Inventories of New Houses for Sale Highest since 2008, Worst Spike in Construction Costs in at Least 50 Years: What the Heck Is Going On?

A look at massive distortions and massive supply in the pipeline.

By Wolf Richter for WOLF STREET.

The index for construction costs of singled-family houses spiked 15.3% in November compared to a year ago, the worst year-over-year spike in the data going back to 1970, and by 21.1% compared to November two years ago, according to data by the Commerce Department on Thursday. This excludes the cost of land and other non-construction costs:

Builders are complaining about all kinds of shortages, including windows, while window makers complain about labor and materials shortages. Lead times are stretching into eternity by the measure of single-family housing construction projects that then get bogged down.

There is enough demand to allow builders to pass on those cost increases to buyers: The median price of single-family houses sold in November spiked 18.8% year-over-year and by 27.1% from two years ago to $416,900. That means, half the homes sold for over $416,900 and half sold for less.

The bottom has fallen out at the lower end with nearly no houses sold below $200,000. Only 13% of the houses sold below $300,000. But 57% of the houses went for over $400,000. The median price is skewed by this shift in mix to the high end, because that’s where the money is, and by the death of the low end:

Inventory of single-family houses for sale at all stages of construction combined – more on those stages in a moment – has been persistently rising for months and hit the highest level since August 2008:

Inventory for sale by stage of construction:

The number of completed single-family houses for sale – which means they have to have windows among other things – has been straggling along below 40,000 (seasonally adjusted) all year, a historically low range in the data going back to 1999, and setting several new record lows along the way. In November, 39,000 completed houses were for sale (red line in the chart below).

But the number of houses for sale where construction hasn’t started yet hit 110,000 in November, the highest in the data going back to 1999 (purple line).

And the number of houses for sale that were still under construction rose to 253,000 in November, the highest since 2007 (green line).

The shortage of completed houses.

Every month since May, completed houses for sale have accounted for less than 10% of total inventory for sale, which hasn’t happened since at least the early 1970s. The pre-pandemic low was 20% of total inventory, in May 2018.

There are few completed houses for sale as delays of all kinds see to it that builders are having a rough time completing construction. And as they’re trying to complete construction or shortly after they complete construction, the houses are sold and don’t linger in inventory:

Sales of New Houses, in Total and by Stage of Construction.

Total sales of new single-family houses in November, all stages of construction combined, fell 14% from a year ago, to a seasonally adjusted annual rate of 744,000 houses, having unwound the entire pandemic spike. Sales also remain far lower than during the boom years of 2002 through 2006 (this does not include apartment and condo buildings).

Sales of completed houses – where inventories have collapsed – have been hobbling along near the levels during the housing bust and in November dropped to a seasonally adjusted annual rate of 164,000 (red line in the chart below), as there wasn’t a whole lot to sell. And at 22% of total sales in November, their share hit lows not seen since 2005.

Sales of houses under construction jumped to a seasonally adjusted annual rate of 359,000 houses in November (green line), and has been running high ever since April last year. This was driven in part by the shortage of completed houses – and more buyers ended up buying a house that was still under construction. The share of sales of houses under construction surged to 48% of total sales in November, along with August and June, the highest in the data going back to 1999

Sales of houses where construction hasn’t started yet – when a homebuilder will build it after the buyer commits to buying it – rose to a seasonally adjusted annual rate of 221,000 houses (purple line), for a share of total sales of 30%, which is roughly in line with pre-pandemic years since 2012, but is down from the peak months during the pandemic:

Distortions… and a lot of supply stuck in the pipeline.

What we’re seeing here are large-scale distortions across the spectrum, from spikes in construction costs and shortages of all kinds, long lead times, and the inability to complete construction in a speedy manner, which leads to the huge build-up of inventory of unfinished houses for sale, while completed houses for sale have become scarce.

There is lots of supply, but – at the moment – it’s the wrong kind of supply: It’s further up the pipeline and some of it is stuck in the pipeline, while buyers are leery of getting tangled up in the potential delays and cost increases. But this supply is coming down the pipeline, and there’s a lot of it, and it’s pegged at very high prices, and it’s doing so as mortgage rates are rising from the ultra-low levels that made all this possible.

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  160 comments for “Inventories of New Houses for Sale Highest since 2008, Worst Spike in Construction Costs in at Least 50 Years: What the Heck Is Going On?

  1. Anthony says:

    Interesting that the cheaper houses are not selling, so I guess all the buyers of the more expensive ones are not relying on housing chains or maybe have no house to sell. They may be renting their low price house out and taking a new mortgage to buy the new more expensive place. All sounds dodgy, though, if the cheaper homes are not selling….

    • doug says:

      I don’t think ‘cheaper’ houses are being built. There are non to sell.

      • Joe Saba says:

        son who recently got married(at 23) is looking at renting out his current home and buying another to live in
        he bought 3 years ago and now looks like genius

        • JM says:

          Genius. Gov workers are so well cared for.

        • Anthony A. says:

          When this bubble pops, all those *geniuses* will be scrambling to dump the overpriced real estate they leveraged up on. It’s coming….it always does.

        • jon says:

          we all are genius until we are not :-)
          Don’t worry, I am one of these geniuses!

    • Truckman says:

      Around here, all the remaining cheaper houses involve major reno work, to which the same problems of supply of materials and lack of contractor availability apply. The only guy near me still building is a just retired drywaller who is calling in a lifetime’s work of favors to get the labor and materials he needs. Even then, I’m helping him out occasionally.
      I’m doing my own major reno work, but I have a barn full of all the materials I need to complete the work because I saw allthis coming.

      • Crazy Horse says:

        Housing in the USA long ago lost the connection between NEEDS, wants, and speculative investment.

        NEEDS
        Levittown, the first large scale suburban property development in the USA, was specifically intended for needs of soldiers returning from WWII who wanted to marry and form families.

        https://untappedcities.com/2020/07/31/the-controversial-history-of-levittown-americas-first-suburb/

        The houses were stick framed using balloon framing, cheap lumber, drywall, and require a low level of skills to build. (The same construction method used to build 20 million dollar trophy houses today) The Levittown developer put up 30 homes per day, and sold them for $8,000 — with GI subsidies that came down to only $4.500. No red blooded American today would call them a dream home, but they met the criteria of Need to a T. Today a building permit alone for the same house on a well in a red neck rural neighborhood would cost as much in today’s depleted dollars.

        WANTS

        In 2020 the suburban starter home of most young couple’s Dreams has three bedrooms, three bathrooms, a three car garage, and a TV rec room in the basement. It is rarely as small as 2.500 sq ft.–more likely 4,000— The sticker price will be $430,000 to $1,000,000. (Or Four Million +++ in Jackson Hole or Aspen.

        SPECULATIVE INVESTMENT

        The modern day starter couple’s Dreams have little to do with Needs. Granted their emotional needs were cultured since childhood by advertising, but the real motivation behind the homes they choose are the desire to build a nest egg through inflation. The history of their parent’s home and that of the age group ahead of them teaches that it is the only way to really “get ahead”, and one would be a fool not to get on board. How easy forgotten that only a decade and a half ago all that air equity evaporated and the Repo Man came knocking on the door.

