Central Banks Did it, Won’t Admit it. Top OECD Housing Bubbles: #1 New Zealand, #2 Canada, #7 USA

According to “Bubble Ranking” by Bloomberg Economics.

By Wolf Richter for WOLF STREET.

It is just so much fun to watch central banks denying that there are housing bubbles, and even if there were housing bubbles, denying that they could be seen, and even if they could be seen, denying that monetary policies are responsible for them, and even if monetary policies are responsible for them, denying that monetary policies could be used to deflate them or prevent them in the first place.

Central banks say this after spending years repressing short-term interest rates via their policy rates – often now into the negative – and repressing long-term interest rates via asset purchases, including housing bond purchases, such as MBS, and thereby driving down mortgage rates, which then trigger enormous price increases and soon housing bubbles.

This is a huge accomplishment by central banks to pull off – denying that bubbles exist and then denying, after their existence can no longer be denied, that central bank monetary policies caused them, and then denying that central bank monetary policies could fix those bubbles (by raising rates and unwinding their holdings of securities).

This time around, the whole thing of central bank monetary policies got topped off with historic amounts of government spending on stimulus initiatives in many countries around the world, which then got topped off by people working at home and looking for homes to buy to move into a bigger place, which then got topped off by booming stock markets that made some people feel richer and more willing to splurge on a house no matter what the price.

So where are we today with this, for OECD countries?

Bloomberg Economics has a “Bubble Ranking,” based on data from the OECD. Not all candidates for the most splendid housing bubbles are members of the OECD, such as China. So this list doesn’t include China and other non-OECD members.

Most of the data from the OECD is through Q1 2021, thereby having missed the price spikes of the past two months. But it will do.

Five indicators go into the Bubble Ranking, according to Bloomberg Economics. In addition to two price growth measures (home price gains adjusted and not adjusted for inflation), it uses two measures (price-to-rent and price-to-income) to assess if these price gains are sustainable:

  • Price-to-Rent Ratio
  • Price-to-Income Ratio
  • Real Price Growth (year-over-year price growth adjusted for inflation)
  • Nominal Price Growth (year-over-year price growth not adjusted for inflation)
  • Annual Credit Growth.

Based on this method, New Zealand and Canada occupy the top two spots of the “Bubble Ranking.” And there has long been no doubt about this.

The US is in 7th place, as the price-to-rent and price-to-income ratios are not as red-hot as in some of the other countries. But the US is #2 in real price growth, behind only New Zealand, and #3 in nominal price growth, behind New Zealand and Sweden, but ahead of Canada.

Here are the top 15 most splendid housing bubbles of the OECD, as per Bloomberg Economics Bubble Ranking. The red fields show the top three per indicator:

Some individual central bankers, including in the US, have now come out and referred to the housing market as a “bubble,” or have referred to it being called a bubble by others, and have stopped denying it.

There is now also a cascading move underway for central banks to remove accommodation of the markets. Some have already started raising rates, others have announced that they will raise rates, others have cut back on their asset purchases, including the Bank of Canada and the Bank of England. The Fed is gingerly preparing the markets for the same by jabbering endlessly about it with conflicting messages.

But even as central banks are beginning to back off, don’t expect them to take responsibility for the bubbles they have purposefully created.

And for your amusement, the Most Splendid Housing Bubble in America and of course the Most Splendid Housing Bubbles in Canada

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  165 comments for “Central Banks Did it, Won’t Admit it. Top OECD Housing Bubbles: #1 New Zealand, #2 Canada, #7 USA

  1. MonkeyBusiness says:

    New Zealand will be fine. Bezos is thinking of Mars as his escape hatch should things get ugly here on Earth, but the other billionaires are thinking of New Zealand.

    Covid free with great nature.

    • MarMar says:

      New ZealandERS, on the other hand, esp those who don’t have a lot of money and can’t pull together a down payment, are not fine.

      • Thomas Roberts says:

        Ironically, the 1% will be made into fine burgers and auctioned off. With only the upper middle class (the 1% to 20%) being able to afford to eat them.

    • Lenz says:

      You really believe billionaires will move to New Zealand?

      We had the pleasure to work in Wellington for a whole year, thought they were fanatics about their mayo, but later realized that every outdoor dining had a big bottles of sunblock smack in the middle of each table. The water is freezing cold in summer, the sun cooks you in a few minutes. Don’t believe the hype. And unless you enjoy a nice massage every few weeks from an offshore earthquake no one is going to New Zealand anytime soon aside from Peter Theil and Cameron.

      Better get a nice hacienda on those pretty hills in Acapulco.
      Oh and the wind was “horizontal”.

      • ma says:

        Dude, you moved to Wellington and expected warm water and rain that fell vertically?

        It’s a pity no one told you the only reason anyone in NZ goes to Wellington is to catch the ferry to the south island…

        ;)

      • Xabier says:

        Billionnaires eat US: never, ever , the other way around.

        One may be taken down by another clique or retired for PR purposes; but that is the Game of Kings, not our business at all.

    • MCH says:

      There is actually a petition for Bezos to stay in orbit and not come back if he is successful in getting into space on his Blue Origin rocket.

      It’s kinda funny.

      Somehow, these guys have all become defined by how much money they managed to make. It’s really kind of weird. Everyone hates him because he created a company that disrupted a whole bunch of crap, and made an obscene amount of money. As if somehow being rewarded for his effort was a crime.

      • Fat Chewer says:

        Bribing Federal government employees IS a crime!

      • topcat says:

        “Disrupting” = not paying state sales tax and hence undercutting the bricks-and-mortal local stores who actually paid tax and employed people.
        Excellent.

      • phusg says:

        As if the government taking a cut of his rewards to reward everything they have done to make his entrepreneurship possible was a crime.

      • bb says:

        Rewarded for his effort???Really???Bullying smaller bookstores and publishers so he could add to his concentrated power and Billions?Greed,it’s called Greed.He then has the goombas to play poor and extract millions from struggling cities and towns and minimum wage workers so he gets tsx writeoffs,breaks,etc.Unions get thwarted,workers fet disabled or deaf on jobsites,he gets taxpayer $$ for kid deductions.It’s disgusting how greedy and selfish he and some of these other uber rich are.They are Ruining the planet,not average Kenyans,Vietnamese,Aussies,poorer Americans.

        • Yerfej says:

          He played within the rules society created, don’t fault him instead look at political and bureaucratic leadership.

    • Lynn says:

      Well, so far over 121K people have signed that petition to not allow Bezos back to earth, so I guess he’s been planning ahead.

    • Sam says:

      I am in New Zealand. It is fake economy. Burger King Burger is $8, Subway foot long is $12. Humidity is always 90 % in Auckland.

  2. Dave Mac says:

    I can hear the feeble excuse given when every bubble bursts spectacularly:

    “The assets and currencies collapse is a Global phenomenon”

    In other words, don’t blame us!

    • Yancey Ward says:

      Yep. That old saying that it is ok to fail if everyone else makes the same mistake you made is pretty relevant here.

    • K says:

      Amen. I do wonder if there may not have been an exchange of favors: e.g., the billionaire-owned, “Federal” Reserve may have given credit to the cronies of the ECB in exchange for those cronies investing some of the money in the US stock and RE markets. Otherwise, the heights to which the stock market has risen are utterly, just insane. The RE market is not far behind.

