump back in I plan to see the seller crying like baby at the deal they will be forced to make.

    • Paulo says:

      Yeah, my question is why were the houses listed so low if they are always bid up?

      Good article and cautionary.

      Booming here on Vancouver Island…booming construction and sales, both. But no one seems to be buying over asking. I don’t see it happening, anyway. Our rural place had a new tax assessment this year. The value went up 47% on one property, and 18% on two others we own. The property taxes are set to rise about 1.8%, so for that modest increase we are thankful. Mostly the new assessments are more reflective of the market.

      There are virtually no building lots left around here as almost everything not already developed is either tied up in the ag land reserve, or is zoned forestry. Newcomers arrive, but many leave. Peace and quiet isn’t for everyone, and I mean that respectfully. Most folks live urban for a reason. There might be an exodus to the suburbs now, or even to the country, but it will change back over time, imho.

    • Lisa_Hooker says:

      Seneca, $50k is only around 16 shares of Amazon or 60 shares of Tesla. Take money out of bubbly stock market and put into bubbly housing market.

  13. Anthony A. says:

    Thanks Melissa for the great report.

    Crazy stuff. I bought our second home when prices went in the tank in 2010. Houses were flying off the shelf, so to say. Nothing but bank repos, foreclosures, etc. There were usually three or four (or more) bidders on a home. Just like now, but in reverse.

    I suspect we will see that action again.

    That was the best $120,000 I ever spent on that 2,000+ square foot brick 2 year old ranch in a great neighborhood in The Woodlands, Texas. Now it’s valued at $300K+. (this is not D.C. or Calif.)

  14. Sam says:

    Parallel universe in new car biz (Senor Wolf’s past life): when retail gas price went to $4 plus (last energy circus in ’08), sales of HD PU trucks/Tahoe’s/Escalade’s stopped overnight.
    Econo/hybrids cars went for msrp plus $2-3k on a waiting list.
    When fuel prices finally dropped 50%, the demand for econo boxes went flatline.
    Then the demand for big pu’s/suv’s [particularly black Escalade’s] went nuclear.
    The dealer (12 stores) had stockpiled multiples of
    [previously forlorned] new large rigs. He knew his customers tastes & traits.
    Long story condensed: after taking back the econo boxes [discounted] on trade in for the loaded [w/massive mark up] HD PU’s/upscale mommy missiles….a bigger & newer jet came on line.
    Cue “same as it ever was”.
    Btw The energy sector has been in the doghouse past decade, note the slowly rise cost$.
    “History never repeats itself, but it often rhymes”. – Mark Twain

  15. Old School says:

    Stockman had interesting article stating if the new stimulus package is added to what has already been released in 2020 that it is several times more than economic loss from covid. Fits what I am seeing as well as economy is contorting. I know some economists are worried that the economy can not handle another $2 trillion dropped into it when so much of certain sectors are severely restricted.

    • Paulo says:

      What I don’t understand about the stimulus is why there isn’t a simple means test with funds slated for those that truly need the help?

      In Canada people had to apply for emergency benefits due to Covid, and if you did not qualify and/or meet criteria you WILL be paying it back.

      “Verifying your eligibility (CRA = Canada Revenue Agency…think IRS)

      The CRA will be verifying that you are eligible to receive the benefit. You may receive a notice from the CRA asking you to contact the CRA to validate your application. This is needed to verify your information and process your application.

      In cases where claimants have received a payment and are later found to be ineligible, they will be contacted to make arrangements to repay any applicable amounts. Canadians can also report suspected CERB misuse through the CRA’s Leads program.

      As part of the Canada Emergency Wage Subsidy, the CRA will also be comparing employers’ payroll records with information provided by CERB claimants to ensure that individuals who have returned to work and who have therefore become ineligible for the CERB repay those amounts.

      • WES says:

        Yeah, and Sparkle Socks told everyone not to worry about paying it back!

      • Mike R. says:

        They have realized that past attempts at inflation are note working as planned. So now the approach is to print money and give to the ordinary citizen. And not just those in dire need. Especially not those in dire need.
        So not to let a good crisis go to waste.
        There will be another 1 trillion or so soon under Biden. Maybe more.
        The big inflator will be the national $15/hour minimum wage Biden is pushing. That will send prices for essentials up to a new level. And once stabilized, those making 15/hour will be back to where they are now at 7-8/hour do to loss of purchasing power. And it won’t take very long.

        • p coyle says:

          and everyone who had already been making $15/hour will be down to $7-8/hour. it’s a feature, not a bug.

    • RightNYer says:

      It seems that Congress/the Fed are trying to overdo it; that is, throw much more firepower at the problem than you’d think you would need.

      I liken it to waking up to a noise downstairs and coming down the stairs and spraying the whole house with rifle fire. Sure, you might hit the squirrel that got in and tripped your motion sensors, but you’ll also turn the whole house into Swiss cheese.

      The fact that so many left-wing economists are sounding the warning bells about the next round of “stimulus” as Biden is about to take office, should say something.

    • Lisa_Hooker says:

      OS, the economy will have no trouble absorbing $2-3 trillion. What that will do to prices is different issue.

    • Cas127 says:

      “it is several times more than economic loss from covid”

      Never let a crisis go to waste.

      Or waste the opportunity for a crisis.

    • Bart says:

      Old, Nouriel Roubini’s (he predicted the housing bust) thoughts on why a Great Depression is coming in a few years. In short order, a lot of people will be underwater on their mortgages. During COVID, the big companies spent much time redeveloping their strategies which will include more automation, AI and otherwise reducing headcount. AI will displace a lot of white collar workers. This won’t end well.


  16. GotCollateral says:

    > Some people actually enjoy the human interaction.

    Because you can’t have human interaction on your own terms working from home without a pandemic outside of the context of work… news to me… lol

  17. Bruski says:

    My guess is that we are in the early stages of hyperinflation.

    Looking more and more like Germany in 1922-3.

    The money printing presses are rolling.


    • Xavier Caveat says:

      The German stock market of 1921-22 was a place of refuge for those volk losing money on then deteriorating marks in their wallets-outpacing inflation, and then the walls caved in. Used houses now are a better vehicle in that whatever the $ might do, an abode abides.

      ‘When Money Dies’ is a fine book on what went on in the Weimar hyperinflation.

      • Mike R. says:

        There are two paths for hyperinflation for the US. One is for the Fed to “chase” the inflation by printing more and more money. All they had to do to stop the inflation was to simply stop printing. This is what Germany did and what is outlined in When Money Dies.

        The other path for hyperinflatiion is if the US dollar loses world status/trust and dollars start “streaming home”. The Fed is powerless if this occurs and is the nightmare scenario in the back of the minds of those who understand all this. That is why certain politicians feel the need to put the brakes on new stimulus plans.

    • Swamp Creature says:

      After 1922-1923 the Mark was replaced by a stable currency and the economy got back to some semblance of normalcy. Those were good times in Germany. Great entertainment “Caberets” , music, art, and philosophy, architecture all flourished. Better than here in the USA.

      We’re living in an armed camp and locked down to boot. The Mall here looks like the German positions before the Battel of the Somme

  18. H says:

    This article is very DC centric but anecdotal I’m guessing nationally. The HQ2 pump, up and to the right.

  19. Hernando says:

    The election is over. They are going to let some steam out and allow for some correction. No or little stimulus, end of forbearance, and no student loan forgiveness.

    In 2-4 years expect free stuff. This year expect some price discovery.

    • josap says:

      From what I have been reading the plan is more stimulus this year, rent moratorium to continue until the end of Sept, and some student loan forgiveness of $10K.

      By the end of Sept people should all have their shots and things can begin to get back to normal.

      Of course, all of this has to get through Congress.

      • Turtle says:

        I do wonder how much the employment rate will correlate with the vaccination rate. It’s hard to imagine all jobs coming back so quickly after the virus is snuffed out. And this is assuming it will be defeated in the US this year. I know I’m not going to be one of the guinea pigs. No mRNA vaccine has ever been approved, until now – for emergency use. And these were developed in a matter of months, not years.

