This may be the most distorted and perverse housing market ever.
By Wolf Richter for WOLF STREET.
This is a world of unprecedented Fed intervention, government stimulus, inflation that has turned red-hot this year amid a weird phenomenon of companies complaining about a labor shortage, while nearly 10 million people are deemed “unemployed” and 16 million people are claiming some sort of unemployment insurance. As 2.1 million mortgages are still in forbearance programs, investors have flooded the housing market, including individual buyers grabbing a second home in crazy bidding wars.
But sales have sagged for the third month in a row, while new listings and supply have started to rise from very low levels, and a lot more is coming on the market this year.
Sales of existing homes – single-family houses, condos, and co-ops – dropped by 2.7% in April from March, after the 3.7% drop in March, and the 6.3% drop in February, to a seasonally adjusted annual rate of 5.85 million homes, the lowest since July 2020, according to the National Association of Realtors today. Compared to April 2019, sales were up 11.8%, having now largely unwound the huge spike that started last summer (historic data via YCharts):
Investors are buying.
All-cash sales, usually a sign of investor activity, accounted for 25% of all transactions in April, up from 15% in April 2020. Individual investors and second-home buyers accounted for 17% of total home sales, up from 10% in April 2020.
Dallas Fed President Robert Kaplan pointed at the role of these investors in distorting the housing market, and named that as one of the reasons for “talking sooner rather than later” about tapering QE.
“Increasingly over the last 6-8 weeks, I’m hearing more and more widespread reports of private investors entering the single-family housing market, competing with families, often making bids above the asking price and requesting that the house remain furnished,” Kaplan said.
“So, we’re in a position where families are being crowded out, or squeezed out, of being able to buy the first home,” he said. “This is an example of an excess, maybe an unintended consequence, a side effect of these extraordinary [monetary policy] actions.”
Buyers’ strike by non-investors in the works? While individual homebuyers are still battling it out with investors in silly and costly bidding wars offering crazy amounts over asking price, there are anecdotal indications that more and more buyers are now staying away from this zoo because they’re exhausted or have reached the end of their financial capabilities or don’t want to end up buying at the most insane peak of the market. For buyers, this is a terrible time to buy a home. And that is becoming increasingly obvious.
For sellers, however, this is absolutely the best time to sell a home.
And sellers are getting ready, more inventory coming.
Inventory of homes listed for sale rose for the third month in a row, to 1.16 million homes, still historically low, but the highest since November. And supply rose to 2.4 months at the current rate of sales, the highest since October (data via YCharts):
New listings of homes for sale are rising from the Pandemic-related drop. According to the realtor.com residential listings database, new listings in April rose 10.9% from March, after jumping by 19% in March from February, and were up 33% from the Pandemic low in April 2020. Despite the rise, new listings remain far below the seasonally normal levels (Aprils connected by green line):
Pent-up sellers. A lot more inventory is coming on the market this year: 10% of homeowners plan to sell their home over the next 12 months, which is 25% higher than the typical share of homes that come to market in a typical year, according to the NAR and Harris Poll in an earlier report, citing their survey of potential home sellers across the US.
Of these potential home sellers, 56% plan to list their home over the next 6 months. And 76% have taken steps to start listing their home.
When vacant homes come on the market, such as the homes that homeowners didn’t sell last year when they bought a new home (the infamous “second home”), it adds supply without adding demand because those homeowners are already living in their new home and don’t need to buy another one.
Buying a home without selling the now vacant home has contributed to the inventory shortage. When these left-behind vacant homes come on the market, it unwinds that shortage. This is the process of shadow inventory becoming real inventory.
The median price for existing homes spiked by 19.1% year-over-year to $341,600, which is up 48% from five years ago in April 2016.
For single-family houses, the median price spiked by 20.3% year-over-year to $347,400. For condos, the median price jumped by 12.6% year-over-year to $300,000 (data via YCharts):
The winner in these crazy bidding wars isn’t the buyer. It’s the seller… THE WOLF STREET REPORT: It’s a Perfect Time to Sell a Home (to FOMO-Driven Buyers)
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Speaking for San Diego County, I can tell you that inventory is still very low and homes are selling with multiple offers including all cash offers and very often well over asking price.
You beat me to it. San Diego is seeing no such decline. Prices continue to rise, sales volume is pitiful due to miserable lack of supply. Combine this with out of control policies in the city allowing houses to become apartments, which is bringing developers in like crazy. No end in sight here.
“allowing houses to become apartments, which is bringing developers in like crazy.”
Could you explain this? Are single family lots being rezoned for fourplexes?
San Diego has abandoned single family zoning as has the state in the form of ADU’s. Accessory dwelling units. San Diego took the state law and gave away the farm. There is no limit as to haw many ADU’s can be built in the city if within a half mile of a transit line. The catch? They have to be affordable, low income designated. The entire city is under this ordinance. It’s not known but groups in San Diego are sounding the alarm. It’s been mentioned on a couple of tv stations and the paper. AB 9 and 10, if passed, will decimate single family residential. Look up this in local SD news.
If you live east of 5, you are not in San Diego.
But you have a yard larger than a postage stamp and no noise from the coaster so it’s all good
The city of San Diego is large, as well as the county. There was a complete change in the county board of supervisors after the election, and post covid we have no way to know how that will change the building codes. The last two major retail/residential plans to go on the ballot failed. Sandag has said adding lanes to the 5 is not an option. The new airport in Miramar was shot down. The awareness is that if you build “infrastructure” they will come, and we don’t want them. Meanwhile hispanics go eight to a 2bdrm apt, and that is no bueno. All that contributes to the pitiful rise in land values, versus homes, and no one wants to sell, while land is undervalued, and no one wants to buy land, while the development costs are inflated. So nothing gets done. SD may be the new SF, all we need is a high tech industry buildout.
I am particularly interested in this aspect of Urban planning “ in this case No planning at all”.
This myriad of planning deficiencies that plagued and are still plaguing our metropolises are now clearly visible to all to see.
First , you get politicians with no credence or skills in planning to make decisions on zoning and re zoning our cities.
Second, you allow the vultures also known by their common name ( developers or large construction companies) to further influence the city councils policies to further destroy the livability of the place.
It is my opinion that the optimum population size of the US under the current circumstances should NOT exceed its current level.
The large size of indebtedness of the US ECONOMY will cause the housing market to crash sooner or later , with even bigger bang that will make the last crisis looks like a piece of cake ( apology to all ordinary Americans who suffered and lost their lives and livelihoods under those circumstances).
The policy makers on all levels of governments have entirely lost the plot and are purely driven by micro economic currents that have differing directions symptomatic to ( Economic upheaval created by contradictory government policies)!
This self fulfilling destructive cycle is akin to the vortex that WILL carry the American Economic life to the unknown.
The reality of a large proportion of labor that CANNOT find suitable work or adequate working hours is a demonstration of how far RE orientation of the American Economy have fallen behind.
While 30 odd years of transitioning to a service economy could’ve allowed the federal government to re tune and re jig the labor market to accommodate these upheaval shifts, we saw that they failed miserably in this task by leaning on migrations of skilled and unskilled labor to accommodate the large corporations needs who in turn slowly but surely abandoned their end of the bargain by transferring their assets entirely outside the US!
You cannot solve the US’s problems by throwing money into the pit!
Congress have No more legitimacy!
as they can NO longer guarantee the two most basic Rights to the people,
Bread and shelter.
How long until we see the inevitable?
PLEASE keep commenting on Wolf’s wonders full site/blog jack..
Gotta add I agree with SO much of what you say!!!
Not all, as that would only be A** kiss,,, but a literal TON!!
from one who has been OUT of the SM since ’80s due to clear perceptions of corruptions/distortions
and on Wolf’s wonderful blog/site for education, just hoping to get back to SM…
“You cannot solve the US’s problems by throwing money into the pit!”
DC’s multi-decade response – “The obvious solution is a bigger pit.”
DC’s recent response (as foretold economic disaster unfolds) – “The obvious solution is a bigger pit, you racist domestic terrorist you.”
“Combine this with out of control policies in the city allowing houses to become apartments, which is bringing developers in like crazy.”
I recall dozens of apartment complexes being converted to condos. That was where the money is (was). A previously low end 500 sq ft apt in the beach areas now sells for 350-400k!
As a non-US reader, could someone please explain what the difference would be between an apartment complex and the condos to which they were converted?
If it’s simply a matter of ownership rather than renting, as it appears to be from what I’ve just read elsewhere, why does this make for a difference in name, for what is in effect the same exact thing?
Here are some thoughts.
Owners can put their condos on the rental market, no problem. That happens all the time. Many mom-and-pop landlords rent them out their condos. This is super common, and no “conversion” needs to take place.
The developer of a new building can also decide to switch to rental apartments. This might pose problems with lenders if they lent on the project after being told the units were going to be sold as condos rather than being rented out, and might require renegotiated financing. There may also be local zoning issues, permitting issues, etc. that may have to be solved.
The bigger problem arises the other way around, in cities with rent control, when you convert a construction project from permitted rental apartments to condos. This depends on the city.
In cities with rent-controlled apartments, there was a big move to convert apartments to condos or co-ops to get around rent control. This was all the rage in San Francisco many years ago. But the city then essentially put a stop to it.
But in San Francisco, only buildings that were built before 1978 are rent-controlled. All later buildings rent out at market rent, including new construction. So these limits don’t apply to newer buildings. There may still be permitting issues in converting a new construction project from apartments to condos, especially if the project has been approved with “affordable units” as part of the deal.
Once the condos have been sold (hopefully during construction), the developer can no longer convert them to anything because they’re now own by others. Someone would have to buy all those condos back from the owners to convert them to rentals. I’m not sure if that ever makes any sense.
Hi Bob WCW,
There are signs that S.D. is bending, but I think the extra push to stay up longer has been helped been zero down V.A. and drug money. Let’s get real—do the high income earners really pay $1.2M for Imperial Beach, Bonita, Chula Vista, La Mesa, Rancho San Diego, Clairemont, Etc. Etc. ?
We bought our house in San Diego back in 2015 and I told my pregnant wife at the time, “we’re buying at the peak!” Shows what I know. I wouldn’t want to be in this market again for my primary residence.
I sold about all my stocks in 2016 as well as they looked fully valued. Who knew the Fed would keep the pedal to the metal for 5 years?
They knew, and all their buddies.
Imagine if you knew back in 2009 that the Fed would assist in $20 Trillion new dollars being created, willy nilly, by the federal govt with the assist of a Fed keeping interest rates well below the inflation rate.
Bernanke said QE to be temporary until things go back to normal…and normal apparently never happened….eventhough stocks roared through the old highs, unemployment went to all time lows….
I am in San Diego and watching some neighborhood
A lot of homes now coming back to market and seeing some though rare price reductions as well
Yes the market is still hot
San Diego is so badly overcrowded, there is no quality of life anymore.
After spending most of my life there, you could not pay me to live there now. Overcrowding makes people desperate, and desperation makes people act like aholes. It is really depressing…
Not to mention everything in San Diego comes from Los Angeles which makes it a disaster waiting to happen. Imagine if the 3.5 million people in the San Diego county area are suddenly cut off due to a major earthquake in LA.
Water, gasoline, food, natural gas, and nearly everything else comes from LA and if there is a major disaster, San Diego is cut off. It’s port is inadequate, and there is only one major road going east to bring in supplies.
It would make New Orleans after the flood look like a picnic…
And people are paying stupid amounts of money to live there… Geniuses…
Agree 100%. Reminds me of a third world country or some of the metro areas outside of NYC. Police have taken up broken windows policing. (maybe they have to, which is a sign in itself).
There is an air of desperation in many people’s eyes.
Over-development will destroy San Diego, like it did LA. No one seems to care. Just build, build, build.
I want to move out of San Diego but am stuck because of some family issues
San Diego is turning into third world country and this adu thing is accelerating this trend
Coastal areas are the worst .
I am still looking for my next qce to settle in
Utterly butterfly confused ?
I came to america to experience first world life but guess san diego is the wrong place for that
I also noticed by talking to realtors about the homes they have listed..nothing although anecdotal .. a lot of people are selling their homes and moving out of state…
Where have you seen the adu disaster? In the college area and anywhere south of the 8 it’s a disaster
Jdog-and LA’s water comes from?