    • MonkeyBusiness says:

      Don’t forget the classic “No one could have seen this coming!!”

  3. Marco says:

    There is just no longer any Political or Media accountability of the Central Banks, they are undemocratic, anti-capitalist and completely rogue !

  4. Bubble what bubble? says:

    My advice to my young kids, as soon as you are old enough leave NZ for Australia. NZ is not the utopia people think it is. Yes there are many things I love about it but sadly it’s heading in the wrong direction. Housing, cost of living, immigration rates causing social problems, incompetent govt. Covid free by luck….

    • ram says:

      Australia is not so hot now either. Hopelessly systemically corrupt government, droughts, fires, floods, massive environmental degradation, and absurdly high real estate prices, even in the middle of nowhere.

    • c_heale says:

      Many NZ were already working in Australia for a few years to earn enough to buy a house. It’s not new. Australia looks more of a risky bet for the future due to global warming, and a low amount of nutrients in its soils due to its geographical history.

      • c_heale says:

        Sorry, meant to say Many New Zealander were already working in Australia back in the year 2000 for a few years, to earn enough to buy a house

        • Thomas Roberts says:

          Global warming in many scenarios will move the ideal part to live in Australia, to the south west coast of Australia. Australia because it’s richer will be fine, most of the losing countries, would be in Asia (including middle east) and Africa.

          In richer countries, there will be the ability to desalinate water for the cities and have agriculture away from the people, in more ideal growing areas of the country.

          In poorer countries, large distance from farmland, often equals malnourished.

          The small population only 26 millionish and certain resources like iron ore, benefits Australia as well.

    • Joshua says:

      Move to Indonesia.

      • Paul N says:

        Am in northern Sulawesi at the moment. Most of Java island is with restrictions even lockdown. We are living in freedom since this is very rural area.
        Perfect SHTF place to wait out the coming apocalypse with lobster 🦞 and 🍺

    • phusg says:

      All that distant lush looking grass is not the utopia you think it is.

    • IanCad says:

      A few years back I must confess, but a former NZ Prime Minister, who, when questioned about the exodus of young Kiwis to Australia, responded that it was a good thing as it raised the IQ of both nations.

  5. Paulo says:

    Canada has been talking housing bubble for some time now. Well over a year….long before Covid. This is not a secret.

    Once again, stats are misleading. Like many places, if you take the top 4-5 RE locations out of the Canadian equation, prices are relatively modest (just like OK compared to NYC, or better yet northern NY to NYC). Often called flyover, if you can work from home, what difference does it make?….. My son in law works for the Federal Govt and has a pretty high end job with lots of responsibility. He works from Ladysmith BC, on southern Vancouver Island. He bought his house 15 years ago and would quit before he moves. His boss lives and works in Ottawa. He has been doing this long before the pandemic or the latest RE boom. My son owns two houses, one where I live in the boonies with riverfront acreage, and one in a nearby small city with an ocean view. He works in northern Alberta, but his cost of living excluding fuel is much lower on Vancouver Island than where he works. He rents out one house to a friend of mine and has tenants in his house in town. The renters pay most of his mortgage mainly because he reduced rent for good tenants. Otherwise, the rent would pay for everything including his suite. Other locations such as northern Vancouver Island, northern BC, the Prarries, and definitely the Maritimes are very very affordable. It depends on the local economy. The Island attracts retirees due to the mild climate and this keeps prices higher than other locations.

    The other ‘problem’ issue comparing countries with just one variable (like the housing bubble) is that it does not take into account other advantages. For example, at 65 I have never had a medical bill much less pay premiums or co-pays. If this is factored in, could people make a bigger mortgage payment? Most certainly.

    In short, the comparison isn’t worth much at all except for linking crazy low interest rates to increased demand, everywhere. As every agent says, “All RE is local”.

    And here’s an interesting stat which may apply to NZ and other OECD countries as well.

    Over 10,000 U.S. residents immigrated north in 2019 through Canada’s Express Entry system.

    This represents a significant increase from the 600 U.S. residents who immigrated through Express Entry in 2015.

    Express Entry is the main way that Canada manages skilled worker applications.

    Apparently, this year the applications are even greater.

    • looongtime reader eh says:

      JFC! I don’t know whats more tedious: watching scotty kilmer flapping his arms trying for escape velocity while bragging about his expensive scan tool or paulo’s constant bragging aboot vancouver island. vancouver island. vancouver island.

      ok ok we get it. yer on vancouver freeggin island.
      your a pilot. a prophet. a god

      must you mention it in EVERY. single. post!?

      (yeah, I know you mention it for reference but after the 3rd time it really seems smug)

      • Angel says:

        looongtime it sounds like you need to follow your dreams by moving to VI!

      • Nicko2 says:

        I lived on Vancouver island for a while. The place is no paradise, it rains 10 months out of the year, there is no sunshine, it’s a damp, dank island, full of mostly old people from the prairies counting their money.

    • Angel says:

      Okay Paulo has fair points. There is a relative/localness to RE prices and cost of living. If you have high prices you have higher costs, wages and opportunities but also more debt and competition. If you are in a low price area, you have lower costs and competition but also lower opportunities, services and probably still in debt. This hasn’t changed despite the pandemic. It’s still the story of the prince and the pauper or the city mouse and the country mouse. Pick your poison, however,…

      Most Canadians do not suffer the same medical poverty issues as our southern neighbours, and yes, this helps create financial stability and increased funds for other costs. Most visits to doctors and hospitals are covered by the government health plans, but dental, eye/glasses, physiotherapy, etc are not. One issue within BC is the cost of ferries to get to appointments, which often requiring overnight stays in hotels. These are all uncovered medical expenses that are a financial drain. If you have a serious disease or chronic condition it will drain your wealth and potentially bankrupt you. Just ask most of the seniors, someone with a disability, chronic disease or those who have cancer.

      As for Alberta, with O&G it’s a boom to bust cycle. For awhile now, it’s been mainly bust so price appreciate as only recently grown with the parabolic bubble. Check out the price history of Fort McMurray and it is definitely also in the hinterlands.

      Most of Canada’s population is and works within a stones throw of the US border. There is climate and geological reasons for this and no you are never going to be able to develop the majority of the CDN land. It’s not feasible. This has significant impacts on both availability of employment, pay, living costs and RE. Again pick your poison. Country mouse or city mouse?

      The latest run up has caused tremendous contagion. Look at London Ontario and the prices in the Maritimes. While, yes the prices relative to Toronto and Vancouver are still very cheap, there isn’t the local pay to support the higher RE prices and it is forcing locals out of the RE market within their home communities. The growing anger around this isn’t unique to the States.

      Additionally, I’m glad Paulo’s son has been successful but it’s also because he got in 15+ years ago. I’m younger than Paulo and so are my son’s. Despite my son’s talents and potential, without a significant helping hand, they will be quite old before they can achieve what was possible 15+ years ago. If history repeats itself, a bust isn’t going to make this better as it will destroy their opportunities. They maybe a lost generation. Without help from us &/or an inheritance, they will socially mobile down regardless of making all the right moves, hard work or sacrifice.

      • MiTurn says:

        “Without help from us &/or an inheritance, they will socially mobile down regardless of making all the right moves, hard work or sacrifice.”

        Same story, different place (Idaho). Well stated, Angel. Success is often a combination of factors that one sometimes does not control over.