        • Crush the Peasants! says:

          The virus will not be snuffed out, unfortunately. It, as well as divergent mutants, will be with us forever. Likely periodic vaccines will be the new normal.

        • Ethan in NoVA says:

          AFAIK the vaccine doesn’t snuff it out. People still get it, people still spread it, it just reduces the effects on the person. CDC guidelines say people that are vaccinated still have to wear a mask / social distance. So that doesn’t really sound like life in 2018 until something better comes along.

        • Bart says:

          M&A has been on a tear. Prediction is for nearly $1.7T of it in the Pharma industry. Likely in other industries too. Layoffs to follow. Add in the zombie companies that don’t generate enough cash to pay their interest costs…

        • NBay says:


          Kinda sad we have gone from “trusts” to “M&A’. But I’ve watched financial engineering and financial “new speak” change a lot just since “Personnel” became “Human Resources”, and “moving people” became “backfill”…a term from construction referring to pushing dirt.

          With humans, words matter.

          Encourage ALL HERE to check out the GREAT “HACKING THE MIND” series on PBS!!!!!!!!!!!!!

    • LessonIsNeverTry says:

      Zero chance of this outcome IMO. Stimulus will be frontloaded.

  20. Willy2 says:

    Based on what read in the newspapers and on the internet there are 2 disturbing trends emerging:

    – A very significant amount of workers who work from home were very happy. They still had a decent income and didn’t need to spend part of their wages for commuting to work and then back to home. But now the employers are catching up. There is chatter that employers are going cut the wages for this kind of employees by say 5%, 10% or perhaps even more.

    – Investors who own Commercial Real Estate (CRE) must roll-over their existing CRE loans into a new loan every say 5, 7 or 10 years. But banks are now increasingly unwilling to roll-over the old loan into a new CRE loan. Don’t ask me how wide spread this is, but it is a disturbing trend noneteless. Andthis will force these investors to “unload” / sell their CRE.

  21. JM says:

    If I remember correctly Biden also planned to raise taxes for those who own a house or more houses considered rich people, so the return to the government budget could be the solution to the hyperinflation and bubble house.

    • chim says:

      Biden has pledged to repeal the SALT cap deduction that the Trump admin instituted, which means plenty of blue staters in $500k+ houses will now save even more money. As always, no matter the party, the wealthy will get their special treatment.

      • Wolf Richter says:

        Only Congress can repeal the SALT cap.

      • Swamp Creature says:

        A lot of those who used the full Salt deduction were not wealthy. Especially in the high tax states. That was propagnada that was put out by class envy proponents.

        • Happy1 says:

          90% of the benefit of the SALT deduction accrued to the top 10%, so let’s not pretend it was a mostly middle class issue, it was about the wealthy.

        • NBay says:

          “Envy” is a morally loaded term…..just use inequality, much better for a more accurate analysis of the subject, yes?

  22. Lynn says:

    @Melissa Terzis

    Are you in DC proper or the suburbs?

    Also, who is buying? Is there any increase in either foreign money or larger investment companies? Smaller investment companies? Are there more people buying second homes?

    & thank you for this article. I’ve had 4 real estate people tell me to wait- 2 of them were selling agents!! But, it just keeps going up. I’m being outbid by online buyers who pay over asking without ever stepping foot in the place. & most of the places I’ve looked at have serious structural issues. One set of buyers did move into a house that had major supporting framing removed and was sinking badly, and I wonder if they have any idea what they overpaid for.

    • Hi Lynn!

      I live in DC. I lived in Dupont Circle which is about 1 mile from downtown for 10 years. Still have that condo. Now I live about 2 miles to the northwest of Dupont in Glover Park. It’s residential, but still all rowhouses. The reason people want to live in some of the residential neighborhoods in DC is school related.

      It’s all owner-occupied buyers who want to buy – at least the people I’m helping. Prices are probably too high now for foreign buyers to look to stash money here. There are still people being relocated here who need a place to live.

      Whether to wait depends on what you’re looking for. If you are in the market for the same thing everyone else wants in your market, and this wasn’t something people wanted a year ago – then wait. If you are looking for something that has fallen out of favor, like condos, then I would keep looking to buy.

      I’m not seeing a lot of second home buyers here at all.

      • Lynn says:

        Thanks Melissa :)

        I’m in California which is a different market, but was asking because I wanted to know if people were still moving out of the cities. I guess it depends..

        ” Prices are probably too high now for foreign buyers to look to stash money here. I’m not seeing a lot of second home buyers here at all.”

        Thank you, that is very helpful. Although, I do wonder if more people are buying homes before selling their current homes?

        ” If you are in the market for the same thing everyone else wants in your market, and this wasn’t something people wanted a year ago – then wait. ”

        That’s also very very helpful. I’m looking at ugly fixers with good framing and maybe ugly but fixable foundation or partial tear out roofing issues- Only the contractors and fools usually want those, but even the contractors are backing off at these prices. As am I.

        • There is usually a sweet spot between what has to be a cash purchase by a contractor/flipper, and a house that needs more work than normal that won’t appeal to most buyers. That’s where I tell people to look, if they have the stomach and wallet for renovations.

          People moving from DC to a Maryland or Virginia suburb aren’t concerning. It’s the calls from former hard-core city dwellers who want to move to the middle of nowhere and not be able to see the neighbor’s house. That’s where I think people should pause and not overcorrect their current living situation until we all know for sure how this shakes out.

        • RightNYer says:

          Melissa, that same phenomenon is playing out in the NYC exurbs. People are moving to places like New Paltz and the Poconos (in Northeastern Pennsylvania) and are coming to realize they might not like it. The inner ring suburbs will be fine, but I suspect their prices will correct at some point.

        • Lynn says:

          “There is usually a sweet spot between what has to be a cash purchase by a contractor/flipper, and a house that needs more work than normal that won’t appeal to most buyers. That’s where I tell people to look, if they have the stomach and wallet for renovations.”

          Melissa, thanks, yes, that’s where I’m looking. I just LOVE the look of vandalized smashed in drywall, broken tile, horrid interior paint schemes, no cabinetry and 70’s orange carpet.. A lot of DIY work but better than a sinking foundation or missing copper any day.

          ” It’s the calls from former hard-core city dwellers who want to move to the middle of nowhere and not be able to see the neighbor’s house.”

          Yep, that is not only a huge cultural and social change, it can also be a steep learning curve. At least out here.. Just hope they don’t piss off the neighbors.. A lot of those people will move back.

  23. Michael Droy says:

    Not as much a Housing market, as a collapse in the market for Money.

  24. “It’s houses that no one wanted a year ago escalating $100,000 or 20% over list price that scare me.”

    If this kind of market behavior doesn’t give you pause for concern, you aren’t paying attention. It reminds me way too much of 2006. Here in the Dallas-Fort Worth area buyers are picking off homes in the sub $300,000 price points like there is no tomorrow. Showed an agent-owned flip a few days ago which was ridiculously overpriced. Some unsuspecting out-of-state buyer might not know it’s a horrible deal, and so there’s a decent chance it could actually sell for cash the way things have been going. No way in Hell it would appraise, but hey, appraisals are optional these days on many transactions with waivers still in the mix. LOL!

    When buyers are snatching up homes that would have previously sat on the market due to obvious defects or deficiencies, and at prices which are significantly higher than just two years ago, you have the perfect recipe for buyers’ remorse.

    Fundamental metrics of value have been thrown out the window in this pandemic. In places like Texas where we have little to no zoning, people are forgetting what happens the market turns. Everyone is counting on a continued ramp up in prices. That works…until it doesn’t. Our central bank continues to incentivize bad behavior and poor decision making in the markets. This liquidity-driven real estate market is a perfect example.


    • David in Texas says:

      Aaron, like Denton, the area just west of the Park Cities in Dallas has been going completely nuts. Builders are buying up cottages (including those nicely renovated only a few years ago) and tearing them down to build these hideous monstrosities that take up every square millimeter of the lot. They cut down all the old trees, too.

