This Reddit Lament Sums up Wonderfully What Lots of Home Buyers Will Grapple with as Housing Market “Normalizes” and Work from Home Fizzles

The price of FOMO.

By Wolf Richter for WOLF STREET.

Here is a Reddit lament by a self-admitted FOMO-home-buyer in Canada. The couple, mistakenly thinking that working-at-home (WAH) was permanent, had bought for that reason a house “hours away” from Toronto six months ago. But turns out, WAH was transitory for them, and now they need to sell the house.

But in the two weeks that the home has been on the market, they didn’t get offers that would allow them to make a profit or break even, as the market is cooling – a horrifyingly bloodcurdling stupendously surprising situation of having to sell a house without being able to make an instant profit.

And they can’t even rent out the house profitably in their estimates. What kind of horror show is this??

This is the horror show of having bought a house in what has been identified as the #2 Housing Bubble in the world, behind New Zealand, and now this housing bubble is “normalizing,” or “cooling,” or whatever, and suddenly the plans go kaput.

Obviously, the couple can sell the house. But they’ll have to price it to where the market is, and the market isn’t where they thought it would be, or where it was six months ago, and they’ll have to try harder and longer and cut the price, and eventually they’ll be able to sell the house. But the dream of making C$100,000 or whatever in six months on flipping a house “hours away” from Toronto have evaporated.

The post was brought to my attention by Steve Saretsky, a Realtor in Vancouver, whose work, reports, and data have appeared on WOLF STREET. Also note the post’s terse marital nuances that come with a situation like this — “she’s livid about the situation and refuses to live here now,” he says:

“Sorry if this is horribly formatted, I’m not a redditor.

“My wife and I bought 6 months ago at the height of the housing market it seems now. We bought hours away from work (Toronto) as we both were working from home. We thought WAH would be permanent and we were both afraid of missing out on buying if we didn’t pull the trigger. Wife is being called back to work full time. I’ve been given notice that we’re going back part time come September.

“We listed our house a bit over two weeks ago, no offer has come in that we break even on let alone profit. Our realtor has told us the market is cooling and that it would be a surprise if we got what we were asking for. We’ve gotten a couple of offers, none of which are asking price.

“We’re at a loss. My wife is looking for work locally but due to the nature of her work she is unlikely to find equivalent in pay or opportunity. She also doesn’t want to leave her employer, she has great upward mobility and seniority there. I don’t personally mind commuting part time but she’s livid about the situation and refuses to live here now.

“My friends keep telling me that there is no such thing as a Canadian market cooling and to just wait it out until it sells.

“If we listed for rent I think we wouldn’t be making a profit.

“Any suggestions would be appreciated.”

What’s amazing to someone like me who has been around the block too many times is the naiveté and the surprise displayed in these eloquent words by the perplexed and frustrated potential home seller. What were they thinking when they bought the house?

They weren’t thinking. They were governed by the fear of missing out (FOMO), and the poster admitted it. FOMO stipulates that you stop thinking, and that you act without thinking, and act now before someone else snaps the overpriced house out from under you. A housing bubble operates on that basis. You cannot maintain a housing bubble without FOMO.

The post also lays bare the whole conundrum of buying a nice big house somewhere far away from the city because now you can work at home, both of you, and then the bosses say, both of them, no, you gotta come back to the office. This stuff really sucks. And I suspect that there’s going to be a lot of it.

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  284 comments for “This Reddit Lament Sums up Wonderfully What Lots of Home Buyers Will Grapple with as Housing Market “Normalizes” and Work from Home Fizzles

  1. MiTurn says:

    They have my sympathies. They’re easy to criticize, I suppose, but such is human nature in FOMO-mode. Better to sell and take the hit now, as it will probably get worse.

    • 2banana says:

      Winter comes early up there.

      Tough to sell houses in winter.

      And the alligator needs to be fed every month.

      • JK says:

        Maybe if they buy a hybrid or EV they can save some money.

        Life is hard.

        • makruger says:

          Growing up in Vermont, I can tell you that long commutes really aren’t very practical (or very wise) during the winter since snow storms make travel quite hazardous and usually there is a multiday cleanup after each storm. A 2 hour summer commute can easily turn into an life altering all day affair during the winter. This is simply too risky in the northern climate zones.

        • Lynn says:

          I think you win the internet comment of the day.

        • Dan Romig says:

          makruger,

          Growing up in Minnesota, I can tell you that winter driving can be seen in two ways.

          1) Have an AWD truck or SUV or car with good ground clearance & good snow tires to get from point A to point B regardless of the weather.

          2) Do not have one of the above combinations & hope for good weather.

          My choice is a Lexus hybrid RX450h with Bridgestone Blizzaks. Yeah, my M4 is ‘The Ultimate Driving Machine’ in spring, summer & fall. But when it snows; I am, as the Vapors would say, “Turning Japanese.”

          I do agree with you makruger that a long commute, regardless of weather or the machine used for it, is not good for one’s quality of life.

        • Me says:

          An EV won’t cut it. He persuaded the wife to relocate to Thunder Bay. The only way to commute from Thunder Bay to Toronto is by plane. But he still asked the wife to give commuting a try.

          It takes almost an entire day to commute one way.

        • Joe Saba says:

          so sad TO BAD
          caveat emptor – only if you have EDUCATION

          business is hard and those who THINK they have it down soon find out

          ITS COSTLY to operate

    • Sweet Kenny says:

      I disagree. Inflation will accelerate and before you know it, prices are back up there. The Canadian government is already extending CEWS, CERS, CRB etc

      • Up North says:

        I kind of agree. Looks like a blip right now. But if circumstances force them, take your loss and call it a day.

      • SimplyPut7 says:

        The government is starting to cut people off because they haven’t paid taxes for the year ending 2019 and 2020. The reality of all the bad government policies will start to set in soon. The media has been hinting at a federal election for some time now, as this is as good as it gets.

      • L. says:

        Agreed. Great comment. As Jason Hartman and George Gammon point out, if you get a long enough loan (30, 40, even 50 years) at low enough interest, INFLATION will pay your mortgage off for you.

        • SimplyPut7 says:

          In Canada, most rates are variable, the longest fixed rate is usually 5 year fixed, there are some 7 or 10 year fixed but they are very expensive.

          The main driver for all of this spending is the Home Equity Line of Credit (HELOC), we’re allowed up to 80% of homes current value, the more prudent banks give 65% or less. But all HELOCs are variable rates that can change depending on the central bank interest rate or if they considered you high risk e.g. you lose your job and the bank finds out.

          They can also force you to close your HELOC and get a mortgage to pay off the debt whenever they want. Since home prices have been going up none of that has happened.

    • Mike says:

      As a Realtor (31 years), I always tell my buyers that you do not buy a house to make money. You buy a house to live in. If you are lucky enough to live in it a long time, it will appreciate. It’s like most games, you win some and you lose some. Being in a town that had a median price of $1.3 M, I pray every day for a 20% drop in prices.
      My advice is to sell the house for what is worth now and learn a lesson from it. Before you buy a home all scenarios should considered. Good luck.

      • Sam says:

        Looks like you are good realtor. In New Zealand, all realtors are thieves and speculate prices. Half of them having minimum 10 houses. I really hate these buggers!

        • Sam says:

          Looks like you are good realtor. In New Zealand, all realtors are thieves and speculate prices. Half of them having minimum 10 houses. I really hate these buggers! They are worst than prostitutes. Selling small 3 bedroom town houses for 1 Million NZ$.

        • IanCad says:

          Very few realtors are thieves, or, anything other than enterprising individuals trying to make a living.
          Sales success is largely dependent upon transferring to the customer a degree of the enthusiasm necessary to the agent. Evidence of this is apparent in every property boom and bust; realtors are very often victims of their own optimism and when property prices drop they are generally the most over-invested.

        • RightNYer says:

          Ian, “thieves” may be a bit strong, but in my experience, they’re nearly all scummy and dishonest.

          Their primary motivation is getting their commission, NOT doing what’s best for their supposed “client.”

        • SomethingStinks says:

          New Zealand realtors don’t hold a candle to the scum that sells houses in California. On showed me a house in Fremont. Place was not updated since 1965, the fridge was the original 1965 model and had molded food inside. Whole place stank. I would not keep my dog in that place. The scummy realtor walked around pointing out how this can be fixed for 20k and that can be fixed for 40k etc. Like every morning I dump dollars. Her 100k+ Mercedes was parked outside. I have never wished cancer on someone so bad.

        • intosh says:

          In Canada, many realtors are basically criminals. They help launder dirty money. Journalists with hidden camera presenting themselves as potential buyers with deep pockets confide to realtors outright that their money comes from selling drugs. Realtors basically say: “No problem, I know what to do.”

        • NBay says:

          “I just used the laws of the land. That is called being smart”
          – Very successful realtor

      • historicus says:

        Sweet Kenny
        “I always tell my buyers that you do not buy a house to make money. You buy a house to live in.”
        True enough…
        But you are in a market where people and outfits like Blackrock are buying for rental purposes…VRBO, etc.
        All of this is money looking for any type of return in a world upside down having been flipped by the Federal Reserve.
        Mortgage money for 30yrs available almost 2.5% below the inflation rate….

    • Ralph Hiesey says:

      WHAT?? AMAZING!! They bought a house that went DOWN in value? Everyone knows (ESPECIALLY salesmen for real estate) housing prices ONLY go up–you can NEVER LOSE if you “invest” in a home.

      Oh wait a minute — just remembered wife and I bought a house in about 2004 for $290K in 2004, and 8 or so years later sold it for $215K after we decided not to move out of CA. That was after putting $$ in upkeep and improvements, with rent payments less than the mortgage payment. OOPS!

      • NBay says:

        I fail to understand why you kept it for 8 years if you were losing so badly the whole time. Prices peaked in ’06-’07 or so.

        Well, look at the bright side, the renter did much worse.

    • VintageVNvet says:

      Agree with your last sentence, like totally dude or dudette mi!
      Been there, done that, wrote the book and got the T shirt, etc…
      Could not believe the very very cheep and cheeper house bought in late 6 could not ever get back to par,,, but could not hold out until it did..
      Suppose all folks who have bought any time near the FOMO peak have had the same or similar experience,,,
      Dad certainly did, and had to sell two of his places, including the farm to be able to hold onto the house we lived in in the crash of ’56.

      • NBay says:

        In ’56 we had only one “house”, I’ve been back there a few times, and it was more like a little cobbled together cabin. No electricity, gas lights, wood cook and heat stove, Sat nite baths with cycling tea kettles, crank telephone, one room school house grades 1-8, one teacher. Never knew there was a crash. Forks of Salmon CA, maybe 4-5 mi up the South Fork.

        But at least we were in CA, and STAYED….and still here.

        • NBay says:

          Learned to cut kindling, ate bear meat, and even had donuts fried in bear grease…..if you dropped one you could hear it hit the floor.
          Lever action Winchester 45-70s and 45-90s were bear guns.

        • NBay says:

          Sorry, make that ’54….getting helpless without damned calculater……use it or lose it.

        • monday1929 says:

          1856 or 1956?? :-)
          Will have to look up that Crash.
          Easy to judge that couple, right? Haven’t we all done dumb things? I know I have!
          It actually sounds like they could get out with a modest loss- probably the best thing to do, and FAST.
          I really did wonder about all those NYC people moving to the middle of nowhere- seemed rash.