      • Ron says:

        Buy a fixer upper you’ll be fine

        • Angel says:

          LOL – You know those fixer uppers are going for around $1-$1.5M unless you go where there are few jobs to support that mortgage!

    • Pete says:

      So many skilled workers leaving Canada for US or Europe or Australia;
      Lived in Canada for over 10 year and moved to the US 7 years ago.
      US has lower taxes, higher payed jobs, much better health system ( even its not free, but 95% covered with good insurances, lower cost of living ( including housing of any kind, gas, internet, you name it)

      • marc says:

        I’m glad you’re mentioning it. Health care in Canada sucks. It’s free but there’s no care. A glorified Cuba.

      • Yerfej says:

        Exactly. Its tiresome to listen to people crap all over the US as if its all Detroit. The reality is you can live and work in the US and retire with much sooner with the savings from the lower cost of living.

  6. Bobber says:

    INFURIATING !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

    Prices in some cities triple in a decade, and that is supposed to be normal ??????

    The price of a dwelling goes up 15% in a single year nationwide while wages stagnate, but that is normal ????????

    Annual deficits equaling 20% of GDP ????????????????????

    Interest rates pegged at 0% ????????????????????????????????????????

    WTF !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

    Then, this morning I hear that Peter Thiel somehow accumlated $5B in his Roth IRA, when the annual contribution limit is about $6k per year. Does anybody bother to think this might be a violation of IRA self-dealing rules ???????????????????????????????????????????????????????????????????????????

    Perhaps Wolf and his commenters are the only sane (and honest) people in this world.

    • Wolf Richter says:

      Bobber,

      In terms of your point about Thiel:

      I could also set up a Roth IRA that will then buy from me my 5 million shares of Wolf Street Corp for $0.0001 = $500. Then when Wolf Street Corp goes public via merger with a SPAC at $100 a share, I will have $500 million in my Roth IRA forever tax-free. Then I invest this money in Super-Duper startup at $1 a share, and when it goes public at $100 a share, my Roth IRA will have forever tax-free….

      You get the idea.

      Thiel put his PayPal shares into his Roth back in the 1990s at something like $0.0001 a share when he started it up along with some other people. It became a very valuable company. He could then sell his shares tax free and buy other investments and keep those gains also tax free.

      The Roth IRA is another vehicle for those with unique investment opportunities to shelter their income.

      • MCH says:

        Remember Wolf, it is also possible that investment could have gone to zero. In which case, nobody would’ve given a damn.

        It’s odd how we target the successful. And all of it so that we can ride the current populist mantra of soak the rich to pay for free stuff in the name of equity.

        It’s like saying someone bought a penny stock in 1997 or whenever that was when Roth IRA became possible. Then those shares rose and the person involved, either through day trading or through a series of successful investments managed to parley that into a billion dollars.

        I just fail to see why this is a bad thing.

        Thiel did something unique, but within the rules, why should he be punished for it. The purpose of your earnings is not so that the government could soak you willy nilly to fund its own irresponsibility.

        • Bobber says:

          Who’s targeting the successful? The topic is tax scams, and who’s doing them. The fact that many wealthy taxpayers participate in the scams is no reason to show leniency.

        • Bobber says:

          As for what’s legal, do you get upset when somebody cuts in front of you while waiting in line, or intentionally spits in your shoe? It’s legal, but there’s a reason we don’t teach that behavior to our kids.

          So why is there a need to defend people who magically stuff $5B into a Roth IRA, contrary to Congressional intent. Society is falling apart because people think its OK, if not smart, to game the system in dubious fashion. Putting a corporate or billionaire label on the behavior in no way cleanses it. They are the same as the jerk cutting in front of you, only it has much greater consequences.

          Of all the people who participated in this scam, Warren Buffet should have recognized the societal issues in play. You shouldn’t argue for increased taxation on one hand, then exploit every dirty loophole when nobody is looking.

        • MCH says:

          Bobber,

          there is no reason why others can’t use that loop hole. The fact that they outed Thiel for it is likely because he had a few billion stashed away. I wonder how many others used the same trick. What he is doing is not a scam, it’s perfectly within the bounds of the law.

          As for intent, it’s a bogus argument, Congress could’ve set up the law in such a way that capped the Roth in the first place, or not even allowed such a maneuver. Society is not falling apart because people are playing by the rules.

          Society is falling apart because it was too uneducated in the first place and allowing a bunch of charlatans to be put into power and allowing them to make laws that are patently self serving.

          And by the way, American society isn’t getting any better, it’s trending more and more toward idiocy. You just have to look at the failing school system to see it, the most important question around school now is not about educating kids properly so they understand basic economics, know basic math, or be able to write a coherent paragraph.

          One look at SF school district in the last school year, and you immediately get the picture, renaming schools because the name might offend the uneducated was actually more important than figuring out how to get kids back in school and making sure tax payer dollars weren’t being wasted. Now, American society is all about complaining why someone else appear to have a better outcome. It’s just stupid.

        • bb says:

          Not about success.Its about privelaged connections,special information,special taxbreaks often created just for a handful of megawealthy people who do not need them.Anger is about a handful who get insanely rich while most work longer and harder to make less than they would or did make years ago paritywise.Anger is about the inyourface Greed and Selfishness and Ego,not about fairly earned success.Policy benefits some while targetting others.

        • Kurtismayfield says:

          @MCH

          “Society is falling apart because it was too uneducated in the first place and allowing a bunch of charlatans to be put into power and allowing them to make laws that are patently self serving.”

          When the people are given the choice of self serving charlatans of the red flavor, or the self serving charlatan of the blue flavor, you have to stop blaming the people and blame the system.

        • EcuadorExpat says:

          In the USA, you don’t have to make a lot of money to get rich, you just have to stop paying taxes, to which I and most independently wealthy persons can attest.

          When Rockefeller was being vetted by congress to become Vice President, he was asked how much personal income tax he paid. He said “zero!” Nobody blinked, and the hearing continued. I paid attention.

          The current tax code is about 70,000 pages. Fewer than 5 pages apply to individual USA CITIZENS. The rest is tax breaks for businesses and the wealthy. It is so complex that many large corporations file such complex returns that the low paid goons in the IRS cannot understand them, so they go after the low hanging fruit, the peons and small businesses.

          If you understand the tax laws to the degree you pay (almost) zero taxes, no taxpaying entity can compete with you. As ranchers, my parents paid zero income tax for most of their lives. My mother died with a ranch, zero debt, and $600k in her safe deposit box.

      • David G LA says:

        So based on this, it seems the rules should be changed – can only put publicly traded shares into a Roth. Problem solved. I’ll email Bernie and Liz.

        • Wolf Richter says:

          There is some discussion now about changing the rules after the Thiel disclosure. But I doubt it will happen. This has been known for decades, and in fact has always been a feature of the Roth. It’s just no one talked about it on the front pages of all the media outlets.

        • MCH says:

          All this complaining seem to be focused on the wrong thing. Which is what Peter Thiel did.

          The real unanswered question is how widely is this rule of self directed Roth used, and what is the actual result for all of those who use the rule. People take these perceived inequities and whine about it seem to not even want to understand the bigger picture in the first place.

          And isn’t it odd the timing of all this. Suddenly, at the most opportune time when anybody who is rich is being bashed, a sudden leak occurs. It’s as if the media suddenly discovered, holy crap, Bezos, Thiel, Buffet, Gates and a bunch of other people are filthy rich.