      These new McMansions are all going for around $1.5 million. As a practical matter, these people might as well be living in an apartment. They have no yard, no spontaneous friendly chats with neighbors, etc. The buyers all seem to be in their late 20s, so we all wonder where they are getting the money.

      Those of us who got out of school during the last big Texas bust, in the late 80s, can’t help but think another one is coming. But I’ve thought that way for at least 5 years and there’s no sign of it yet. Perhaps with the help of the Fed, we’ve reached Irving Fisher’s “permanently high plateau.”

      Just kidding, of course, but it sure seems like it now.

  25. Stonedwino says:

    Timing is everything in life…Ditched the big suburban house in 2015, and started renting again as we had triplets heading to college.
    Triplets are about to graduate from college and we are still renting. I’ll keep trading stocks until stock market and housing market blows up again and maybe then look to get a good deal on a house again. People are buying homes on emotion now and that never turns out well..

  26. Preston says:

    Question for the realtor professionals: What percentage increase in prices can we expect if the State and Local Tax deductions are reinstated by the Dems “stimulus” bill? Of course, it will affect high end homes in hit property tax states. Does anyone have any hard data?

    • Swamp Creature says:

      From Mrs Swamp Creature

      This may make it easier to sell and put more houses on the market. This will offset the tax advantages. Currently, a lot of people are gaming he system by holding on to their properties to keep their tax benefits grandfathered in resulting in less houses for sale. One you sell you lose some of those tax benefits. They may offset each other.

  27. Lou Mannheim says:

    It must be a powerful feeling to be a fed governor. Really powerful. William McChesney Martin was so… Keynesian.

    • Swamp Creature says:

      Him and Volcker were the best Fed Chiefs we ever had. The rest were lightweights.

      • Lou Mannheim says:

        Indeed, they kept the Fed independent, restrained and thoughtful. I have no idea what these Ayn Rand reading, Monetarist folks think they’re doing. The pain inflicted on the risk-averse the last 20 years is inexcusable, bordering on eugenics.

        • Heinz says:

          Those at helm at Fed today are simply power-drunk and pretentious fools. That is fitting for our interesting times.

  28. roddy6667 says:

    One of my nephews owned a home in Mills River, NC, part of the Asheville area. Asheville is the beneficiary of people fleeing urban areas. Prices are up. He had owned this home less than 2 years, but he sold it for almost a $100,000 profit. Smart to get out while the lemmings run for the cliff.

  29. Xavier Caveat says:

    After 9/11 is when the nationwide housing bubble really got going in earnest-there had been regional bubbles prior, lots of cocooning and primarily on the coasts, and then came the crash in the GFC, followed by a funny thing in that secondary cities of size went ga ga (i’m looking at you-Denver et al) to the point where prices came close to coastal numbers, madness.

    This is more cocooning with the Covid bump, but what happens to those city homes the plebes fled when nobody wants to live in a scary metropolis, and the uselessness of a big city during a pandemic?

    • Turtle says:

      I wonder if cities like Denver and Boise would tank hard in the way that Phoenix and Las Vegas did “last time”.

    • Lynn says:

      Denver went up drastically when the pot industry took hold there. Parts of Texas and Dakotas went up because of oil jobs.

      • Happy1 says:

        Denver went up as people from CA “discovered” it as a livable alternative to the west coast, and as tech and similar companies reached a similar conclusion. The pot thing attracts a very different crowd that can’t afford a 500K home. If people are moving out of CA, Denver will appreciate in price. Real estate in Denver is a boom and bust thing though, and it has been boom since 2012 now.

        • Lynn says:

          The pot business people can afford it. Both legal businesses and black market. You might be surprised.

  30. Tony bolongy says:

    The ever elusive question WHO Is Buying the inner city condos

    • David Hall says:

      As new vaccines near approval and approved vaccine production ramps up, interest in lower cost multifamily housing may increase.

      If interest in vacation travel, hotels, and restaurants will recover, will people be called back to their offices by their employers?

  31. Drunk Gambler says:

    If it is a bubble, what are the INDICATORS ? Price Growth and Delinquencies. According to Michael Burry. Price Grouth not quite there yet. Delinquencies – under th questions at the moment.
    All these bubble talks nothing more then a gossip. NO DATA .

    • Wolf Richter says:

      Drunk Gambler,

      Been reporting the “DATA” for months. Just because you didn’t read them doesn’t mean we didn’t post them. Here is one of them, how at the low end of the housing market, namely FHA insured mortgages, delinquency rates spiked to an all-time record high of over 17%. They have since risen to 17.5%. In a number of cities, the delinquency rate of FHA insured mortgages exceeds 20%. In the Washington DC-Arlington-Alexandria metro it’s 22.1%. Yes, DO LOOK AT THE DATA. I highly recommend it:


      • Swamp Creature says:

        I think the Drunk Gambler must be Drunk

        We need to keep a close eye on this indicator. This is what signaled the last financial crisis. It actually started in 2005 out in California and spread to the east coast very quickly like a virus.

      • 91B20 1stCav (AUS) says:

        Wolf-thank you for maintaining your mighty heart and reporting in an all-too-frequent ‘…who knew???…’ response to the current all-too-frequent factual bad news environment. (Dr. Pangloss, take a bow…).

        may we all find a better day.

  32. Swamp Creature says:

    From Mrs Swamp Creature

    Haven’t had a day’s rest since May 1st when they started opening things up. Working 18 hours/day including weekends. Appraised values are lagging behind the market values by 10% or more. Many factor are causing this especially the ultra low interest rates. This is similar to the 2006/2007 bubble but with a different cause. Back then it was the lenders pushing the bad loans. Today smart appraisers are being conservative on the appraisals because they don’t want to get sued when the bottom falls out. Look for that to happen when interest rates normalize or the bottom falls out of the commercial real estate market which then spills over to the residential market.

    • Wolf Richter says:

      Mr. Swamp Creature, you should bring Mrs Swamp Creature on more often :-]

      • Dale Chiusano says:


        Melissa – DC Realtor is spot on.

        I like to add one more thing.

        Housing Affordability is sinking, and has been for some time.

        The big crash in housing will come, and when it does, it is the upper
        middle class and below that will pay the price.

        Thanks to the stupidity of the Federal Reserve keeping interest rates too low for this long.

        Just a thought.

        Mrs Swamp, Appraiser who work urban areas.

      • stratus says:

        I second the motion. Maybe she can crank out a short article between bites (if she’s still getting a lunch break).

        Make hay while the Sun shines.

    • Sam says:


      Thank You for the clarity & insight you bring into the RE calculus.
      Given the increasing number of incentive$ that are being offered to entice applicants for leases (large upscale apts. complexes in PDX) , combined w/the growing number of similar developments in the pipeline, this race “to the bottom” has barely begun.
      Addendum – each week I notice more rental trucks ‘loading up’ in front of prestigious (apt) complexes, mirroring the dwtn SFO/NYC escape stage.

      “History is a set of lies agreed upon.” – Napoleon Bonaparte

      • Swamp Creature says:

        “Assume everyone is a scoundrel until they prove they can be brought into your circle of trust”

        Archduke Francais Ferdinande, aire to the throne of the Austrian Hungarian Empire, spoken just 2 weeks before he was assassinated.

  33. Martha Careful says:

    The pandemic has resulted in a generational shock and reset, blowing away all connections to historical data. The stimulus and lockdowns and slow recovery are happening within the context of a systemic shock. 2021 will probably see a greater spike in virus problems, but, the shock factor has less impact, i.e., people are numb. The slow rollout of vaccine offers hope, as does more stimulus, thus instead of another round of economic shock, I think we see unexpected growth and a post WWll Boom — which doesn’t fit well with a doomer outlook, or a Fed is insane theme. Therefore, what if the WTF economy and all the bubbles dovetail into a strong recovery? Nothing makes sense, but I’m not sold that the end is near, if anything, the worst is behind us.