        NEEDS II

        One does not need to go back to the end of WWII to find examples of housing driven by function rather than speculation or social pressure. Couples and families have been living in one of these structures in the Pacific Northwest for over 20 years, while others are found from the tropics in Central America to the high Arctic.
        The steel structure for an entire residential sized building only weighs 1,000 pounds and can be erected in one day with no machinery or moved to another state behind a pickup truck. They can be fully permitted under the Universal Building Code—- and fully plumbed, heated and insulated cost $20,000–$25.000

        This company has a 42 year history of development and refinement of their product, so they are not exactly an architect’s wet dream. Not everyone dreams of living in a geodesic dome, but they are a perfect example of Needs trumping Mortgages.

        Another centuries-old housing form that fills the NEEDS of several hundred families from Arizona to Alaska is the modern iteration of the Mongolian yurt. They can be from 16 ft. in diameter to 100 ft. , and are so well insulated that people winter north of the arctic circle using only wood for heat.

        Will the future show that shelter is more valuable than a defaulted mortgage?

        • Crazy Horse says:

          The 25 K cost figure is for a 24′ two person dome about the size of a modest apartment. They can be any size up to 100 ft. diameter stadiums. 25k includes heating, plumbing, wood flooring, and four season insulation. Heating cost is less than half that of a similar volume conventional structure and materials cost is a fraction of that needed for a starter tract home. Like I said, not for everybody, but a 400k mortgage isn’t either.

        • Wolf Richter says:

          Crazy Horse,

          I took out the link (twice now) because I don’t allow product promos in the comments. If they want to promote their product to our readers here, they need to contact me, and I’d be happy to try to work out a deal with them.

        • joe2 says:

          You plotted the evolution of housing. Now plot the intelligence and education of the people and God forbid the intelligence and honesty of the government.

          My father built his first home himself. Concrete block. My first baby picture is in a crib next to the construction site. You think we will ever see that again?

        • Crazy Horse says:

          Got it Wolf

          I wasn’t trying to promote a company, just allow viewers to quickly understand a type of housing that is far from the mainstream and a fraction the cost.

    • Djreef says:

      The ‘cheaper’ houses we’ve seen have been total crap. Listed FEMA trailers for $150,000 on an acre, and fixer uppers (At a time when materials are unavailable, and expensive).

      • VintageVNvet says:

        OF COURSE dj:
        WE the PEONS, ( thanks unamused ) have always had the now considered ”alternative” to build our own housing.
        Maybe just a dug out in the prairie walled and roofed with sod, at first,,, and in other places with woods, maybe just a log cabin, as has been clearly enough described in our USA literature, like for eva…
        Not just a ”meme”,,, but was actually available to anyone willing and able to put in the very very hard work…
        Now a days, it certainly IS more challenging,,, but it, the possibility of building your own ”home” is still out there,,, how some ever,,, building that home still has the basic requirement of working your assets off, just exactly as was the requirement long ago…
        Been there and done that a couple of times!!

    • Seneca’s Cliff says:

      In most places of the country the fixed costs of land and development charges have become too high to practically build cheap houses. Back in the days when my wife first got started in the wastewater treatment business most of the costs of treatment plants and large scale piping were paid for the Federal government ( like dams and highways). Now they have to totally be funded locally. Nearly all the additional capital cost of supporting a new house are front loaded in to a systems development charge paid up front by the home builder or developer. These changes support new roads, sidewalks, sewers, water piping, water treatment expansion, wastewater treat expansion and so forth. The days of slapping up subdivisions with houses on 1/2 acre lots with septic tanks are long gone. So are the days of drilling a few municipal wells and running some sewer pipe to a settling pond are also long gone. In our neck of the woods SDC’s run at least $65,000 per dwelling. So cranking out new $100,000 houses is no longer possible. The price to pay for too many people packed together trying not to poison each other with their waste products.

      • Georgist says:

        So what needs to drop in price?
        The non fixed cost of land.

        • joe2 says:

          What will drop is the percentage of underlying land allocated to each “living unit”. Go up young man.

    • Wolf Richter says:

      Anthony,

      “Interesting that the cheaper houses are not selling…”

      That’s not what I meant to say. What I meant to say is that builders aren’t building homes in that price category because they’re making so much more selling expensive homes.

      • Truckman says:

        Whilst it is true that the builders are not building cheaper homes for the reason stated, it is also true that the cheapest home they could build would no longer be cheap.
        Our local government has just authorized a bunch of ‘affordable’ homes’. However, they have quietly adjusted their definition of ‘affordable’ upwards by 30% more than it was. In practice, no one in the bottom half of the wage bracket can afford the ‘affordable homes’, which completely defeats the government’s stated reason for the affordable homes in the first place. The minimum wage locally has just been assessed as 45% below what the minimum liveable wage is, both measured by the same government methodology of two years ago. Needless to say, the government itself had been ‘unable’ to complete the minimum liveable wage assessment this year ‘due to Covid’. Color me surprised. The Opposition party did it for them.

        • joe2 says:

          “government itself had been ‘unable’ to complete the minimum liveable wage assessment this year ‘due to Covid’.’

          And thus the breakdown starts. First as a plausible reason and then as a convenient excuse and then as a necessity and then as a demand and order.

      • Jake W says:

        so basically, the same phenomenon as car makers spending most of their capacity making pickup trucks and other high end vehicles they can sell for higher prices and margins.

        that’s the sign of a birfurcated society, where you have “haves” with a ton of money, and “have nots” with none.

      • Swamp Creature says:

        Similar to what is happening with cars.

      • Jay says:

        It’s the same reason the GM & Ford don’t make cars anymore. They’re not happy with 10% profit margin.

    • Coffee says:

      Maybe the builders are just putting “cheap home” stuff in the upscale homes…

      • Peanut Gallery says:

        BINGO! Winner winner chicken dinner right here folks

        • joe2 says:

          Yeah. How many people know a good shower control is over $1000? nah, throw in a $100 plastic Delta.

  2. historicus says:

    The Fed skews all they touch
    and those in business attempting to do their business get false signals and are at the whim of decision making behind closed doors by an unelected cabal that does not answer to their mandates.
    It is time for a formula GUIDED monetary policy.

    Imagine a year ago, and you were told CPI would be 6.8% and PPI would be 9% and Fed Funds would still be .05% and QE would still be happening. It would have been incredulous.

    The Fed’s unpredictable behavior is destructive. But some don’t have to predict the Fed, they know. Mixed signals, delaying what should be done…all confound those attempting to do business (build homes) in this country. And some will likely get trapped by sudden policy changes.

    • Bobber says:

      The people are inundated with information about trans bathroom policy, virus speculations, and parental leave, but the practical questions of the day go unasked.

      Why did the government allow American jobs to be systematically outsourced for decades?

      Why are workers required to pay tax, yet the wealthiest individuals and corporations are allowed to pay nothing?

      Why is there money in politics? Why do Americans given a choice between Mickey Mouse and Donald Duck in elections?

      Why is the government printing money and handing it to large corporations and foreign manufacturers via subsidies and handouts? Why is money printed and given to companies with increasing revenues, unaffected by the pandemic?

      Why does government policy reward speculators and debtors while punishing prudent decision-makers, hard workers and savers?

      Why are future generations being locked out of housing and financial markets?