        • Bobber says:

          MCH,

          “As for intent, it’s a bogus argument, Congress could’ve set up the law in such a way that capped the Roth in the first place, or not even allowed such a maneuver.”

          That’s clearly incorrect, and it cuts to the heart of the ethical issue. The intent was obviously not to let wealthy people stuff $5B of gains in an IRA. That’s why they put clear and strict contribution limitations in place. It was sold as a middle class retirement savings benefit, not a gimmick to make billionaires wealthier. Do you actually think the intent of Congress was to provide tax subsidized retirement security for wealthy people? That’s a non-starter.

          Limits WERE intended, but they were ineffective because nobody expected billionaires to work so hard to exploit a loophole. They also didn’t know private companies could go from zero to $500B in valuation in a decade.

          And you can’t expect the IRS to catch this stuff. The Peter Thiels of the world have been successful in reducing the IRS budget by 30% since 2010 in a world where tax evasion is rising. As a result, audits of individual tax returns are down by more than 50% since 2010 according to the latest IRS databook. They tried to close the loophole in 2016, but Republicans wanted nothing to do with it. When you factor that in, the raping of our tax system via loopholes starts looking systematic and intended to me.

          Thiel is no different than the guy who walks up to the buffet and eats the whole thing while people are standing in line. He assumes nobody is going to stop him. Why should the rest of us tolerate, much less apologize for, this unethical behavior.

        • MCH says:

          @Bobber

          Hint, when he did the self directed Roth IRA thing in the first place, he wasn’t a billionaire. That he became one after the fact and ended up with a significant portion in his Roth IRA is purely incidental.

          Get a clue, he didn’t stuff $5B dollars of gain into an Roth IRA. He started with almost nothing in that Roth in the beginning. Seriously, did you even read or understand the article. It could’ve gone differently, at any one point, it could’ve failed. His paypal options might have become worthless. His investment efforts could’ve been a disaster (Facebook never getting off the ground), etc, etc. What he accomplished through some degree of skill with assets in a tax sheltered account is not him deliberately being unethical.

          Let me address it this way. Let’s say you had $10K dollars at the beginning of 2001 due to the internet boom in your Roth IRA account. (now, instead of a self directed Roth, you had it in a plain brokerage account). By picking right stocks and doing the right options, you managed to get that to a billion, how is that ethically wrong.

          Seriously, do you even have an idea of how this stuff works, or did you even read the article? Or just the headlines and formed your opinion.

      • Old School says:

        I heard a financial adviser recommend 20 years ago that an individual should put his riskiest investments in a Roth IRA. If you are fortunate to hit it big it is tax free.

        I like to keep REITS in a Roth because income passes to individual tax free and so the income is never taxed at corporate level. Seems like a loophole that you can keep a trust in a retirement trust.

    • MCH says:

      Meaning Thiel was not an idiot. Can anyone blame him him?

      The fact that he somehow managed to set up a Roth and dumped his Paypal shares in early on is not a knock against Thiel. He did some homework, and leveraged the system.

      It is as Wolf said, a unique structure, but obviously not illegal. Why bother being outraged about it.

    • Sam says:

      Thiel is some how lucky billionaire and most stupid as well. Who wants to come and invest in New Zealand?
      There are many better countries and geographically central in World. New Zealand is end of globe where 24 hours minimum travelling time. Beaches having black volcanic sand and cold water in Sea even in summer!

  7. Angel says:

    Reading the article I couldn’t help but wonder if Canada could give back it’s silver medal in this category. This is an award I would prefer that we had not won.

    Serious question. NZ and CDA have had the sharpest vertical climbs in the last 6-10 months and as a cherry on top, neither blow out in the ’08 bust. Therefore, our #’s are even stupider than everyone else’s. Assumably, this will change the degree of impact and mean that the 20-30% correction calls for other countries would not apply to these 2 countries. Therefore, the drop, like the parabolic rise, will need to be equally parabolic. Add in the ever increasing historically high leverage held by households, that the market was extremely soft when the pandemic hit and insolvent government debt levels there is additional weakness and high risk. That is what I’m reading and makes sense to me, however, I haven’t heard any real discussion on how this might play out differently for NZ and CDA. Has anyone heard any analysis? Anyone talking about this? Any theories, data, history to fall back on? Data, charts that predict what might happen? Thoughts on contagion?

    • Johnboy says:

      Jacinda Ardern is simply Margaret Thatcher with a tilty head and fake empathetic frown. She has destroyed the young and poor kiwis who voted her in. Shame.

    • Anon1970 says:

      Toronto’s strong residential real estate market can be attributed to at least six factors: (1) It is a relatively safe city. In 2020, its homicide count was about 1/10th of Chicago’s. Both cities (not counting suburbs) have about 2.7 million each. (2) Toronto has experienced substantial migration from Montreal in the past few decades owing to French language laws in Quebec. (3) Canada’s income tax laws are very generous to sellers of their principal residence – no capital gains tax. (4) The Toronto area attracts a disproportionate share of new immigrants to Canada. Few immigrants are going to settle in remote parts of the country where there are few job opportunities. (5) Relative to its population, Canada admits many more legal immigrants each year than the US does. (6) Immigrants to Canada are typically admitted based on their job skills rather than on family reunification.

      • The Real Tony says:

        Number one is the Chinese both local and foreign. Without the Chinese being in Canada homes would cost about one-third of what they sell for today or would sell for about 66 percent less. The Chinese pay 1.5 to 2 million dollars for a townhouse in satellite cities that would sell for around 50 thousand dollars in America.

  8. RP says:

    I live in NZ and the residential property market is insane…house prices up 30% a year on top of what was an extreme bubble already.

    Its good for me as I have a house and can make money, but young people and the poor are looking permanently shut out…so many of our young people leaving for Australia, where wages higher and house prices are cheaper.

    • ram says:

      Kiwis that came to Australia that I know, have now moved to Eastern Europe where they could finally afford a house and some land, and even a recreational piece of land out in the country.

    • Old school says:

      What did Fed expect if you facilitate people being able to borrow money at zero real rate with leverage ratio between 4:1 and 100:1 when the asset price has been growing at 4 or 5% above real rate for 10 years? FOMO is going to cause people to get in late on a leveraged overpriced asset.

  9. jrmcdowell says:

    “This time around, the whole thing of central bank monetary policies got topped off with historic amounts of government spending on stimulus initiatives…”

    Indeed it did and it was the monetary policy that enabled the government spending and stimulus initiatives. One of the difficult things about discussing MMT is that if you ask ten different economists what it is, you will undoubtedly get eleven different answers. But if the definition of MMT is the government spending money into the economy without issuing or having regard for the debt, we are already there.

    When the Fed buys Treasury bonds, that debt doesn’t need to be serviced as long as it sits on the Fed’s balance sheet. Fed officials are talking about tapering and interest rate rises in the future, but they’re not even pretending that they’re going to unwind the balance sheet. And if the Fed’s balance sheet doesn’t get unwound, that amount is purely printed money. This means we currently have a quasi-MMT financial system with two-parts debt and one-part printing.

    The old system of traditional debt issuance seemed to be a far more sound and honest system with the bond vigilantes providing discipline to the system, but unfortunately those days appear to be over as we enter the era of helicopter money.