    • RightNYer says:

      Growth WHERE exactly? The Boomers are aging in population, and thus will consume ever increasing amounts of resources, both in Social Security and Medicare. They’re also leaving the workforce. Our manufacturing situation is not going to get appreciably better, regardless of what happens with the dollar.

      So we’re going to have growth in financial products? More and more people trading derivatives? Writing code for Facebook?

      • Anthony A. says:

        Us boomers and boomers+ are history. We have all the toys we will ever need and a (usually) paid off home. What we are doing is getting sicker (more frequently) and buying more and higher priced meds.

        Our goal is to either spend what we have left on travel (when it comes back, or IF we can (physically)), or give the funds to the kids and the taxman.

        Count us out in the equation for the next strong recovery!

        • RightNYer says:

          Right, Anthony, exactly. Which means the “strong recovery” will have to be from Millennials, many of whom are still living at home and have never really dug themselves out of school debt.

          I don’t see any reason to be optimistic here.

    • lenert says:

      Tim Duy shares your sentiment of an upside surprise – the level of aggregate savings is still elevated from unspent stimulus and:

      “the number of homes sold but not yet started has doubled.

      This is literally months of higher construction activity in front of us, not to mention the durable goods spending needed to fill those houses when they are occupied. Traditionally, housing is a good leading indicator and it is hard not to be positive about the economic outlook with numbers like these.”

    • lenert says:

      And the demographics are favorable for the next decade – increasing numbers of millennials entering their home-buying and peak-earning years.

      • R Hughes says:

        No demographics are not favorable. 15 to 24 age population numbers in US in slight decline. 25 to 54 age population numbers have essentially been flat since 07 at 125 million. Only areas of growth have been in 55 to 64 and 65 plus. So essentially headwinds in the future.

        See c. Hamilton’s blog “economica” for very detailed demographic info on both US and world.

    • It truly depends if people want to get back to life as it was pre-pandemic. Will they want their prior life back or will they be happy with their new life they chose? And will everyone else – which would hold up the values in the new areas where people moved.

      • Martha Careful says:

        I think overall recovery back to where we were, will be a process of hybrid layers and phased in adaption. As one example, I’d be shocked if massive amounts of people get excited about cruise ships and adventures to remote places. Yet, many jetsetters were willing to ignore ugly virus realities during December and the cofactor of new variants, so, if nothing else, some people have extreme cabin fever and will go on as if there isn’t risk. Except for a few weeks in early April, the majority of people took the virus seriously, but even with all the chaos and death, the economy basically survived in tact.

        I think the stock bubble needs to pop, but maybe just a 5% decline, with plenty of buyers waiting to get on the next rocket.

        Housing, slow and steady rise upwards, but many areas will see mini bubbles and mini crashes, linked to either growth or decline, the have’s and have-nots. Seems like a lack of supply will drive prices and if the economy does do ok, the nice areas will get pumped up.

        None of a recovery will make sense, but I don’t think we suddenly get an economic shock that hasn’t been there for 8 months.

    • Trailer Trash says:

      “I think we see unexpected growth and a post WWll Boom ”

      Sounds good, except maybe for that giant tidal wave of debt heading for the beach, and one or two other minor problems…

      • HeyJude says:

        And the fact that the “surplus” of savings sitting on the sidelines will go into the supply chain as a torrent of inflation. Lumber for those new houses has risen 20% in just the last few months in our area. Appliances cannot be found in the basic builder level – they are on backorder with no delivery date…you have to buy an upgraded package if you want to close.

  34. The wealth disparity gap is widening. Those leaving the rundown digs are living in RVs. I have a mind to turn my old 50s ranch style into a uberish mansion with a helo pad on the vacant lot next door. Location above sea level, low fire danger, low crime neighborhood, nearly shopping and schools. A conservative city hall and school boards. It’s not Calabasas but there are enough of the well healed types around to give support to a community of, for, and by the entitled. I’ll even consent to a faux marriage with one of their daughters, in order to transfer the old property tax cap.

    • Sam says:


      You might investigate a ‘jack up’ (aka house raising) where you can increase sq footage by 2-3x on original footprint. Plus do all updates (hvac, plumbing, wiring) to modernize your enhanced Mcmansion.
      Cavate: depends upon your local bldg. codes & governance.

    • Lynn says:

      Put a white fence around the second lot with the helipad and call it a “horse property” if you’re in California.

      I would not recommend living in an RV though. 220 sq ft gets old, especially when gas and space fees add up and every space is full on your travels. Not a good time for that.

  35. Martha Careful says:

    Just tossing this out there:

    During her leadership at the Fed, Yellen took interest rates off the zero bound as she started policy normalization off the emergency lows from the Great Recession. Despite raising rates from zero to 1.5 percent, the S&P 500 returned a stellar 12 percent compounded.

    Yellen is one of the Fed chairs with the best stock market returns ever, with the Dow gaining 13.5 percent annually (12.5 percent inflation-adjusted) during her four years. Those annualized returns are the third-best of any Fed chair.

    Bernanke (2006 to 2014 tenure) was less successful, but still had about a annualized 4.6% gain during the problematic GFC.

    J. Powell assumed office as chair on February 5, 2018 and his performance with S&P 500 so far is about 13.951%.

    Between all the bubbles, shocks and drama of the last 14+ years, it’s very possible that the Fed hasn’t destroyed America and that as ugly as things seem today, it’s very likely that the Fed and Treasury will get through this.

    • Wolf Richter says:

      Martha Careful,

      She’s not going to be Fed chair. She’s going to be Secretary of the Treasury. Her job will be to do what Congress tells her to do, namely spend the budget as prescribed in legislation and raise the funds by selling Treasury securities to fund this spending. That’s her new job. She cannot spend any money that Congress doesn’t tell her to spend. She cannot print money. She cannot set interest rates. But she gets to pay the bills, pursue financial crimes, collect taxes, go after tax dodgers, and the like, and she gets to lobby Congress.

      • Martha Careful says:

        I think her prior Fed experience will help her to partner easily with Fed and Powell. I think she has substantially more economic experience than Mnuchin, so I just see that as a positive thing. Additionally, all the many years of Fed performance that I suggested are linked to solid people at Treasury.

        America may wander down the BOJ ZIRP road for a few years, but Japan hasn’t crashed and burned because of low rates. Yellen simply seems like a very fine compromise going forward.

        It also doesn’t look like the dollar plays a huge (long-term) role with stock valuation or super low treasury yields. A lot of these shocks seem as if they’ll play at, as usual. Thus, in time, as confidence increases and valuations come into line, GDP may actually bounce upward — or at least maintain it’s plodding trend.

        • Young says:

          I think her prior experience will help her to partner easily with Fed and Powell in order to make the rich richer at all costs, if I may add.

          I happen to remember her in one of the testimonies to the Congress, as a Fed Chair. She was like deer in the headlight, jaw dropped, could not even answer a softball question asked by a friendly member.

          But, I am sure she knows what to do when she is told.

      • Treasury has to spend whatever it takes. They also have discretion over which bonds they issue, and they assume a leadership role over the Fed. They are a cabinet position of the executive branch, and probably the most important, including Defense, who comes to them for money. They have discretion in that area as well. The way in which Treasury handles the dollar has long reaching effects. Yellen is a lousy choice, we now have two Fed heads in charge. She is an academic, not a financial executive, and while I countenance that choice raises some ire, someone like Liz Warren would have been a much better choice to address Main St economic issues, and put Wall St on notice. Powell showed himself to be a spineless toady of the president when pushed into extra curricular rate cuts. These are interim selections. Neither will last long when shtf.

        • NBay says:

          YEP. LIZ for sure.

          We are in for 4 years of GOP-lite, BFD, just slows the cancer, since nobody wants the train wreck…..been to this “party” before, since 1980….

          PS- Nobody seems to have a good source on the ACTUAL cost of the Vietnam war…2/3 of WW2 is what I’ve heard, and know and met a lot of the people who hid that cost, after taking their cut.
          Blood money spends as well as any other sick source of excess. That war really trashed this county, BIG TME.