      • NBay says:

        Burma Shave

        • NBay says:

          Cancel that-Either I blew it or Wolf trashed it.

        • Wolf Richter says:

          NBay,

          I think you blew it. I didn’t trash anything. I had no idea what you were talking about when you posted this. So I looked it up. Turns out it’s a long-gone shaving cream brand. I still don’t understand why you put this into a comment. But heck, I’m used to it, there are lots of things I don’t understand.

          Note: if you use some special symbols that are used in html code, the commenting software strips those out for security reasons, and stuff disappears. But I doubt that you did this. But it does happen.

        • NBay says:

          Nothing complex….just a bit of Classic Americana that every kid (who is in my age bracket) on US roads a LOT loved. I thought it was 4 signs (posts), but website says it’s 6. We traveled a lot as did the old man before he got married. Loved the “Mother Road”, I still do. It’s on the ball cap that covers my bald head.
          https://en.wikipedia.org/wiki/Burma-Shave#/media/File:BurmaShaveSigns_Route66.jpg

        • NBay says:

          Actually, even thought the real sign posts were a long ways apart, they picked a bit of wisdom that REALLY holds true for today’s drivers. Way too much “horn-bitching” going on.

    • Old school says:

      My friend is moving out of her beach place this weekend with a substantial capital gain. Buyer is a nice family that inherited some money. Wife has cancer. A couple of teenagers. Values depend on individual situation.

    • Morty Mc Mort says:

      I had a company a few years back with 20 or more employees in a Tech related business – they were all under 30 years old…
      When I related any information or stories that suggested house prices could go down.. well.. they looked at me as though I had 3 heads…
      One day, I realized.. everyone of them had lived their entire adult lives and they had only seen house prices go up up up..
      Why would they think anything else..
      I suspect many will learn about real market volatility in the months and years ahead..

      • Jj says:

        I work in a yacht club and overhear the older generation lament what the future holds for millennials and younger. Not just that they see the writing on the wall and taxes eventually going way up on the wealthy and this same cohort losing all their perks over time. But they are resigned that eventually a revolution will get their children in the end. Their only consolation seems to be that they won’t be alive to see it. Quite sad really.

        • NBay says:

          The even sadder thing is, that while they may know it and lament it, they still won’t give up one damned dime of their luxury lifestyles unless it’s somehow forced on them.
          It’s likely going to be hell in the streets, (already IS for a lot of people) but they’ll be dead or in heaven, so they are basically saying F everyone, even their own kids…I just don’t get this attitude AT ALL.

    • Wisdom Seeker says:

      Good Judgment often comes from experience.

      Experience comes from bad judgment.

      Fortunately one can also gain some experience by reading thoughtfully about the bad judgments of others.

  2. We have all all of the ingredients for some serious cases of buyer’s remorse. Looks like the tide is turning in North Texas. We now have double the amount of resale inventory compared to the record lows this spring…just in time for a seasonal slowdown in sales.

    • MyLadyHumps says:

      I don’t think there will be much buyer’s remorse. Central banks are not going to let the run-up in house prices stop. They will offer mortgage at negative rates when the time comes, and when they need more gas they will go further negative.

      It’s not house prices that will drop, it is currencies that will continue their rapid declines. Will this couple be upset to own a house out in the weeds of bum-fawk Canada after the buck is worth zilch? I doubt it.

      • historicus says:

        “They will offer mortgage at negative rates”

        Mortgage money provided by the Fed’s MBS purchases….put at rates 2.5% below inflation for 30 yrs….looks like a negative to me….
        If you can borrow at 2.5% and watch what you buy go up 5,10,15% a year….is a ridiculous condition set by the Fed.
        Of course, real estate is perhaps the most illiquid of all markets….and when the worm turns, there will no where to go.

      • weath101 says:

        Wealth101 @ mylady
        I would rather own a house than a bunch of dollars, if there is a currency crisis. Then again, I would rather own gold and silver than dollars, and will rent until house prices drop (with gold going way up).

  3. Paulo says:

    It probably will get worse.

    The Market is certainly not cooling on Vancouver Island, although I see some greed down the street from me and I hope they get hung up with the house.

    When I look at these insane prices I always compare it to vehicles. If a pickup truck is worth $80K, then certainly this _______ must be worth$_______.

    Good article and good news. Sorry for the individuals, though. Don’t wish marital problems on anyone.

    • Sweet Kenny says:

      She was part of the decision to buy, ironic that she now wants nothing to do with it. Out of touch – must be a government employee – I see a theme of him making bad life decisions.

      • Up North says:

        Lol. Good point!

      • Petunia says:

        Sell the place and consider the loss rent, is my advice. Also, once you make up your mind to leave a place or situation, just go.

        • Yeah all this cry whining over breaking even after six months. Declare victory and go back to Toronto, if prices are down there as well then it’s a wash.

        • Shawn says:

          Petunia thanks & well put! I think I am going to bail on this house due to road noise & people walking by unknkown 6 mo ago during pandemic when I bought.

      • Me says:

        According to the reddit threat, he talked her into purchasing in Thunder Bay. They are both crazy. No one is ever commuting from Thunder Bay to Toronto.

    • gametv says:

      My theory is that people moving out of high priced areas into more rural areas will lower the overall prices in real estate because rural areas have more undeveloped land and if prices increase there, it is easier to simply have the market re-balance by building more homes, whereas in a crowded urban environment there is little undeveloped land.

      Once the excess demand dries up, the prices adjust downward rapidly, because prices are determined by supply and demand and the demand side is predicated on local incomes and monthly payments. Lower interest rate is the other temporary piece that will readjust and cause prices to drop.

      Global debt bubble. How does it end?

      • TenGallonHat says:

        Whoa, totally bizarre theory.

        People moving to rural areas decreases rural prices?

        WRONG.

        Housing prices have doubled in rural areas.

        There isn’t just “land” available everywhere. “Land” needs water, electric, etc.

        And, oh yeah, builders if you can find any!

        A commenter recently posited that there really isn’t any housing problem as this is a very, very large country with lots of “land”. LOL.

        • Bill says:

          Try reading the original post a little more carefully and thoughtfully. The original poster is simply applying the law of supply and demand to land. Something that noted British Economist David Ricardo observed over 200 years ago. Yes, rural real estate prices can increase spectacularly, e.g., prune orchards between Palo Alto and San Jose. But when land is plentiful and local incomes remain flat, higher real estate prices are temporary.

        • TenGallonHat says:

          Bill, we aren’t talking about prune orchards. If you would have read a little more carefully and thoughtfully, you’d see, as gametv wrote, we’re talking about “people moving out of high priced areas into more rural areas”.

        • Wisdom Seeker says:

          TGH you’re still not reading carefully.

          Gametv is saying that OVERALL (nationwide), average real estate prices can be lowered if people move from high-priced congested areas (lowering sky-prices there by a lot) to underdeveloped rural areas. In places where land is abundant, there’s plenty of low-cost development possible, so prices IN THE LONG RUN won’t rise much.

          In the short run, of course, the market is stuck with supply/demand price changes based just on today’s housing stock, and things can be crazy until the homebuilders get into gear. But rural areas can build a lot more, a lot faster, and more cheaply than urban high-cost nightmare cities.

          P.S. the prune orchard comment was too subtle – he’s referring to the land now known as Silicon Valley, which was at one point rural fruit orchards and is now one of the most expensive plots of land in the nation.

        • SS says:

          Most of the rural farmland in Michigan for building a house is implemented in a farm preservation act PA116 which in order for a farmer or landowner to get it out and sell a lot for residential building, would require more money to pay back the extra property taxes for at least 7 years prior and a lot of paperwork. So in my neck of the woods, rural building site lots are hard to come by.

        • ross says:

          I’ll second that…from the NC Blue Ridge Mountains.

      • 91B20 1stCav (AUS) says:

        Game/TGH/Bill-i’ve posted my experience on this before…

        Moved from NorCal to the Spokane area in 1990, believing temporarily, for work. Met a local woman while there and wound up making the assignment permanent. At the time, there was a large influx of folks from CA, and curiously enough, TX, to the area.

        Local get-togethers in 1991-2 went something like this-

        Local: “…man, did i skin those newbies on that (house/property)!…”.

        Newbie: “…man, did i take those locals on that (house/property)!…”.

        Flash-forward five years-

        Local: “…man, property’s gotten so expensive my kids can’t afford a (house/property) around here anymore!…”

        Not-so-newbie “…my wages stopped increasing once i moved here, guess i bought at the right time. Don’t know how my kids are going to do, though, they may have to go back to the big city…”.

        (When my relationship there ended, was fortunate enough to be able to return to NorCal in ’98).

        may we all find a better day.

        • NBay says:

          Not a moment to soon, either, land prices started going up, especially when Vroman got in.

        • 91B20 1stCav (AUS) says:

          NBay-true that. Local wisdom even in the late ’80’s was that it was very likely a one-way trip if you moved out of state.

          may we all find a better day.

        • monday1929 says:

          Gotta watch out for those “Local Woman” :-)

  4. 2banana says:

    No sympathy.

    They, and millions like them, have fueled the insane housing bubble.

    Grab the cheap and easy money/debt, rush to buy, bid up prices ever higher, no need for an inspection, and don’t worry…

    We will always be able to sell at a profit to some greater fool. It’s like a law or something…

    Stupid should hurt. Fools will learn no otter way.

    • Gattopardo says:

      “They, and millions like them, have fueled the insane housing bubble.”

      ^^^^^This. They contributed to the bubble, drove up prices for others. They probably also contributed to higher property taxes for their neighbors.

      My worry: if/when the housing market really cracks, there will be all kinds of various “help” programs that will create further distortions, keep price discovery from remerging, and merely stack more wasted money onto the national debt pile…

      • 2banana says:

        Yep.

        Mr. and Mrs. Redditor never worry about the locals that just got priced out of buying a home in the town they grew up in, the rising property tax rates they fuel, the driving up of rents for the locals, etc.

        They got theirs! And a big FO to everyone else.

        And they want others to feel sorry for them!

        • Wellstone's Ghost says:

          Your comment crystalizes the scenario and its impacts perfectly! Very concise.
          I like it.
          Jesus said to be kind to others.
          He didn’t say we couldn’t call them out on their b@llsh*t.

    • Alex says:

      I wonder how this same FOMO phenomenon has impacted Zillow Offers. They bought up a slew of homes in San Diego over the Spring and summer months, paid over asking, and then re-listed them at even higher prices a week or two later. This is all according to the price history section on these homes.

      Many of them are still on the market 60+ days later. They have cut their price multiple times on some of them, but because they overpaid too much, they are still overpriced.

      I wonder if they did this all over the country. That would be absolutely amazing if they did. But you would think the folks at Zillow would be too smart to give into feelings of FOMO.

      • Jon says:

        I am in San Diego and am seeing a lot of prices cuts as well as homes coming back to market
        Good prices homes still sell fast

        Lets see ..

        • The Bob who cried Wolf says:

          Where are you seeing this? In the center city things are still on fire with no end in sight. Not trying to say it isn’t happening elsewhere, just not in the center city. I’ve seen the least desirable places come to market, disappear, and come back again, but anything nice is gone in less than a week with multiple offers and always overbid.

        • interesting says:

          I was just on zillow, OC, Orange area, and was surprised to see some listings with “price reduced” banners. Modest as they were.