      • andy says:

        Perhaps uneducated voters too busy with TokTok videos to even know the names of their representatives is the answer?

      • Swamp Creature says:

        Why is Elon Must worth 250 billion, yet paid not a penny of taxes in 2019 and 2020?

      • Wisdom Seeker says:

        Maybe the Founding Fathers were right to restrict voting rights to landowners i.e. people “with skin in the game”?

        When no one cares what the government does, we get the government we deserve.

      • kam says:

        Why? Because they can.
        A lifetime of savings cannot keep pace with the American Central Bank conjuring fake numbers to replace the real incomes lost by outsourcing American jobs, wealth, incomes and families.
        There are 2 Americas.

  3. Mark says:

    “Imagine a year ago, and you were told CPI would be 6.8% and PPI would be 9% and Fed Funds would still be .05% and QE would still be happening. It would have been incredulous.”

    “People of privilege will always risk their complete destruction rather than surrender any material part of their advantage.” ; John Kenneth Galbraith

    • Michael Gorback says:

      One of my favorite quotes, except Galbraith failed to understand that people of privilege will make their cuts so the tree falls on us, not them.

      • kam says:

        Galbraith, safely rooted in Harvard tenure, a man of privilege.

        • robert says:

          With a chalet in Switzerland, attending all the best parties and preaching crypto socialism for the rabble!
          There’s what is now a funny book, from 1988 titled ‘Capitalism, Communism, and Coexistence’ – From a Bitter Past to a Better Prospect, in which Galbraith and Soviet Professor Menshikov rhapsodize about a world in which the best of both systems cooperate to make a better future, by central control and planning, literally months before the Iron Curtain countries began their collapse, a prospect which neither of them had a clue was happening in real time before their eyes.
          Come to think of it, neither did the ‘Intelligence’ Agencies or anyone in government. Modelling and projections by idealistic academics are linear – until they fall off a cliff.

  4. perpetual perp says:

    Every significant inflation or hyper inflation episode in history came from supply disruptions: One cannot buy that which is not for sale. Printing a lot of money is a waste of paper. It’s a symptom, not a cause. Capitalist speculators take advantage of the supply collapses. The cure is not capitalism. The only competition that can crush this speculative fever is the currency sovereign state. The State can compete with any capitalist. It’s not even a fair fight. The State can create supply and create demand as well (as the Fed has witnessed). Time for the state to freeze building assets and then re-direct them to building affordable housing. Enough of the BS.

    • Augustus Frost says:

      The state can create supply to solve the current shortages?

      Is this a real comment or supposed to be a joke?

      I ask because any such claim is farcical.

      • Enlightened Libertarian says:

        I have to agree. I was a developer/builder for 30 years and I could consistently build housing for 50% less per square foot than any “affordable” housing that any government could build [Pacific Northwest]. The layers of bureaucracy all taking their cut of the available funding drove the finished price sky-high, despite giving themselves all sorts of favorable advantages.
        Appy for a building permit as a private builder and be prepared to pay for road mitigation fees, school mitigation, park mitigation, water runoff mitigation, sewer mitigation, affordable housing mitigation and I can’t even remember what else. My wife and I think of government as a giant extortion scam.

    • Peanut Gallery says:

      You must be one of those people who still think the government can do something right…

      The government can never do anything right, just about. Less is more when it comes to government

      • robert says:

        The great philosopher and economist, Ringo Starr, said in the 1960s:
        “Everything the government touches turns to sh*t.”

    • kam says:

      The “State” controls the Fed, the Central Bank.
      Rather than capital accumulation via savings and earnings from value-added enterprises, the State appoints the Fed board to reduce interest rates to zero, to conjure up nominal dollars, all to feed the greed of the State’s employees and donors.
      The State is the disease which purports to be the cure.
      Bust up American Monopolies in Media, Internet, and Banking. That would be a good first start.

  5. Old school says:

    The USA made a blunder going to completely free floating currencies as it facilitated out control Federal spending and debt creation.

    House prices have been increasing since 1970’s at about 8 times faster than income so that in some areas house prices are near 10 times income. I think median is about 6 X.

    Similar story for stock prices. Shiller PE has been going up much faster than company earnings so that the Shiller PE is about 10 times it’s lowest recorded value.

    It’s all been built on ever lower interest rates and ever increasing debt loads by government, corporations and individuals.

    How long it can go is the question? It’s what undisciplined government s do. If the trend continues then Shiller PE’s will be closing in on 100 and median house price will be 10X median income in a few years. Leveraged always, always, always means more risk.

    • Peanut Gallery says:

      So how do we get back on the gold standard? Paging Judy Shelton…

      • Khowdung Flunghi says:

        “On March 19, 1968, President Johnson signed a bill eliminating the “gold cover” (i.e., the reserve backing by gold) for Federal Reserve notes. Prior to the removal of the gold cover, each Federal Reserve Bank had been required to hold a gold certificate reserve of not less than 25 percent against its Federal Reserve note liability. “

        • Harvey Mushman says:

          “On March 19, 1968, President Johnson signed a bill eliminating the “gold cover”

          Yet another casualty of the Vietnam War.

        • DanS86 says:

          No wonder the French got nervous. France was one of the biggest exporters to the USA in the 60’s.

        • David Hall says:

          In 1971 Nixon ended the obligation of the U.S. to convert currency to gold. Inflation had been growing and people were demanding gold from the U.S. govt. in exchange for their paper currency.

      • RedRaider says:

        So how do we get back on the gold standard?

        Nothing stopping you from putting yourself on a personal gold standard.

    • JM says:

      Old school: it goes until the credit stops flowing because the risk of default becomes greater than the reward of a few % return. I think we’re about there now. The FED buying MBS the last several years made this real estate (and stock) market bubble, and when they stop buying housing will plummet.

      • Peanut Gallery says:

        Let’s not forget the responsibility of GSE guarantees of those said mortgages bundled in MBS. That also plays a huge factor in facilitating housing bubbles

        Even with low rates, imagine if every mortgage originator had to portfolio every mortgage they originated……

        That would have to have a dampening effect on home buyers ability to bid up home prices

    • Augustus Frost says:

      It will supposedly all work itself out some way, somehow. That’s what I keep on hearing since this country supposedly has some birthright to perpetually higher living standards.

      Yes, it’s actually magical thinking.

  6. polistra says:

    A builder in my neighborhood appears to be driven by price, not shortages. Back in 2017 they bought a decaying apartment bldg and some nearby vacant lots.

    They’ve been renovating it SLOWLY since then, at the rate of one week of work per season. Suddenly this fall they decided to finish it. On 11/26 they put up the For Rent sign. Immediately they started work on a vacant lot across the street. As of today, two new houses on the vacant lot are framed, sheathed, and dried in.

    Clearly they aren’t slowed down by shortage of labor or materials now. They were just waiting for the best price to lock in the leases, and now they’re hurrying to finish and sell before the drop.

    • I’ve seen this movie already.

      I promise not to spoil the ending.

    • implicit says:

      Wouldn’t surprise me to see people trying to break their purchase agreements as the stress of higher inflation over time worries them.
      The high-end Market, especially the mixed-use income-producing, should hold up better for those with enough money. “In-law” apartments for larger homes could get bump up that doesn’t ,show up in the data. Black markets matter.