    • Old School says:

      Feds policies of setting short term rate at zero and QE does reduce interest rates which 1) immediately increases market value of existing assets and 2) causes CEOs to consider financial engineering vs real capital investment 3) robs savers of interest income 4) encourages fraudsters to come up with financial products to provide yield

  10. Brad Ord says:

    The NZ situation is actually worse than it appears. Americans might feel their houses are getting pricey, but compare the price-income ratio. What’s more, the quality of the housing stock here in NZ is appalling. What would be tear-downs in the States are considered perfectly acceptable here. I live in a suburb of historic state housing, and about one in three houses is boarded up because they were in use as meth labs. If those places hit the market, they’d be expecting about about US$1.5m. In a country with substantially lower wages than the USA. It’s insanity, but the bubble has gone on so long that no one really believes it can pop.

    • jon says:

      The bubble pops when no one believes it’d pop barring few. This is the nature of bubble as it tries to suck in as many people as possible.

    • ram says:

      Australian house prices are also in a bubble. Matter of fact, ALL Australian real-estate is in a bubble: agricultural land, commercial space, factory space, and even “raw land” out in the middle of the desert. A side effect of this is businesses (unless they inherited the land or bought it long ago) can’t make a profit because the land is too expensive. The extreme costs of factory space all but wiped out Australian manufacturing. The costs of commercial spaces severely handicaps restaurants, entertainment venues, and retailers.
      Every time the cost of land goes up, businesses close and lay off staff resulting in ever higher levels of un- and under- employment. This can only come to a tragic end!

      • Janna says:

        Farmland here in the US is unbelievably expensive as well. I’m surprised that food costs aren’t higher. We bought farmland about 20 yrs ago, but we could never afford to buy now. Land improvements such as tiling runs in the thousands. Then regular maintenance and taxes run you a few grand more.

    • wiley says:

      Like to know the deets on who or what entities per country are buting up the land.Blackrock,Vanguard,Lloyds,Bezos,Gates,China are big buyers of U.S. Land.It should be limited especially regarding foreigners.Many will be corralled off the land and crammed into cities to make way for rewilding which theyre already doing in u.k.Gates supposedly bought big acreage in w. Texas.Thelandreport.org. Also heard land being used for $laundering.!

  11. Bob Hoye says:

    Good coverage.
    The problem is that intrusive central bankers really believe that their issuance of credit forces economic activity.
    Which is confusing correlation with causation. Yes credit expands with increasing business activity. But one does not cause the other.
    As we are seeing, the public decides where the extra “lolly” goes. And recently it is into intense speculation in financial assets and house prices.
    Both now to dangerous levels.

    • BoomBustProfits says:

      Imagine what life would be like under a sound money regime…where there was actual discipline enforced on that inherently inefficient, wasteful & coercive territorial monopolist known as Government….A lack of sound money (and the taxation/Government it funds) is the root of all problems. “The Feds Collect Most of the Taxes in America—So They Have Most of the Power”

  12. Jezabeel says:

    I live in NZ. Adrian Orr is the Reserve Bank Governor. He says it is categorically not his problem or mandate to control house prices. But! At first sign of trouble when Covid hit he dropped the OCR by 1% and dropped Loan to Value Ratios just like that – to defend house prices.

  13. “Impovernment of the booble, by the bauble, and for the bubble..” J.J.

    • Sit23 says:

      Yes, but NZ did win the Test Cricket World Cup, or mace, actually. That should put values up a bit more!

  14. Anthony says:

    When it comes to housing the question that always should be asked is, are there more people looking for housing than there are houses. I know in my own country of England (not the UK, as the other countries have different demand) we have many more people than we can build houses for.

    I’ve no idea what the true demand ratio is around the world but England clearly has a housing shortage and has had one for sixty plus years.

    • Old School says:

      I think USA figured stimulus wrong and put in too much to offset covid as Larry Summers said. Heard the number was $50K per person. People feel flush not realizing government borrowed $50K on their behalf.

      • jrmcdowell says:

        That money was not borrowed in any traditional sense of the word. Trillions of bonds were monetized to offset most of that debt and will likely be rolled over and sit on the Fed’s balance sheet for eons.

        • Old School says:

          Maybe they can just monetize $10 million per Capita so we will all be rich and buy $100 loaf bread.

    • jon says:

      The way i see it is this: Is there any shortage of land e.g. in coastal areas ? if yes, then housing should go up. If not, then it should go down. A lot of times shortage of land is artificially created e.g. zoning. ON top of this, I’d expect, it’d be cheaper over time to build homes because of technical advancements. Companies are able to build homes factories in 24 hours.
      so why is housing so expensive? The answer is very simple: it is by design.

      • SOL says:

        True that John. HOA, urban growth boundaries, realtors, local governments all in bed f****** normal people.

      • wiley says:

        Wealthy and investment co.s hoard the housing appropriate land and not enough converting of former commercial,warehouse,charity properties to housing.Tons of old postoffices,hospitals,malls,car dealerships,offices,churches,whatever are sitting rather than being productively used.

      • It’s democracy. The people who don’t want growth show up at City Council meetings. You want to develop, who will pay for the roads and schools and police and fire? Developers try to offload that on existing taxpayers, who lose their quality of life and have to pay for the privilege as well? Very large and complicated problem broken down over several layers of government. Right now the state has mandates on cities to build affordable housing. My city is trying to annex some property which the county has approved for development to meet these mandates. Cities often sprawl past their boundaries by extending fire water and school districts. You may live in all of them, pay taxes in all of them, but you can’t vote in the city elections. This is just Ca, but take the pot agency for instance. They issue licenses, you apply, pay their tax, grow your own and sell it. Many cities have counter ordinances against growing. Others simply file applications, so the state put a 10 day response window in law. They are doing this with other pejorative zoning regulations which hold up development and impinge on a landowners rights to do what they want with their property. I can be fined for hanging my wash on the clothes line, and I don’t live in an HOA. This is one reason behind blue flight. There are hoods where everyone is packing and murders are routine, but I can’t stand on my lawn and drink a beer? There is either too much law or not enough and no faith in the fairness of institutions. If I want to develop my land I need a bank of attorneys to knock heads with the cities bank of attorneys. Or to negotiate environmental quid pro quos. I love my city but I wouldn’t hesitate to sue the pants off them.

    • phusg says:

      Yes, supply and demand must play some role. I always wonder though where all these people that can’t consume a house live?

      • b says:

        We live in mobilehomes,friend’s homes,rv.s,rooms rented in homes/apt.s,apt.s,vehicles,tents,shelters,campgrounds,workplaces.Some live at parental or family member homes,residential motels.

    • Yerfej says:

      Uh no you don’t have a housing shortage, you have a importation of too many people problem. The false sense of progress on the back of a rising GDP number has skewed peoples understanding of what is good for them.

  15. Rowen says:

    Jerome Powell explicitly said he could increase the money supply, but he couldn’t ensure that the right areas of the economy were stimulated. That responsibility fell to the government. For whatever reason, FedGov chooses to subsidize real estate and not industrialization.

    • two beers says:

      “For whatever reason, FedGov chooses to subsidize real estate and not industrialization.”

      The reason is simple, and would be plainly obvious if most of us hadn’t been mis-educated with neo-classical economic nonsense and patriotic social psychology (aka, “propaganda”). It’s called “class war,” and if you aren’t part of the ruling class and its 10% professional-managerial class administrators, you are probably getting crushed and not even aware that class war is being waged, furiously, against you.