        • QQQBall says:

          In the area we are tracking seeing modest price reductions, but I believe some sellers put some air in their asking price. Realtor tells me cash is still king and inventory is tight. Lots of all cash buyers going south from NE,

      • PeterT says:

        Zillow absolutely did this in Phoenix…I’m tracking opendoor and zillow listings with price cuts and they have now gone thru several rounds of cuts and are bordering on break even prices, soon to be losses….this party will be fun to watch.

      • Lynn says:

        Oh thank goodness.

      • Bobby Dale says:

        And no pity for the bondholders who bankrolled zillow offers.

    • MyLadyHumps says:

      “Stupid should hurt”

      Central banks exist to make sure stupid, reckless bets pay off with massive profits.

      Stupid is making stupid money in huge piles everywhere you look. Prudent and rational behavior are the new stupid

    • Volvo P-1800 says:

      There’s a saying in my native language (Swedish): If the head is stupid, the body is going to suffer.

    • historicus says:

      Why is the Fed still helping mortgage rates stay WELL BELOW the inflation rate? It is feeding the speculation…and we have seen how that ends.

      • Old School says:

        I liked what Rick Rule said: “Now there are more debtors than savers so who are politicians going to cater to.”

      • California Bob says:

        re: ‘Our downward societal trajectory will continue until there’s violence to stop it.’

        Yep. Because violence is the best, historically-proven way to solve any problem. (/s, if necessary).

        Wolf,

        Since when is advocating for violence tolerated in your media empire’s comments boards?

    • Petunia says:

      What they did is easy to understand in Canada, Australia, and New Zealand. The prices there have been rising for a generation and nobody remembers real estate prices ever dropping. Where they went wrong wasn’t in trusting their employers, it was not understanding those markets were driven by Chinese money, and that money has mostly dried up.

      • td says:

        Having lived on and off in the Toronto area for many years, I’m aware of quite a few market downturns and a really bad crash in the 1980’s. Five to ten percent corrections are very common over the long term. Consequently, many older people are well aware that prices fluctuate.

        Since 2019, we’ve been considering upsizing a bit from a two bedroom condo to a townhouse, but there is no way we would ever do it in a seller’s market like the recent one. I’m betting that we’ll see another one of those 10% corrections soon, though that would leave prices higher than in 2019. Since we’re thinking of trading up slightly, a bigger correction would be nice for us. If it doesn’t happen, staying put is not so bad.

        Real estate bubbles are like balloons and tend to inflate and deflate with some long-term frequency. Vancouver city is the poster child for a real multi-generational roller coaster. Toronto is catching up, but that implies much more volatility going forward.

        All IMHO, DYODD as per usual.

      • coalman says:

        Here in Oz, their was a massive bubble in the 1890’s that popped, prices in real terms , adjusted for inflation, did not recover until 1961!!and only because of the huge influx of immigrants after WW2.

    • Lisa_Hooker says:

      Hurt? Major stupid should leave permanent scars.

  5. MiTurn says:

    “a horrifyingly bloodcurdling stupendously surprising situation…”

    Wolf, you have a way with words. Descriptive and, say, nuanced!

    • Wisdom Seeker says:

      Agree! Wolf’s tongue-in-cheeck evisceration of the poor-mouth from the underlying reddit post is hilarious. Hoocoodanode?

  6. DougP says:

    It sounds like time is the real issue. The house was bought at the top of the market and selling in less than a few years won’t get back the costs after deducting the cost of the sale.

    The same thing happened in the Bay Area in 2018 when we had a similar land rush and I saw many homes that were listed that were bought a year or so earlier. People got transfered and had to sell.

    But if they had kept it they would have been able to sell now for a nice profit rather than taking a 200k hit as I saw a few do.

    Whatever they sell it for now, it will be worth more at a later date, but it sounds like they are out of time and will have to take a loss unless they rent it, take a smaller loss on monthly, and sell when they can get out flush.

    Tough spot

    • 2banana says:

      Well, you got to figure out what the alligator eats.

      P/I, taxes, insurance, maintenance, security, etc.

      Let’s say on nothing special special Bay Area $1.5 million house (insane – isn’t it?) that turns out to be approximately:

      $9,000 per month

      $108,000 per year

      A 200k hit isn’t that much in comparison to the never ending feeding with no end in sight.

      • Harrold says:

        Bringing $200k to the table during closing is something a lot of people cannot do.

  7. Educated but Poor Millennial says:

    Wolf,
    In Los Angeles, the show is still going on,
    As every one can filter out the results in Zillow and see the last 7 days of sold properties, all of them are gone for average 12-15 % over asking price.
    FOMO is still going on and average guy with $60-80K a year salary can’t afford the 2 bed condo anymore , it is selling for $650K average price.
    I was predicting the Black Christmas , but I have doubt that this market will end this year.
    Anyone Any thoughts?

    • MyLadyHumps says:

      It is not going to end. We are witnessing a monetary crisis unfold, being able to short any currency (borrow with a mortgage) to buy almost anything for any price seems like a sure bet to me.

      BlackRock sure seems to understand this fact, they don’t care how much a house cost or where it is located, they will buy it.

      • interesting says:

        Not sure I agree with ya there. That implies that “it’s different this time” and it never is.

        California RE is either massively rising or cratering with pockets of air in between.

      • Wolf Richter says:

        MyLadyHumps,

        No, BlackRock isn’t buying any houses. This nonsense needs to stop here. I already debunked these braindead headlines picked up from Twitter that got dragged into here. I’m going to start deleting that garbage in the future. But they might buy a large fund/company that already owns lots of existing rental properties, and it just changes hands.

        https://wolfstreet.com/2021/06/22/no-blackstone-didnt-buy-17000-houses-out-from-under-desperate-homebuyers-and-blackrock-didnt-buy-a-whole-neighborhood-but-built-to-rent-is-a-h/

        • VintageVNvet says:

          That may be fact this time Wolf, but was not true when we had to come to the saintly part of the TPA bay area in late 15 to take care of very elderly parents.
          First house we wanted, ( OK, to be clear, I wanted, ) because it was a wonderful example of MCM ( Mid Century Modern ) had sold to some hedgie or PE or some such, according to the listing agent who then proceeded to work her ( AF E-5 butt ) off to find us the right place in the right HOOD, actually much better for my better half to tend to her parents,,,
          Other places, owned by banks, would not deal even a little bit,,, and IMO, the only reason we got the place we now call home is that the big boy who bought at the court house steps quickly realized his ”bird dog” screwed up and did not estimate correctly the clean up and repairs needed.

        • Wolf Richter says:

          Whoever was buying, it wasn’t BlackRock. BlackRock is NOT a PE firm. It’s the largest bond fund manager in the world, for crying out loud.

        • MCH says:

          Not BlackRock… BlackStone on the other hand…

          Or BlackIgnis, or BlackPebble, or BlackGranite, I wonder if BlackFish will be interested, oops, probably not, wandering away from the geology theme

          :)

        • No You're Mr Lebowskie says:

          Good point, so large investors are not using cheap easy money to invest in single family homes to convert them to rentals. It just is not happening no where, no how.

          And… there is no buyers remorse, housing bubbles, inflated prices or any of that ridiculous nonsense. There is a free and fair market for houses whereby people who need houses are buying them at the going rate and at a reasonable price they can in fact afford.

        • Wolf Richter says:

          No You’re Mr Lebowskie,

          Don’t twist everything around I said. I said that BlackRock wasn’t buying single-family houses. I didn’t say anything about “large investors.”

          But the big thing now is for these large investors to buy “build-to-rent” — meaning entire new developments that are designed and built specifically for the rental market. No homeowner ever owned those. This is the hottest thing right now in home-building. It creates new rental supply, but doesn’t remove homes from the homeowner market.

      • Wisdom Seeker says:

        @MyLadyHumps:

        I thought the same way in 2005-2007, with “peak oil” hype (and oil prices >100/barrel), gold shooting up, housing shooting up, the market shooting up… But it was all a mirage. Millions of people wound up on the wrong side in 2008 and should have learned an expensive lesson.

        The Feds WILL switch to the “time to fight inflation” routine. They absolutely cannot afford a “fast” hyperinflation. They’re signaling now that the punch bowl is about to go away. Best to be nimble and not have too much leverage.

  8. Alku says:

    Paging SoCalJim…

  9. rich says:

    No one buying or selling a home to live in is guaranteed a profit. This couple just forget the three most important things one has to consider when buying real estate, “location, location, location”.

  10. DawnsEarlyLight says:

    Definitely a ‘popcorn worthy’ article! They must have bought the most gloriously ginormous egocentric set of BLINDERS available! Explains the shortage on blinders.

  11. Depth Charge says:

    Oh, you mean the WFH wasn’t permanent after all? I said this many months ago. Big shock, said nobody ever.

    • Wolf Richter says:

      It’s permanent for a lot of people, but it’s transitory for others. It’s the “others” that will have to grapple with this.

      • Trucker guy says:

        I wonder how much is a lot. I was homeschooled online. Very, and I mean very few kids would be recurring names for more than a few months in the online classes. It was usually the Asians and the very religious Muslims that I would recognize for years. Most people aren’t enough of self starters to manage themselves. Unless bossware proliferates, I don’t see productivity matching bodies in seats at office jobs that are easy to outsource to WFH. And to that end, why in god’s name would you ever bother hiring Americans when you could go India with depressed wages and already an innate level of English fluency and competency in IT?

        The other aspect is a manager and supervisors can watch a workforce. If someone is goofing off or working slow or whatever, they can crack the whip. Not so at home. And if someone finishes work quickly, a boss can pile on more to high performers to raise productivity.

        So the WFH in my opinion will likely peter out rapidly. No point in hiring expensive Americans when you can hire from anywhere. No way to manage people with unfathomable invasions in privacy that most won’t tolerate. People won’t get vaccines for their job. I doubt computer surveillance will go over well either.

        Call me skeptical but it would take years of trust and displays of competence to allow an employee free reign to sit at home and also do their job. I also wonder what long term psychological effects WFH will have. I know when I get off work and hit the house I know I’m done and that’s wonderful. I’d hate seeing a room or computer in my house and knowing that is where I’m also trapped 40 hours a week or whatever. But I can stay sane and work indoors anyways so who knows

        • Wolf Richter says:

          Trucker guy,

          WFH is nothing new. It has existed for decades. Major companies such as Microsoft already offered it long before the pandemic. Lots of people work at home, and have for a long time, including lots of commenters here, including myself. People love it.

          You’re evaluated for your production.

          Older bosses might not like it, but if an employee threatens to quit if they have to work in the office 5 days a week, then well, you gotta do some math.

          Most of the major companies have announced permanent plans that include work from home in some kind of hybrid model or totally work from home. For office workers, this is now a real option.

          For corporate cost cutters, this is huge. Companies save a TON of money because much of the office expenditure is now rolled over to the household.

          Even many Wall Street firms have announced hybrid plans that will allow them to reduce their office footprint per employee.

          What the pandemic has done is it has proven that WFH works on a large scale, that people like it, that people would in fact be willing take a pay cut to be able to work from home, and that it’s a productive way of doing things in most cases. Sure, you want people to get together, but it doesn’t have to be every day. So they make arrangement to meet.

        • David Hall says:

          Some customer service jobs are WFH. There is technology to monitor how many consumers they service per hour.