Having returned to college following the Army, i decided to take a flyer on Geography as a major. My first Climatology class had a section on water history in the West. First research question: ‘…at current usages, how large a population can the Los Angeles Basin sustain with native water resources?…’. Answer: prox. 80,000…
(For the record, i was born and raised in San Diego, my grandfather arriving and settling there in 1910. The realization of an incredibly-fragile water base for SoCal led me to leave the area in ’77. Don’t disagree that San Diego isn’t the city/county it was 50 years ago, but major population increases have many negative livability/resource effects anywhere they occur).
may we all find a better day.
Speaking also for coastal San Diego, it’s still full blazing nuttiness. Every house that I’m so sure is overpriced ends up pending in a few days. No matter whether it’s a twin-home at 2x the price from a few years ago, or a $4 mil lipsticked pig SFH with some serious flaws, they all go into contract quickly.
What really shocks me is the price per sq ft. $1k used to be a pretty hard ceiling for all but super premium pads. Now? $1.5k seems pretty common.
All this in formerly under the radar San Diego, where income is considerably lower than LA, SF and pretty much all major metro areas.
_________________ is different and special and will not see a drop in prices because _____________ and _____________ and ___________.
It really is different this time. It’s a new paradigm. We are immune to a downturn. Prices at worst will just plateau. Everybody wants to live here. They aren’t building any more land.
Inventory has been going low for years and this increase seems more like regular fluctuation with the usual selling season. I think this is just confirmation bias and don’t think you can read too much into it.
If house prices are very clearly at a peak, and the pandemic eviction moratoriums and mortgage forbearances are coming to an end why are investors buying up homes to rent?
Many of them — the second home buyers for sure — aren’t going to rent them out. That’s not part of their plan at all.
Then what is their plan?
If a plan exists (like Iraq War 2.0?).
That DC is never, ever forced to move away from ZIRP?
Owning a vacant home is only a good investment if home prices rise by a lot all the time, because those price increases have to cover interest, taxes, insurance, and maintenance. Once prices are flat, that investment becomes a pure expense.
Buying rental property is a completely different activity. And people can actually live in it.
I’m still confused (I think. That shows how confused I am…)
1) You say that second home buyers don’t plan to rent them, then state
2) Owning a second vacant home in complete reliance upon price appreciation is a very risky proposition (I completely agree)
3) But you don’t explicitly state that #2 is their actual “plan” leaving a sort of mysterioso aura implying some third possible (unstated) intent.
My guess is that you think #2 (vacant, ultimate flip) is what is actually going on…but your posts are reading more vague/mysterious…like there is some third unspoken possibility.
Enough so that I am being a pain in the butt about it (since I can’t imagine what a third possibility would be).
I know a working high-income couple that owns three expensive homes in different cities of the same state. They’ve moved a lot for their jobs, and with each move they buy a new house but keep the old residences. They aren’t even renting them out. They are not finance professionals, and I imagine they are just too busy to think much about it.
With today’s wealth concentration and high dual income households, I expect there are other folks in a similar position. When RE is rising fast, there just is no urgency to sell, even if the property is vacant. If prices clearly start falling, it will be a different story. When you make enough income, and have a busy job, all financial matters go to back of mind.
As I see it, the apparent plan is this: When prices start falling, sell. Until then, hold.
I talked to a real estate agent who just bought two houses because she doesnt trust the stock market due to how expensive it is and wants to have her money in assets due to inflation.
I think that investors have heard the term inflation and thought that housing prices would go up in an inflationary environment. But if inflation goes higher, interest rates go up and payments go up and that socks housing prices down.
These amateur investors think they are brilliant, but will be hit with alot of bad news because they are putting alot of cash in these deals and that means they cant just bail and hand the keys to the bank.
Some of my friends are borderline buyer it means if the interest rate goes up they’d be priced out because of higher monthly payments.
Also… my neighborhood has at least million dollar homes and most are multi family multi generation due to unaffordability..
Almost everyone with any substantial investments thinks they are an superthinker mastermind. Right now, it’s possible that everyone is wrong. I could see all investment assets declining. Precious metals could possibly hold their value (though they may temporarily drop). It would be very funny if those just holding cash in the bank right now win out. Obviously, upto this point being in the stock and housing markets was the best move, I mean it would be funny if people who pulled everything out right now and pulled a Warren Buffet and just keep cash in the bank, win out.
During Trump we saw the staggering buildup of public debt and money. That money mainly went to the top1%.
Yes, there were some somewhat quiet rumblings about inflation then–
But the press chatter inflation talk only came to a roar after a Democrat got elected. That was predictable. Ok for Republicans to give a big boost the economy–but now we’ve got to stop those dangerous high spending Democrats from spending on infrastructure or anything else. Good Republican messaging.
The talk has put panic in those with lots of high cash trying to grab assets to make a killing when prices go up.
But I still don’t see how price increases can be sustained on goods and services that the bottom 80% buy– at least not until wages go up on the bottom 80%. Where’s the money going to come from? So far “inflation” seems to me mainly asset inflation by those few with lots of cash.
As I’ve said before–I could be wrong. We’ll see.
Lol are you actually trying to pretend the corporate media isn’t the mouthpiece of the democratic party? That is some INSANE gaslighting on your part.
Hahahaha, Murdoch’s empire, including Fox?
If any party ever made a pretense at fiscal responsibility it was certainly NOT the Dems. But neither party bothers anymore. There’s a great recent article in Reason Magazine about it, and it’s both depressing and refreshing (to read something that isn’t blatant partisan spin).
Yes, Fox News…but in terms of number of news outlets, one (versus the (defecating) herd of liberal news like minds).
Admittedly, NewsMax and OANN have emerged…but so recently as to be almost irrelevant for the moment.
Until 1995, there was *nothing* other than the Establishment infected oligopoly of polished lie State liberalism (today, with media Balkanization, the lies are much less polished).
Pre 1995, there was Rush Limbaugh on radio…and that was it. (Well, you could shoot your television in outrage but that did not tend to affect electoral outcomes).
In 1995 Fox News arrived and topped the news ratings almost immediately…and for the same reason Limbaugh did…they addressed the 50%+ of news consumers whose intelligence/lived experience had been insulted for decades via the Establishment pap pumped out via the MSM sphincters.
And 25 years later, Fox News still effectively stands alone (on television…the marching blog army of conservatives on the internet is another matter…although even there, there is no conservative HuffPo/BuzzFeed equivalent retailing half-truth politics to the mass mkt of celebrity-stunted, drive-by news consumers.
Cas-(Wolf-here i go offtrack again. As always, understand an x-out.) in this instance re: media-looks like EVERYONE’s slip is showing (…and i have ZERO patience with smug chickenhawks of any stripe, of which Mr.Murdoch’s organization is rife, or those who would ignore other nations’ right to self-determination by demonstrating a willingness to send our military to cover our mighty MIC’s production under the guise of ‘preserving’ human rights and/or democracy).
Our society is still very much one of humanity’s experiments, as Franklin foretold. Our short national history has pendulum-ed along, swinging back (in the context of contemporary age) to accepting (including the tragic failure of 1861-5) legislatively hard-fought, and always humanly-corrupt, compromise between parties as the best way forward-i.e.-country (thinking of at least a minimum prosperity for the majority of the populace) over party (the willingness to suck up your electoral defeats while resolving to work harder to convince a majority of voters to look your way next time ’round while not totally spannering the government in the interim), and this, despite a significant portion of that population appearing to be willfully ignorant or flat uninterested in the constant, truly-critical examination of the vital business of their homeland (a lot of oxen awaiting in line to be gored, perhaps the seeds of eventual decline…).
The business of media, is business-it’s there to make money. Technology has given it steroids in terms of distribution, if not civic responsibility and adherence to verifiable fact. If media’s product has morphed into one of appealing to myriad echo chambers because that is what sells, (after all, ‘…if it bleeds, it leads…’) then the sane-to-bonkers viewpoints on all sides of the current Great Divide exist, and though excoriated, can not be wished away. The question then is not to blame the motivations of the media, but to examine those of who demand and consume their current product. We can only hope ‘…as seen on TV…’ has not become an acceptable short-circuit for the pain-in-the-tush hard work of critically-objective information-gathering, thought and action, but my optimism is not high at this time.
The great Mort Sahl once quipped: “…the U.S. is the WORST country in the world-AFTER all the rest of them…”.
If there has ever been an ‘American Exceptionalism’ it’s a general embrace of the above remark, looking forward, knowing we must always strive to do better for ALL of our citizens. The world does not suffer extended laurel-resting, history’s locker room is full of nations thrown out of the game for just that.
Are we now deciding to join the crowd?
Rant over with my apologies.
may we all find a better day.
So it’s voices of hope crying in the wilderness against the “defecating herd” of massive “liberal news like minds”? Correct?
Looks to me like it’s all designed first to agitate and piss people off, and give them something (anything) to bitch collectively about, and then attempt to “define” an “enemy of the people”, which currently seems to be in the persona of this “mythical classic liberal”, who thinks he’s smart but is actually stupid. Am I right so far?
Guess it doesn’t matter much who is chosen to hate and fear as “destroyers of correct way”, as long as it’s all agreed upon and then “made clear” to all the “people who have been insulted (and mainly economically crapped on) for decades”.
Well, good luck creating these dangerous and obvious internal enemies, nothing binds a group together more. It’s just a pity you can’t get filthy rich off it, like some of your heroes you mention.
You might want to look up that famous line by Goebbels, in case you think this stuff is all “new”. Maybe I’ll chase it down for ya, although I realize this is a pointless exercise on my part…you have made many “leaps of faith” isolating you from my liberal treachery.
Blessed are the flexible, for they shall not be bent out of shape, eh? Toodles.
Oh, and what is “media Balkanization”. I watch, Tucker, Hannity, and Laura fairly regularly, but I missed that. Maybe from mind of “the great one”, Levin?
Really, I want to know.
PS, I love potty humor, so naturally I love South Park, but I don’t think you are trying to be humorous, so you probably don’t know about Mr Hankey. He’s cool, but flawed like all of us.
PERFECT TIMING….to be on the wrong side.
I’ve noticed [over the decades] that realtors always buy at the peak.
Wash. Rinse. Spin. Repeat.
Never ask a fish how to catch fish.
It makes sense that realtors buy at the top, they have “earned” lots of money in the run up and lose sight of the downside which they experienced (or not) in the previous market bottom, thus they have cash and myopia. It’s almost an affinity scam.
That is the perfect prescription for buy high sell low.
Wells Fargo, for one, is sitting on tens of thousands of houses that have not had their mortgage paid now for a year. Some percentage of these houses are going to hit the market when the eviction moratorium ends. As a homeowner in Ca I am very concerned. Some markets, like crappy towns like Pomona, where I am, have not seen the price appreciation one sees in San Diego or La. There has been massive in migration from the global south but these people came with nothing and earn very little and depend heavily on government to survive. And there are no jobs and no income to support these prices unless one considers dual government job couples…….prison guard/cop, fireman/county nurse, teacher/prison guard, DMV clerk/cop, Addiction counselor/homeless advocate, ESL teacher/administrator and all the other admin jobs that government provides.
Nobody knows the peak price. FOMO buying may lead to a temporary plateau but inflation and fully reopen can add more fuel.
Tell the stock market that it is ATH and must crash… Keep telling it the pop is coming
Doesn’t make it so. The fed and all the powers are driving us one direction.
You might be right, but Fed has pounded is with the Zirp and now if they want to stimulate they have to monetize the debt by buying more treasuries and government backed paper.
Once yield on everything gets close to zero, you might as well own gold as you aren’t getting yield anyway.
I don’t know 300 million people, but I do know that everyone I know who wants a house has a house now. Everyone bought in once they could get sub-3% mortgages and now they’re nesting.
You must not live in a high cost of living area. The large majority of people that I know under age 45 are still hoping and dreaming of a chance to someday own a house.
I’m done with houses. I rent now and I’m dreaming of a camper.
Why would I want to mortgage 2-5 years of my life earnings for a stupid house? And once I get it, pay ever increasing local property taxes to a school system that is ideologically opposed to what I teach my children? And also have the choice of either spending every weekend maintaining it myself or paying top $ for some contractor to maintain it with laborers who can’t speak English? How much for a new roof? New A/C system? Running new wires? Insulation? Any of those jobs cost more than a camper.
Retiring to a camper is sounding better every day. As soon as my last child moves out. Heck, maybe as soon as my 2nd to last moves out.
My wife and I will be the multi-millionaires retiring to a camper. We can drive from the keys to Alaska and back while ya’ll are slaving for your houses.