        • 91B20 1stCav (AUS) says:


          may we all find a better day.

    • RightNYer says:

      Okay, so the S&P increased, but the value of the dollar decreased, wealth inequality got worse than ever, and our social fabric is literally being torn apart. Meanwhile, debt levels are 4x what they were during WW2, and the economy is so fragile that it can’t handle anything other than ZIRP.

      A Faustian bargain if I ever saw one.

    • Martha Careful says:

      Additionally, going back to pre Dotcom era, the annual return on the S&P500 between 1990 and January 2021 is 5.587%, adjusted for inflation – and that includes a few bubbles (ups and downs), 2 terrorist attacks, several presidents, etc.. …

      I think the GDP forecasts going forward are far too rosy, but hopefully, towards the end of 2021 and through 2022, the overall economy will be stable. The stock market does seem highly overvalued and optimism has never been so surreal and disconnected from reality, which can be seen in things like Rydex Ratios”.

      As for housing, massive shortage and massive demand and a tsunami of baby-boomers with lots of dough, who are re-evaluating where to live; forget every PR piece about Top 10 cities BS from the last 20 years, because there’s a massive demographic shift in place, which is real-time — and not synchronized with any prior data sets.

      From some crazy web place (Salient Tactical Growth):

      “As the market surged to new highs, equity valuations rose. Low interest rates continued to make stocks attractive when compared with bonds or with holding cash. Recent data showed a record 92% allocation to stocks in the widely watched Rydex Funds indexes.

      2 The latest readings were higher than those seen at the dot-com bubble peak in 2000 and the housing bubble peak in 2007. Equity mutual fund and ETF cash levels have now fallen to a record low of 1.7%.3 History teaches us to be wary of the crowd at extremes and we are reaching extremes in investor sentiment, suggesting the potential for a pullback in prices as we enter the new year.”

    • Old School says:

      Current 10 year nominal GDP growth is around 4%. It’s a very similar number to real final sales. If long term stock market cap is going up much more than 4% for a long period of time, it by definition is a bubble.

  36. Robert says:

    @meliissa terzai said “Now everyone is moving out of the city, ”

    I understand why people are moving, yet the facts show that suburban areas can be hit with COVID just as hard or harder than the urban areas. Look at Orange County, CA or many parts of LA. These are just great big suburbs, yet their hospitals are hitting defcon 1. My local hospitals in the northeast are at about 75% capacity, but nothing like southern California. I’m not sure what’s going on in northern California.

    You could argue that the type of people who live in suburbs are less likely to obey mask mandates. You have to be obedient to authority just to live in most urban areas in the northeast in the first place. Good masks are the key to this crisis.

    • Wolf Richter says:


      I’m going to chime in here. Melissa also indicated that the condo market is in the opposite position. And as I have reported month after month, the rental apartment market is getting hit really hard in DC. So there is a shift from condos and apartments to houses. This could be from a city condo or apartment to suburban house, or the shift could be within the city.

      We’re seeing the same dynamic here in San Francisco — the single-family house market is by no means hot, but it’s hanging on, unlike condos.

      • QQQBall says:

        Amortize the sometimes insane HOA fees into a mortgage payment at 3%. I know its not exact apples-to-apples, but some coastal condos have HOAs of $300/mo or more. That make a condo much less attractive versus a SFR. And thats not counting the occassional “special” assessment.

        • Old School says:

          My guess is less than 20% of people are doing a decent financial evaluation on buying a home or a stock. A lot of recency bias on prices going up.

        • HeyJude says:

          It would be more realistic if the buyer of the SFR also includes amortized estimates of new roof, exterior maintenance, lawn care, etc. – whatever is equivalent to what the HOA covers. None of that SFR care is free – we spent 30K on a new roof a few years ago.

    • Swamp Creature says:

      The Swamp Creature’s daughter owns a Condo in a nice area of DC close to the business district (17th & R) and she is renting it out for slightly more than her mortgage payment ($2,500/month) so she is breaking even and building equity. Last year was a lot better before the pandemic. When the pandemic is over I see the rental market in DC going back up and the prices with them. Its all about location, location, location. There will always be a market for properties in the cities especially DC with the Government as the primary employer. No need to panic.

      • tom15 says:

        If the private sector, state & local govts. have adapted to WFH,
        why not DC?

      • Swamp Creature – wait, really? That’s where I own a condo! I lived there for 10 years. Small world!

        • Swamp Creature says:


          We’ll keep your name handy if we need your services in the future. She’s a little unhappy with some of the tenants in the building, smoking dope, and cigarettes. That goes with the territory when you own a Condo. She’s planning to hold onto it as an investment. Bought it in 2016 and has a very low interest rate on the loan. When this pandemic is over, people will be moving back into the city and prices and rents will start going up, especially in that area.

    • El Katz says:


      Suburbs in Orange County, CA and LA County are “cityburbs” – virtually indistinguishable from any city with SFR’s. We lived in OC and had a 3,000 square foot house (plus a 3 car garage, 3 car driveway and a patio) on a 5,000 square foot lot. You could wash your neighbors back from your window if asked. We used to laugh that you could tell the brand, pattern, and utensil (dinner fork. desert fork, tea spoon, soup spoon, knife) from the sound when your neighbor threw it in the sink because the houses were so close together.

    • whatever says:


      The surge in OC hospitalizations is coming from the high density, low income areas like Anaheim, Santa Ana, etc. with majority immigrant populations.

      The gentry areas we that people would flee to – the beach cities, master planned communities, and McMansions – have little to no Covid.

      That being said NoCal has a third of the population of SoCal. You really can’t compare the two when the density is so different.

    • HeyJude says:

      Good reliable PCR tests using cycle limits in the low 30’s would be better, to reduce the unquantified number of false positive case counts. Sort of like the FDA is alluding to now at last. And it is also now being reported in NY that the majority of “cases” are not from restaurants etc, but from home settings – where most people will not and should not wear masks.

    • Happy1 says:

      People are moving to suburbs for more space, if you are working from home, a spare room or two makes a huge difference. And if you have kids who aren’t in school or other activities, you really need a yard. That’s what this is about.

  37. Xavier Caveat says:

    I realize a good amount of the value of a home is that hallowed ground it rests upon, it isn’t as if you’re going to find many 3,500 sq foot lots in our country…

    That said, go ahead and tell me of any other commonly held used consumer item that goes up in value…

    Cars: nope
    Appliances: nope
    Furniture: nope
    Shoes: yes, if you have the right must have sneaker
    Clothes: nope

  38. Drunk Gambler says:

    Sales in Home Improvement stores, Home Depot and Lowes, can be used as indicator, secondary. When people gonna default on their mortgages, they don’t spend money on renovation.
    Credit card debt, going down, making room for new post Covid spending.
    Refinance on old, more expensive mortgages. Makes payment more affordable.
    No liquidity crisis whatsoever. Planty of cash available.
    No underwater properties. Not in a subbs at least .
    Just doesn’t seem like a collapse is in the cards…

    • RightNYer says:

      Drunk Gambler, the absurd amount of money you see on renovations are due to upper income people feeling “rich” due to their stock portfolios having gone up dramatically, plus having extra money from not gone out to eat or on vacation. I wouldn’t extrapolate that to the market as a whole.

    • Swamp Creature says:

      Wrong. I think you must be drunk.

      Home Improvement stores are doing well because people have time on their hands to do the do it yourself home improvement tasks. And stores like Home Depot have done a good job of servicing customers through the pandemic. I even opened a Home Depot credit card and spend $200 -300 every month there. Their outdoor landscaping dept has been great and is always busy.

      • David G LA says:

        And people have 1200, 600 x spouse and kids bonus-fed-monopoly dollars to spend. Time for a new refrigerator or washer.

      • El Katz says:

        If you have a few additional hours every day because you’re WFH and not commuting, you have more time to do the upgrades to your home that you were previously putting off.