    • Enlightened Libertarian says:

      They might be constrainted by financing. Depending on conditions it can be almost impossible to borrow money from banks for construction projects. Sometimes you have to borrow from private money at double bank rates. Then roll into more conventional financing. Been there, done that.

  7. nearlynapping says:

    So what happens when this large supply, infused with much higher construction costs, meets higher mortgage rates and less demand?? Does the Fed respond or let the market be a market? Or will the Fed be unable to respond because it can’t defend the USD and suppress rates at the same time?

    • Peanut Gallery says:

      The Fed will opt to crash the markets (RE, stocks) if it is forced to choose between defending the USD or defending the markets.

      They will raise interest rates. Just a matter of velocity (how much at what time)

      And don’t forget the broader / global perspective too. The USD must adjust together with other developed / larger economies in the world. Post WW2 the US produced over 1/3 of the world GDP. I think we are at less than half that today. That surely mean we can’t make macro adjustments unilaterally as much as we could in the past.

      There’s much more at hand than just our domestic issues.

      • Sams says:

        The question is then, what happen to the US dollar if the stock markets crash?

        There may be some coupling there that make the US dollar loose it’s value if US stocks do.

        • Peanut Gallery says:

          If the markets crash, that IS the dollar gaining purchasing power against those assets

      • Augustus Frost says:

        It’s a no brainer. The stock market and its “investors” will be thrown under the bus if necessary to maintain USD status as reserve currency.

        And to your initial question, higher rates and current nose bleed prices equal collapsing sales volume and ultimately a price crash.

        I still believe the government will initially try another mortgage moratorium to try to prevent a 2008 housing crash repeat, if it becomes necessary.

    • sc7 says:

      The big variable will be how much demand falls alongside those interest rates. Will it finally bring us to <1 prospective buyer per property? That would be the first threshold to cross in order to see prices start declining, we are currently very far from that level.

      I personally see a correction on the horizon, but people hoping for a crash back to late 1990s valuations will be waiting forever.

      • Jay says:

        SC7,

        My realtor statement wasn’t an attack on you personally but everything we read nowadays about realtor-based analysis that says everything is going to be fine. What’s going to happen to the housing market in 2022? Anyone with 1/2 brain knows what’s going to happen, but being Karnack The Great in terms of timing is an entirely different story.

        So I do apologize in that sense, knowing that it was not likely that you’re a realtor. Best regards.

  8. Paulo says:

    This excludes the cost of land and other non-construction costs

    Tariffs on lumber.

    Tariffs on steel.

    Tariffs on aluminum.

    Additional local zoning expenses. Property tax rises to offset downloading plus no income taxes in some states needed to provide expected services and programs.

    Adding on to this list is unimaginable debt financing at minimal interest rates, and rising buyer expectations of features and appliances. New houses today, even starter homes, are about as realistic as destination weddings and yearly air travel vacations for average income earners.

    Higher energy costs in all phases of construction has added a burden.

    Perhaps we are just hitting the wall of reality?

    • There is going to be a tech solution to housing. Most likely after we pass peak global population, and Covid has done a lot to bring that about. The combined effect of decreasing demand and hi tech innovation will bring housing prices down. In my area lot prices are about 1/3 of the total cost, one day they will be 2/3s, location^3. Housing is about comfort and security, and by most metrics the modern home is overbuilt, and provides a climate buffer at inflated prices. Interesting the first wave of settlers burned the same material for heat, that they used to build. It’s a consistent pattern, we extract a single resource until its gone and then look for something else.

      • GG Smith says:

        Automated driving will be the solution. When vehicles turn into entertainment pods, gyms, restaurants and sleeper cars, real estate will be in for a rude awakening.

    • Wolf Richter says:

      Paulo,

      You foreigners (you’re Canadian, ex-Usian as you explained many times, and one with a personal grudge against the US) who have gotten fat of exporting to the US, hate it when the US imposes some additional costs on your exporters. Yes, your lumber mills are paying those US tariffs, because they have to compete with US lumber mills that are not paying tariffs. SO they’re paying taxes to the US. And that’s good. This should have happened two decades ago. The US needs to act to get its huge trade deficits under control. You Canadians don’t get to determine US policy so that it benefits your companies. Get a grip.

      In terms of your imagination that tariffs which took effect a few years ago are now suddenly causing lumber prices to spike is just silly if not delusional.

      • DawnsEarlyLight says:

        British Empire still trying to control the colonies.

      • kam says:

        Lumber tariffs on Canadian framing lumber are 8% total.
        The Price of commodity 2×4 today is $1100USD on the cash market, up from about $400USD 2 years ago. It peaked at $1700 last spring.
        Canadian mills also own American mills, a reversal of a generation ago. Canadian mills have so much cash now, that they are scrambling to find things to do with it.
        And all those America mills were bought up with subsidized profits from the Canadian quota system of handing out timber cutting rights.
        Canada has always been about protecting the status quo, and preventing new entrants to controlled Canadian markets.

      • Ryan Luoma says:

        With friends like America who needs enemies. The US has lost several trade disputes with Canada including softwood lumber over the years. The US doesn’t honor those rulings.
        America only likes to follow the rules we all agree to in trade agreements when it goes America’s way. When it goes against the US those rules don’t apply anymore. Canada and many other countries are much smaller economically and militarily so we don’t have much recourse when the US ignores their own agreements with us. We have tonnes of resources for the US economy including for the green economy. We are your largest trade partner but the US really gives two f$%#s about their friendships until they need our people or resources for your wars. Looks like soon you’ll be engaged in major wars with Iran, Russia and China and you’ll need all the friends you can including your friends resources. (Note I do prefer a US/Euro centric world vs a Russian/Chinese dominated system)
        Americans can be so generous and yet can also be the most arrogant selfish people who are forgetting the mutual benefits of trade and Allies. The US is still continuing the Trump trend of self isolation and is often blind to what’s happening outside your borders.

        Wolf, I know you’ll come up with some great counterpoints to explain the USA is in the right. You’ll provide some technical chart or some legal reasoning that vindicates the US.
        Most Americans have a hard time with honest self evaluation of their Nation. Canada like wise has made many mistakes in its social economic system over history but seemingly more (not always) willing to admit errors.

        I’m sure you’re aware that a trade deficit is neither good nor bad. It very much depends on the circumstances and with the reserve currency this doesn’t negatively affect the US like it would other countries.

        I’m sure you’ll ignore or discount my comment as from some foriegn person. Also the US sure does like to affect and make policy in other countries with impunity.

        Regards from the socialist/communist North!

        • Wolf Richter says:

          Ryan Luoma,

          Canadians bitching about the US, and USians bitching about Canada is like watching the 2010 Olympics US-Canada hockey game over and over again. It never gets old. And Canadians are always right, in the eyes of Canadians.

          But it’s the US that has the hugest trade deficit in the world, and it’s off the US that exporters in other countries got fat and rich. And it’s the job of US policies to slow this down. And the exporters in Canada, Germany, China, etc., which got fat off the US trade deficits, are going to bitch. Let them bitch. Fine with me.

  9. Jay says:

    First and foremost, lest we not forget that builders are highly incentivized to restrict supply. They simply make more money which is readily apparent in today’s market. So lets not read too much into so many homes not completed, materials / labor shortages otherwise.