          WFH may be practical. There is a shortage of cars used by commuters.

          I am glad I did not flip my home and go rent. There is a shortage of pickup trucks used by housing construction workers. For me housing is not a short term trade. I have been in my home 5 yrs.

        • LeClerc says:

          Companies are free to treat their workers like serfs.

          But the workers may tire of serfdom. Some will move on, and some will do other things.

          Inciting a broad swath of the workforce rarely turns out well for the overseers.

        • Sams says:

          WFH may be a bigger treath to bullshit jobs than productivity. In the office or not, the measurable is the job output. Now, if it is difficult to measure if the job output it could be a bullshit job that get axed soon.

        • drifterprof says:

          @Truker guy:
          “And to that end, why in god’s name would you ever bother hiring Americans when you could go India with depressed wages and already an innate level of English fluency and competency in IT?”

          Having dealt with online “help” that were Indian, their Hinglish is often very challenging to understand. In most cases I go through some iterations of asking them to repeat.

          Indians working from Hyerabad would not be amenable to a hybrid WFH model, which seems to be a good compromise between company and worker. So it seems like the Indian tech guy would function best mostly lone wolf positions that didn’t require much problem-solving teamwork.

          I’m wondering if a company would save on social security taxes, etc. by hiring those WFH foreign workers. Seems like there would be rules about that.

        • fajensen says:

          The other aspect is a manager and supervisors can watch a workforce.

          I’d say that, in most of the “knowledge work”, they can’t. They have absolutely no clue what people are doing and why they are doing it.

          Managers can reliably measure “Bum on Seat” so that’s what they are mostly measureing. The second thing often measured is “progress” or “deliverables”, according to a schedule.

          This is where the wheels begin to come off. There is no way for management to tell if a developer spending 100 hours on a tast could have done the task in 3 hours, perhaps if it was specified differently, the programmer was more skilled or a team of 3 did the job.

          On top of that, Very Generally, developers tends to be smart, cynical, people: They know that if The Project Plan says 100 hours there is nothing at all to be gained by delivering in 3 hours except Trouble for being bad at esimating and More Work.

          The thing is, “knowledge work”, It’s just like Grandads assembly line, only with nicer looking furniture, table-top football, lunch restaurant and free drinks. If the production is “fixed”, with a reasonable static flow of well-defined end products, like a call-center, then They can monitor all the way down to measuring toilet breaks.

          As soon as one goes into working on “Projects”, one cannot, without a really well planned-out project structure and cost-structure, measure much except (IMO) silly stuff like “Earned Value” (EV).

          This rarely happens “in the wild”. Management likes things like it is Now, they want loose structures, KPI’s that are Gameable and they don’t want a toll-gate project model because that will make delays, scope changes, and feature cancellations visible – and on their head.

          I mostly do project management these days and it is all shit & and giggles & taking the piss, all the way from Olympus and down to Hades!

        • RightNYer says:

          Drifterprof,

          It’s not just the accent or “Hinglish” as you put it that’s the problem. The problem with all non-Western customer service, even if they speak the language fluently, is that much of our communication hinges not only on understanding the words, but picking up on nuances, subtleties, sarcasm, slang, and so forth.

          Here’s an example. I was on the phone with a customer service rep trying to help me with something, and I said “Don’t go crazy, it’s no biggie if it can’t be done.” The rep had no idea what I was saying, whereas the meaning of that is readily apparent to any native English speaking Westerner.

          The other, more salient problem that makes people hate foreign customer service, is that they are noticeably bad at picking up on the fact that the person to whom they’re speaking is getting frustrated, and realizing that they have to try a different approach. Instead, they just continue, seemingly aloof to how angry the customer is getting.

          With these problems in simple things like customer service, imagine how bad it would be if you tried to outsource legal or accounting work.

        • Augustus Frost says:

          fajansen, very good post and spot on.

        • otishertz says:

          What’s not to like about Work From Underwear?

          People newly phoning it in because of the plague and expecting it to last without an eventual pay cut are delusional. Employers thinking there is a real productivity gain are delusional as well.

          Time will tell. This all applies to air conditioned jobs as I like to call them. I am sad for what is likely the end result of all this social experimentation.

          Work from anywhere is the same thing as hire from anywhere.

        • joe2 says:

          I agree. Home is your castle. After work, at home, I wouldn’t even take telephone calls. After a while they figured it out.

        • California Bob says:

          re: “There is no way for management to tell if a developer spending 100 hours on a tast could have done the task in 3 hours, perhaps if it was specified differently, the programmer was more skilled or a team of 3 did the job.”

          With 3 programmers, the ‘3-hr task’ will take 10 hours:

          3 X 3, +1 for ‘synergy’

          Signed,
          Ex-Programmer

          ps. The other, goto metric–“Lines of code”–is even more specious. When programmers are judged by ‘lines of code written,’ there will be more lines–hence more bugs–written.

        • Trailer Trash says:

          I did work from home in the 1980s (before the internet). I was writing minicomputer application software for wholesale distributors.

          I made sure to rent a house close enough to the office to be a local phone call, since my connection to the company computer was over a land line.

          Many bosses don’t like work from home because they need to feel in control of the workers. They suffer from the master/slave mentality which says that slaves (wage or chattel) won’t work unless threatened with a whip.

          I’ve been self-employed most of my life, and the threat of being hungry and homeless was more than enough incentive to keep my nose to the grindstone. (Until I got too sick to work.)

        • Cynical Engineer says:

          Because it’s even more challenging to hire in India than in the United States.

          Did you realize that most of the major Indian cities do not have a reliable power grid? Major office buildings routinely equip with enough on-site generating capacity to run the entire building and USE it multiple times per month. Unfortunately, the average Indian home doesn’t have this backup and goes down with the grid. High-speed internet connectivity is hit-or-miss and usually too expensive for the average worker. WFH in India generally doesn’t work well. The epidemic is not over, and never really let up in India.

          So you’ve set up your office building in India with backup power. That probably took you a year. Now you need to hire people to work in it….if your candidate has a job now, they may have to give 4 to 6 weeks notice. So, you make them an offer and they can start in two months. If this is an engineering position, you’ll discover that the competition for high-quality candidates is brutal.

          Cheaper in India? Maybe once upon a time. Not anymore.

        • NBay says:

          I thought “managers” and “manager talk” when I was a mostly hi-tech worker bee were in the ozone, but just reading you folks is an entirely different level of gonzo….and you are the ones who make the BIG bucks!….for “something”….no wonder this “economy” and planet are so FD up.

          “Economy of Scale my ass, it’s more like “Scale Created Absurditys” You are all WAY over your skis. You sound more FD up than the Military, way way more, and that makes you REALLY FD UP!

          Bucky Fuller was right.

          “All the real talent goes into the Arts and Sciences, and that leaves the dregs to put it all together”

          When building a big machine you have to watch for “tolerance stack-up”…..you management types sound like “human (or verbal) stack-up”

      • MCH says:

        Just like inflation… transitory. :)

        In the end, it all depends on the time scale one is looking at.

        Although I think the nail that really sticks up is that the wife is furious…. I think that’s the hardest part about any marriage, the agreement and discussions on the financials.

        We each have our own individual ideas, but if we don’t talk them through with significant others, it can really wreck the important things.

    • fajensen says:

      Maybe not, but, when coming in from “abroad” I need to pass a Covid-19 test at day 1 and another one at day 5 to be allowed onto the site where I work. This is mandatory.

      That’s one week WFH, and I travel for work.

    • RedRaider says:

      What I find interesting is the negotiation phase we are entering. People get a taste of WFH. And want it permanent. Employers respond “no you have to return to the office”.

      It’s a matter of who cries uncle first. Does the home owner meekly comply or does he up the ante with “No we quit”. Now how does the employer respond? Doesn’t he know there’s a labor shortage? At this point both sides have had the pain increased.

      I think they’re both making the situation confrontational by mandating the other guy bear the pain. Much better if they worked together to find a solution acceptable to both.

  12. GotCollateral says:

    Most of us here knew this type of crap was going to happen…

    Kudos to those were able to sell to these muppets

  13. Ron says:

    Life is not fair but you sleep in the bed you make my mom,s wise words

  14. Stanley F Brossart says:

    I’ve had my real estate lic. in Cali since 1974 and its a never ending story except this time will be THE ENDING.

    • Internet person says:

      Seems like Bay Area real estate will just permanently go up.

      • TheFalcon says:

        Unlikely.

        During the recession in the early 90’s, Bay Area RE lost about 15% of its value over the first half of that decade.

        Values next fell by about 40% after the 2006 peak. This occurred not only in the SF Bay Area but also SV communities.

        We are setting up for another 3-5 year devaluation. When it begins is anybody’s guess.

    • NBay says:

      Cali is in Columbia.
      You know, where the 757 crew punched in the wrong code and the aircraft happily headed for Bogata and flew right into a mountain.
      My brother was a 57/67 pilot then and said AA made changes in codebooks and training procedures.
      But they should have noticed the damned turn…..computers make people lazy and careless, but it does save money by allowing only two pilots on the flight deck.
      With the current price per death it still pencils out to a profit, (according to company lawyers) so naturally management decided it was “wise”, PROFIT WISE. Rather simple decision making……
      Every time my brother took a free ride in the jump seat he was VERY WELCOME. Saved a few asses in Sioux City and maybe a LOT of other times we don’t know about…but the FAA and NTSB do, although they are as easily lobbied as any other regulatory agency, although not as well gutted as most. Civil Aviation, ya know? They leave the Patent Office at full strength, as well.

  15. Mike says:

    I’d just rent it if they can cover their mortgage payments. Hopefully this issue starts popping up more and more.

    I was 100% work from home, but will transition to 2days in and 3days home. If that becomes permanent and in writing, I’ll happily move a couple hours out of town and hopefully get a deal.

    Problem with the Canadian housing market is that people normally do not sell at a loss, and I can’t fathom a situation where that will start to happen. (no matter how livid the redditors wife is)

    • Nathan Dumbrowski says:

      Agreed WFH is collapsing. Something is pushing HR fiends to make it mandatory. Nobody can argue with HR. Doesn’t matter if you have a letter from your manager/director/VP if the policy is to return to the office then it will be followed as the company policy

      These owners didn’t account for reality. There are times when the situation runs amuck and you grin and bear it and make some tough life impacting calls.

      I hear the sound of jingle mail

      • papi says:

        No Jingle mail except in Alberta which has Canada’s lowest housing by far in relation to earnings. If they sell at a loss, they basically still have a mortgage for whatever they still owe the bank.

        • td says:

          Even in Alberta, jingle mail is not too common. If you read the fine print in mortgage documents, you see that you have to assume complete personal liability for the debt.

      • RightNYer says:

        I don’t totally agree. From what I’ve seen, the really good employees with in-demand skills will be able to negotiate on this point. The average employees, if the employers want them back, will not.

      • Ephesians 289 says:

        It’s tough for companies to mandate the vax if one WFH….

  16. Satya Mardelli says:

    Still no significant supply growth in metro Phoenix. However, Zillow indicates the price increases are slowing. Cali buyers keeping the demand pressure up

    • PeterT says:

      Zillow has a hidden agenda, to keep their owned homes from selling at a loss…of which there will be many…I’m tracking them in Phoenix and they are approaching losses on many

      • Depth Charge says:

        Zilldo has been losing $60,000 per house since they started flipping. They’re planning to make it up on volume.