        We live in a community north of Scottsdale, AZ. You should see the money that people are pouring into these homes. $100,000 pools and patios with built in TV’s… 5 car garages…. You can’t find a contractor (other than a handyman) to do anything other than major remodels and those that do post give you the “I don’t want to do your job but if you’re stupid enough to pay $x I’ll take it”. More affectionately known as the F U price.

        Materials are getting short…. try ordering a washer / dryer. There’s a wait on most models, despite the advertised sale prices. Ordered one January 6th and it *might* get here in March. Go price a sheet of plywood or OSB.

        • HeyJude says:

          Yes EK,

          We recently purchased a new builder home on the outskirts of a mid-sized city. We had to seriously upgrade all appliances as the builder’s standard appliances were all out of stock and no delivery dates. Since we signed the contract in late July, builder has raised prices about 20%. And they still can’t get their normal appliances or flooring.

    • Old School says:

      Fed facilitated cheap debt. Congress and companies sucked it up like cocaine. Consumers still had ptsd from last recession and said no thank you for the most part.

  39. Drunk Gambler says:

    EXTEND AND PRETEND. I understand why people are bearish nowadays. But what if they wrong? How long does one have to stay in that Bear Den exactly ? How long Wolf has been preaching collapse of RE ?
    5 years? Just EXTEND your waiting and PRETEND that bubble still there, even if it’s not.
    Does Lightning really strike twice? :)

    • Old School says:

      When you reach new inflation adjusted highs the current cycle is mature. Bubbles can carry prices higher, but it is no mistake for a prudent person to sell if he desires to.

  40. breamrod says:

    one must remember that foxes and wolfs( apologies To Wolf man) never change. They ( private equity) will be waiting in the weeds for the crash. Yellen and Powell will make sure it happens while saying ” nobody could see it coming”. Bubbles always extend and go on longer than any prudent person could imagine. The Fed wants it that way so the crash is much more lucrative for all of their buddies.

  41. ReluctantBuyer says:

    Thanks Melissa for this piece. After reading this, I guess I stay a bit longer on the fence and look over the fun to fade out. I’ve been looking at houses in “good neighborhood” in the Easy Bay (No offence to Wolf. Can’t stand the fog and chill weather of the peninsula). Me and DW pull in low six figures in salaries and have saved up a bit more than our combines salaries. I thought we’re ready to pull the trigger, but definitely don’t want to overpay and feel like being left holding the bag.

  42. Swamp Creature says:

    When purchasing a home you should not do it if you have less than a 5 year time horizon. The commissions and closing costs will take that long to get absorbed. My first home purchase took 10 years to break even adjusted for inflation because I got caught up in the Paul Volcker Interest rate spike (18% mortgage rate) . The next one, I got lucky because of the timing and broke even after one year. But the house was a rental home and needed a lot of work. After many, many, years the investment finally paid off.

    The point is, other than having a place to live, I’m not a big fan of real estate speculation or using your home for that, or using it as an ATM machine. I’m old school. I’ll gamble on something else but not the roof over my head. Paid off the mortgage as soon as I could. Screw the lenders.

  43. Swamp Creature says:

    Another leading indicator of trouble ahead is the commercial real estate sector. It usually leads the residential by a year or so, both ways. Right now the commercial real estate in the DC area and close in suburbs is in a depression. Closed stores, empty strip malls, boarded up windows. Bad loans will lead banks to stop lending to failed businesses altogether. Its only a matter of time before that filters into the residential sector, no matter how low interest rates go. Those who take out 30 year mortgages at 2.75% and leverage their home to the hilt will be singin the blues when the house value declines and they are underwater just like in 2006/2007 and they lose their high paying White Collar job that has been outsourced or eliminated in a Corporate downsizing move, and have to relocate. There will no public appetite for massive bailouts like there was under the Bernanke/Paulson/Geitner regiems and there shouldn’t be. Everyone is going to be “ON THIER OWN”

    • RightNYer says:

      Swamp Creature, exactly. I’ve said for a while that the “recovery” of the economy is a papered-over mirage, and that commercial real estate will be the downfall. CMBS bonds WILL be impaired as retail stores go out of business permanently (because their sales have moved online; COVID just accelerated this process) and as businesses reduce their office space footprint. When pension funds, insurance companies and other entities that hold these take losses, they will have to sell our holdings, like stocks, to pay their obligations.

      Simply put, we have way too much commercial real estate in this country, and contrary to popular belief, converting them all to luxury condos is not a feasible solution.

      • Swamp Creature says:

        Yep, Europe and the rest of the developed world doesn;t have all these malls and useless Department Stores. They’ll all be gone. They were never needed in the first place.

      • Swamp Creature says:

        I wouldn’t be surprised if half the commercial real estate loans that these big banks are carrying on their books as assets at full face value are completely worthless.

        • HeyJude says:

          Those soon-to-be-worthless buildings also ruin the desirability of the nearby neighborhoods, as they will sit idle for a long time. Possibly as long as a decade, waiting to be torn down and/or repurposed.

  44. Petunia says:

    I’ve seen this frenzy before in Florida in 2002 when prices were rising weekly/monthly. By 2006 house prices had almost doubled. I knew these prices would come down, but I didn’t expect the economy to implode as well.

    The first warning was an article in the newspaper in about 2005/6 about a guy who had flipped is way up, from a modest home in Miami, to a $500K house, on an income of $32K.

    Knowing what I know now, these markets are doomed. The music is going to stop, because incomes are not rising, with the craziness.

    • Swamp Creature says:

      As Chuck Price the former CEO of Citigroup once said

      ” As long as the music keeps playing, we’ll keep dancing”

      And now that the music has stopped we ain’t dancin nomore

    • Turtle says:

      I wonder how soon.

      And how big a part forbearance will play.

  45. SocalJim says:

    This is a hard asset run. COVID just jump started it. People are losing the faith in the USD. The Donald exposed that our election system smells and this makes all the difference to the desirability of the USD. While single family owners are making money hand over fist, apartment building owners are in big big trouble. Better take a look at the holding inside your REIT.

    • SocalJim says:

      Politically, what makes the USD denominated financial assets worth holding is the balance between political parties that protect international investors with prudent US govt finance. That balance requires transparent elections, and without it, some USD investments will be reallocated from financial instruments to hard assets, and some USD investments will be moved to investments denominated in other currencies.

    • David G LA says:

      Donald smells thats for sure.

    • David G LA says:

      But yes, I do agree, it’s a hard asset run.

      • Spilling over into Wall St and the reallocation to cyclicals. No way to extrapolate the old business cycle trends into this situation. Why gold isn’t at $5000 is a question we need to ask ourselves?

  46. Drunk Gambler says:

    17% Delinquencies on FHA loans. FHA insures only 8 million mortages in US.
    How many mortgages in US total?
    What is the total % of Delinquencies
    in US?
    Simple question.
    This is where we should start before we jump into BUBBLE conclusion.
    Remember, rates are historically low. And refinancing.
    Does anybody know a stripper with 5 home loans on her hands in Vegas?
    How exposed are banks?
    Any flexable rates that pose a potential threat in distant future?
    So far we are not in the bubble –
    We are in the DARK… :)

    • Wolf Richter says:

      The FHA delinquency rate shows how the housing market is split in two. Which is what I have said for months: there is a land rush going on at one end, and credit is blowing up at the other end, but it’s not very visible because most of these nonperforming mortgages have been moving into forbearance programs, rather than foreclosure proceedings.

      • Old School says:

        I had a friend who bought a foreclosed FHA property during the last cycle. If I remember correctly she entered a bid on-line. That was during the small window that feds were giving you first time house buying credit if you kept it 5 years. It worked out really well for her as she remodeled it, lived in it ten years, sold and made a nice profit.

  47. Swamp Creature says:

    Look back in history to see what is awaiting us.