    With that said, does it really seem like there’s a housing shortage? No! The newly constructed homes for sale chart clearly show we are at about 2004 levels. Had we not overbuilt from 2004 – 2007, the mother of all housing crashes might not have been as bad. The same can be said for today.

    What I find interesting is that rapid deceleration in costs starting at the end of 2006 or about 18 months before it all imploded. If costs today were anywhere in line with 2004, we’d have a really big problem on our hand.

    Not to worry. 2022 will be the year the housing market starts to figure out what it wants to be when it grows up without its helicopter mom, the FED, distorting what a real / fair housing market should look like.

    • sc7 says:

      Newly constructed homes for sale is in no way a figure that is representative of a housing shortage. A housing shortage is the total number of homes available relative to the number of households in need of a home.

      The underbidding that took place from 2009 to 2018, coupled with a huge demographic wave of millennials hitting peak-buying years from 2019-2024 is what is responsible for the shortage. The White House published a good article about this on Sept 1 titled “Alleviating Supply Constraints in the Housing Market”. The current supply situation (still growing slower than demand) is nothing at ALL like it was in the mid-2000s where new supply was exceeding demand by >15% YoY.

      Yes, we absolutely do have a housing shortage, severe in many coastal cities. Increased supply of newly-constructed, denser housing is exactly what we need to remediate this situation. Very dense housing by public transport hubs is the only way we can keep large urban areas priced affordably.

      • Jay says:

        Nope! What you have is a dysfunctional housing market that’s been driven by incredibly low mortgage rates creating enormous, OMG FOMO fake demand. If interest rates were where they need to be, 6%, housing prices would be dropping through the floor along with demand, because a lot of people would be hunkered down waiting to find the bottom. Oh, and there would be increased supply from increased foreclosures, because we’d be working our way through a recession. The totality of actions that Uncle Sam and the FED have taken over the past two years is BEYOND UNPRECIDENTED. We need Wolf to write an epic Doctorate Thesis paper to really truly understand how beyond normal things are right now. We should have been in an epic recession, depression even. But, things were really only bad for about 45 days. After that, most everything started to bounce back due to the trillions that were thrown at the pandemic and will be for years to come.

        Also, when we have people who can afford a home but living on the streets, then we can say we have a supply issue. Right now, we have builders, contractors, suppliers (especially lumber) conspiring to rig the market for profit. They know they’ve got to mop up for now, because the next one could be . . . . (anyone’s guess how bad & when).

        Let me guess. You’re a realtor.

        • sc7 says:

          Jay,

          I don’t disagree with much of what you say about the fed being largely responsible for this getting to where it is price wise. We do still, however, have a shortage of housing units where people want to live. There’s cold hard data behind this, no matter how you want to spin it to the contrary. Even if people got foreclosed, those same people still need to go somewhere. Where there is excess shadow inventory in the country, it largely exists in places people do not want to live (see the rural flight).

          The fact that you had to throw in an ad-hominem about me being a realtor instead of discussing based on the merits of your argument is sad and makes it hard to take you seriously.

          I am in no way, shape or form a realtor, never have been and never will be. I do not think highly of most of them. I am also not in any way invested in real estate except for ownership of my primary residence bought many years ago.

      • Bobber says:

        They are building denser housing in Seattle area, but it’s all apartment buildings. The number of apartments built the last five years is truly amazing. Single family home and condo developments are few and far in between.

        The Powers That Be are taking advantage of the repressed interest rates and converting the entire city to a rental mecca. Of course, this will exacerbate the wealth gap, which is already at unprecedented levels.

        • Peanut Gallery says:

          Seattle is magically blessed with bodies of water on both sides and a government that refuses create more housing units or the transportation infrastructure to truly create “more housing” (access to more houses up and down the I-5 corridor).

          Basically the only solution Seattle local government thinks it has is to zone specific / small areas of the city and dump tons of apartment units in those specified up zones. They are adopting the urban village model (or whatever nonsense).

          Just remember Seattle metro area has basically stayed about the same in the past 20+ years due to the fact that local government refuses to expand and allow for real growth. They could enable it but they would prefer to prioritize environmental concerns and what have you over said growth.

          It will never change. You can either accept it, or leave it but don’t bother fighting it.

        • Anthony A. says:

          Bobber, here in Houston we are stuffed with apartment communities. A report in mid 2020 stated this:

          “Currently, 2,883 apartment communities give Houston a total supply of 679,580 units. This includes 81 communities and 22,419 rentals that were completed within the past 12 months.”

          There are probably upwards of 2,000,000 residents in apartments here in Houston given 3+ persons per unit.

          Nuts!

      • Jay says:

        Also, let me point out the fact that we’re now in a MMT driven economy, which in large part is taking root all around the world. The only thing we’re waiting for is for the FED to be consumed by Congress which is what the pure MMT folks want.

        When the next downturn comes, there’s a good chance the FED funds rate will not have reached 1.5% which means it will easily be lowered to 0-.25% again with a snap of the JP’s fingers. Mortgage rates will sink back below 3% and inflation will jump from what might be 4.5% at the time back up to 7% or higher.

        QE and excessive government spending will resume, supporting the fact that we live within this MMT-based dreamscape economy. At least to the adherents of MMT, deficits and debt don’t matter. It’s all one big, monetized FED asset.

        I mean, we all know that the CPI measures are cooked, right? 6.8% CPI-U, yeah right, JP. Totally believe that one.

      • Augustus Frost says:

        What you say would be true if demand wasn’t based upon actual ability to pay.

        What people “need” is irrelevant which equally applies to household formation.

        Most Americans are actually broke. The only reason so many people can supposedly “afford” current prices is because of the most distorted lending costs in history and still current basement level mortgage requirements, regardless that it’s tighter now than 2006.

        No, having a high FICO score and being able to make a 3% down payment (or anything close to it) isn’t a high quality buyer.

        • sc7 says:

          This depends on the area you are looking. Here in Boston, I periodically look up transactions in the public record. I have occasionally seen some homes go with 10% down payments, but all or most seem to go at 20% or more down.

          Credit scores are near all time highs and payments as percentage of disposable income (see FRED) are at all time lows (thanks to the fed’s ridiculous bond program).

          Are people here actually interested in discussions based on data points, or if you disagree with the premise of a massive crash and a huge conspiracy, you must automatically be a realtor?

    • JeffD says:

      If it were legal for anyone to build their own single family home on their owned land without permits, prices would drop like a rock. Unnecessary regulations are what create high costs.

      • Truckman says:

        And it is impossible for the government to fix the problem when the government IS the problem. Same applies to supply, Covid, and a hundred other things.

      • Trucker guy says:

        Depends on what and where you build. If you start a SFH home in the woods on property you own you’ll get crucified.

        If you just find an abandoned lot and set up a scrap wood shack you won’t be bothered. Code enforcement goes after whoever they can pull civil asset forfeiture or place a lien on etc to put money in the treasury. I worked for the county when I was younger. The code enforcement was never found for the huts covered with blue tarps and using electricity off of temporary power poles and crapping in the woods.

        When my parents built their very nice for the area house, they were told to move out after moving in for another inspection because they didn’t seed grass 50′ from the foundation and only did 25′. Of course, they had the extra 250 dollars to pay for another inspection. Poor people just drag everything out and have nothing.