    • Alex says:

      Are you sure it’s Cali buyers? Because the vacancy rate is extremely low here. It is very difficult to find a rental for people looking for a new place. It makes me wonder where the hell all these people are coming from if there was such a population influx in every city across America this year. It doesn’t seem real.. Also, Zillow Offers is huge in Phoenix. They are probably the ones keeping the demand up.

      • Nathan Dumbrowski says:

        My SoCal renters haven’t been able to locate another home in range. Gave them four months notice and called the property manager today to make sure they knew I would be returning in the next month. Plan to wait this out and then try to time the market to leverage up.

        Imagine that this story is but the tip of the iceberg. Many more stories like this or similar where layoffs, cost spikes (food, utilities, maintenance) will cause mortgage disruptions to increase. Trickle –> Stream –> River —> DAMN the damn has broken loose

      • p coyle says:

        judging by the number of cali plates i see on my commute, arizona has plenty of refugees. we are running out of water, too. not sure these people are good at long term planning…

        • Alex says:

          I’m sure the number of license plates you see represents significant statistical relevance of migration dynamics.

      • NBay says:

        Cali?
        Still wondering why CA rates a NATIONAL nickname…..no other states do….maybe within the state?
        I guess its because we are the BIG DOG in the USA and most all new things and trends start HERE, not to mention the land itself, which is more than deserving of it’s mythical legend historical naming.

        No wonder I love it here.

  17. Paulo says:

    No one has a crystal ball, and it is only in hindsight that many see how crazy everything has become. The article reminded me of a family friend who bought a bunch of Nortel 20 years ago? I just remembered when he lost $40K, then doubled down convinced it would turn the corner. It was very uncomfortable listening to his wife remind him about it. For years.

    Something like this house fiasco may be impossible to ever recover from. Like my brother in law who overbuilt on his budget right before a downturn. To quote him, “I knew I was in trouble when I was still nailing on the subfloor”. He went on to finish his high end home just before the market slid, and lost about $250K which was a fortune in the early ’80s. He rented for the rest of his life. If he could have hung on to the place it would be worth 2.5 mil today, anyway.

    People get in trouble when they lose awareness of their limitations and station. Plus, always best to err on the side of caution.

    If people buy what they can afford, pay the damn place off ASAP, it doesn’t matter what the market does. Ever. Debt is a dangerous tool to use. Many people have been brainwashed about all kinds of investments, willingly, Like lemmings.

    • Augustus Frost says:

      Great post. I don’t always agree with you but you are one of the most sensible contributors here. :)

    • MCH says:

      Here lies Nortel, killed by China… and the greed of its executives. May it rest in pieces in the shit pile that was made by its management.

      That name, and a bunch of others, like Lucent, Alcatel, Marconi, Ciena, they bring back such memories of stupidity and outright shortsightedness, and painful lessons that were largely ignored by corporations and the west.

  18. interesting says:

    I was just thinking about RE today because I was listening to the radio and it’s the same commercials over and over.

    Mortgage refi
    Doors and window seller
    garage door seller
    how to get out of debt

    rinse and repeat. I’d say 90% of the ads on the radio are RE ads and debt relief ads.

    And prices are completely insane just like last time.

  19. Maximus Minimus says:

    Don’t quite blame the FOMO crowd for the situation. The populus is clueless, and needs a guiding hand (just like the invisible hand), which has been missing in action for more than a decade now.

  20. Trucker guy says:

    I almost feel like a shark sniffing out a surfer who knocked their leg and the first scent of blood is wafting into the water.

    According to Zillow/realtor the latest market trends have been posted.

    The county I’d like to buy in (rural nothing with some millionaire mansions) has had no increase in median sold price for the first time in 30 months. The days in market have jumped up from 40-53.

    The county below (hot in town market) went for the third month with no median price increase. Days on market from 38-67. Average sale price was 3.5% below asking.

    The county north of me (absolute devoid of anything) jumped from 380-400k median sold price. Other data not listed. Probably because nobody lives there.

    The county east (mountainous superfund site and mining waste) jumped 10k from previous month. Median days on market from 195-232.

    The county west (rural and inexpensive, historically really low housing prices/depressed area) from 200k to 250k as median sold price. Houses averaged 12% over asking price in sale. Days on market 50-53 from last month.

    The really cheap dumps 5 hours from town are the only things selling above asking right now. Probably because they are the only houses you could even hope to afford. Everything from 400k+ is really peaking it feels like. As someone who has had to sit on the sidelines renting in town as a misanthrope, I can wait to watch it crash and burn… If it does. Of course Mr. And Ms. Dumdum who burned themselves will need bailing out because being stupid with money means you get a govt handout. Hopefully it is too big to save this time.

    • Trucker guy says:

      Also for reference, the days on market in these areas were in some cases almost 30 days or less at times. Price increases in median sale price had been jumping 10-20k a month. Everything was selling for over asking price. Many properties were no inspection or cash only. Still over valued but with some perspective there is hope filtering through possibly.

      • Anthony A. says:

        I keep remembering 2010 when we went looking for a house for my daughter here in Spring, Texas. There were pages upon pages of bank repo’s, HUD auctions, in foreclosure, other homes for sale by owner, etc. We bought a 3 year old brick and hardiplank 2,000 square foot home in a very nice area for ~$62 per square foot. The home had sold for $200 K new three years earlier.

        And we had plenty of them to choose from.

        Will we see this again?

        • NBay says:

          Was living in Tucson ’09-’10. Was much worse than what you describe. Me and the GF put in a final lo-ball offer of $150K on an almost new house that was rejected (asking $165K). By 2011 it would have been over asking. Worked out just as well for both of us, though, “decided” we couldn’t live together, but took a lot of great vacations ’07-’14. Telluride June Music Fest was magical, hit 2 of those plus a Rainbow Gathering…crazy wild.

          BUT

          You have asked THE question.

        • NBay says:

          Was only 1000 sq ft, but in very high end subdivision on N Oracle and right next to Catalina State Park. HOA $35/mo, just to enforce “ambiance”. Big deal, no lawns, just rocks, desert plants, and the EVER ubiquitous Popocatepetyl (sp?) signs, statues, etc, etc, etc.

          He was cool, even though nobody knows anything about him, I researched it.

        • NBay says:

          Kokopelli…looked on old t-shirt. Down there they like the “party animal” version of his legend, and believe me, he is EVERYWHERE! Every house, inside and out.

    • otishertz says:

      You hit all directions but above you? What about those houses in the sky above you?

      Just kidding, don’t worry, the Fed already bought all the MBS for sky houses.

  21. OutWest says:

    Anyone living in a sub 1000sf place, rented or owned, gets it. Especially with little to no debt.

    The old rule still stands…1/4 of monthly income goes toward housing. More than that spell trouble.

    • georgist says:

      This strategy is a disaster for the past 20 years.

      • Constellation Class says:

        georgist,

        Can you explain what you mean?

        • georgist says:

          I don’t like that it’s been like it’s been, but loading up on debt to buy financialised assets has beaten savings hands down.

        • p coyle says:

          tell that to the couple wolf wrote about in the article. i don’t like it either, the way that it’s been, but there are other strategies available than just running with the herd, even though you might feel like you’re missing out a bunch of the time.

  22. Sweet Kenny says:

    The Liberal government has extended CERS, CEWS and CRB. If you look at the Delta virus charts, Canada is up next for a spike. They won’t be returning to the office or any return will be delayed. Liberals have politically benefited from funding these lockdowns so I see more of the same this fall. Can you blame them though? It’s a race to the bottom and the US senate just voted another trillion+ into the pipeline. Liberals have got room to move.

    • JimMonet says:

      I’m not a libtard but I do like working from home.
      Your theory of more brrrrrr = more Covid is spot on

    • Roger Pedactor says:

      This.
      So much of this.
      Another $3.5T in the pipeline, probably a lesser amount passed, maybe $2T or so when all is said and done. The crazy part is that the U.S. dollar is going up against other currencies.

      This entire thing doesn’t really make any sense. The Fed, being as “apolotical” as it is, is probably going to announce tapering and an eventual rate hike after Congress approves whatever form of the additional reconciliation bill that passes. This should drive down the strength of the dollar, but there is a counter movement on bond yields with prices going crazy because I think people are expecting an imminent collapse of capitalism or something.

      With the way precious metals are manipulated by the combined efforts of the Fed and the big banks, you now see crypto prices going up and the hash rate difficulties going up again, which also signals that the movement of mining from China to the US and Canada has largely happened. And of course Musk had his breakdown when TSLA’s BTC holdings went negative and he immediately started tweeting about his belief in BTC.

      It’s all so insane. Add in more likely eviction stops, stimulus, and unemployment benefits while Delta runs wild and conflicting reports of vaccine efficacy and the North moving toward the colder seasons and more indoor time, I don’t really see how we end up anywhere but in a place with both higher interest rates and insane money printing. Which makes no sense economically by any reasonable stretch at all. Just like the Reverse Repo yield nonsense.

      Traditional economics don’t apply at all anymore. I give up trying to understand this. There is no logical conclusion. Money is a meme at this point. Globally. Which in my mind just emphasizes China because the state owns everything and capitalism is a meme to them to begin with.

      Basically, I think in the next 5 or 6 years everything will be highly centralized globally and currencies won’t matter.

      • georgist says:

        It does feel like I should spend less time thinking about macro and more time finding out if Powell had a good breakfast.

        • Roger Pedactor says:

          Lol. No other choice. This is likely a societal shift towards collectivism. Globally. Some third world country is going to end up with an influx of capitalists. El Salvador is already angling.

  23. gametv says:

    The core of the problem is greed. People want to believe that they should have it all without the hard work or waiting. We have also come to accept the economic slavery that is imposed on us by the billionaire crowd.

    Higher education is way too expensive. (The education industry is among the top lobbyist industry groups).

    The healthcare system and hospital billing practices are pure fraud. (More heavy lobbyists here)

    Real estate is also way too expensive. Fly in a jet and you see plenty of empty real estate that can be developed. Why does our government pack us into small places rather than provide incentives and get rid of the barriers that prevent private enterprise from building more quality houses at affordable prices?

    We are the new economic slaves. But at some level many people are acting stupid and greedy and somewhat deserve what they get. Sorry, I know I should have more compassion, but so many people refuse to educate themselves and then think the universe owes them so much.

    • Augustus Frost says:

      No one deserves to be bailed out at someone else’s expense for their bad decisions.

      No, I don’t think the wealthy should be bailed out but even if they are, doesn’t mean everyone else should be too.

    • 91B20 1stCav (AUS) says:

      Game-water, climate, house power, transport access, desirability, and, did i mention-water…

      may we all find a better day.

  24. PeterT says:

    I wonder how many have figured in capital gains taxes or property tax increases…not to mention all those who didn’t sell but whose homes are going to be reasssessed with a 40% tax bump due to this craziness…there’s a lot of unintended consequences going on!

    • Petunia says:

      Many long term owners are getting burned by taxes caused by all the speculation. I hear this is a big issue in Austin, TX.

      • Escierto says:

        Not just Austin. With no income tax, Texas is dependent on sky high property taxes to fund local services. Many people cannot afford their property taxes.