Buy a small condo to live in after selling the house. Use it to store your stuff and lock up when you leave in the camper for months at a time. Buy a Class II so you can park it anywhere. I have a friend who does just this (in Texas).
What stuff? LoL
Amazing how much less I want a house the more stuff I get rid of.
What little stuff I want to keep can either go in part of a kid’s or a friend’s garage or a cheap storage unit.
Put more accurately: everyone I know who had the means to buy a house but was sitting on the fence bought a house in the last 12 months. Everyone I know who wanted to move to a bigger home went and bought that bigger place.
I don’t know anyone who’s currently looking for a house or who is likely to start looking for a house in 2021.
Which makes me wonder if my group is unique and special, or if the USA is running out of buyers.
Your group is special. US is never runs out of buyers. It’s all supply and demand.
So I’ll do a lil’ promo here for my friends at Wealthion:
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To see the complete lineup and learn how to register, visit: wealthion.com/conference
Good stuff, will have to check it out. Really like some of the pieces that Matt Taipei had covered in the past.
In the areas I own rentals in, most of the remaining inventory are homes with incurable defects … busy streets, airplanes overhead, adjacent to apartments, …. Any normal home is instantly hit with multiple offers. Realtors are knocking on doors. Sales at 10% over the ask happen fairly often. You call that slow?
Housing market rallies have price spurts followed by short periods of consolidation before another price spurt.
When buying in this type of market, you have to be careful. Only buy a quality location even if you have to overpay in a bidding war. Pass on everything else.
“Sales at 10% over the ask happen fairly often.”
Is the assumption that another SFR or apartment will never be built? Another suburb? Local jobs never lost? Relocated to lower cost metro.
The endless upward ratchet mindset of RE investors (at mad prices) always amazes me.
Current housing mania is peak lunacy, for sure.
But this frenzy has been going on for many months so it has consequently seeped into our national consciousness as a ‘new normal’– with the real estate industry as a cheerleader egging prospective buyers on despite moonshot pricing, bidding wars, and insane waiving of contingencies (your get out of jail card in case there is a deal-breaker lurking unseen when you are under contract).
Wolf’s article’s premise– that this frozen-up inventory problem is starting to thaw out and more sellers are getting ready to sell– jives with my gut feeling that this is an inflection point and more supply will lead to prices cooling off.
No, I simply don’t see a housing market crash this year. But slowly, almost imperceptibly at first, this red hot market is facing headwinds.
It is about time for some common sense to show up.
You’re mistaking contingency with disclosure
No, sorry, I didn’t read it right the first time
SocalJim is still drinking too much of that Lawrence Yun cool aid. I wouldn’t do anything in this post. If anything I would do just the opposite of what is recommended.
1. Don’t buy now period.
2. Don’t even try to buy in a quality location right now.
3. Don’t get into a bidding war.
4. If you have to buy , then look for a fixer upper in a good location.
5. If you have to buy and you can;t find a fixer upper in good neighborhood then look for a renovated property in a marginal neighborhood.
We’re doing a lot of VA appraisals that fit into category ‘5’ above and the prices are coming in at reasonable levels.
In my opinion, if you can’t find a way to swing a quality location, then don’t buy at all.
Nothing worse than buying a dog at a high price.
SocalJim. You didn’t read my response. I said ” look for a renovated property in a marginal neighborhood. There are good deals here in neighborhoods that are undergoing demographic change. The houses are not “dogs”. They have been renovated by investors and are in pristine condition. And they are not overpriced and are affordable. That’s why Vets are buying them. So you are wrong on everything. That’s what’s going on here.
This is why I never listen to Realtors. You realtors are all drunk peddling your own misinformation.
I stopped looking recently. I couldn’t even get in to see a house so I told my realtor that I was on a buyers strike. She said “but the interest rates are so low”. Yeah but the houses are too high so what’s the point? Now out of my range.
The market you comment on is in SoCal. The majority of the nation is not seeing that craziness.
“The market you comment on is in SoCal. The majority of the nation is not seeing that craziness.” Oh? I’m seeing it in working folk USA, MA, land of the Camponeli (single level house w/o a basement usually 1100 sq ft or 1400 with addition).
timbers, Boston metro has the biotech pharma job machine supercharging that housing market. Moderna just announced a major expansion in Norwood.
Biotech and pharma will be to Boston what the Defense companies are to Los Angeles … both industries fueled by government spending for national defense.
My immediate Boss has mentioned to me more than once the high wages Moderna and other Pharma firms are offering, “stealing” our staff (I am at Bristol Myers Squib) but also making it harder to meet our hiring goals for a new factory (I still do not have an immediate permanent manager they haven’t yet found one they like).
As I have no direct prior experience in medical factory work, I intend to use my current position as a training platform. In a year or two I will seek and get a decent raise…or…Failing that, I will seek out a new employer. With my Boss telling me other firms hindering their hiring with higher salaries, seems like a no brainer.
Rule 4: See Rule 1.
Rule 5: See Rule 4.
I think you are taking the George Constanza approach to SocalJim’s advice there and I like it.
Because the U.S. is still a lot cheaper than many other G7 foreign countries. Except for San Fran and maybe New York, the rest of the U.S. looks cheap compared to these cities: Hong Kong, Tokyo, Vancouver, London, Paris, Brussels, Berlin, Amsterdam.
I hate to have to break this to you, Doug, but this nation has a long, long history of protest.
It’s how things evolve and change. In fact, the USA was born out of protest against an empire led by a king.
So whining about demonstrations just lets everybody know where you get your info from. You’re trained to be scared of people who (oh gosh, get ready, this is really SCARY) say things like:
“My life matters.”
“I don’t want the police to keep killing innocent people.”
Boogie boogie boogie, you really scared me when you said “My life matters.”
If you think the USA is so terrible, perhaps you should try Saudi Arabia, Russia or some other place where a scary demonstration will never happen because everybody lives under authoritarian rule (aka a police state).
Talk about a snowflake!! If you’d turn off your TV and just take a look around, sure we have problems. But the USA has a lot going for it.
Nobody likes taxes but they’re the price of civilization. Crime? Sure, it’s been around since the dawn of humanity. These things “come w/the territory.”
You get the award for drinking the koolaide!
“Crime comes with the territory”.
Is that right?
Protest? I think that the American WAR for Independence was a little more than a ‘protest’.
BLM is a protest? More like violent demonstrations.
And I didn’t know that a foreigner could buy real estate in Russia or Saudi Arabia.
“In the areas I own rentals in, most of the remaining inventory are homes with incurable defects …”
Of course that is true– this is a wild market which some dodgy sellers are using to good advantage to finally offload their crummy properties at premium prices.
Their thought process is that there are enough FOMO desperate buyers that will take a chance at their run-down, decrepit and old, or otherwise risky properties. They are often sold AS-IS, and couched in lovely terms like: ‘project for a handyman’, ‘needs a little TLC’, ‘imagine adding your personal touch’, etc.
Some properties are unabashedly offered though lying in flood zones, others are next to cell towers, high tension lines, parking lots, busy highways, or rail lines. Nothing new there– except for the jaw-dropping asking prices.
I remember the frenzy in California in 1990. Sky is the limit. Shortage of homes for sale. Yada yada….
I know, “It’s Different This Time”.
I really hope those investors lose all their fortune! They are deserve this punishment for their animal spirit. Every home they buy makes someone’s life more miserable. Can’t wait for Biden to tax the hell out of them.
The investors may be the rabbit, but Powell is the carrot. He and his coterie of sycophants should be tried for treason and get the electric chair.
Why is the Fed buying mortgage paper, essentially lending to home buyers below inflation?
Everyone wants some of that money…
and the area where I live, people who wish to sell are pulling their homes off the market because the replacement costs of their homes just went up by about 35% due to lumber, copper, and labor costs.
Nice job federal reserve!!!!
I think it’s easy to let low interest financing influence you to pay too much just like on a car or credit card teaser rate.
If you look out the next decade you have to game out the possibility of an inflationary and a deflationary outcome.
Old School said: “If you look out the next decade you have to game out the possibility of an inflationary and a deflationary outcome.”
There’s saying a whole lot of nothing.
@ Old School –
Maybe you could get a job on that Wealthion panel.
I am just saying for your personal finances you are best at considering more than a base case especially when buying a home. You probably should consider a base case of more of the same plus inflation running very hot and opposite case of deflation.
“Why is the Fed buying mortgage paper….”?
Amen to that. In fact I cross my fingers every night hoping that will happen, sadly my prayer has not been answered yet.
So if an individual spots an investment opportunity and takes advantage of it, all legally mind you, do they deserve to be punished?
Jeff-explain to me again, please, what that ‘moral hazard’ in the economy thing is? And to whom exactly does it apply?
may we all find a better day.
I know people who were planning to trade up, but put that on hold. If you sell your home, you may not be able to get back in without bleeding money in a bidding war. That is causing the market to freeze.
The warning signs of a tight market have been out there for a long time. For years, less than 5 months of inventory was available. But, many ignored that warning sign with a myraid of excuses.
I know of someone who gleefully sold to the FOMO crowd in the Seattle area. Now he is being outbid on the houses he want. Mostly cash buyers. Having a hard time getting back on the Merry-go-round, meanwhile prices are increasing.
How many people are getting suckered into a less than desirable house because “interest rates are so low”. They might be stuck in that house for a long long time if (when) interest rates rise
The smart thing to do, probably re: buying a home now:
3) Purchase after bubble pops (they always end up popping)
4) Ignore FOMO
If you’re sitting and waiting for the prices to come down, I may have some bad news for you. This will keep going up at least for a few more years. Then it would slightly dip, or remain leveled. In the long run, those prices will only go up.
As a first time single family home buyer, I do not regret bidding 10% above asking price, four listings in a row, until I finally “won” a house.
Biden and the Fed has made sure cash is trash. So you can sit on it and watch it burn, or you can buy your house, before that train has completely left the station.
Yeah, and what do you think is going to happen when the Boomer population starts leaving their houses and moving to condos or senior housing?
We’re near the peak.
We live in a 55+ home area with hundreds of homes here. What you say is going on around here. This neighborhood was built 22 years ago and the initial gang of old people are moving to apartments, assisted living facilities, or dropping like flies on a hot day. There are three of these neighborhoods near us (5 mile radius), each with several hundred homes. Lots of movement, but no bidding wars.
RightNYer the global demand for USA homes and rentals is insatiable. Run a poll of all other countries and find out how many people want to move to the USA. The answer is that billions of people would move here instantly if they had a chance. So regardless of Boomers aging and passing away the demand for USA houses will always exceed the supply until the rest of the world doesn’t want to move here.
USA home prices are set mostly by interest rates and mortgage availability, which the people have allowed the Federal Govt and it’s unconstitutional pet, the Federal Reserve, to control. IMHO this is all illegal under the Constitution but the people love their interest rate controls, and subsidized mortgages.
Except that most of the world’s people who want to move here are destitute, and will not be able to pay anything you’d consider reasonable for those houses.
correct it’s not instant demand for mcmansions the day destitute people move here. May take a couple of years or a generation or two. But the demand is insatiable.
Will demand still be insatiable if we lose our reserve currency status and have to start living within our means?
The issue is, the demand for homes is not organic, meaning is is not being driven by people needing a place to live. It is being driven by greed and speculation. That is why it is not sustainable. When people make decisions based on emotion, instead of logic and reason, their decisions are doomed to end in disaster.
That is why every bubble bursts…
Rightnyer desire to come to the USA was insatiable before the USA had reserve currency status.
How many poor people do you know in other countries? Have you traveled? If you have not tried, maybe pick some of the poorest of the poor and get to know them and try to help them. Then you will understand why I say billions of people would be happy to come here.
Based on the people I personally know in other countries, I would guess even if the USA had a worse downturn than in the 1930’s, lost reserve currency status, and the welfare system stopped working- billions of people around the world would still want to come here, even if that meant arriving destitute.
Even if you told them that to get started they would have to go to Detroit and camp in a vacant lot with no welfare, the people I know would still want to come. And within a few years or 2 generations they would get a McMansion for themselves and be very happy with it. Even if they had an $800k mortgage on it.
This is why I say that baby boomers supposedly vacating houses is irrelevant to the long term supply/demand balance of USA housing. Price of USA houses is determined mostly by interest rates.
. . . and subsidized mortgages
Spot on Raging.
Also their kids can get into colleges almost free in the U.S. where they cannot afford it in their own country. I was was riding in a cab with a 55 year old cab driver from India or Pakistan.