        In short: squat on some land owners land and live in a shack built out of old pallets.

      • VintageVNvet says:

        -That IS still legal in many areas of ”flyover” Jeff,,, as long as you don’t want to hook up to electrical grid and/or public water system, which many and more are choosing…
        Last new house we built, had NO permit requirements at all until we chose to connect to grid; that was a $75 permit that included inspections for temporary pole, rough in, and final…IMHO, they were more interested in doing their best to insure our house did not burn down, etc., rather than any ”profit” motive…
        Septic permit was $100 and included county inspector watching the entire installation of the septic system…
        Could have done without either, and built out the house with solar electric, pumped our water from the creek,
        ( which we did for several years until we could afford to get the local water district to install their pipes up to our property. )

        • RedRaider says:

          I live in a township outside of a small (20k) town in central Wisconsin. People in the township have their own wells. The town has 6/8 high capacity wells scattered throughout the area. Whenever we have a dry summer the town struggles to keep up with demand. They stop watering their lawns, etc. And they try to get us in the township to have a water conservation policy in sympathy. A minor scandal occurred when it came out that the town was trying to get the township to stop using their private wells so the water table would recover faster for their high capacity wells.

          There’s always an element of contradictory self interest when government gets involved. Heck, there’s always an element of contradictory self interest among people even when government is not involved.

    • COWG says:

      “ First and foremost, lest we not forget that builders are highly incentivized to restrict supply. They simply make more money which is readily apparent in today’s market. ”

      Jay,

      Building houses is just like any other business with supply and demand…

      And like any other business, money management is first and foremost…

      In todays world, one contrary theory you may have overlooked is that builders may be treading cautiously because you never know what may thump you, be it supplies, labor, interest rate hikes, etc…

      A prudent builder may consider it wise to build a hundred houses their customers want today vice a thousand nobody wants tomorrow…

      BTW, sc7 knows his area ( Boston) pretty damn well and is knowledgeable in others as well…

  10. tom21 says:

    We may be in that bottom 13%, but I will be happy when the build is done.
    Hoping to be moved in by early march ( replacing a burn down ).
    Current estimate for our 1600ft2 ranch is at 290K down from starting estimate of 311K. Build time will be about 11 months. Windows & doors
    were the longest wait……so far. Fly over country.

    • Peanut Gallery says:

      Can I ask what metro city area / state you are in?

      Also, is your home a stick built or prefab? Wondering if builders in your area are attempting to breach contract and pass cost down to you…

      • tom21 says:

        Stick built in rural WI. No metro area near us. Unless a town with 4 bars, and a general store qualify.

        Our new build is replacing a burn down. 100% covered by insurance.
        So price increases will be passed down to us.

        • Peanut Gallery says:

          Up until very recently I had relatives in WI, it is a very beautiful state, very underrated.

          Best of luck with your build! I have heard of some terrible, terrible scumbag builders who have pulled all kinds of deceitful horrible tricks on their customers. I hope they burn in hell for their sins

  11. Peanut Gallery says:

    Wolf, where do you get reliable DTI data on housing? Isn’t that the canary in the coal mine that we should be watching?

    • TheRealMRDyno says:

      I would really like to see a waterfall graph with individual percent of buyers on the X axis and percent-equity on the Y axis, covering the last 20 years.

      A similar graph with debt to income on the Y axis would be great, too.

    • sc7 says:

      Look at MDSP on FRED. It may not be the data people are thinking or hoping they’ll see, but it’s a good place to start.

  12. MiTurn says:

    In my area, one of the bottlenecks is simply workers. Contractors can’t get enough skilled workers to build what they need to complete, let alone start new construction.

    • Truckman says:

      Ask yourself why any schoolkid would want to train as a construction worker. You’ll have to go back to school for years to get a certificate because they’ve academicized the qualifications, and you hate school. Then because you’re the last guy in you’ll be the first to get laid off when the boom’s over. And of course as soon as Covid’s over you’ll be replaced by a bunch of illegal immigrants who’ll work harder for less money and never complain about safety problems. And that’s what a bunch of teenagers down the road told me. What are they doing instead? Most are going into fishing boats because the profits are back and there’s no competition from immigrant labor.

      • Augustus Frost says:

        Requiring credentials for jobs which previously didn’t need one (and where it is unnecessary) is one of the biggest problems in the labor market.

        It’s the modern medieval trade guild to reduce competition. These certifications aren’t necessarily cheap either with the cost of CPE.

        Most should be abolished (I have three for my job and profession) and those who believe is diversity should be most in favor of it since it adversely impacts minorities the most.

        • JeffD says:

          This is what I was trying to get at with my comment about “regulations” above. Really, day laborers could help you build your house if it were legal for you to build what you want, how you want.

      • Peanut Gallery says:

        The wear and tear on your body from those fishing boat jobs are ….. oh I don’t know, probably not worth it?

        What are those boats paying for a summer of work these days? Just out of curiosity

  13. Petunia says:

    The Chinese govt just committed to taking over and finishing the bankrupt developments in China, to control the potential unrest arising from unhappy buyers.

    I hope the mega landlords here in America are paying attention, because they are on the verge of being outlawed. They are already addressing it in GA. I could see this coming years ago.

    • Red says:

      because they are on the verge of being outlawed. UM NO in this particiular housing subject imo.

      • Petunia says:

        At the very least rent control is coming. But more communities are going to control this unrestricted takeover of the housing market.

    • Peanut Gallery says:

      Petunia, would you please kindly elaborate? Are they taking ownership of those said developments, or are they just infusing capital?

      • Petunia says:

        China is confiscating the unfinished projects and promising buyers to finish them. This leaves the developers in more trouble with no assets to satisfy any of the claims of investors. Basically any assets held by those developers land and unfinished buildings are now gone.

    • kam says:

      Government taking over building construction, via the China model?
      That must be the punch line to a joke. If you set aside the corrupt governments (U.S. and China), chained up the Big Money interests, and allowed Free Enterprises (with all it’s faults) to supply housing, then the solution would be found. Affordable supply would match demand.
      China stands on a 2-legged stool. The $500 billion per year from the American Consumer Market and the 40% of it’s economy directed into Residential Construction. China has been fooled. They created a Central Bank to create magic.

  14. Trucker guy says:

    So the price increases are related to a lack of workers and or a lack of being able to get materials. So this historic charge upward only has a basis in temporary market factors and easy money to soften the blow. What is the incentive or force to keep prices elevated above what normal people can afford? Especially when interest rates are about to start climbing?

    Either wages will have to concurrently explode with it or the prices will have to crash. I don’t see any way around it. Once governments finally throw in the towel and say the unvaxxed are to get bent, we’re opening everything; supply chains will eventually catch up. The fun money stimmies will run out and everyone will begrudgingly march back to the time clocks.