      • VintageVNvet says:

        True Pet,,,
        And exactly why you should have stayed in FL,,, settled down and now would be reaping the benefits of the cap on property taxes…
        Especially as you get older, which, somehow and some way, we all do until we don’t…
        While I love CA, and the SF bay area especially, there is no way now that I will be able to go back there for any length of time in spite of former ”GFs” asking me to come back with all expenses covered…
        Just saying, SF area totally out of control for any and all of us blue collar folks, and SF, my fave city next to London in the early 70s,,, will be suffering for a long time due to the impossible rents for manual labor workers,,,
        FAR FAR different than when we PEONS could rent a place for less than one or two day’s hard work worth of wages…

    • Paulo says:

      You don’t pay capital gains on a primary residence in Canada. That is how people set themselves up for retirement, at least did so in years past. Buy cheap or broken, fix it up and sell after living in it, rinse and repeat. Maybe downsize as a senior. That is what I did, then cashed out and bought the final junker at age 50, rebuilt it and bought land, and now sitting on a great lifestyle all paid for. Sweat equity in action as opposed to RE as simple investment. By the way, built family homes as opposed to just buying fixer uppers. I do all the work myself being a carpenter. Everything. Finishing off new furniture this week for a bedroom.

      If one’s RE assessment goes up, the mil rate is adjusted downwards to just cover the projected local Govt budget. It is illegal for local Govt to run in deficit and political suicide to sit on taxpayer cash beyond a small contingency fund. My taxes went up 1.48% this year, despite a huge increase in assessed home value of just under 50%. That is all we really look at, last year taxes compared to this year, and what justifications occur in the public budget meetings as to why.

      • Anthony A. says:

        Paulo, if you keep posting how great life is in Canada, you will start a stampede at the border crossings. I hear Woopie Goldrbeg is heading that way now too. She can afford a home there and she is not Chinese!

        • Paulo says:

          Anthony,

          I have a hunch that most WS readers and commenters would be great additions to Canada and we would be lucky to attract them. From what I read here everyone appears to have a good work attitude, history, and are critical thinkers who care how ALL situations are developing these days.

          Actually, we are admitting hundreds of thousands of new immigrants every year to Canada. I won’t try and paste in the websites, but the immigration program is deliberately seeking contributors by the point system as well as refugees from war torn and failing economies. Everyone here or their family was an immigrant one time or another, including first nations.

          My wife and I were discussing this just the other day. We actually enjoy the diversity and don’t see immigration as a threat. It is also a kick in the butt to remain competitive and for kids to take school seriously, imho. Immigration is a net plus, imho. I think there is one high school in Vancouver that deals with over 30 different 1st languages, although there are only two official languages…English and French.

        • KGC says:

          Whoopie won’t meet the criteria to get into Canada. Most Hollywood types don’t. Canada won’t let you in if you have a DUI or any drug related record., not even for a vacation. Which is why I laugh every time I hear those types talk about moving there.

        • Wolf Richter says:

          KGC,

          I never had any trouble getting into Canada.

          But each time I entered back into the US, I got harassed and hassled by US customs in secondary questioning. I was apparently on some kind of blacklist, having traveled all over the world or whatever. Drove me nuts, these people.

        • 91B20 1stCav (AUS) says:

          Wolf-just had to grin at that. Rewarded myself for graduating uni in 1980 (took awhile to get there, GI Bill didn’t cover expenses and worked in conjunction-a student loan was a philosophical anathema to me) by taking two months and my salvaged KZ1000 on a cross-Canada/trans-U.S. tour with my girlfriend at the time.

          We were extensively questioned by the officers when we departed the ferry in Victoria (well, i DID have long hair), but they satisfied themselves that we weren’t gunrunners and sent us on our merry way (delay time, about 20 minutes).

          A week later we reentered the U.S. in Maine. All packs opened and dumped, all person, clothing and footwear thoroughly searched, seat, sidecovers, airbox and fuel tank removed and inspected.

          The ground area covered in the aftermath was quite impressive. Less so when we were grudgingly told we could go, with no offer to aid in reassembling the debris field.

          Delay time, 3 1/2 hours. Needless to say, we didn’t make Augusta that night…

          may we all find a better day.

        • 91B20 1stCav (AUS) says:

          Thinking about it, maybe it was the California plate and DL…

          may we all find a better day.

        • p coyle says:

          91B:

          reminds me of my last trip through oklahoma.

          and yes, may we all find a better day.

    • Keith says:

      I sure didn’t. In the past three years, the internet has claimed my house has increased in value by well over $100k. Bought in the 330k range and not almost worth half a million- on paper at least. I still have lots of work to do and still cannot grow grass, yet the property taxes keep getting adjusted higher and higher over this phantom wealth. Best part, no pay raises and the cost of everything else in going up. At this rate, I told my girlfriend, in five years we may have to move.

      • Depth Charge says:

        And once you pay it off, try not paying those property taxes. You will get kicked out as the real owner the house – THE COUNTY GOVERNMENT – will take back their property. There is no “ownership” of real estate in the US.

        • Keith says:

          Happened to a neighbor. The neighbor claimed it was set on automatic debit and assumed the payments were being made. Then low and behold when they got notice their home was sold at auction and they had to vacate. No notice sent to the house, itself. Making matters even worse, they ended up with a house next door to their foreclosed home and apparently have not been good neighbors, as the new owners have had the deputies over a few times. We are out in the sticks, so responses can take time. Things seemed to have settle down, thankfully.

  25. Nacho Bigly Libre says:

    Sounds like an outlier case (no pun). Hard to generalize with that.

    USPS/census bureau says in USA 85% of those who moved, moved within the same metro area.

    Possible the trend is different up north.

    • Wolf Richter says:

      Nacho Bigly Libre,

      No, same trend up north. These people moved within the same metro area (Toronto), they just moved further away from the center. These metros are huge. The Greater Toronto Area has a population of 6 million. And they might have moved a little further out. Like someone moving from San Francisco to Sacramento or into the Foot Hills. That is what the USPS data is saying: people moving from a zip code in San Francisco to a zip code in Fresno or in the Foot Hills or just an hour away in the East Bay somewhere.

    • RightNYer says:

      Yeah, but look how the Census Bureau defines “metro area.” For example, Harper’s Ferry, West Virginia is considered part of Metro D.C. It’s about a 1:00-1:20 drive, and that’s with no traffic. Not an issue if you can work remotely most of the time and only have to come into the office once a week or less, but if you bought a house there planning on working remotely forever, and now your employer tells you you need to be back in the office 4 or 5 days a week, this commute is going to be maddening to many people.

      Every major city has “exurbs” like this, which are at the periphery of that city’s metro area, and are really only feasible for commuting if you don’t have to do it every day. And those are the places that have seen some ridiculous price growth in the past year and a half. I could be wrong, but my understanding is that land and houses truly in the middle of nowhere, as in many many hours from civilization, have not seen that type of ridiculousness.

      • VintageVNvet says:

        Not sure if you are wrong in the macro Rnyr, but in the county where we had built a solid farmstead prior to having to move back to the saintly part of the TPA bay area to care for elderly parents,,, from what I can find on net, , prices of bare land have more than tripled in the last couple of years….
        Certainly ”anecdotal” and would welcome more widespread comments from all over to establish even a little bit of verisimilitude here,,,
        here being the only place I am trusting to get even anywhere ”truth” writ large or small,,,
        Thanks again to Wolf and the commentariat!!

        • RightNYer says:

          How far was this area from the nearest real city?

          Is it a popular retirement area for people with horses?

          There are a lot of factors at play.

        • VintageVNvet says:

          80 miles from the major international airport, Nasville…
          Yes on the horses, still WAS mostly farms, both large and small, and tons of hardwood forests,, significant Amish population.

        • RightNYer says:

          See, that’s what I meant. 80 miles from a major airport is still within “exurbs.” You could easily do that commute if you only had to do it once or twice a week.

          I’m talking about a place where the nearest city with over 200,000 people is 400 miles away.

        • KGC says:

          As best I can tell there’s nowhere in the lower 48 that’s more than 400 miles from a city of 200k population.

        • RightNYer says:

          Pretty sure that much of the Dakotas and Montana fits the bill.

        • KGC says:

          Montana, especially the western part, is crying over price increases as folks move in and buy up ranches, and the Dakotas are have been seeing price increases for over a decade due to fracking.

          My grandfather had a ranch out in eastern MT; I’ve lived all over and I wouldn’t sign up for those winters. Folks moving from L.A. to Helena or Bismarck are going to be problems the first couple winters, if they last that long.

  26. andrew says:

    I feel immensley cheered up having read your article and the comments. The housing market is cooling somewhere in Canada? Good.
    However, the Canadian Mortgage and Housing Corporation (CMHC), a government arm sort of like Fanny Mae, underwrites most mortgages for the banks, and the banks won’t be allowed to fail with underperforming mortgages. That is, Canadian taxpayers are supporting the government, the banks, and a home owner class.

    • td says:

      The banking oligopoly is supported, but if CMHC insurance is triggered, it means that all the blood has already been squeezed from the homeowner stone. Mortgage holders are on the hook for monthly CMHC payments that are embedded in the overall payment.

  27. While I fully believe this was a bubble, I don’t know that we can call time of death yet. We need to wait for fall, see what happens when people come back from their summer vacations and then see how the variant affects life – which was almost returning to normal. Do we go back to lockdown? Or does the world keep spinning. So many variables to this but I never thought this would last.

    People don’t think. They only live for today. In addition to my “real” job as a Realtor, I also run a dog rescue. We are getting slammed with people surrendering dogs (all 1.5 years or younger) that they can’t care for. People are ridiculous. They all ran out and bought houses in the woods and got dogs thinking this would last forever. Now we have an even bigger mess to clean up.

    I posted my thoughts on the “bubble” on YouTube early on 2021.

    • p coyle says:

      people who quit on their dogs, especially those that are giving up plague dogs, deserve what they have coming to them. where i live, even the homeless take care of their dogs.

      once upon a time, i lived in a quasi-functioning society. apparently, not so much anymore.

      • RightNYer says:

        I don’t think we’ve truly had a quasi-functioning society since the mid 1990s or so.

      • 91B20 1stCav (AUS) says:

        p coyle-sadly, i don’t find it much of a stretch to think that those who give up on their dogs are only an eyeblink away from giving up on any humans near them, then, ultimately, themselves. (So grows nihilism in the face of universal commodification…).

        may we all find a better day.

  28. jm says:

    Some mentioned jingle mail, but I seem to remember reading that Canada is not a “no recourse” nation. If so, the bank can demand they pay off the full amount of the mortgage, and go after any other assets they have, even garnishee their wages, I suspect.

    • RightNYer says:

      That’s true for most U.S. states too, and I can tell you that lenders rarely bother. Unless they KNOW the person has tons of assets, and is just not paying because they don’t want to, it’s almost never going to be worth the money they’d spend on legal fees trying to collect on a deficiency judgment.

  29. Jezabeel says:

    Everyone in NZ is gearing up for another spike. As in spike protein. Not spike in housing values.

  30. roddy6667 says:

    These people suffer from the delusion that they MUST own a home at all times. It’s an unquestioned article of their faith.

  31. Prue Grubstreet says:

    These stories are coming fast and thick now. Just saw one on r/realestate about a couple that FOMOed on a condo, paying $250,000 over. Well, when some other units sold for much less, they became incensed and decided to, well, “sue everybody,” Jerky-boys style. Here’s an excerpt:

    “They also had the temerity to try and get the HOA involved on their behalf to argue to the realtor that they paid too much, obviously a bizarrely non sequitur and desperate move. My friend was even asked if he’d be willing to testify in court if called to do so. He’s a retired lawyer, and after telling them there was little chance this would make it to court, their response was ‘we’ll just see about that’, and hung up.