  16. Sailor says:

    It’s exactly the same as I said Covid would develop back in Jan 2020, and it has.
    1. Failure to prepare for anything other than perfect market conditions.
    2. Generating a financial culture where it’s in everyone’s interest to deny that a problem is developing.
    3. Fixing the data to be able to claim that nothing needs to be done, and/or generating some spurious virtue-signaling reason why nothing ought to be done.
    Disaster happens.
    4. Present solution thought up as the only possible one.
    5. Start covering up incovenient evidence immediately
    6. Blame someone else for the whole thing, especially people who have alternative solutions.
    7. State “lessons will be learned”. Fire no one. Increase taxes and government control.

    …and repeat.

  17. Micheal Engel says:

    1) Annual real vs nominal growth : UK is the worst. After Brexit UK no longer have a strong currency. US inflation is second.
    Switzerland deflate. When real prices are close to nominal prices, corrections are painful.
    2) US export suck. Inflation below 2% target for over a decade. US Gov spending had fill the gaps. That’s Cain’s whatever it takes.
    3) Central banks became the engine of growth.
    4) In 2008 RE collapsed. Central banks lower rates to save the world, revive RE and the US economy.
    5) Lower interest create bubbles : RE bubble and debt bubble. Instead of 30Y – 40Y recovery, central banks used 100 MV jumper cable to revived the patient.
    Gov spending precision targeting was directed at consumers pockets. We didn’t disappoint the central banks, we spent with no end, but we still complain.
    6) In order to prick a bubble central banks have to preempt. Preempting might precipitate the crisis earlier.
    7) If the gov raise interest to “neutral” level, they might neuter the economy.
    8) Rates are low to induce growth and inflation > 2% and that’s why
    we got RE bubble, stock markets bubble and a debt bubble.

  18. Tom Stone says:

    “Unrealized” gains are by definition unreal.
    Sometimes you find out just how unreal they are.
    Ouch.

  19. rhodium says:

    Central Banks possibly accidentally helping create a mindset change by getting people to give up chasing after physical and monetary wealth. Instead they may realize the silliness of it and pursue other things. From a spiritualistic viewpoint, removing the incentive to mindlessly chase assets and wealth by making it seem ever more insane and silly, they may very well help usher in a new era of a cultural mindset that realizes the addictive behavior of trying to endlessly acquire more stuff in a finite lifetime. That may be anathema on a finance blog, but I’m playing with the idea (after recently reading a few books about addiction) of beginning to point out the addict-like behavior of people freaking out so strongly about the arena of investments and money. If not for people’s gambling behaviors, the housing market would have been far more stable over the last 20 years and we may not have had such a shortage after so many home builders went bust in the last crisis. Stand back for a moment and appreciate if you will the unnecessary pain and suffering caused to yourself and others by excessively valuing various things in your life. It’s easier to change your mindset than to buy a house or to figure out where to put your money these days ;)

    • drifterprof says:

      “It’s easier to change your mindset than to buy a house or to figure out where to put your money these days”

      Probably not easier for the majority of humans. Easiness of changing mindset depends on genetics, life experience, humility, and deep mental orientations / practice. Not many people can do it.

      • Sailor says:

        A very valid point that should be made more often.
        As a boarding school teacher, we had 7 years to gently equip the children with, more than anything else, the ability to change their mindset. This included teaching them how to teach themselves, beacuse if one thing is guaranteed, the skills and knowledge they would need 30 years from now are not identical to the ones they had then.
        You also need to teach them that principles, morals if you like, are not part of that mindset, but are eternal. However, you must also teach them how to decide what their principles are, and get them to realise that they may not be able to resolve a problem by sticking to all of them.
        The experience is key. One must offer them opportunities to learn these things every day, and one must teach them primarily by the most powerful method, which is example.
        Name me a current world ‘leader’ who practices what they preach ;)

        • Michael Gorback says:

          “Give us the child for 8 years and it will be a Bolshevik forever.” Vladimir Lenin

          Ready for your children’s indoctrination to Critical Race Theory?

        • Sailor says:

          It is a most difficult thing to be a teacher without being an indoctrinator.
          In fact one has to almost continually reflect on one’s actions to avoid this.
          It’s even harder to find teachers who will walk away from the job if forced to be indoctrinators.

        • MarMar says:

          I was wondering how long it would take for that shibboleth to appear on this site.

    • w says:

      True for some of what you say,R. But maybe the billionaires should pursue higher spirituality and donate their money to the public good,maybe libraries,dental care,prescriptions for elderly,mentalhealth services,affordable,safe housing for all.What a different world it would be!! :-)

      • Yerfej says:

        And of course someone like you will demand to dictate how that money is spread around. How is it you arrived at the impression that you’re “good” and the billionaires are “bad”?

  20. Petunia says:

    I’ve been tracking the exploding real estate prices in the 5-Eyes, English speaking countries for 5 years. It’s been all over the internet weekly for that long. None of this is recent news.

    We have commenters here from Europe telling us what negative interest rates have been doing there, for at least 5 years, as well. Suddenly the MSM has deigned to notice, that’s interesting, I guess.

  21. Phoneix_Ikki says:

    USA# 7? How’s disappointing.. What happened to go big or go home of Murica mentality? Weimar Powell must be failing pretty miserably with ZIRP and 40B a month in MBS and can only get us lousy #7 spot…pssh…

    Central banks denying they caused the house bubble definitely a masterclass in gas-lighting. These people in charge there are definitely bunch of narcissists since they are so verse in demonstrating their uncanny ability in gas-lighting and double talk, a trademark of any successful narcissists.

  22. MonkeyBusiness says:

    7# in housing. FIRST in stock market.

    Shorts will be carried out in body bags.

    • Jack says:

      MB

      “Gentlemen, we have a deal”!!!’

      We are embarking on a mind boggling exercise of creative bonfire in the housing market, the like of which we’ve never seen in the history of entertainment.

      We are all waiting for the new CEZARE’ to take us to even greater heights, and probably make Rome an even shinier City!

      Long live the commander in chief!

      Personally I am Not worried about any housing bubbles now, we have the infrastructure plans ready to make our Empire even greater and Stronger.

      All I want you guys to do now is to go and gather all those shells and trinkets on the beaches of our motherland, so we can proof that we’ve conquered every corner of this world.,,

      Ummm, bar the pesky Taliban that is :)

  23. Micheal Engel says:

    1) UK & NZ have a chronic history of bubbles and busts. They are small islands loaded with immigrants.
    2) European NR put France, Netherlands, Germany… Switzerland at the bottom of the list. Their inflation rate is about 1%.
    3) Japan is missing in action. Japan is another island, ex immigrants
    invasion, Plenty abandoned rural houses with no takers. WFH in rural Japan will rejuvenate the RE market.

    • Cobalt Programmer says:

      Marriages are declining in Japan. No marriage, no houses, no bubble.

      • MonkeyBusiness says:

        Population has been on the decline for many years now.

        With that setup, gains in the rural areas will be offset by losses somewhere else.

      • Wolf Richter says:

        My sister-in-law lives in her condo by herself in Tokyo, close enough to her office at a big trading company to where she can walk to work if it’s not too hot. This is now fairly common. Unthinkable 50 years ago.