He said moved here when his kids were still in junior high and high school and all 4 of his kids got full tuition to schools like Georgia and Georgia Tech and Emory. We are talking about $120k or more free tuition per kid and and over 600k when all is said and done.
I made too much money, just barely 6 figures, to get my kid much of a scholarship. She had never had anything below a A, 30 ACT, PSAT national merit semifinalist (top 1% of all SAT test takers) as she just missed the national merit final cut . She ended up with a $1000 scholarship at a state public school that ran about $17k a year.
She had to pay $120k out of her own pocket via loans to go to med school to become a Physician assistant. Yet I know of foreign born students with not as good grades getting free rides.
Sometimes is stinks to be middle class.
ya ru82 the gov can’t get enough immigration because immigrants will never do things like “buyers strike” on houses or complain about the corruption of the govt etc.
Ultimately, if there is a buyers strike on houses, it will mean only 2 other people in the entire USA joined me. Everyone else will gleefully line themselves up to be mowed down by the banks and be foreclosed on when TPTB decide to increase rates
I’ll just add to my comment that sales are down because there’s literally nothing left to sell lol Not because the market is cooling
Inventories are rising, not falling.
Time to short the homebuilders you think?
I read a funny comment somewhere….was it here?
The previous mid 2000 bubble there were to many houses being sold to to many people who could not afford them.
Now you do not have enough houses to sell to a lot of people who can afford a house.
I am sure we will see a dip but it may not be as low as people think.
I live in flyover land an empty lot is now running close to $100k. 10 years ago it was $60k. During the last housing bubble you could buy some lots cheaper in foreclosure but that was from builders that bought a lot for spec houses. That is not the case now. There is hardly any spec house being built so there will not be any crash prices in land.
Wall street is buying houses and they have no risk. So what if their is a crash, the will buy more houses. They passed all the risk in MBS to investors. But those MBS are backed by the fed so nobody will take a loss like the subprime fiasco. IMHO, Wall Street will buy more houses on any dip. I can be wrong but somebody would need to explain to me why anyone would not buy real estate, bundle it in a MBS that the GSE backs 100% no matter what the price. There is no risk. I guess if the GSE quit backing these loans, then this could turn out bad?
I have to say. I was super bearish on housing in 2007. Sold all my stocks and went to cash. The only investing I did was to buy puts on some Merrill Lynch and Leman Brothers. I just new all those sub prime people would not be able to pay their mortgage when the rates adjusted.
I am just not sure what the catalyst is this time. Higher rates…sure. Maybe another recession?
But there is no way the FED will let a recession happen just 1 year after a recession. They will keep pumping IMHO?
I do believe stocks are overvalued and in some places housing is overvalued. But what will be the catalyst for any downturn?
Hey whatever you tell yourself to make you sleep better at night. There’s a certain comfort to lying to yourself and validate your own decision with flawed logic. One thing I will tell you though, you sure did fail your history lesson, when has the stock or housing market ever not suffer a painful crash or correction after hitting a peak? Sure many years later the trend line is up but so is inflation.
You sound like a newbie who has absolutely no clue about real estate. The idea that this market insanity would continue forever is about as delusional as thinking Dogecoin is going to become the reserve currency of the world. We’re in the biggest housing BUBBLE in history. I look so forward to watching these FOMO ‘tards get absolutely smoked. They’re going to be crying to mama as they go into foreclosure. Suckas.
It would appear you forgot one of the players on the market. The big corporations have entered the room. So just like the Stock Market where it can stay dynamic longer than you can stay solvent. The corporations will buy all the available market. They will be backstopped by the government and they can afford to lose Billion YoY for the ultimate price of a gain in 20 years
I didn’t forget anything. This argument didn’t work last time and it’s not going to work this time. Furthermore, the FED itself has started to take notice of the excesses in the housing market and also take a lot of heat for their contributions to said excesses. Stick a fork in this thing, it’s cooked.
Why do people think they are psychics?
He’s got buyer’s remorse, so he’s trying to justify his decision. He knows he grossly overpaid, so he’s vacillating between the denial and the bargaining stages of grief. Anger is probably mixed in there a bit. The 5 stages of grief are not necessarily experienced in order, and people go back and forth.
Lisa-because,like all psychics, they will never, ever, forecast an unhappy/unpleasant ending…
may we all find a better day.
I wish you good luck with that. Truly.
I agree that cash is trash and houses are the new cash. They are an illiquid form of cash, more like certificates of deposit in the old days. I own houses and treat them like cash. I am an idiot for owning unleveraged real estate because the debts will eventually be inflated away, but that’s also what makes houses equivalent to cash. Leveraged real estate is an investment.
It’s not that crashes have been abolished. It’s just that houses are no longer risk assets (individual markets still have a small amount of risk, but on a nationwide basis, as Bernanke famously proclaimed, houses have never declined in price until 2008). Even stocks are not risky anymore when looked at in aggregate (individual stocks are risky, but a broad index is defended by the Fed). The lack of risky assets to invest in led to the creation of riskier assets called cryptos.
Gone are the days of timid Fed interventions like we saw in 2001 and 2008. The Fed has learned to be bold and real estate moves slowly enough where price declines can be avoided as we saw in the March 2020 crash. Home prices should have declined by 15-20%, but there was no time.
Besides that, the interest rate on the 10 year will head back below 0.5% eventually, supporting home prices. The one thing you can bank on is that debtors will be bailed out at the expense of savers. I also think that the best time to sell real estate is at the bottom when the market is weak. When real estate falls 5-10%, chances are that something else falls by 50%. For example, copper might fall by 50%. Even if you have to sell your house below market value to find a buyer, you could then buy copper at half the current price. If you sell your house now, what are you gonna do with the money? You don’t know if copper will drop by 50% until it happens, and it’s too much risk to sit in cash waiting for something that may or may not happen.
LOL. Do you really believe this?
You talked me into it!
I’m dumping all my cash into copper on Monday morning!
Illiquid form of cash? Do you know what that is? It is a investment which is poised for deflation. Anyone who believes the current valuations are sustainable is in for one hell of a shock…
Why? Housing price is usually in par with the inflation rate.
“In the long run, those prices will only go up.”
And in the long run we are all dead.
I think normalcy bias and wishful thinking has many good people actually believing the fantasy that this time the housing market has crossed the Rubicon to lofty valuations and will never look back. In other words: “This time is different”.
I wouldn’t bet the farm on it.
Wow! Another person that can see the future before it happens!
Don’t stop there “Cash Guy”, tell us all your predictions!!!
Remember that if there’s not much to sell, sales volume will be down. Here on the Monterey Peninsula, trying to buy is very much still a blood sport.
BUY NOW OR BE PRICED OUT FOREVER!!!!! RATS WILL NEVER BE THIS LOW AGAIN!!!!! THERE’S HISTORICALLY LOW INVENTIRY SO YOU BETTER BIY NOW!!!!! [CUE ROCKET MORTGAGE AD]. DON’T MISS YOUR CHANCE!!!!!
Sounds like Dietek, the crooked subprime lender in 2007.
No strike apparently, saw this gem of an article today thought you guys might enjoy. Nothing to see, new normal here…
“Buyers get the home but offer $300,000 over asking price to do it in red-hot Texas real estate market
DALLAS — These are hard times to be a homebuyer in North Texas, even for those putting in competitive bids.
Real estate broker Joe Atkins of Joe Atkins Realty said he has seen plenty of cases where it is extraordinarily hard to be selected as the winning bid.
“You’ve probably got a 10% chance. I have made plenty of offers for clients this year and gone $50,000 or $100,000 over list…and lost,” he said.
Those $50,000 or $100,000 bids over what the seller is asking aren’t on million-dollar homes.
Atkins said that’s what is happening with $500,000, $600,000, $700,000 properties.
As for million dollar homes, Atkins shared the story of one of his agents who recently had a buyer in that price range in Southlake.
“He did not recommend this…they told my agent that they wanted to go $300,000 over (asking price) to try to secure the property. According to him, they got it but it was still tight,” said Atkins.”
50k on a 500k home is just 10% above asking. This has been the new normal for the past year.
You offer the profundity of a man standing in his yard in the rain inferring that it’s raining everywhere, and predicting it’ll keep raining the world over, forever…Wolf indicates that we may be at a pivot-point in the Covid-19 housing bubble, and provides evidence for it…
Each of these WTF-bubbles is, to some extent, a toilet-paper shortage, though some are made worse because the Fed or another Central Bank has put its fingers and toes on the market-scales…
Everyone wants a narrative because they can’t see the bleeding obvious.
I wonder if a lot of cash home buying are people diversifying out of stocks. If I had ridden the market to the top I would have had enough funds to pay cash for a nice beach house. I didn’t and so I don’t get the ocean view.
You can buy SFH real estate inside your IRA but you can’t live in it, so that might fit some of the buyers leaving them empty with furniture inside. If in an IRA you can flip it tax free.
Un fort jun lee OS, it is, once again, PE and their hedgie funnies folks doing the ”cash” buying of SFR once again, as I seriously went head to tail with when we Had to buy in the ‘saintly part of the tpa bay area 6 yrs ago when we HAD to come back here to take care of very elderly parents..
We were also ”cash” buyers, but could not compete with the Private Equity and Hedge Fund buyers who were much more ”connected” with the various and sundry websites trying to be ”the” connections for buyers, but, in fact just ”defaulting” to the the PE and hedgies..
Time and enough to stop this obvious scam holding houses and homes of all kinds OFF market for families needing shelter..
It would be interesting to see how much business the RE IRA businesses are doing.. If what you are saying is right, then there are going to be some substantial adjustments when this thing goes sideways…
The market has entered the “auction stage”. I have always found auctions to be interesting, because of the emotional aspect. People will bid far more than something is worth, because emotionally, they want to “win”.
They allow their emotions to replace their common sense, and reasoning.
Of course afterwards, they are often remorseful, realizing they paid way too much.
The same always happens in the later stages of a housing boom.
I have always theorized that it is driven by the segment of the population that was too afraid to buy before, but is now consumed by greed seeing the prices rising so fast, and their fear of missing out. Their fears of property ownership are simply overwhelmed by their fear of missing out, and they buy strictly out of emotion with no logic or reasoning involved..
Panic buying at the top of markets is the best indicator I know of that the market is close to collapse.
J-Pow!-and here i was thinking, a priori, that rats (animal OR human) would always be among the lowest of the low (i can’t wait for their coming improvement of character…).
may we all find a better day.
And today, the US Govt just reinstated higher tariffs on Canadian softwood lumber imports to 20%. That’s 20% on today’s already high lumber prices.
Can’t fix stupid. Tariffs are simply a consumer tax. If the US was self sufficient in timber/lumber there would be no imports as Canadian fixed costs in wages and benefits for producers, including taxation in all sectors at source…is higher. This will be absorbed and hidden in RE valuations. Financed at low interest…for now.
BS. Tariffs are a tax on profit margins, often paid for by the foreign supplier via price reductions because it has to compete with US suppliers who don’t pay the tariffs. YOU as Canadian hate these tariffs because YOUR companies (the suppliers) are paying them via price reductions. I LOVE these tariffs because YOU get to pay OUR taxes. Hahahahahahaha…
Dead on Wolf!
If China is trying to sell into the US, and gets slapped with a tariff, the Chinese exporter must eat the tariff or try to sell their product at a price above what the going rate is compared to the prices of other competing non tariffed exporters like S Korea or Japan. And that doesnt work.
you know, that works as long as there are competitors to Chinese made goods.
Guess which country is moving into automation faster than the US.
Paulo: “Tariffs are simply a consumer tax.”
Wolf Richter: “I LOVE these tariffs because YOU get to pay OUR taxes. Hahahahahahaha…”
Tariffs raise the price of lumber by reducing competition amongst suppliers, regardless of whether those suppliers are foreign or domestic. It’s not “how a marketplace works.” To argue that tariffs aren’t “simply a consumer tax” is to presume that the taxes are fixed and inevitable, and thus taxes collected on foreign goods are offset by taxes not collected domestically. That’s not how taxation works.
Burned timber harvesting in California forest fire lands is going gang busters feeding Red Emerson’s massive Sierra Pacific mills. If you see a logging truck with smoldering logs that would be his operation. We need the jobs for our loggers and mill workers – sorry Canada.
I say we invade ’em and take their logs. It’s not like they have a military to stop us. Heck, we are their military, eh!