    But wait, there’s more! These disgruntled buyers then approached some of the younger homeowners in the neighborhood to rally them to take over the HOA board and get it out of the hands of the out of touch ‘boomers’. ”

    Weaponizing an HOA to sue your realtor because you paid too much — bizarre! The next few months should be interesting. As someone who has felt quite a bit of despair at the thought that I might never be able to buy a house (I resisted the FOMO and shelved my real estate plans), stories like these give me some hope.

    • Augustus Frost says:

      For some people, it’s always someone else’s fault.

    • Udee says:

      Same thing happened to us in 1991 when we sold our house which we had bought in 1986. We sold it for about $38,000 over our purchase price but about $5000 under what we could have gotten 3 months earlier. But…our next door neighbors had bought about 6 months earlier at the top. I still remember the wife yelling at me on the phone –You shoulda held out!

      • Depth Charge says:

        I remember my mother’s next door neighbors who bought at the very peak in 2006, for triple what my mom paid in the 90s. Then, when the entire thing melted down and prices dropped over 50%, they blamed everybody except themselves, went into foreclosure, and left town.

  32. joe2 says:

    Poor babies are school of hard knocks grads now. Does no one ever do an actual cost/benefit/risk expectation value analysis anymore?

    I’ll be they have not even thought of pricing the moving expenses. That and RE commission is what always kills any idea of moving for me. They might try stiffing the employer but I doubt it would work. Gone are the days of having your employer buy your house on a move – unless maybe you work for Blackrock.

    I bought some gold at 1930 but I’m not whining. I’ll hold it or sell it at a loss. Not a happy result, but not a totally unexpected result. So it’s manageable.

    • Prue Grubstreet says:

      Wait? Employers used to buy houses for new recruits? Jeez, sometimes I feel as though I live in a different country when I hear these things. What was that United States of yore? As dead and gone as the Soviet Union, I guess. (And perhaps it was the Evil Empire that kept our own Empire in check. No need to prove that capitalism is the better system now, so let it degenerate and rot.)

      • MiTurn says:

        When my son moved from Texas to Idaho to work at a mill as a master electrician, besides paying all his moving expenses and getting a cash bonus, buying his existing home was part of the equation. But he had no problem selling it, so it didn’t figure into his new employer’s cost of getting him to work for them. This was about 6 years ago.

        I guess it all depends on how incentivized (that is, desperate) the employer is.

      • joe2 says:

        Yep. Now from my experience this goes all the way back to the 80s but I have met international bankers whose packages us mere mortals cannot conceive of.
        When the small startup I was working for folded, I joined a fairly large well established corporation. My first company trip I got picked up in a limo to my surprise. A limo was always used. On one trip back all the flights got diverted by weather to a small out of the way airport where everyone was going crazy trying to get out. No problem, my limo pulled up and I left with all looking daggers at me. The company did pay all my relo expenses and buy my house once for a move they wanted me to make back when mortgage rates were 13%. This was in the days of extravagant Christmas parties, expense budgets for team building socials, smoking on planes and parties in the back and flexible expenses. Traveled Executive. Lots more stuff, but remember I was only a lowly employee, not an executive or C-suite guy. This was all pretty standard stuff in those days. Not anymore.

        So the next time someone says the US is not going downhill, you now know for sure it is. As you sit on the plane, if it wasn’t canceled, with your mask on getting glared at by an old fat steward thing or sitting in “diversity” training. Fun and living are being outlawed. It will get worse.

      • 91B20 1stCav (AUS) says:

        Prue-your parenthetical comment is absolutely on-target (many ‘progressive’ steps taken by the U.S. ’50’s-’70’s were only in response to Soviet propaganda pointing out our country’s many hypocrisies in living up to the promises of its Constitution) , but might add the prescience of Eisenhower’s farewell speech warning of the rise of the MIC-which, thanks to the Cold War, became the main industrial driver-gov’t influencer-cum-welfare queen of the nation.

        may we all find a better day.

  33. JH says:

    Thank you Wolf for the awesome updates. Unfortunately, no slowdown at all here in Cali. Prices are continuing to boom higher and homes still selling very very fast. There just is no real material “shift” at all happening in the market. Vote buying via Stimmy checks will continue well into 2023 along with ongoing “extensions” for moratoriums on mortgages and rent, etc. UBI is here now. The FED with their continued MBS purchases and ZIRP will also continue. The government will not allow deflation of asset prices. “There is nothing more permanent than a temporary government program” – Ronald Reagan

    • PeterT says:

      Things absolutely are slowing in Cali…look at price reduction numbers…and nimber of deals falling out of escrow.

      • TheFalcon says:

        Agree with Peter. DOM are longer, reduction in number of bids per property, some price reductions.

        Will this trend continue? Who knows. Need to wait until next spring selling season. Lots can happen between now and then.

        • SOL says:

          It’s because all of California is moving here, to Bend. Equity refugees screwing up Oregon prices

  34. 3D Modeler says:

    They’re falling into the classic Wall Street FOMO trap. Buy a stock on the way up based on FOMO, then panic when things turn for whatever reason. Buy high, sell low. Following up one rash decision with another rarely ends well. Maybe they should consult with van_down_by_the_river for some sage advice.

    • RightNYer says:

      The higher the stock bubble goes, the worse the crash will be.

      Anyone buying S&P at these prices is paying $100 for $2 worth of earnings. Yikes. And even those measly $2 earnings are based on trillions in stimulus, unlikely to be repeated.

      • JoeC says:

        So the question is: Someone who is mid 30’s with a long time horizon until retiring, where do you park your money?

        • 3D Modeler says:

          As mundane and boring as it might sound, dollar-cost averaging in the S&P 500 is still a viable strategy for someone in their 30s. Not so much for someone in their 70s….not enough time and earned income left to recover from a major recession, or worse.

        • RightNYer says:

          3d modeler, is it?

          Most overvalued market in history. Fed printing only explains some of it.

        • 3D Modeler says:

          What would you suggest to JoeC?

        • RightNYer says:

          I’m in my late 30s, and there are zero good answers. Every asset class is overpriced, but holding cash is a guaranteed loser by a few percentage a year.

          That’s why people hate this “bull” market. Because it’s fake.

    • 3D Modeler says:

      Come to think about it, Wolf could further monetize his site by facilitating a consultation between someone like the Canadian couple and one of his trusted commenters for a reasonable referral fee. Could be a win-win-win. ;-)

  35. georgist says:

    Lot of nasty schadenfreude vibes on here.

    The bigger picture: buying a home should not be one of the biggest decisions of your life, where the timing makes or breaks you.

    Your financial health should primarily be a function of the value you add to society.

    Interest rates are low because productivity is low because there are too many rentiers …. because rentier activity is more lucrative than real activity.

    There’s zero comments on the bigger picture and until Americans actually stat to *think* instead of chewing each other up like rats in a barrel, your country will continue to get weaker.

  36. NoPrep says:

    Agree. Not thinking. I think the corporate world at large has a great interest in ending WFH to a great degree. Multiple factors explain why. Numerous chiefs like the head of Netflix were there with that position from the start of the pandemic. These two believing WFH was going to be permanent was a part of a poor assessment and financial decision they made.

    • Roger Pedactor says:

      WFH kills urban centers. NYC looks horrid.

      Without commuting urban centers are not financially solvent. DiBlasio and Cuomo are both probably relieved they don’t have to deal with the fallout of what that city has become.

    • Harrold says:

      Pandemic is not over yet…

  37. Micheal Engel says:

    1) In Mar 2020, when the market plunged, JP was buying UST & MBS to support the stock & the RE markets from going under, into a black hole.
    2) The blue whale order his RE agency to buy homes at bargain prices.
    3) The sharks imitated the whales and each other. They clustered together, flooded the RE market with buy orders. The market was dominated buyers. There was no equilibrium. The RE market metastasized. It was not a “free for all market”. It was going crazy, up, WTF.
    4) They fixed it, flipped it and kept the rest.
    5) The market choked and prices rose. Thanks to the tech sector, WFH became a new economy.
    6) A year later the market calmed down, back in equilibrium. Buy orders are about equal to sell orders.
    7) In some markets prices are still rising, in others, fading.
    8) The whales & the RE sharks are dripping stealthy sell orders.
    9) They know that WFH will bounce back.
    10) They don’t know when, how far the RE market correct.
    11) There are no clusters of buy or sell orders. It’s a RE goldilocks.

    • georgist says:

      I have to agree that private equity piling into housing is hard to justify. Rates at rock bottom. Prices sky high but about to crash.

      Private equity: wow now seems like the perfect time to pile into real estate!

      Hard to believe this was “organic”

      • RightNYer says:

        Why not? Money managers know that every asset class is obscenely overpriced, and if interest rates tick up, even a little bit, they’ll crash.

        But they’d rather be wrong with everyone else than wrong on their own, so they all pile in, hoping for the best.

      • Peanut Gallery says:

        I don’t understand this thought that private equity is some huge factor in driving home prices? I guess they are a nice, convenient “evil” scapegoat to blame.

        But in reality, it’s:

        1) Low interest rates
        2) Debasement of fiat dollars
        3) Every day people buying homes because of the above two reasons

      • ru82 says:

        I don’t think housing prices are going to crash. Maybe go down some but there still is an inventory shortage.

        For prices to crash….there needs to be foreclosures. What demographic is going to get foreclosed on?

        The average home equity in real estate is at 65%. 59% of homes with mortgages have at least 60% equity and this time we do not see the HELOC equity stripping behavior. Also, 87% of homes have at least 20% equity. It will take a real big crash of 25% to 30% for people to think about jingle mail this time.

        Sure some regions are way overpriced but others are not. Housing in the U.S. is till cheap compared to other G7 countries…especially those Euro countries that had NIRP. Mortgages could be had for 1% to 2%. Some Adjustable mortgages actually paid you interest back on your loan.

        U.S. Home owner demographics
        GenZ (1 to 26) = 1%
        Millenials (26 to 41) = 17%
        Gen X (42-56) = 28%
        Baby Boomers = 42%

        So the under 41 crowd only owns 18% of all the homes. I was surprised it was this low. They are the ones I know that keep getting overbid.

        The under 41 crowd is bigger than the Boomer age group. So they can suck up the babyboomer homes as they retire and there is still a shortfall in inventory for this age group. Plus add in a yearly 1 million population growth and another 1 million in new immigrants and another 500k illegal immigrants.

        But it all comes down to liquidity. A combination of higher interest rates and the GSE reducing the amount of mortgages they guarantee (rought 95%) could cause problems. The GSEs even guarantee the Wall Street companies rental home mortgages. IMHO…the GSEs hold the key for housing. They can support housing high prices or they can cause a downturn.

        • Anthony A. says:

          Your home ownership numbers add up to 90%. 10% is missing. Could that be the group older than Baby Boomers? Like me and others called the Greatest Generation born between 1927 and 1946?

        • ru82 says:

          Anthony – Yes exactly. The last 10% is the Greatest Generation ownership.

  38. WP says:

    Hopefully realtor selling fees are different in Canada than the US. I imagine they haven’t factored this in and will be in for quite a shock on how much they will be losing.