    • John Burton says:

      Who would want to live in rural Japan (especially in northern Honshu on the Japan Sea side of the island)?
      At the least you would want a location that offers both summer and winter recreational opportunities.
      (I’ll ignore the language and residential permit issues.)

      • Yerfej says:

        It might be that its safe, quiet, and pleasant? As opposed to living in the UK or NZ which are maybe not quite so?

  24. Daisy Halton says:

    You all know that one of the points of the communist manifesto is having a central bank. Central banks are not capitalist, free enterprise. They are pure communism. They are the command economy plain and simple.

    • Fat Chewer says:

      You are wrong. Whoever told you that lied to you. The first central bank was

      Established by Dutch-Latvian Johan Palmstruch in 1668, Sweden’s central bank, the Riksbank, is often considered by many as the world’s oldest central bank.

      It’s right there on Wikipedia. You could have looked it up yourself before you posted your gibberish, but no, you would rather spread bullshit rather than the truth. You have no credibility. Yet you don’t care because you probably don’t even know what credibility is. Internet anonymity allows you to lie your ass off without repercussion and don’t you know it. Liars spreading BS like you are the real problem today.

      • Frank Saulton says:

        Wikipedia is 100% factual and always tells the truth and Sweden is not a free enterprise, capitalist economy. They are very socialist in there policies countrywide. A central authority with too much power in any case is not free enterprise, capitalist anyway. This goes for government and business.

        • Fat Chewer says:

          You are poorly informed. Socialism wasn’t even invented until 200+ years after the Riksbank. Don’t let an impossibility stop you from lying.

          And so you try to destroy Wikipedia’s credibility because it doesn’t conform to your bullshit? Wikipedia has infinitely more credibility than you two clods ever will.

          Sweden invented the Riksbank to fund Sweden’s contribution to the 30 Years War.

      • marc says:

        Socialism destroys first…then kills.

  25. drifterprof says:

    I must have been a child savant genius when I bought a square inch of desert land in Arizona back in the 1950s. Very cheap investment!

    And people thought those advertisements were grifting schemes. Gonna pay off big-time soon!

  26. Root Farmer says:

    Wolf,

    “Most of the data from the OECD is through Q1 2020, thereby having missed the price spikes of the past two months.”

    Would that be Q1 2021 then?

    Sorry to nitpick. It’s amazing you keep the quality as high as you do.

    Many thanks

  27. Auldyin says:

    When I was 20 I thought this can’t go on.
    Now that I’m a few 20’s I think this will never end.
    Do they think they’ve done well if they prevent it going hyperbolic over their time???
    What a Hell of a bang if they all go ‘pop’ at the same time.

    • Sailor says:

      The game is that the crash has to happen on someone else’s watch. The guys who caused it want to be comfortably retired by the time it all goes bang, insulated from the consequences by time.
      What history teaches is that this only works for small ‘bangs’. With empire-crumbling ones, they are all put up against the wall.

    • Nathan Dumbrowski says:

      Momma told me as a young child. Never move out of California for you will never be able to return. Wise words. Wise words I lived by. Getting ready to move back to my place in SoCal

      Georgia was great but Cali is where I want to have my toes touch the sand

      • RightNYer says:

        Different strokes. I wouldn’t move to California if I had a free house there.

        • Yerfej says:

          Upstate NY is gods country. Now just figure out how to push that obnoxious huge pile of NYC garbage into the ocean.

  28. Minutes says:

    Survivorship bias alive and well in many comments. Yes I’ve owned a home for a decade. I wasn’t timing anything and I dont feel like a genius now because things are in a bubble the world over. Many just shrug and say well thats the way it is. Nonsense. Its as fake as the woman with three breasts in Total Recall. Wolf has done an excellent job of laying out why this has happened. It is a consequence. It was never some given. Nor should it be.

    • Sailor says:

      However, just because survivorship bias is present, and even common, doesn’t exclude that some of us worked it out a while back ;)
      The more I plan, the luckier I get.

  29. cb says:

    The problem boils down to one simple thing –

    the money lenders. Particularly those lenders who get to lend legal tender created from nothing. Scum they are – the FED and central bankers, banksters and wall street.

    • cb says:

      There is a reason the younger generation is trending “socialist” and supporting Alexandria Occasio Cortez (AOC) and Bernie Sanders. The “Capitalists” let the Money Lenders subjugate much of the population to debt slavery.

      • Fat Chewer says:

        Yes. Though Capitalism has been doing this since day one. Socialism is an attempt to bring back some equality of opportunity. That is why it is doomed. The rich understand this and attempt to destroy socialism at every opportunity, but poor shlubs don’t know shit from clay and that is what has brought about our current situation. Get educated or you will become slaves.

  30. Micheal Engel says:

    USA is #7 because NYC & SF RE had a bust. NYC weight is so large, it sent us to the middle of the bubbles line. Chartists give every city equal weight. That’s bs. By itself, it’s a false positive bias we had to accept. Minnesota, Buffalo, Mobil Ala or Detroit are not equal to NY. There is nothing in the world equal what used to be NYC. But NYC became a third world city. Not the only one.

    • Jack says:

      Very pertinent observations from ME.

      maybe, the figures that makes the statistics so friendly and benign as to give us only # 7 on the honors ladder are a bit skewed?

      Wonder what Mr Wolf thinks of this variable?

      Nonetheless, great comment Micheal.

  31. Depth Charge says:

    Correct me if I’m wrong, but isn’t the FED on record saying they wanted to blow a housing bubble back in the day? This is all by design. That’s why these guys need to be rode out of town on a rail – or worse…..MUCH worse.

    • Jack says:

      I’d go with the “ MUCH WORSE “ option please,

      Maybe send them all to Newzealand :))

  32. Depth Charge says:

    By the way, Barry “I didn’t run for fatcat bankers but I really did and now I live on Martha’s Vineyard and am a hundred millionaire after barely having two nickels to rub together when I took office” Obama was traveling around the country during his term speaking about how he had to get house prices up.

  33. Depth Charge says:

    Look at that entire list and tell me what the common theme is? Socialist countries and/or policies.

    • Rosebud says:

      People today are sleeping on comfortable, modern, spring-foam mattresses of durable fabric and air cooled ventilation, whereas a list of 40 years ago, when the rage was high interest mortgage rates, the beds were made of water, vinyl, sweaty and of difficult copulation value.

      • Xabier says:

        I suggest that economists look into ‘copulation value’ and hedonic values thereof.

        Bank account bailed in? Cash banned? Gold seized? Living on UBI?

        Oh, but just look at the mattresses you have these days?! Some people are just never satisfied!

      • Rosebud says:

        It is obvious you got out of the bed on the rightside today. Clearly you see how The mattress post is an Economic Treatise of the highest import. High house prices are a necessity to counter vale the purchase of a magnificent roll-out mattress for less than 125$. If we made houses a crappy place to sleep with an expensive, fadish tsunami roll bed and a horrible contraption for healthy exercise, house prices would come down, and finally everyone renting would be happy.

  34. BruceAForbes says:

    Great and topical article. Here in NZ, you are hard pressed to find anyone – newspersons, economists, central bankers. politicians, social commentators, friends, neighbour’s etc etc who will blame loose monetary policies and low interest rates for the present situation. This I find quite amazing and it brings to mind the old saying “there is none so blind as he will not see”. Nevertheless if something cannot go on- it will stop.
    Best
    Bruce

    • Xabier says:

      The denizens of NZ do seem particularly ill-informed, although that is not saying much these days.