    The first indictor that things were going wrong in 2005 were days on market. This started to increase dramatically in mid summer 2005. Then, you heard about the trouble out in California with the subprime lenders. The next shoe to fall was the houses that were listed for sale suddenly changed to rent. This started to be noticeable in 2006. The delinquencies never occurred in my neighborhood, but did occur farther out in the suburbs. They started accelerating in 2007/2008. The Alt-A mortgages started going belly up and the whole crisis spread to middle class people who were just trying to live a normal life and have a roof over their heads. Their houses plunged 30%, some went underwater.

    To use the analog model for predicting future events, we’re already into the deliquency mode, (20%+ FHA) so were even farther along than 2005. Given the huge spike in housing prices the crash that we are about to witness could be more abrupt and worse than 2007. Its all due to the shortage of inventory, the 2.75% interest rates and the gullibility of the population. Its not going to end pretty.

    • Petunia says:

      Anybody in forbearance cannot sell unless they have enough equity to cover the shortfall. This is probably why inventory is low.

      I heard a realtor complain that a client couldn’t close on a house because the seller had lied about being in forbearance. At the closing, the sale price didn’t cover the amount owed on the mortgage, and the buyer didn’t want to make up the shortfall and walked away.

  48. Drunk Gambler says:

    FHA mortgage balance Sheet 1.3 trillions $. Total amount of mortgage in US is around 10 trillions $. So FHA loans makes only 13% of entire US mortgage market.
    Does anybody know Delinquencies rate on the rest of the market?
    Total value of housing market 33.6 trillions $ according Zillow new research. So mortgages only make 30% of entire US Housing Market. That means 7 houses out of 10 paid off.
    Let’s assume that Delinquencies rate on rest of the mortgages is exactly the same as on FHA loans.
    That gives us Delinquencies rate on entire US Housing Market somewhere around
    5%. Which is not that bad actually. Even if all of those 17% will default.

    • Wolf Richter says:

      Drunk Gambler,

      “US Housing Market. That means 7 houses out of 10 paid off.”

      Not quite. The math doesn’t work that way. About 1/3 of the homes are free and clear (without mortgages).

      In terms of overall mortgage delinquencies… make sure you read the entire article from top to bottom because it explains what is going on and it will answer some of your questions, but only if you read the whole damn thing ;-]


      • Drunk Gambler says:

        I just did. Still nothing.
        ” Whole Damn Thing” doesn’t give me any numbers on how many troubled home loans are there (on US Mortgage Market).
        My question still stands: Does anybody knows total % Mortgage Delinquencies in US ? Not just FHA loans. ( which is only 10% of Entire Mortgage Market).
        If nobody can tell the exact number, then we are in the DARK. NO DATA !
        Hence, your RE Collapse of the Century prediction is BASELESS…

        • Wolf Richter says:

          Drunk Gambler,

          The last chart in the article shows newly delinquent mortgages = 2.5%.

          My article linked the NY Fed page where the data is from:

          Go to “Downloads” and download the NY Fed spreadsheet. There is all kinds of data on delinquency data in it.

          Separately, via the MBA, we also know that 2.7 million mortgages are in forbearance, or 5.5% of all mortgages.

        • Wolf Richter says:

          And from CoreLogic:

          “In October 2020, 6.1% of mortgages were delinquent by at least 30 days or more including those in foreclosure.”

          This includes the delinquent mortgages that are still in forbearance but were delinquent before they entered forbearance.

  49. Drunk Gambler says:

    We still missing that 20% a year price increase, for 5 consecutive years .
    My house only increased 6% last year. Nothing fancy really…
    Just now we’ve got double digit price jump on median house. It only 10-11 %.

  50. Lynn says:

    @ Melissa,

    One more question please. I’ve seen comments here and there online about investors posing as family buyers or couples who “just want to move to this area”. I have no idea how prevalent it is but I suspect some of that might be increasing in my area. Do you see any evidence of people buying these homes and either not moving in or moving within one year or renting them out? I know, how would you see that? But if you look and see that in the future it would be good to know.

    • Lynn says:

      These would be the ones paying in cash.

    • Hi! Not seeing that in my demographic of buyers. And I haven’t heard that from others either, and our brokerage is very chatty about trends we all see. I have a mom-thing going on so I get a lot of people in their 30’s 40’s 50’s who are interested in knowing more about schools and different neighborhoods with definite plans to live in the homes.

      If they were buying with a loan, they would need to disclose that to a lender or risk mortgage fraud. Also, as part of the contracts here, buyers need to disclose if they are planning to live there or not. Obviously someone could easily lie about both items, but the penalties are too high to risk for most. I’m not seeing a demand here (yet) for people buying to become landlords.

      When interest rates are low like this, everyone wants to buy.

      • Lynn says:

        Thank you Melissa, that’s what the 4 agents I’ve talked to here say as well.

        “I’m not seeing a demand here (yet) for people buying to become landlords. ”

        That is a relief.

  51. Swamp Creature says:

    Warren Buffet:

    “The price of an asset is what you pay.”

    “The value is what you get”

    Judging by this logic, the prices people are paying for properties bear little or no relationship to the value they are getting.

    Appraised values can be done by three methods.

    Market Approach – all fluff
    Income Approach – affected by declining rents in urban areas
    Cost approach – most conservative, cost of rebuilding the same structure

    Only FHA uses the Cost approach in their appraisals.’

    Even with the FHA’s conservative methodolgy we have over 20% default/forbearance rates. The Conventional and VA use Market approach which is even more inflated. Based on Warren Buffet’s logic, buyers are paying through the nose but not getting the value. The top appraiser instructor in the DC area who does appraisals himself has cut every appraisal by 10% to make up for the distortion in market caused by the Pandemic and the easy money policies of the Fed. We recommended stopping these cash out refinances during this pandemic because of the dangers of going into infected properties, and because appraisals can’t even be done properly, because of the pandemic, as a lot of repairs may be undetected with exterior only inspections. No one in the industry has even addressed this issue. No one cares. Its all about making the quick buck. Prices keep going up and you are told to shut up.

    The greater fool theory only works until it doesn’t work.

  52. SocalJim says:

    The millenials really blew it. Remember the urban propaganda pushed by the media since 2008? A whole generation was brainwashed into thinking that it was a new world where urban living was the future … where everyone was going to be happy living in super dense condos with no cars and public transportation … in areas that were high crime just a few years prior. The story went that SFR and suburban life was out and the previous generation was stuck with those homes.

    That story ended badly and now the millenial generation is rushing into the old american dream … a house in the inner suburbs. Some millenials were smart and ignored the propaganda and they have massive equity because they bought a SFR in an inner ring suburb years ago. The rest are desperate to get into a single family … they are outbidding each other. This is comical to watch cause there are not enough homes for them. The unlucky ones will be stuck living in high density urban condos.

    Just good old fashioned survival of the fittest.

  53. mike oxbig says:

    Asset prices will only come down when debt comes down.

    it is a tautology.

    Debt is not coming down. And only a certifiable idiot would think otherwise.

    • Wolf Richter says:

      Sheesh. “Debt comes down” when it defaults and is written off. That is a normal part of the credit cycle. And it happens in bankruptcy court every day. It happened during the mortgage crisis on a massive scale, when mortgage debt dropped, and it happened with credit cards in 2008-12; and it happened with commercial real estate debt at the time, a huge chunk of which was written off, etc. In 2020, it happened with debt by retailers and oil & gas drillers, and others.

      The Fed’s policies have bailed out many companies and their creditors, but not all.

    • SocalJim says:

      Debt comes down when banks are unable to write more debt … and that happens when bank balance sheets are impared from bad assets. The key to debt contraction is understanding when bank balance sheets are impared.

  54. Drunk Gambler says:

    Guys, I think I’ve got it.
    FED Data on Delinquencies all banks, with specific residential, commercial and credit cards numbers.
    Delinquencies on residential properties were round 10% in 2008 – 2009. When collapse basically already happened. And round 2.5% in 2006. I don’t know, if this data can be used to make a sound prediction for 2 years ahead.
    Food for thought, anyway…


    • Wolf Richter says:

      Nope, this is banking data only, mortgages that commercial banks hold on their books, and does NOT include mortgages held by other lenders (such as nonbanks, such as the largest mortgage lender in the US, Quicken Loans), and does not include mortgages that have been securitized, and does not include delinquent mortgages that have been moved into forbearance….