It’s not that simple. The difference between the US price and the Canadian price is the tax that US consumers will pay. If the tariff goes beyond that the remainder is what comes out of the profit margins of the foreign supplier.
As a Canadians I find the actions of both nations involved to be truly disgusting.
Prices are set in the market place, not by costs. In terms of the price that a company can charge, it doesn’t matter what something costs. That’s the number one principle in business. If you don’t get that, you don’t get business.
Therefore the low-cost producer wins. That’s the number two principle in business.
By having to pay for tariffs, the Canadian producers become higher-cost producers — and lose profit margin. If they want to raise their prices to cover the tariffs, fine, then they’ll lose sales to their low-cost competitors in the US that don’t raise prices.
That’s how a market place works. Anything else is propaganda.
I agree with Wolf so far as the current tariffs go. However, Canadian lumber producers have been buying US assets for years and are beginning to dominate in the US market. Generally, they have nearly half their production in the US, which represents expansion during the preceding period of low lumber prices.
The strategy is to supply Canada and Asia from Canada, and to supply the US from local production. In true capitalist fashion, the jobs stay in the country of origin, the profits go to the shareholders in what is now a huge flow of cash and companies like West Fraser climb to the top of the lumber pile.
I actually agree with you, it’s just that reality is messier than that. In my industry we order PCBs frequently. Local Canadian, US, and even Taiwanese manufacturers are completely non-competitive by an order of magnitude with China and, this is the key point, they refuse to compete. So we go to China. Our government could tariff Chinese PCBs by 500% and all it would do is raise our costs and end up effectively taxing us. You would think that these non-competitive businesses could not survive and it baffles me how they do.
You mean if we didn’t have environmentalist who are dead set against logging even if it was good for the environment?
I’m assuming there is a payoff somewhere to these guys by the Canadian lumber industry, just as the US lumber industry is paying off someone to keep the higher tariff.
Been to a few opens houses in Scottsdale lately. Almost no one at the few we’ve been to. Not the experiences we were told about in the media. Did we just miss it and now buyers are holding back? I was worried there’d be a dozen cars at each open house, but we’re definitely not experiencing that.
I’m not sure if we’re buying right now because I’m skeptical we can find what we want for our price and we’re not getting caught up in this stupid mania. Even if the market doesn’t turn and we’re further priced out. Better not to be rash. If we manage to find something we can afford and we love maybe we’ll buy. No hurry here.
Arizona, and Phoenix in particular, does not have the water resources to support the current population into the future, much less a growing population. Lake Mead water level – dropping. Lake Powell water level – dropping. Snow melt into the Salt River – decreasing. Water table – dropping. Rainfall – decreasing. Temperatures – rising.
The Southwest is not experiencing a mega drought, this is the new climate. Unless someone builds a pipeline to the Great Lakes that place is doomed.
The Phoenix area is approaching an era of severe decrease in habitable population. Anyone paying top dollar to live in the Phoenix area is whistling past the graveyard and in severe denial. Phoenix will be the Detroit of the West – the population needs to drop (a lot).
MLH-don’t be a buzzkill. Don’t you know freshwater always comes from the faucet? (sarc-on. Your comment applies, more or less in the foreseeable future, to all of us here in the American West… Or, in the words of the immortal Sam Clemens: “…whiskey’s for drinkin’, water’s for fightin’ over…).
may we all find a better day.
Saw a hearing on this Billion $ pipeline Las Vegas wanted to build to southern Utah. (don’t know if it was ever done)
Anyway this old time farmer from the Utah area targeted, stood up and said, “OK, let me get this straight. Yer gonna spend $1B for this pipeline, and carefully monitor our ground water, and if it drops, yer gonna shut the whole thing off? Vegas Water lady leading meeting had nothing much to say, and changed subject.
When I was living with lady in Tucson ’09-10, she said they expected (and built homes like crazy till GFC) 10-15M people in Phoenix-Tucson corridor, and “proved” there would be water for all.
A new survey just out from bankrate.com says that 2 thirds of the millennials that purchased a home have buyers remorse and believe they made a mistake. A main reason was repair and maintenance costs way beyond what they expected or could afford. I guess buying with online viewing and no inspections or contingencies didn’t work for them. “ hey dude, bidding up the price on a 90’s McMansion covered in Dryvit with failing plastic pipes is a bummer.” I expect this is one of the boat anchors dragging the market RE market down the last 3 months.
This problem is HUGE and understated. Most can’t keep up typical home maintenance costs due to overextending themselves with these stupid low interest rates. There are “housing bombs” all over this country with homes for sale that have been poorly cared for that will rap thousands in losses for those that buy them.
Even if not in bad shape now, what happens when in 5 or 10 years they need to take out a substantial loan for really big repairs? Even more of a concern, what happens if they’re upside down too?
“…and that old house we lived in, the roof is cavin’ in, like every other one along the block. Took thirty years to pay and ten to rot. Now Dad says it’s all better just forgot…” ‘home sweet home (revisited)’-rodney crowell
may we all find a better day.
Yes, this is a not often mentioned but important point– the true carrying costs of a residential property are often overlooked when starry-eyed buyers (like naive younger generations who are good with electronic gadgets but would hold a hammer at the wrong end) only pay attention to the monthly nut (cost of mortgage payment) and not the total expenses picture.
“Gee Honey, how could we possibly have known that this beautiful house we overpaid for would need a new roof and HVAC so soon. I feel hurt, and need to go to my safe space”.
So it bites harder when they overbid and overpay for properties that have defects anyway (and if inspection was waived there could be some very nasty surprises in store indeed).
Beside ongoing maintenance, one needs to be mindful that rising house prices means rising taxes and other fees on real estate. Assessed taxes after purchase will immediately jump if they and their new neighbors are in bidding wars.
A newly purchased house often means new household formation with everything that entails– new furnishings, renovation, and appliances. More often than not, the lady of the house will ensure every purchase for their new nest will be more than adequate.
After a decade of fast rising property taxes, our State legislature promised to pass property tax relief this year. Their bill increased the exemption on all homes.
The county assessor simultaneously announced the appraised values on the median home was being raised 25%. The net result will be the relief people were expecting is now going to be a raise of $350 this year on the median priced home…
I expect this will happen most places, and insurance rates are going up substantially too.
In a boom cycle, greed always reaches a fever pitch, and everyone starts piling on, governments included. Maintenance and carrying costs rise exponentially, forcing many buyers into hardship and financial desperation. We seem to be at that point now..
What state is this?
Could be almost anywhere, but sounds just like Idaho.
I know that in Boise the assessor’s valuation increase is expected to average 28%. State legislature rammed through (without debate) a “homeowners exemption” increase of $25,000, which equates to about a 6% median valuation discount. So a net +22% to assessments.
Couple that with the city raising it’s levy rate by 20% and the county raising its levy rate by 12%, the local machine is set for a windfall that they are unlikely prepared to spend.
The median homeowner, on the other hand, is looking at 40-55% increase in taxes due.
Probably no big deal for all the tech-refugees, bitcoin millionaires, and retirees lugging around suitcases full of west-coast equity that drove this particular madness… not so great for local families who thought they were buying a home well within their means in 2019 or earlier.
Wow! I would have said something along those lines ages ago if I thought people who were taking the adult step of buying a home HAD NO CLUE!!!! Has no one watched those flipping shows and wondered how they did such a huge reno in only four days? Or at least gave a thought for the poor bastard who bought it? I swear, sometimes I wonder how these people made it to adulthood without taking out a Darwin Award first. I have an idea for a new meme; the Powell Award for the stupidest financial decision you ever made.
Mine is not getting into the stock market in 2009. Or not getting into the housing market before RE Bubble 1. Oh gee, that was when I was too busy being a twenty something. Regrets…
Went tire-kicking in various parts of Austin, exurbs of San Antonio three weeks ago. In prep for my trip from CA I favored about a dozen homes on Redfin, went to a few. Today in less than a month every single one of them is on contract, several already closed with all-cash offers. And I have a budget of low 7 figures with my CA property.
I’m sitting out for at least half a year to let things cool.
Millions to spend and nothing to buy.
That’s very sad.
No, just too smart to buy right now.
This person has the patience to ‘wait it out’ and will hopefully pay a lot less because they waited for the FRENZY to stop.
Please, I must live under a rock, but where TF is all this mega cash coming from? I know it’s always a factor but without foreign money launderers, I mean buyers, what accounts for that volume? Asking for a friend…
The fed printed $5 trillion…..
The Fed is printing $40 Billion per month and shoving it into the the residential real estate market at low, low rates. Divide that sum by the number of homes sold every month and you will have the answer to your question.
I don’t know whether the Fed is incompetent, corrupt or both but they seem hell bent on pushing us off a cliff and there seems to be no stopping them. Powell said he is going to do it and he won’t listen to reason.
I hear the RE tax increases in the area are brutal 20-50%+ for new buyers. Was that a consideration for you?
Your budget is in the low millions, and you cannot find anything in Austin, Texas… I think you are doing something wrong.
Or, are you counting decimals as two digits?
By low seven figures I mean 1.5M. Was looking at house on golf course north of Austin. Looked at it the Friday it went on the market. Sold the following Wednesday for 1.6M cash.
Anything on a lake in or near Austin is easily over that.
it is certainly the most distorted and perverse housing market I have seen in my lifetime.
And it seems to be unwinding, which is not a surprise.
Indeed. And why? Fake rates by the know it all Fed…destructive Fed….
Real rate if you lock it in. You can say all you want but all my friends have ~3% mortgage rates. So we are all happy to have these fake rates all the way to the bank with some of the cheapest loans seen in generations. The price of the homes is outrageous but so is the rate. Cheap money is best used not confused
2.99 here and never selling. I can rent the overpriced house I bought at half the going rate and I’d still be able to cover the mortgage with it.
Meanwhile inflation is turning cash into dust.
Do you think lenders will be content getting a 3% return on mortgages being issued today when tomorrow interest rates rise to 4-6+ % in an inflationary environment that may reach double digits?
Lenders won’t take it sitting down. In a currency reset (very likely to happen) existing debts will likely be also reset accordingly. That means a cozy 3% rate will get adjusted upwards for parity.
“Meanwhile inflation is turning cash into dust.”
Weird. My cash has gained over 50% against Bitcoin – a supposed store of value. When all other asset prices crash (I don’t actually believe Bitcoin or any crypto is an asset class), my cash will appreciate like never before seen. Do you always declare victory during the 3rd inning of a 9 inning game?
Heinz – you are correct. That is why the GSE have purchased or backed 97% of all originated loans since 2010. Banks do not want to hold a 30 year loan with artificially low interest rates.
My feeling is the turning point for home sales was the cutoff of extended unemployment in over 20 states. I see this as unleashing inventory into the market because the jobs are not really there and now the survival income is gone too.
Point in case, actual situation:
Step daughter-in-law (divorced) has been unemployed since 4/2020. Oil & gas accounting work is not coming her way. Since the state has shut off the Fed UE extra, she is going to have to sell her mortgaged house soon and move into an apartment. Even with forbearance, she can’t make the bills on just state UE and she has already tapped her 410K.
I’m sure there will be more like her.
It sounds like she’s got that mentality where she refuses to take what’s available until she can get what she wants, cutting her nose off to spite her face.
DC, there are no oil & gas jobs for a 52 year old women right now. And a clerk job in K Mart won’t pay as much as the UE she was getting. Even now, with a min wage job in her future, the house must go as the payment/insurance/taxes/etc can’t be covered by $8.50/hr. She’s SOL right now.
If you think in terms of opportunity costs, wasting your time getting 15 hours @ minimum wage with a schedule that never allows you to take a second job, is definitely a non-starter. Add to that the age and gender bias against women over 50 in the job market (men are still readily hired at that age), and I can imagine Anthony A.’s step DIL is in a world of hurt right now. The best she can probably hope for is to start up an accounting business of her own.
Are there accounting opportunities in other industries?
I know someone who was a nonprofit accountant, lost their job, delivered mail for sometime then made a transition to business accounting. Their new employer was okay with them learning on the job which was nice.
What really set the economy on fire was not just the fact that they were sending all these UE bennies, but the fact they were allowing people to stiff the landlord TOO. They should have had a rider in there that stated that anybody receiving the PUA had to pay rent or their mortgage, or they were not eligible. That would have reigned in the excesses and not BBQd the landlords. But CONgress is a joke, and they didn’t think it through. Giving people excess money while allowing them to stiff their creditors is what led to the situation we’re in with the speculative excesses. My rent could pay the note on 3 new automobiles.