    At today’s rent prices and the fact I’m priced out of the market with a middle class income, I’m very seriously considering living out of my truck again and being homeless if my landlord/roommate dies from health issues. I don’t know when the crash will come but I’d say within a couple years or less. Or wages will have to absolutely skyrocket. I still don’t see where in the timeline that wall street captures enough of the market to fix prices or where small investors start racketeering home prices. I think a lot of people are going to be stuck upside down on “investment properties.” Housing and slum lording are dirty work. I’ve said it before but houses are like bonds or stocks where you let them sit with no overhead or costs until the day you sell. There is a mountain of carrying costs to deal with on housing in any form. SFH is wildly inefficient from a landlord perspective and hard to manage. I still don’t see wall street becoming deeply entrenched in real estate because of this. I’d say they’re just chasing yields since returns elsewhere are so dramatically low due to inflation. Why is it only just now that investors are taking to real estate and housing when it was fair game in the past? I had a grandfather who did the slumlord schtick. It was a pain in the ass more than full time job that barely out performed his aggressive stock options. I remain highly skeptical.

    Only time will tell though.

    • Truckman says:

      Here is the way round it, and it’s already started.
      Big corporations buy up all the property with all the government-printed money (YOUR money). They then rent to you at the maximum you can afford working 80 hours a week.
      You will own nothing, and be happy*

      *happy is now defined as less miserable than the alternative ;)

      • Trucker guy says:

        The issue there is most people aren’t going to work 80 hours a week only to be able to rent an apartment. The peasants will revolt when the elite get too greedy.

        I know for myself, I’m working 50-60 hours a week in a job where I was initially told I would be getting 30-40 a week. And it is a tough job with lots of manual labor and is somewhat dangerous.

        I’ve also been homeless before and also lived in my car. I’m beginning to get the urge to go back to a dead end part time mcjob and not kill myself for a company who is already screwing with my pay.

        If I have to start working 80 hour weeks and spending all my money for a Soviet style flat I’ll gladly join in on the revolt.

        Corporate America needs to navigate the next few years very carefully. I’ve never seen an anti work and anti corporate rumbling like this before. And I don’t find the workers demands unreasonable.

        I’m assuming by your name your a trucker as well. You know how awful a deregulated labor industry is if you’ve been otr any amount at all.

        • Truckman says:

          No, the peasants don’t. History tells us this. The Soviet peasants did not revolt.
          Lots of people make a lot of noise.
          A few like you and me quit.
          But most people will put up with almost anything, especially if it’s applied gradually, as long as they can live and eat.
          Only food shortages and/or capricious government killings, in their immediate area, cause revolutions. Romania would be an example if you are looking at the collapse of Communist regimes.
          Now you may join in on the revolt, and when it gets going almost everyone does. But almost no one will start one.
          A deregulated labor industry is hell if there’s a labor surplus and people have no other way of putting food on the table. It is heaven for the workers if there’s a labor shortage. From which one concludes that the real problems are immigration and the offshoring of jobs.
          The one thing guaranteed to start another American revolution is if the food trucks stop rolling.

        • kam says:

          Trucker Guy
          FWIW. I started driving when I was 16. A Mack 237hp tandem logging truck. I kept falling asleep from the drone of the engine. So I went to university.
          What I don’t understand is there is such a shortage of trucks and truck drivers, that you should be making serious money in today’s labor market. I was just quoted DOUBLE the rate I was paying last summer for a 6 hour haul. Take it or leave it. And to be fair, our product has more than double in price, via demand, not us increasing prices, so the trucking rate is effectively a minor cost.
          BTW. I have build 2 houses myself. The first one was a side split when I was 23 and the second one was a 3 story when I was 31. Go work in carpentry and electrical and build a house out of sweat equity. You will never regret it.

    • Sams says:

      There may be other possible scenarios playing out depending on who run the show.
      Think “cash for clunkers” and “share buyback” applied to hosing to keep the price level rising.

      Those with large inventories of housing together with the banks take those houses that perform worst rent wise out of the market. That is, they demolish those houses. No slum lording, bulldoze the neighbourhood down.

      Then gentrification if the money is there. And yes, they will get their permits. Gerrymandering is the flip side to gentrification.

    • sc7 says:

      There is considerable upward pressure on incomes, particularly in skilled, white-collar work as as much as 2% of the workforce never returned from the pandemic. Much of this attributed to boomers who have been working past retirement age.

      Investors are absolutely flocking to RE because it is a relatively stable return compared to equities, since bonds are basically worthless. They can afford to buy at an inflated price and lose money on cashflow at first.

      I know people on here generally hate government intervention, but if we want to preserve owning your own home as part of the American dream, I think a discussion needs to be had about serious regulations and restrictions on corporate ownership of residences, particularly SFH and lower-density properties.

      There’s always a need for rental supply for people in a position where it does not make sense to own (flexibility, finances, whatever), but I see less of a problem with a corporation owning a single building with 50 apartment units than I do a block of 50 SFH.

      • COWG says:

        At the level these decisions are made, I tend to think it’s more of a spreadsheet entry than a conscious thought of what they are morally doing…

        They don’t live there so they don’t care…

  15. GSH says:

    We are undoubtedly at peak housing prices for this cycle as I just purchased a second home in Phoenix at asking price. It will be downhill from here for the reasons mentioned. I’m not too bothered by it. Most assets are correlated, i.e. they will all go down together. Just look at 2000 and 2007. No place to hide. You can lose 30% in equities, 30% in cash by holding it three years, or 30 % in houses. Just go and do what’s right for you.

    • Red says:

      We are not at the peak ffs people.

      • GSH says:

        Red, you are really underestimating my innate ability to buy at the wrong time. Proven time and time again.

    • Beardawg says:

      GSH

      Interesting (and accurate) take methinks. I remember getting out of equities when they dropped 10% in 2007 (great move), but the 3 rental condos I owned took 7 years to come back and I did not wait – sold them in 2009 for a 70% loss. Arghhh !!

      Ironically, they are now worth 3X what I paid (13 years later). However, I would have physically/mentally aged 25 years if I woulda kept them and remained as a landlord.

  16. Beardawg says:

    I am interested in knowing what constitutes “low end” homes ? I have been out of the buy / rehab / put in renter / sell mode for a couple years, but I perused the KC MO inventory yesterday and saw $50K to $75K 3BR remodeled homes for sale in abundance.

    I guess no one is buying those houses because it’s not worth the borrow ??

    • Wolf Richter says:

      This is about new construction — and the price categories that are being targeted by builders. There is no money in building a lower-end home. Everything has gone upscale.

    • Peanut Gallery says:

      I have also seen these crazy cheap homes in the Kansas City, MO area. Is anyone familiar with that RE market? Why in the world are those houses so cheap?

      • David Hall says:

        Suspect a high crime area. Are there burglar bars on the windows?

        • Beardawg says:

          Peanut & David

          The low end stuff in the KC Metro IS profitable, but yes, also in dicey neighborhoods. I was there (as an investor) for 3 years. I exited as a lender, carrying the paper on the homes I bought / rehabbed. My borrowers are doing well, but you must have the right mindset for that kind of market. Great margins but higher than average risk.

          Given the outlandish increases in home prices in Class C and above neighborhoods in the past 2 years, however, and cost of construction of new homes, I think KC, St Louis, Cleveland, INDY, etc are going to be goldmines for rental ownership.

  17. Atomized says:

    Ahnold, the former Cali Governator, spend 250K to provide 25 tiny houses to vets. Compare and contrast with the City of LA HHH program unit cost, at one time hovering in the 500-600K range. Or tents, (Tents!), at 2,500 per. Those aren’t apples to oranges but there are some issues to note for the discerning news consumer tax-payer.