      This is exclusively balance sheet data from commercial banks, sorted by big banks and small banks. This is only of interest if you want to look at the risks on bank balance sheets.

      As I noted elsewhere in this thread in reply to your comment:

      From CoreLogic:

      “In October 2020, 6.1% of mortgages were delinquent by at least 30 days or more including those in foreclosure.”

      This includes the delinquent mortgages that are still in forbearance but were delinquent before they entered forbearance.

  55. NBay says:

    Really have no business learning or commenting on this article, so I
    just went to the current end of comments. I’ve never bought a house in my life and have no interest in doing so. I rent a 500 sq ft hotel style apt with is just fine for me, been here 10 years. I only bought two mobile homes and some bare off-grid land, on which I built (and never finished, in the usual “detailing” sense). Took 16 years, with only last 4-5 years of it being up there full time.

    Good luck to all still still playing real estate games, unless you plan to get excessively rich off it by lying to people.

  56. SFtoDC says:


    Not sure if you are still monitoring this thread, but thank you all the same for the insight and analysis.

    I live and rent in SF, CA but work takes me to DC often (pre-pandemic). I’m a big fan of DC, and for the past 2-3 years (again, pre-pandemic), I considered purchasing a condo there as an investment. (I’m renting in SF, under rent control, at well below the market rate, otherwise I’d be out of SF in a hot minute)

    Like I said, I’ve been a casual observer of DC real estate for a couple years, and as you know condo sales continued apace, pre-pandemic. I’d flag places in my price range in neighborhoods like DuPont, and watch them sell at or even slightly above asking within 2-3 weeks.

    You noted that since COVID, people are fleeing DC proper – it seems like that is true in most major cities. However, I don’t see a corresponding increase in DC condo listings or a decrease in asking prices. Surely some of these people fleeing DC are fleeing the brand-spanking condo developments I’ve seen downtown, at Waterfront, on Church St, at Navy Yard, etc. Yet listings (at least on Redfin) appear stable, as do prices. What gives?

    The pandemic has hit the DC rental market sharply, as it has in SF. But I firmly believe the DC market will rebound once vaccinations are wide-spread, and people who come to DC for political/govt work, or on assignment from DoD, or working for one of the many international institutions there will return to DC, to work on-site. (I don’t believe the same is true for SF, BTW)

    Again my question is, why don’t I see an increase in inventory in the DC condo market? How are prices relatively stable if everyone is fleeing? Eviction/foreclosure moratoriums can’t explain everything, right?

    Thanks for any thoughts on the above…

    • It was a crazy week, and I just got back to these. I now hope you see the reply :)

      A combination of a few things are keeping prices in DC stable on condos – for now.

      1) People are holding off market, hoping this is temporary. The internal debate in my brokerage is that people are listing condos and getting zero showings. ZERO. And zero people to an open house. But – this isn’t ALL neighborhoods.

      2) The prime neighborhoods are still prime. It’s the neighborhoods adjacent to prime neighborhoods that aren’t selling. I just sold a condo for a client in Dupont in December in a day. Buyer came in with a VA loan and 0% down. There are still buyers out there for condos, but it’s back to location location location. If it’s bit off the beaten path? Nope. It sits.

      3) The Waterfront is a different entity entirely. There are a ton of people 1+ hours from the city who want to have a place here, plus there are tons of foreign buyers who purchased here as well. This is holding this market strong, as it has been for several years.

      What you’re seeing is a combination of reduced inventory leaving just enough supply for the buyers who are still out there, so prices aren’t dropping. If the pandemic continued for another few years, there would be people who just couldn’t hold off market, and would list at the price needed to sell. It’s just going to take more time. We’re still short-term on this.

      I just closed a condo on Church St in Logan Circle for a buyer at $960K, but it started out at $1.050M and was massively overpriced at that.)

  57. Hey You says:

    I don’t know what % are buying with a mortgage and only at most about a 10% downpayment. But if the case, then price to income ratio will be one resistance point metric, as national median housing price to household income ratio peaked around 4.6. The website Long Term Trends is one reference.

    Yes you buy a 30 year loan when you buy a house without cash, so with rates below 4% then perhaps the ratio would increase to above 4.6.
    And for VA mortgage guidelines it is 38% of household income that can go to housing (principal+interest+taxes+insurance+hoa fee).

    Patrick of patrick . net as well as Calculated Risk Blog all warned back in 2003-2008, with Patrick being interviewed on 20/20. I thank Patrick for making me rich because of following his advice.

    But I like how Wolfman publicized the mortgage default data, as that will bring on a lot of supply on the market within 18 months. Wolfman
    has been my other go-to man.

    BTW, Melissa I can tell you a lot about Alexandria’s Van Dorn Village during the runup of 2005. But if I am frank as far as who was getting mortgages, then I think given a lot of the sanctimonious and implied political comments, that I will get shamed.

    • There are communities like Van Dorn Village all over the metro area in terms of type of home, etc. There are a ton in Maryland that people wouldn’t look twice at a year ago because the areas were undesirable, the neighbors were undesirable, the amenities were non-existent This is where I’m seeing a massive runup in prices, alongside the ugly single family homes people vomited all over a year ago. This is exactly why I think there’s a problem.

  58. SpencerG says:

    Good article and I really like the headline and the author’s main point. When the Lion starts to move, all of the other animals should stand still and keep quiet until they know which direction to head in order to avoid becoming the big cat’s next meal.

    That said, I am curious that the reasons given for the moves to the suburbs are tied so exclusively to COVID-19. While I and most of the people on this blog are old enough to remember big cities being dangerous places to live… for most Millennials that simply isn’t the case. A city like NYC with 9 million people and fewer than 300 murders is basically Disneyland for adults. Yet this past summer for the first time city dwelling Millennials saw riots, crime skyrocketing, and the police and political leaders at a loss for what to do.

    To say nothing of the fact that family sizes of families with children has been edging up since the Great Recession ended and hit a 40 year high in 2019. You might can keep your city apartment with only one young child… but once two or more enter the picture you find having a yard for the kids to play in is kind of nice. To say nothing of the fact (or perception) that the public schools in the suburbs are far superior.

    It is not an accident that the “DC Real Estate Market is delivering amazing value on condos.” And the author’s suggestion that buyer’s think long term about a home buying decision is a smart suggestion. But we need to be aware that people may be making a good decision for their own families by heading to the suburbs at this time. Even if it took a Pandemic to get them to make the leap.

    • Hi Spencer!

      If a move to the suburbs was in the cards for the family, that’s not quite what the aim for me is. It’s the people who were hardcore city dwellers who either overcorrected by moving to the middle of nowhere all of a sudden that are concerning. Hey, if living in the middle of nowhere was always their lifeplan, that’s great. But for many, it’s a new idea based on what is probably a temporary situation for us.

  59. Swamp Creature says:

    Mrs Swamp Creature

    Taking a week off after working non-stop for the last 8 months. While everyone is singing the blues about being out of work, we were blessed with working in a profession which was considered essential, appraising homes under the VA program. The job was already 90% WFH, and required only minor tweaking to continue operation in the Covid-19 environment. Did better this year (Pandemic year 2020) than last. We didn’t even need the money as we are comfortably retired. We didn’t do it for the money. We did it in the American spirit of helping your neighbor and your countryman, especially the Vets serving overseas.

    We thank all the health care workers who put their lives on the line to keep us and other Americas healthy during this trying period.

  60. ridgetop says:

    Roku, the largest OTT provider, it’s CEO just told his employees that they will all be coming back to the offices when this pandemic is over.

    • My friends are arguing with me on Facebook over this article that people won’t go back to work – ever.

      I’m really not sure of that at all. Many people can’t be “trusted” by their employers to actually do work at home. So we will see how this plays out.

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