  39. Jack says:

    I don’t know wether to cry or laugh!

    Just flip through international real estate markets around the world, Europe, Asia, North America, South America, Australia and see what the central bankers did to the economies of the world .

    I am Not going to talk about China , as the government controls the breath of every citizen ( let alone their real estate affairs).

    Take core logic’s latest prediction or projections in regards to the Australian domestic housing market which is

    “ The Australian domestic housing market is expected to reach $9 TRILLION eye watering dollars later this year.”!!!

    Yup this is where we are.

    Any wonder that the fed keeps suppressing the bond market?

    Any wonder they keep this game running?

    In this instance ( Australia’s financial system is entirely hinged on this one aspect of the human life that was supposed to be a right of every citizen to have an affordable housing at a fair price).

    In comes the banksters and realtors and a whole host of other swamp creatures !

    ( our own Wolf Street swamp creature here merits an apology as this is Not directed at him) , in comes those criminals that drove us to the last financial Crises this time fully legitimized by our equally criminal legislators ( or were they just gullible?!).

    and the complete financialization of housing is beyond recognition and turned into just another tool to enslave the population and subdue them into a life of compliance and servitude.

    Gentlemen, we’re beyond the joke now.

    We’re in deep waters , or as Ozzie’s calls it up the shit creek!

    • Nicko2 says:

      First post here considering the global perspective. Kudos.

    • MikeG says:

      Please, it’s “Aussies”, unless you’re talking about a mumbling rock star.

    • BeaV says:

      and the complete financialization of housing is beyond recognition and turned into just another tool to enslave the population and subdue them into a life of compliance and servitude.

      ^^^This deserves repeating.

  40. Yeah all this cry whining over breaking even after six months. Declare victory and go back to Toronto, if prices are down there as well then it’s a wash.

  41. David W Young says:

    I feel like a kid again, dancing gleefully amongst the popping bubbles. What bubble is not showing more and more pops of extinction on an almost daily basis. When central bankers think they are the Masters of the Economic and Financial Universes, when most have never met a payroll, their actions at distorting the prices of not only money, but subsequently assets across the entire spectrum, eventually cause hyper-active prices to come back down to Earth.

    One has merely to observe, notice the parabolic, exponential progression of asset prices to know, from 100’s of years of investing, that the Risk to Reward Quotient is no longer favorable for those particular assets. Home prices are no different than bonds, stocks, commodities, and the general price level of goods and services. There are few asset markets out there today that have favorable Risk to Reward characteristics.

    Homes, stocks, bonds, Dollars are all markets that have all the internal characteristics of weakening and preparing to roll over. If any market stops going up for any length of time it will be sold by today’s Instant Gratification Investor. I just buy the dips in Gold and Silver because I don’t see any long-term value in most other assets and want to stay out of the Dollar System as much as possible.

    Worked from home for over 30 years with my own business. Low cost way of operations, and my life expectancy is increased by no commuting time in the Washington, aka Swamp, Metro area. Vehicles last longer also.

    Personnel interaction is essential to most successful businesses. Hard to develop a team spirit with a two-dimensional screen shot of a fellow team mate on a computer screen. Hybrid models will be the new normal due to cost savings if nothing else, and we will learn to adjust to a world full of bugs that want to kill us. But still don’t think we have come up with even temporary fixes at the moment.

    • georgist says:

      You must be very happy if you like dips and gold!

      • David W Young says:

        Started buying gold in size in 1997 below $300 and silver in size in 2004 below $7. Yes, I am very, very happy.

        • georgist says:

          I have some as insurance but your outlier$300 is just that. Xau hasn’t performed well over the last decade.

        • RedRaider says:

          Aww! Why did you have to go an ruin my day? I thought I was the greatest gold bug with a cost basis of $425 :-)

  42. Broken Mobile User says:

    Hi Wolf. Long time reader. First time commenter, and it’s not even about the article :) . Just wanted to let you know the hamburger icon for the menu in mobile view has been missing and broken in iOS 14 for several days now. I haven’t checked it out on another phone so it could just be me. Please feel free to delete this message unless you feel a thread would help determine if others are having the same issue. Thanks for your hard work. Love the site.

  43. otishertz says:

    “a horrifyingly bloodcurdling stupendously surprising situation of having to sell a house without being able to make an instant profit.”

    I fell out of my treehouse laughing. xD FOTL

  44. MonkeyBusiness says:

    Or it could be 4D chess!!! They are trying to get people to sell their houses for cheap.

    If it comes from the Internet, it has to be true right??

    Anyway this is just an anecdote. The proof is in the pudding. For us in America the pudding is Case Shiller.

    • Wolf Richter says:

      The CS lags about 4 months behind. I love the CS’s methodology. But it sure requires a lot of patience.

      • MonkeyBusiness says:

        But it’s more certain. That’s a plus.

        Still if lots of people are trying to dump property at once at multiple websites, I would not say no to the validity of that data.

  45. random guy 62 says:

    One thing I didn’t see noted in these comments is the effect of lumber prices.

    As the cost of lumber was skyrocketing, it provided more fuel for price increases, as the cost of new structure might drag up the price of existing structures with it.

    Now that the lumber bubble has fully popped, it should take some of the momentum out of house price rises.

    I’ll admit, we got a wee bit of FOMO and took advantage of the record low rates late last year by moving to a nicer place, but we did it the old fashioned way. That is 20% down, debt free otherwise, monthly payments at 25% of income, located near home and work, and the whole property was priced about 40% off new replacement cost. Benefits of flyover country I guess.

    Some of these home buyer stories blow my mind.

  46. Phoneix_Ikki says:

    FOMO makes the world goes around….we’re in the golden age of powerful mix of FOMO, Hopium and kick the can down the road type of thinking when it comes to housing and pretty much every single asset class out there.

    As much as I hate to predict this but this can go on a lot lot longer with the never ending blessing from the FED and our government to throw the kitchen sink at propping the market up as much as possible.

  47. Gabby Cat says:

    Taxes! A lot of employees were told that remote work was going to be the new norm. A majority of organizations received a great deal of positive performance from their employees. They found they were saving a lot of money keeping employees home and turnover due to work-life balance shrunk. Many were ready to implement it permanently. Then local governments saw the potential of loss due to income tax and lack of commercial development. They threatened to take tax incentives away from the organizations. Now everyone is forced to come back to the office. Where I live most of the government officials own or have family in commercial development. Amazing what greed can do!

  48. Artem says:

    It would be really helpful to know the industry of wife’s employment.
    Probably banking, to add to the irony.

  49. Phoneix_Ikki says:

    Lemmings think alike and maybe time for some new friends..

    ““My friends keep telling me that there is no such thing as a Canadian market cooling and to just wait it out until it sells.”

    • David W Young says:

      Canadians need to watch their own central bank that has been pulling back on the reins of system liquidity for several quarters now. Duh, once you start draining liquidity from a market very dependent on same such as mortgages and financed housing, the top in price is not very far behind.

      Have to laugh when citizens project current price activity and government largess to the far side of the Moon. No such thing as Forever in market and economic manipulations. Same with U.S. Fed and U.S. Government shenanigans. They have already lit a blazing fire under American Inflation and put the last inning hex on the Dollar. Got Greenbacks, got aspirin???

  50. Micheal Engel says:

    1) Dot by dot, the CPI is stuck at the same spot. The last two dots clustered together, stall. US1M to US 10Y are down today. SPX made a new all time high, a tiny doji, but QQQ touched dma20.
    2) Toronto RE trend is up. It will cont to glide up, effortless, without buying
    clusters or volume. Up, because the trend is up. That’s all. Up until there will be a change of character, – a large selling cluster, on high volume, that attract more selling dots, that grow like cancer cells, metastasize and flood the market square.
    3) Toront is up by inertia. Toronto rondo up, until it stop.

    • David W Young says:

      Michael, did the Nasdaq lead the rest of the markets down in 2000/2001? The fastest rocket loses its fuel and reaches terminal speed first. We know what happens once terminal or stall speed is reached.

  51. Micheal Engel says:

    1) There is no EV without coal. Rotterdam Coal Futures weekly, log.
    2) Every bubble need a backbone. Rotterdam backbone was : Mar 3/
    31 2008 hi/ lo.
    3) Coal sugar high ended in a 12Y A-B-C downhill in June 2020.
    4) In Aug 2021 Rotterdam is up to it’s backbone.
    5) The weekly RSI is > 93.
    6) Tesla plunged 70% in China.
    7) Ilan will win gold in Beijing first winter Olympic downhill.
    8) Ilan will drag coal down,
    9) There is no fear of 2K today, but the FAANG are dirtier than Rotterdam.

  52. SocalJim says:

    Buying a house in a rural area only works out in a doomsday scenario.

    • BeaV says:

      Well considering that most of the new owners of these rural “estates” still haven’t figured out why they don’t get a water bill from “ya know, the water people”, I’d say it’s unlikely that even a doomsday scenario is going to work out well for them.

  53. Ed C says:

    The real estate frenzy seems to be continuing in the Phoenix area. ’72 Sold’ is marketing themselves on TV and elsewhere. They have a spastic salesman / owner wildly gesticulating in the TV commercials. He wants you to “sell at the top” and “stay in your house for up to six months”. I wonder how all this is going to play out. I’ve never seen anything like it anyway. Why would I sell my house? So I could turn around an buy an equally overpriced house? Why would I endure the hassle of doing that? No thanks.

    • Turtle says:

      That man says it’s the top and wants to buy anyway?

      “I wonder how all this is going to play out. I’ve never seen anything like it”

      Who knows! Probably something ugly, at some point.

  54. GvsCfa says:

    Where is the US as compared to Canada? Are we seeing the same price decreases and inventory builds that this Canadian couple are seeing?

  55. KGC says:

    What bothers me is a Spanish scenario, where there are tens of thousands of houses that the banks can’t sell because nobody will pay the prices they want, and they won’t sell because the banks can’t put a true market price on them without taking such a huge write-off they’ll go bankrupt. Spain is not the only country like this, just the best example.

    Banks in the EU have been trading bad loans for over a decade trying to bolster the prices and the only thing keeping them (and those countries) afloat is the politicians allowing accounting practices that are blatantly illegal to try and hold the Euro together.

  56. Turtle says:

    243 comments on a post about residential real estate and not one mention of forbearance.

    I guess we’ve all come to accept that it will basically never end.

  57. TK says:

    Housing has always been cyclical. As is the stock market. Everyone goes to one side of the boat and the boat nearly tips. So they rush to the other side. In hindsight we can criticize, monday morning quarterback. But none of us can predict the next big shift. Just count our blessings and enjoy what we have.

  58. SOL says:

    Bought first house in 2005. Paid to get out from under water mortgage at closing in 2015. No interest in being drowned again. I’ll buy next crash, or I’ll rent until I die. Not going backwards again.

  59. Manual says:

    Buyers need to be smart enough to account for all contingencies. The housing market is out of control and the properties are simply not worth it. I grew up and live around Lizzy Borden’s hometown. A depressed city of 80k ppl who’s textile mills and manufacturing companies were packed up and moved to China in 2000. Multi family houses before the pandemic were $300k -$350 range. Now $350k – $450k is the norm. Those prices are crazy cause the city is crap and has no immediate future or industry. For those who pay for that junk shame on you. You deserve to lose money. Same for other overpriced areas.

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