In March 2021 the number of new housing construction starts was the highest since 2006.
Builders have been raising home prices as input costs rise.
Some national builders are not writing contracts on future builds because they cannot get an accurate fix on costs – so they continue to develop the infrastructure (streets, etc.,) but aren’t building homes until things stabilize. There’s an entire Shea/Toll Brothers subdivision a mile or so away that has a moratorium on sales (I think the marketing term is “temporarily suspended”). In a recent edition of one of the building rags I subscribe to, this appears to not be exclusive to my locale.
There’s also a spec builder nearby that is trying to sell an incomplete home. The house is closed in and roofed but needs all interior finishes, appliances, HVAC, etc.. I guess it got too painful for him to press on. Has it listed for $799K. I got out the popcorn.
A custom build across the way from us came to a screeching halt ($1M+ Dryvit sh*tbox) as they couldn’t find any more corners to cut and material costs and availability is killing the GC.
Might be a lot of whistling past the graveyard going on……
Recent call from developer in Maui, mac kenna area. We looked at just started to build condo units, 1300 sq ft., at 1.5m at xmas time. All sold out ??? or sales hype, who knows. Now sales person calls, says new price 2.0m and availability. 33% increase, probably cost increases, in 5 months.
My guess at 2.0m cheapest units the new numbers don’t work for many and lots of cancellations. Most expensive units went from 3.5 up to 4.5m. This has probably really screwed with proforma from conception of the development 2+ yrs ago.
Also knowledgable locals involved in re and development told us don’t consider anything now, have patience, wait it out, unless super good buy.
Had FOMO in 2004. Learned my lesson. I’m a renter in Bend, OR where the median is now $657k. It’s a nice place to look at homeless and smell your neighbors pot all day, but not $657k nice.
I purchased my retirement house a couple of years ago. It has gone up in value $200K since then. I like where I live, but I would not move here today at these prices.
I never understood Bend, OR. It’s in the middle of nowhere, and there are much nicer areas for outdoor recreation. I consider it the most overpriced housing market in the entire United States, with the exception of Reno, NV which is an armpit.
Bend, OR’s town motto is “Poverty with a view”.
I can only speak to my area…
people are leaving the urban city with all the riots and shootings and closed schools and moving to the suburbs.
Houses are often in a bidding war. Contractors cant build or bid due to inflation in the building materials and supply shortages. People who were thinking of selling must pull their offer or sharply raise the price…for they realize the replacement cost of their house just jumped 35% in 5 months.
The Fed has locked up the housing market, IMO, with fake rates.
When inflation ran this hot in 1999 and 2006 30 yr mortgages were 6%…now 3%.
nice job Fed. Terrible that you, the Fed, always seem to know better than the free market…you dont, and ruin all you effect.
Good point. It is the new normal.
Affordable housing will come in the form of condos and apartment buidlings.
I think the Single Dethatched home is becoming a middle class or higher luxury. 75% of all homes are owned by families making above $60k-$70k. 75% of renters are people making less than 60k. Basically 50% of the population is getting price out of single detached homes. They may be able to afford a $150k condo in the future but not a $450k single detached home.
That is what prices are in flyover land for new homes. You cannot find a new single detached for less than $400k in my area. Why…the lot is going for $100k to $150k. This is in an area that in 2019 the median single detached home sold for $270k.
What are you talking about ???
House prices barely budged since the end of WWII when Bill Levitt sold his first 17,000 houses in 1947 for $6,990 each.
Well,Riverdale,IL is not exactly Levittown,NY,one might say apples to oranges…
IMHO Riverdale is so much better,so vibrant and full of action !!!
13731 S Eggleston Ave, Riverdale, IL 60827
MLS ID #10992657, CARTER REALTY GROUP
4 bds 2 ba 1,420 sqft- Townhouse for sale
Price cut: $5,900 (Apr 2)
556 W 136th St, Riverdale, IL 60827
MLS ID #10992636, CARTER REALTY GROUP
4 bds 2 ba Townhouse for sale
Price cut: $5,900 (Apr 2)
13638 S Wallace Ave, Riverdale, IL 60827
MLS ID #10992627, CARTER REALTY GROUP
3 bds 2 ba 1,243 sqft- Townhouse for sale
Price cut: $5,900 (Apr 2)
13729 S Eggleston Ave, Riverdale, IL 60827
MLS ID #10992624, CARTER REALTY GROUP
4 bds 2 ba Townhouse for sale
Price cut: $5,900 (Apr 2)
-and many more !
Buy now. Once the country opens up and Chinese buyers start flooding the market again, it will be even crazier.
Maybe those Chinese will bring some manufacturing plants back here when they relocate!
Well, judging from Foxconn (granted it’s a Taiwanese company and not a Mainland Chinese one), I think the only thing we’ll get is another regular off the mill con perpetrated on the American public.
“It is easier to fool someone than to convince someone they are being fooled.” – Mark Twain
Sam-one of the best insights of human nature ever written…
may we all find a better day.
I am looking at the low end in my region, a desirable area where prices have increased 30% or more thanks to remote work. According to my realtor, the multiple offers are from working people with less than 10% down, many trying for FHA loans at less than 5% down. Equity matters. People who are counting on not being fired and who put less than 5% down are the market. I asked if there were all cash investors in this low end market and she said none.
It’s anecdotal, but I can wait. The foreclosures will come. They have to when no one has savings or equity, no matter how low interest rates stay or what the population pressure is. Wages are not rising as much as in places with true worker shortages. I would guess that investors are staying cautious because they know better. From sales records on some places, flippers bought last year and are selling this spring.
This is all in a service and extraction economy adjacent to and serving some of the most expensive towns in the country.
A sustained declined in real estate prices?
Wake me up when the stock market declines by 20% or more for a sustained period of time. As we all obviously know, the Fed has outlawed that.
So there will no sustained decline in real estate.
This time really IS different. The Fed has for the first time in history discovered how to use it’s “tools in the tool box” instantaneously.
Sustained asset price declines are ILLEGAL.
LOL yeah ok
Xcept for Bitcon (and related sector companies).
Anyone who believes anything is linear, does not understand the laws of cause and effect. Nothing is linear, everything is cyclical. Everything reverts to the mean. It is never different this time. When you have lived long enough, you understand what the younger people do not..
The U.S. bought Alaska from Russia for $7.2 million c. 1867.
When is the next down cycle?
I have some mega tech stock that is not worthless. Somehow hoarding empty houses did not seem right.
“Nothing is linear…”
Including the tools in the Fed’s tool box!
The Fed tools really are different. They acquired them around 2008, around the same time the US Prez got the AUMF for any reason he wants including kicks and giggles.
Each has produced disastrous results.
Just saying that IS what is different, and will/already has produced a different result. Not a good one, but….
This time really IS different.
No, it really is not. In my life, I have seen it all happen before. The FED is not all powerful, and in fact has gone bankrupt, and may do so again.
When everything is based on debt, that cannot, and therefore will not be repaid, the result is money destruction on a scale you cannot even imagine.
Sure the Fed can print all the money it wants, but if it attempts to push that money into circulation, it has dramatic detrimental effects as we have seen this year..
TIMBERS IS CORRECT!!!!! I HAVE OUTLAWED STOCK AND HOUSING DECLINES!!!!! THEY WILL NEVER HAPPEN AGAIN!!!! AND THE TIMBERS ARE ALSO HIGHER THAN THE SOUNDERS IN THE MLS STANDINGS!!!!! HAHAHAHAHAHAAHHA!!!!!!!!!!!!!
“No, it really is not.”
Yes, it REALLY IS!
The Fed has new powers as of 2008, and as of 2020 they have learned to use them instantaneously.
LOL, do you really believe these “new powers” overcome the laws of physics? All crashes are caused by the same thing, people take on more debt than they can pay, this time is no different. You have not lived long enough to see the cycles complete, but they will. Anyone who believes this time is different is naïve and has a lot to learn…
I agree….housing may flatline or go higher as long as the Government is printing.
I just read that Biden is sending out $10 billion to help mortgage holders. So anyone thinking their may be a lot of foreclosures with the end of forbearance, that may not happen and the Government will pay their loan payments next.
It would look bad if we had a recession just 1 year gone.
Okay, but just don’t go building an altar to worship the Fed. They’re not a god. They can’t control things absolutely. All they’re really doing is making the future nastier.
It’s very possible almost everything tangible is going to double/triple in price over the next decade….I think it’s time I wrap my head around this and expand my manufacturing capabilities in building products.
Much higher inflation is here, regardless of how much our psycho-Fed wants us to believe otherwise. How long higher inflation exists, depends on how what the Fed does next with monetary policy, and what the current govt does next with fiscal policy…
Per Jim Bianco (Inflation is already here, wish I could post his charts):
One-third of everybody’s income is now mailed to them from the government. Everybody is stuffed full of money. They’re buying stuff like crazy. The supply chain cannot keep up. It is not a problem of COVID, semiconductors. Look, the head of Intel said that the semiconductor supply chain is going to be a problem for two years. There is a simple fix for the supply chain. Charge more money, that’s called inflation. What they’ve done now isn’t status, they’ve rationed the product, delivery times are at a 70-year high, but I think the next step is they’re going to charge more money and we’re going to get inflation…
But I have a feeling that we’re going to find that once the base effect passes, those price increases are going to stick around, people are going to become comfortable raising prices, un-anchoring, and then we’re going to have something we haven’t seen in a long time and that’s inflation. You pretty much have to be over the age of 50, probably over the age of 60 to remember inflation first-hand, it’s been such a long period of time. But what I try to show with this is almost every measure says that inflation is coming back and it’s coming back with a vengeance.
You can’t fix a supply issue quickly by raising prices. Higher prices certainly haven’t increased house supply.
Higher prices will attract more producers to increase supply but there’s a lag time. In the example you cited for Intel, they plan to build two (possibly three) more fabs at a cost of $20 billion each and it will take 2 years to bring them online. You’re accusing them of rationing but if I had warehouses full of chips and customers willing to pay a lot I’d think about selling those chips to fund the new fabs.
The chip shortage is exacerbated by hoarding. The trade war with China caused the Chinese to stock up on chips and chip-making equipment,
Another problem is IoT. Everything has chips now – your Nest thermostat, your NSA-designed Alexa, your Ring doorbell, even your refrigerator. Because who doesn’t need to talk to their refrigerator?
When gun grabbers like Obama and Biden get elected we have ammo shortages even though the manufacturers are running wide open.
During the 70s gas shortage hoarding exacerbated the problem. Instead of waiting until being down to 1/4 tank everyone was staying full. We were probably driving around with a couple of weeks’ worth of gas fill-ups hoarded in our cars.
If you want to make a good investment in semiconductors quite a few big players like Samsung and Intel are getting into the game using a new chip fab technology. There are to my knowledge only two companies that make the equipment they will need to make chips using the new technology. They don’t make any chips. Chips are the gold and these two companies make the picks and shovels. Search for EUV lithography and figure out who’s going to be selling marked up picks and shovels.
Money expansion (inflation 1) and rising prices (inflation 2) has been continuous for several decades.
I lived in NYC during the last inflationary period(1970’s), during the gas lines too. While wages were low, there were plenty of jobs then, not now. There were more good paying union jobs back then as well, not now. Most of what we bought was made in America, not now. Nobody was complaining about housing being unattainable, expensive yes, but attainable with budgeting.
This time it’s different.
“You pretty much have to be over the age of 50, probably over the age of 60 to remember inflation first-hand, it’s been such a long period of time.”
Ha, surely you jest or left off the sarcasm tag?
Consumer price and especially asset inflation has been smoldering for years– and much more than CPI fraud that Fed promotes.
22 states will soon be ending their 300 a week supplemental income program.
Common sense begins to return…
Yep, time to get back to those crappy jobs. It’s the American way.
Any website link tracking end date by state?
One-third of everybody’s income is now mailed to them from the government.
Everybody is stuffed full of money.
Both of these sentences are blatantly false.
I read a lot of wisdom here and a lot of bewildering crap too.
Prices are starting to drop, you can deny it but you cannot hide it. It will become obvious in the following months.
Not yet in my high taxed neck of the woods.
Anecdotal evidence but prices in the East Bay are bananas. We feel completely priced out. Any house in a half-decent neighborhood gets offers for well-over asking. Getting a decent 1500 sq ft home for less than 1.25 million is impossible.