      Which is perhaps why they have put up with the Jacinda ‘Bild Beck Bitter ‘tyranny for so long – just to ‘keep them safe’……..

      Those who claim to be ‘protectors’ often have quite a different agenda, as the history of the 20th century shows.

      Our host Wolf knows that, being of German origin – I am sure he would confirm it.

  35. JGo says:

    “denying that they could be seen, …, denying that monetary policies are responsible for them, …, denying that monetary policies could be used to deflate them or prevent them in the first place.”

    Is this what Mark Twain had in mind when he said, there are lies, damned lies, and statistics?

  36. Bead says:

    I thought one axiom of Bernankism is that you can never identify a bubble. The key corollary is therefore no one can ever be responsible. Hoocouldanode, how very convenient.

    • Depth Charge says:

      The problem for them is that there are thousands of people pointing the bubbles out the entire time, so there goes that idea.

      • Saltcreep says:

        DC, the problem is that, unless the only time someone is on public record saying we’re in a bubble happens to be the day before it bursts, then they simply get dismissed as broken clocks when it does finally burst.

        And anyone saying we’re not in a bubble can just keep saying it until it bursts, and then they can deploy the ‘unforeseen events’ narrative. It’s easy to point at a pin and blame it for the pop in order to deflect attention from the fact that a non bubble doesn’t pop when a pin is applied to it.

        • Depth Charge says:

          The problem isn’t that they are able to blame it on unforeseen circumstances, or “never could have seen it coming,” it’s that they are completely unaccountable even when ever single human being knows they are full of sh!t. “Subprime is contained” comes to mind. Everybody knows Bernanke was full of sh!t, but he was financially rewarded and praised for being full of sh!t.

  37. Nathan Dumbrowski says:

    Seems like BofE is going to continue with the loose monetary policy. How much of all of the global spending was done by governments as compared to previous decades? Can a majority of the big economy Central Banks all have agreed on this stance to collectively funding the bridge over bad times?

    Could we in the USA possibly dip into negative rates? I know Wolf you have said many times it isn’t palatable. Think about the number of refi’s that would rush in to re-start their 30 year clocks if rates went to from 2.8 to 1.8. Banks really make their prime money on the first years of loans and all the charges

  38. Volvo P-1800 says:

    As a Swede I’m suprised we’re not #1. I bought an apartment in central Stockholm in 1993 for SEK 1 million. The flat below mine (same size) just sold for 13 million. People must be even more crazy in New Zealand.

  39. YuShan says:

    Many Gen-Z and millennials put all their money into Bitcoin and Doge in a last attempt to ever be able to buy a house.

    I guess Elon Musk will be lynched first, but JPow should start worrying about his health too. At some point you would expect medieval scenes of angry peasants with pitchforks marching on the eccles building.

    • w says:

      Would Loooooove to See that!!!Maybe those in power would be more sensitive to their actions’reverberations in the lives of Hundreds of Millions of fellow Humans! :-)

  40. zee raja says:

    housing bond purchases, such as MBS, and thereby driving down mortgage rates, which then trigger enormous price increases and soon housing bubbles.

  41. Chris Herbert says:

    A debt denominated country is one full of rentiers swapping spit. There is a lack of productive investment when swapping spit is called ‘investing.’ We need an industrial point of view, an industrial policy. That will take a generation. If you cannot think beyond the next quarterly report, you are going to fail and disappear. Our nation is full of people who have the attention span of a fly in mating season.

  42. historicus says:

    The Fed promotes inflation, and now we have it in spades…

    So people with homes must hold onto their largest hard asset.

    Meanwhile, the Fed promotes ultra low mortgage rates, 2% under inflation….and the buyers see this and want all they can get.

    Keys tossed in the mailbox is in the future…..

  43. The Real Tony says:

    If not for the major cities in Alberta, Canadian home prices would lead the world by light-years in year over year gains.

  44. Yamo says:

    The Fed is the biggest scam ever, protected by corrupt politicians, and fake media.
    Selling promises that cant be done, with none asking them about their all failures.

  45. Bombastic Failure says:

    Wolf, you absolutely have to write an article about the only Central Bank that showed tremendous will and courage in taking the painful but necessary measures required for deflating the housing bubble. The research “Does an amortization requirement affect household indebtedness?” showed that a few years ago the average loan repayment period in Sweden was close to 148 years, but following the Central Bank governor’s warning the Swedish Parliament ratified in 2016 a law that reduced the maximal amortization to just 105 years. It was a dramatic change of policy, which took away Sweden’s claim at the top position in the global housing bubble. Now, you owe me an organic beer :)

    • Wolf Richter says:

      I heard life expectancy is really high in Sweden, something like 201 years for women and 197 years for men, which would explain why it’s perfectly logical to have 150-year mortgages :-]

    • So if you die in the 104th year of your mortgage does the bank get the house? What are their probate laws? I understand Sweden really threw the elderly under the bus during Covid. Last night they were chirping on PBS that the US took the biggest hit to life expectancy during the pandemic. They said for every death nine people were directly impacted. It would go a ways to explain the housing crisis, you own two homes, one used to belong to Grandma. In some places it is just not feasible to rent. And the Midwest is still a collection of dying towns. If you count those abandoned homes with no real value, then you have a thumb on the supply scale. I don’t know what the rural urban dynamic is like in Sweden. You leave an empty home and nature gets after it pretty quickly.

  46. Sound of the Suburbs says:

    What is real wealth?
    They had the same problem the last time they used neoclassical economics.

    At the end of the 1920s, the US was a ponzi scheme of inflated asset prices.
    The use of neoclassical economics, and the belief in free markets, made them think that inflated asset prices represented real wealth.
    1929 – Wakey, wakey time

    The use of neoclassical economics, and the belief in free markets, made them think that inflated asset prices represented real wealth, but it didn’t.
    It didn’t then, and it doesn’t now.

    Real estate – the wealth is there and then it’s gone.
    1990s – UK, US (S&L), Canada (Toronto), Scandinavia, Japan, Philippines, Thailand
    2000s – Iceland, Dubai, US (2008), Vietnam
    2010s – Ireland, Spain, Greece, India
    Get ready to put Australia, Canada, Norway, Sweden and Hong Kong on the list.
    It wasn’t real wealth, just a ponzi scheme of inflated asset prices.

    Will they ever learn?
    It doesn’t look like it, does it?

  47. Richard Evans says:

    There is no house price bubble. What there is is a rush to fixed assets by those with cash because their currency is about to devalue massively thanks to money printing and inflation.
    Better to own a shed you can let out than cash at the moment.

  48. ru82 says:

    The economic boom in just the past 1 1/2 years has probably been the largest increase in wealth ever!

    Housing, stocks, 401ks, land, cryptos

    Now most of it has gone into a few hands but WOW!

    I have a couple of rental houses that have gone up 40% and 100% in just the past 3 years.

    I look at 401k investment choices and and most are up 50% pre-covid prices.

  49. James says:

    Inflation eating into budgets, student loan payments starting to become due in September again, foreclosure moratorium coming to an end, eventual (I am hopeful) fed rate hike in the near. Prices will either come back down, or wall street will own all SFHs in the USA

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