Is there an end in sight?
Condo prices in San Francisco and Silicon Valley are down year-over-year. Lots of condos on the market.
What’s up are single-family house prices.
If I only I wanted to live in those places or in a condo. At some point beggars can’t be choosers, but for now I’ll rent.
Hopefully the madness ends soon
I can’t speak to low and middle-class housing in Arizona, but high-end housing is on fire.
I am looking at a fancy condo in Scottsdale right now in a new building and it’s selling for 145K over what the previous owner bought it just a month and a half ago for (high 400s to low 600s) – arguably they somehow got a fabulous deal, but still…. And I think it will sell pretty quickly, it’s already a “hot home” on Redfin.
High-end real estate is so low in inventory, cash buyers and those who can put 200-300K down (and thus pay towards any appraisal deficiency) are plentiful.
I would say this mania has at least another 9-12 months to go on, maybe longer, maybe much longer. Anyone who thinks it’s just about to fall off the cliff is just kidding themselves.
It’s abnormal which would lead one to believe it is not sustainable. That’s what everyone said before the last crash.
> Buyers’ Strike ? Amid Crazy Spiking Prices, Home Sales Sag for 3rd Month,
> New Listings & Inventories Rise.
As soon as my penny jar fills up,
I’ll buy one of those million $ homes
( before the prices double again ).
Depending on how much is left over,
I may even buy some for my squatter friends,
so they too can feel the pride of “ownership”.
1) Crazy Existing Home Sales :
2) The 2020 extremes are two crazy spikes to ignore. The annual sales will
stabilized at around 6M/y – 7M/y. Peace and tranquility after the storm. A new LT plateau, with creeping inflation, to adjust value and rent, to restore market sanity, for a decade, or longer.
3) Recession : Sept/ Oct high @6.75M is a lower high. The first target
@6M was reached, confirming the downtrend. The next target : 3M/y.
4) Prices are crazy. Unemployment is crazy.
Weirdest economy ever! My view is that we are experiencing an artificial supply collapse. I’m in the deflation camp. I simply do not see enough income out there. The Fed is making the same mistake FDR made initially. Putting cash into banks doesn’t create productive investment when you have a rentier economy. The housing market will soon suffer what amounts to exhaustion.
Supply chains are still screwed up due to Covid aftershocks. Was in my local grocery store the other day and they were out of essential items like bottled water and detergent that I buy every week. I called the supply manager and he said things are getting worse. Truckers are not able to complete deliveries, plastic packaging materials are in short supply, employees are not reporting to work etc. I told him that I was being forced to shop at a competing Safeway store to get the items which I couldn’t get. Here it is 16 months into this pandemic and they still can’t get their act together.
In picking a place to live, logistics is something most people never consider.
Disasters happen, both natural, and man made, so it is something that it is prudent to take into consideration. If you live in an area where everything must be shipped in from somewhere else, then your chances of shortages are increased exponentially over places which produce their own necessities.
Since when did “bottled water” become essential? Most of it is absolutely filthy and leaches chemicals from the plastic which you ingest. I don’t touch that garbage.
How about tap water that flows through pipes built in the 1930s. I’ll take bottled water any day.
And you’ve never heard of BPA-free bottled water? Even my local Walmart sells bottled water without the chemical leaching plastics. Like Swamp Creature, I’ll take the bottled stuff any day.
Lake Michigan water. The last good thing about Chicago.
If you live in an earthquake zone, or flood zone, bottled water become essential real fast when things go sideways.
“This is an example of an excess, maybe an unintended consequence, a side effect of these extraordinary [monetary policy] actions.” (Kaplan)
Ya think? I am constantly amazed by these Fed Folks stating the obvious like it’s some sort of recent revelation. I understand it’s pablum for the masses but it’s frustrating. Perhaps all the world really is a stage. Just sayin’.
The Fed promotes inflation….then we are told they can’t/won’t fight inflation because to raise rates would ramp up the debt service too much.
Isnt this why there shouldnt be too much debt? Isnt this why there shouldnt be intentional inflation?
Inflation is theft from savers and the labor of people. Intentional Inflation (the Fed game) is INTENTIONAL THEFT. Plain and simple. Why the complacency?
Those who push for higher wages dont get the fact that inflation is stealing the value of the current wages, and will steal from any future wage hike.
Wake up people.
The theft has already taken place my friend.
No it’s a question of allocating the losses.
Heritage Foundation, etc formed c1970
Their first puppet in by 80
and increasing numbers among those needing loss-allocation services ever since.
For those of you out there ready to buy your first primary home, SocalJim is spot on. It is indeed a terrible time to buy a house in a compromised location. Do not get pressured into making this mistake. Local housing markets all have a “soft” season, or they go through lulls lasting a few months or more. Be patient.
For those of you ready to sell that big family house and downsize, be very careful. Buy that downsized home first if you can. This is Boomer downsizing territory and it is just as bad as first timer Millennial territory.
This situation is not going to change anytime soon.
With interest rates still so low, and lumber so high. It really is impossible for things to lower. I can see this lasting a bit longer.
I’m a Real estate appraiser. Just did an appraisal that people guarantee to pay their asking price even if appraisal came in below. Turns out they bid about $125,000 over the appraisal price on a $400,000 house. Then try to tell me I used the wrong comps for the house they’re buying when their house is a dump and the comparables are all in great shape and bigger.
Experienced and ethical independent property appraisers (not local government appraisers always eager to increase tax revenues) must be very conflicted these days, and under outside pressure to work hard to ‘find’ the right appraisal to support these ridiculous valuations.
Good luck to you, sir.
Did you tell them they’re idiots?
Do your job and use the comps to determine the market value and tell those people to go f$ck off.
What I think a lot of people are missing here is consumer sentiment. If the Fed raises rates and the market starts to take a dive it is going to change the perception of the economy to the average person who doesn’t really follow it. That sentiment will just follow down the line through assets.
Everything is dictated by fear and greed. What you are seeing now is the greed end of the equation. When greed turns to fear, markets dry up overnight…
1) After 11 days of pounding, Iran declared a total victory
at the Palestinians expense.
2) On May 7, after failing to close > Apr 26 fractal zone, NDX fell
sharply down. NDX recovered, bounced back up, but yesterday failed to close > Jan 25/26 fractal zone. The overweight NDX wasn’t able to climb the cloud cliff.
3) NDX cloud is getting darker : T&K bearish flip, the front end Span A
is tilting down, narrowing fast, and Chicku the May 5 Harami.
5) SPX might cross dma50, penetrate the cloud, or cross it. NDX might breach the cloud and osc below the flatbed to form a neckline with May 5 low.
4) Thanks for the filter.
No problem. Had a spare one from before I got a well and drank collected rainwater off the roof.
When a roaring inflation is in the works, do you sell your most valued hard asset? Especially when its replacement value has jumped about 35 % in five months?
People (sellers) are sitting out this peculiar environment in which there is little housing supply, an inability to create supply due to shortages and inflation, and fake interest rates for 30yrs below the inflation rate….and everybody wants some.
Whenever the government subsidizes an asset class under the pretext of making it affordable the opposite happens, always.
As more people can afford to bid, prices increase accordingly totally nullifying the subsidy.
Housing is being heavily subsidized by the Fed buying 40billions per month in MBS.
Why is the Fed still doing this is beyond bizarre.
Am I the only one not understanding the rationale for it?
Is the Fed going to own all the housing market in the US and be our landlord?
If the Fed wasn’t buying MBS , housing would be much cheaper today.
Maybe they are buying MBS as a trojan horse for not buying 10 year Treasuries directly. They are afraid of the 10 year rate going up. If it does it is game over for the financial markets. By keeping MBS interest rate low it helps keep the 10 year Treasury low. And they can look like they are just helping the financing of the housing market in the Covid crisis.
The banks are not lending their money into the mortgage market. Most mortgages are funded by FHA or other GSEs. The fed is the only market for mortgage debt, based on overpriced homes bought at low interest by borrowers with questionable job prospects. The fed is trying to maintain a floor for housing so the rest of the real estate market doesn’t get repriced.
“The fed is trying to maintain a floor for housing so the rest of the real estate market doesn’t get repriced.”
In other words Fed policy to make housing UN affordable.
The Fed is partnered with Blackrock.
google Blackrock and real estate and see what you find…
they made a huge investment in residential real estate a few years ago…
ok for us to notice ?
They’re desperately trying to forestall a meltdown just like last time, which is imminent. Their mentality is that they just QEd a little more before the last meltdown, it would not have happened. They are “kitchen sinking” it.
*IF they just QEd a little more before last meltdown…”
Exactly – Every year since 2010 the GSE basically financed 95% to 99% of every originated loan. Only 1% to 3% of mortgages were issues by private labels.
During the subprime debacle, almost 50% of all loans were private label.
The following chart show how banks and private institutions have pretty much exited this business.
The GSE securitize many of the mortgages they buy into MBS and sell those MBS to investors, including the Fed (which has over $2 trillion of them), and banks (which own a whole lot of MBS). But GSEs do guarantee the underlying mortgages. So the MBS are very low risk for investors.
I wish this point were made more often — the efforts to artificially make something more affordable via subsidy merely invites more buyers (or allows buyers to pay more). So equilibrium with those new conditions is reached. IOW, price rise to (or near to) the point of previous “affordability”.
To really make something affordable, you’d have to limit the demand. Maybe that’s the point of the only over-55 communities?
This site is beginning to remind me of walking the wheel in midnight express with brad Davis . Do you think we will get out ?
back then Men wanted to dabble in exotic contraband, Women wanted to work and get paid maternity leave. There was a unique stress that defined the era.
The arch Strike proxy was the Postal Servuce. And on August 12, 1981, the women won 17 weeks of 93% paid maternity (Cdn). Presumably a gargantuan delivery of hash oil also arrived in the neighbourhood that summer.
I live in upstate NY and the home prices are rising but the tax situation is the part of the equation I cannot wrap my head around. The homes are assessed at full value and the rate in our area is about 43 dollars per thousand so to just use round number of 40 would put a 300k house at 12000 per year, a
400k house at 16000 a 500k house at 20000 and so on.
So even if you can afford the house due to low interest rates, how do people continue to pay the ever increasing oppressive tax bill????
I would like to purchase a home with a bit more land and privacy but I cannot swing it because of the tax payments.
And I know the real answer is to get the hell out of NY but we are not ready to move yet.
I’d rent forever before I’d pay for a house with taxes that high. But I wouldn’t even live in that market. That’s why there’s flight from the northeast. The taxes are ridic.
Not just the northeast. We looked at homes in Austin a few years ago, and the taxes were INSANE. Easily double what the same level of home would cost in CA. Yes, TX way more than CA.
Texas doesn’t have an income tax the likes of CA and the sales tax is marginally less.
They’ll get it from you…. one way or another.
The thing is, income tax usually for most of us either ends or is drastically reduced at retirement, where as property tax haunts you forever….
Property taxes in Texas are also some of the highest in the nation. For a typical 600k Austin home you will still be paying about 14,000/year. Texas is off the table for me.
a) The equation involves Women getting paid not to have children. This is the work premium.
b) unattainable Housing is no longer the price weapon.
c) change the e) in Engel to a)
This happened today: split level ranch had a real physical open house on a busy 2 lane fast traffic road. Cars parked for blocks caused traffic jam, only one lane to pass. Estimate 100 cars parked both of street. House: terminal flaw on busy street, old kitchen and baths as in 70’s ish, finished basement if you can tolerate 70’s ish ugly wood walls and carpet. Otherwise seems solid. IMO very underpaid at $360k. Will be interesting to see how much it the bidding war will take it to.
You really like to pimp the FOMO and cheerlead this, dontcha? Oh, that’s right, you’re a loanowner.
Nope. You assume too much, many times.
BTW a lot of your comments elsewhere assume a great deal too, as if you can read folks minds and psychology. I can assure you, you can’t.
And it shows.
You’re projecting again.
But now our brilliant President is in effect paying people to have kids… What could go wrong…
We need kids. Without them, who is going to pay for your Social Security and work in your nursing home?
Properties are being snapped up by investors, whether individual or PE groups at any price because there is no downside:
82% of mortgages are backed by the federal gov’t –
if prices drop the investors default, hire a lawyer, and dump it on the taxpayer –
or claim hardship and stop paying (moratorium) until prices get better.
The “new capitalist” credo has reached the housing market.
If its profitable I win,
and if it isn’t the taxpayer loses.
Housing? I am living in a very comfortable 4by4 RV with my dogs. I can go literally anywhere with it and get away from everyone. I don’t need any campgrounds because I am totally self-contained, including solar. My only expense is a little bit of gas and occasionally having to buy water if I can’t find a potable source plus food and a few essentials.
Sometimes it’s a hard lifestyle. For example, I spent part of yesterday hunkered down because of high winds. I went into town and parked by some buildings which mitigated it. But I managed to find a really nice little café while there and had a great dinner. My expenses so far this month are around $500, which includes eating out occasionally, but I haven’t done much travel.
I am in the west, where there’s lots of room and places to camp. This is not something that would be easy to do in other places. I owned three houses, all very nice, but since I am single I don’t need much space and I got really tired of paying taxes and upkeep. When I get tired of camping, I find a cheap Airbnb for a couple of days. I know most people can’t live like this, but it is way off the hamster wheel. I do have a passive income, so I don’t have to worry about finances-that is unless I decide I want another house. It’s unbelievable what houses cost, not only to purchase but also to maintain. It’s just not worth it to me. And even though I am vaccinated, I don’t have much contact with anyone so I don’t worry much about the virus.
I believe in living life, not worrying if my money is disappearing into poor investments. I am not a kid anymore, I’m 70, but I do have enough that if I can’t live like this anymore I can rent something. The freedom from all the BS is an incredible feeling. I have lived like this off and on since I was 47 and quit my last job in high tech.
In a couple of weeks, I’ll be heading north into Yellowstone country for the summer. Every morning, I wake to you the sun and go to sleep with the moon. I enjoy photography and have some incredible shots that I would never get if I lived in a house. For example, sunrises and night sky photos. Not to mention lots of wildlife. Last night I went to sleep to the sound of coyotes. I know many of you are urban dwellers, and I encourage you to reconsider your lives and what you’re doing. There are better ways that aren’t expensive. Best of luck to everyone.
Good for you. Most of us have too much stuff including debt.
Your story is why there is an excess of houses for people to actually live in. They’re being traded as get-rich-quick assets, but insofar as shelter goes, there are too many based upon demand to actually reside in them.
I don’t know how many homeless people there are in this country, but I’m sure they would love to have houses. I don’t think I am a rare case, but a lot of the people I see wouldn’t live this lifestyle by choice. Of course, most of them don’t have the resources I do.
I’d venture to guess that most of the people I see living in parking lots and places in busted up RVs don’t want to be there, they just have few choices at this point. All of the once cheap rentals are long gone. It’s despicable what Weimar Boy Powell and his cronies have done. In my opinion, worthy of capital punishment – or frontier justice.
Could be BS, but I read somewhere the Weimar Constitution was written well enough that South Korea (maybe others) adopted it.
Realize that’s not your “Zimbabwe” point…….just interesting, if true.
Thanks for sharing your story. I love the simplicity of how you exist on this planet. It takes a lot of wisdom and emotional intelligence to not be hypnotized by tradional human tribal instincts that reside deep within our crocodile brains. I supsect you have always been a creative and open minded person who is not afraid to try something outside the box of what society (actually the wealthy mostly) deem an appropriate blueprint for how to exist. Life does not have to be so complicated, the way society is headed, life gets more complicated by the minute, unfortunately by design..
The world needs more people like you! Best of luck to you also, Colorado kid…
Thanks for your really nice comment. Some people aren’t so nice about my lifestyle, but I found that simplicity really is the best way. Sometimes people say I’m not doing my share for society, but I paid over 12 K in taxes this year, so I don’t feel bad about using all those things that go with civilization, like the highways I travel. The key is to get out of debt.
Your share for society? What kind of fool says something like that? The only thing any of us owes society is not to be a burden on anyone else.
Jdog i agree I am referring to things like paying for my share of the highway and infrastructure that I use. I don’t feel like I owe anyone anything, but I do like to donate to good causes. For example, I was in Montana a few years ago when there was a big fire and I donated to their local Humane Society to help house animals that had been Impacted by it. I try to make every place I go a little bit better by my presence, not worse.
Hey bro, right on! I’m 70 too, but I had to work a lot longer to get free of the grind.
I’ve traveled through Wyoming a few times, and one thing that stuck in my mind, flashbulb-like memory, was the beauty of the Teton mountain range.
I’ve lived like a hermit crab most of my life, but finally settled in a permanent shell (married a Thai woman, who owns house and has government pension).
“I believe in living life, not worrying if my money is disappearing into poor investments. … The freedom from all the BS is an incredible feeling.”
YEP! Especially if you can adapt to a culture that has its problems, but still has the old politeness and reserve between people. Not people’s angry in-your-face unhappiness too often experienced in high-density America.
I really enjoyed your story.
Your choice of austerity has all my respect. It is very rare (but not unique cause practiced routinely by monks and philosophers).
Yet I am curious to know what a person of your wisdom finds nice in social isolation (I might wrongly take your story for complete).
I actually don’t feel like I live an austere lifestyle. I am rich in the beauty of the natural world and the friendship of my dogs. I have friends all over the west who invite me to come visit. I’m not antisocial, I do enjoy people, but in small doses. I don’t know that I have any particular wisdom that anyone else doesn’t have, I am just independent and stubborn and don’t like being told how to spend my money.
Thanks for sharing; truly inspiring.
This lifestyle is not for me, but yet it is a mark of inner greatness that I recognize and admire.
I mostly see around me the people that are self-absorbed and ready to pay whatever it takes for winning in everyday competition.
These values are not evil per se, but in extreme quantity these values turn the people into indifferent robots that hate the whole Unverse including other people and themselves.
Once my kids are grown, this is my ideal. You mentioned your RV is solar; does it have the ability to hook up to a campground power supply if you find one available?
Yes It has a 30 amp connection and a roof mounted ac. I have stayed in campgrounds when visiting friends who didn’t want to Boondock, as well as when I just needed to be in town to do laundry or that kind of thing. For example, one of my dogs needed some teeth pulled so I stick around for a few days to get that done and make sure she was OK.
It seems that in the future, we should use our houses as investment vehicles so we can drive around in our motor homes. Brilliant! But who would live in the houses?
“ The winner in these crazy bidding wars isn’t the buyer. It’s the seller…”
If some PE funds get tagged, I’m okay with that. The winner is inflation, and RE agents.
There appears to be a drop in sales transaction volume, which might precede a huge price drop.
For example, look at how sales transactions peaked in 2006, then prices started plummeting a year or so later.
Another takeaway from 2006 is that the drop in prices played out over 5 years from 2007 to 2011. It was a brutal period for anybody trying to sell a home. Many sellers chased the market down for years, trying to maximize sales price. If they simply sold at a discounted price early, they would have come out much better.
Transaction volume is an early indicator. If it continues to drop, prices could be down a lot by Spring 2022. Anybody thinking about selling should be doing it now, before the rush. Better to be a little early than deal with the headaches of a 5-year RE down cycle.
The first indicator of trouble in 2005 was a lot of houses that were for sale started sitting on the market for more than 30 days. That became 60 days.
The next thing that happened was houses for sale for a long time were then listed for rent.
Then the defaults started in California and spread eastward to the rest of the country.
Price declines started in 2008/2009 and continued for 3 years as the subprime market imploded.
I haven’t seen much of any of these things happening around here yet.
I’m closely watching one of the hotter markets. There is already significantly more inventory. The market also appears to have already stalled with properties starting to sit 30+ days. The # of DOM’s before there are any sales is definitely climbing and tend to be for asking or below. I have only seen 1 or 2 sales recently that were for well over ask. Price reductions are occurring and even then some are still not selling. Interestingly, it appears that what little remains of the FOMO behaviour is heavily weighted to the suburbs instead of the rural properties were that activity dominated. I’m also hearing increased discussions that the purchasers didn’t think through the location of their new abode (type & distance to amenities & people, distance to work, running costs & work, weather, etc). Kind of like they are deciding that if there isn’t a pandemic they really don’t want the rural lifestyle.
People here and there know the 1981 algorithm is popular with me. East Asian countries in particular with an affinity towards gender selection, male, while aborting females for instance. Many men are wifeless today, time on there hands, up to mischief buying RE in North American for shadow PEs. How many 40 year old spooks gaming the world with their inefficient nuts? Too many. Danger to us all
Many people are buying homes because the interest rates much lower than inflation rates. On Wall Street, this is called arbitrage profits.
On top of that, the housing policies put in place during 2008/2009 caused a shortage of single family homes. These policies were a huge mistake.
Put those two together, and you have a huge rally.
The only things that change, one bubble to the next, are the faces and narratives.
And the market is locked up….thanks to the Fed putting rates at these levels.
Have 30yr mortgages EVER BEEN below the inflation rate?
So material inflation is rampant, people see the replacement cost of their homes rise 35% in five months..
So now you have people with cheap money courtesy of the Fed looking to buy…and the sellers pull out or put a stupid number on their house knowing the replacement costs are crazy
Nice Job Powell and the Fed…market is locked.
No market can go parabolic forever. I don’t care what the talking heads say. I also don’t expect it to plateau. Though the dynamics behind the crash will be different than the last time, it will still be a crash.
the “casino” just punches more chips…this is new….
Simple logic dictates that for every 1% prices increase, a certain number of people get priced out and are not able to buy. Think about that for a minute. As prices increase, the prospective buyer market is made smaller and smaller and smaller… At some point it becomes too small to keep up with supply and prices have to drop to compensate. As prices drop, panic ensues in the people who bought only for profit, and they then dump their property on the market trying to retain as much profit as possible. This exasperates the problem and soon you have a crash.. It is always the same.
We’re buying a house on 5 acres near the beach in a beach town – 2 miles from the beach – it has a well it has propane it has septic… check check check it is woodies but near a fire station so we do not have to pay extra fire check
It’s a modular but with the land we can build …. the sellers dropped the price by 10%
This is coastal California mid section- I would have paid this much 2 years ago
There are still deals out there but not where ordinary folk are looking
Currently renting in the greater Boston area and planning to sit tight to see what happens over the next few years. Guessing when the everything bubbles begin to pop, can easily pick up a 55+ home in Tucson for a cheap price compared to today. Maybe the rates might be higher then but hopefully would drop down again and support a refinance. Given the likelihood of serious economic troubles when the bubbles all pop, I would expect to see rates at zero again at some future point.
Affordability is driving the market for houses here in the Swamp. As long as the mortgage rates remain low the party will continue. When the 10 year Treasury breaks out of the current trading range and goes over 2% it will be game over. Mortgage rates will approach 4% and the houses will be out of range for most new buyers. Houses for sale will then sit on the market for weeks and months. The shadow inventory will come up for sale when it is no longer profitable to hold onto second homes, and forebearance properties. It will be 2006/2007 all over again but for a different reason than the subprime meltdown.
It’s amazing people think this is sustainable. They must think Jerome Powell is Zeus or something.
If you act like a sheep, chances are good you are going to get rounded up and slaughtered. Investing in chaotic, out of balance markets like the current housing market, is a fools game. However, if you live in Nazi states like CA or NY, you are wise in the long run to escape tyranny at any cost.
Didn’t take me long to get used to saluting, but if you don’t like doing that, yeah, probably best you stay away.
1. all the forebearing payment will extend mortgage payment instead of instant lum sum payment
2. existing supply and demand stays same,
3. recent buyers lock in the fixed mortgage payment with low rate so they won’t be impacted by rising rate
what does history show the impact of inflation upon housing price? Some says housing price will go up the same way as general goods, ex:
Well, I’m not Wolf but this is a public forum:
1. The end of forbearance doesn’t trigger a job offer for each borrower. Some will be unable to resume payments and be forced to sell. Increased supply.
2. Inflation could run so hot that interest rates must increase and that would affect home buying power. Decreased demand.
3. “recent buyers lock in the fixed mortgage payment with low rate so they won’t be impacted by rising rate”
Some think there could be a problem if work from home opportunities end and the worker moved too far out for comfort. I don’t think this will be a big issue myself.
People are also buying with their COVID lifestyle budget of not travel, not going to events, etc. Once everything is open again they will realize they cant afford to keep up with maintenance, mortgage, and have the lifestyle they want now that everything is open. Add in inflation on everyday goods, and people cant afford as much for housing.
Investors are driving this market.
$75K median household income in a $750K median house. What could go wrong? I hope nobody’s A/C condenser or water heater bites the dust. Cuz real estate agents don’t talk about those things.