    When housing program price comparisons induce notions of orders of magnitude then something is clearly wrong.

    • Petunia says:

      Just saw a picture of an upscale mall in LA surrounded with barbed wire. How long do you think it’s going to take for house prices to fall in that area, when you can’t tell the high street from a prison.

      • Brent says:

        CNN:

        “Famous LA shopping center adds barbed-wire-like fence to deter smash and grabs”

        CNN is clueless as usual.

        There are no barbs in this coiled wire (yet).Otherwise it would be called “concertina”

        Where is Vintage Vietnam Vet ???

        I am sure he will enjoy watching video in this article and have a flashback of black pajama-clad revolutionary VC (Victor Charlie).

  18. Nate says:

    I wonder how many of the low end buyers are moving into the loads of termite-like apartment mounds they’re building around here and waiting for prices to come down…

  19. JeffD says:

    There are plenty of rural homes for sale for under $200K in many states. These are all city prices.

    • Wolf Richter says:

      This is about new construction — new houses being built and sold by builders.

      And yeah, you can buy an older house in Tulsa for under $200k. All you have to do is move to Tulsa. They even pay you to move to Tulsa if you’re working from home and bring your income with you. That’s how desperate they are. I used to live there. Highly recommended :-]

      • Softail Rider says:

        Wolf,

        My concern here in Illinois is real estate taxes. Originally on contract for deed I bought a story and half for $12,000. This was when there wasn’t any money to be had. Finally 401ks and IRAs made money available. Years later I rebuilt a home with cash on the same lot and removed the old one.

        Taxes on the old house was $800 a year. Taxes on the new one is now $3988. This is a break even for me as taxes are the reason for buying, living, and retiring in the old house.

        My question is “What happens when people can’t pay RE tax.” One of the effects of the Depression.

        As a back stop I’ve also property in south Mississippi where RE taxes are low and we use this for our winter home.

        • Wolf Richter says:

          Softail Rider,

          The dilemma you posted is precisely why California passed Prop 13 in 1978. It limits property tax increases. The purpose was so that older people won’t be forced from their homes because they can no longer pay the property taxes as home prices surge.

          But in doing so, California removed one of the few impediments to relentlessly soaring home prices to where it has now become the “Housing Crisis.” And it produced other iniquities, such as Intel paying almost no property taxes on its campus that it has had for many decades, or a young couple that just bought a house paying a huge amount in property taxes, while the old couple that has been living in the hear-identical house next door for 50 years pays almost none.

    • Trucker guy says:

      Yeah in places where the household income is 15k/yr. Any place in the states have pretty much outpaced wages for SFH. Only if you are in a wealthy state and move to a dump will you find housing reasonable.

    • OutWest says:

      JD – many of those lower cost rural homes lack high speed internet which is a big showstopper for most people.

      I’ve been following new listings for the past few months in my state of Washington and have been surprised to see how many homes still have crappy internet. Rural homes with internal (cable) sell quickly for more.

  20. Crush the Peasants! says:

    Where I’ve been looking, $300/sq.ft. to build a custom home, not including the lot. View lots go upwards of $100k.

  21. dishonest says:

    What did homey comedian Will Rogers say,

    “Houses, they ain’t makin any more of ’em”.

  22. Mendocino Coast says:

    About 2006 I went to New Zealand and Loved it . Rented a Car for $20 Per Day ( they drive on the other side ) unlimited Kilometers and toured the entire North Island for 1 Month .
    I should have bought a house as you could move to NZ much easier than Now and for much less money as homes were very cheap . Now you must invest 3/4 of a million in order to meet requirements unless you’re British or Maori to move to NV
    except Student Visas Etc . You can own a House and Visit however a few months out of every 18 Months But thats hard now .
    New Zealand Has Rules They Should Have in the USA ! you can not Own land , Homes along the Coast on the ocean side of the road areas unless you’re a citizen
    And that’s a Very Good Rule keeps Investors from buying up all the choice land and homes in such areas. Driveing up Real Estate Prices !.
    As well you can’t Buy property adjoining Parks , and that’s sort of thing . On Coastal Highways you can only buy on the inland side of the highway
    Why ? to keep Capitalists Investors From driving up the price of homes for the citizens of the Country Making Homes No longer affordable for Average Citizens .Now do You Think the USA thinks like this ? certainly not those who simply want to make money like it seems the Fed Members want to do it seems .
    These are great rules trying to protect Homes and property for the country
    Now you can’t Even buy anymore, hardly driven by the onslaught of mainly Chinese Buyers ..Switzerland, Hong Kong and Singapore all have restrictions in place or have imposed additional taxes on foreign buyers.
    New rules for non-resident buyers in New Zealand – New Zealand Property Guides

    • Cookdoggie says:

      Isn’t NZ the #1 most overpriced housing market in the world right now?

  23. J-Pow!!! says:

    Now is a good time to buy.

  24. Michael Engel says:

    RIP USSR Dec 26 1991.

  25. Robert Dickson says:

    Wulfgar the Berserker!
    If you think new home prices per square foot in the US are high – take a look at Norway’s housing costs. I did because I am trying to establish residency in Norway for their lower (socialized) healthcare costs. My wife takes Actemra for her RA – the cost of her drug in sub-cutaneous (injectable) form is $2600/month. Norway controls drug prices and the same drug in Norway is $300/month. The high cost of Norway real estate is driven by their much higher cost for land.

    • J-Pow!!! says:

      It’s true! This time it’s different! [Enter city name] is special and prices are unlikely to go down because people will pay an amount they can’t afford to live there!

    • Saltcreep says:

      Hey Rob, being Norwegian myself, and living here, I can ascribe to your observations as relates to prices in the larger conurbations, but if you’re happy with moving a bit further out of town, then property prices can be very affordable.

  26. CCCB says:

    With respect to available low priced homes, it’s very difficult to build a decent home that can sell for under $300,000 and it’s virtually impossible to build one that can sell for under $200,000.

    Labor and material costs are up 20%+ and lot prices are up 200-300% over the past 3 years.

    As for prices, there’s a huge influx of new residents moving into the markets where most building is happening …Texas, Florida, Georgia, Carolinas, Arizona etc. New home prices there are headed higher – much higher – before they head lower… regardless of interest rates.

    Why? Becausee folks from New York, California and other outbound states are flush with cash after selling luxury condos and mid-century ranches for millions or cashing in stocks. They’re mostly headed south and helping push the prices of limited inventory up and out of the reach of locals. Sad but true.

    Yes Wolf, I AM a real estate broker, but I’m also a property developer, home builder, and investment property owner and I know my markets. I’m calling it the way I see it – at least in Florida and Texas where I operate. But rest assured, when markets start to change I’ll be the first to pull back or pull out. That’s how I survived 2008

    Interestingly enough, if you overlay a chart of home prices on the chart of total NEW homes for sale, you’ll see that property prices actually substantially LAG the total number of new homes for sale. At the present time, total new homes for sale are still rising, which to me portends higher home prices in the near future.

    Merry Christmas and a Healthy & Prosperous 2022!!!

    • Petunia says:

      Everything you point out was exactly the same, in the most affected areas, before the GFC. High cost to build, lots of cash, low supply, etc.

      Heard two anecdotes about FL today. One guy is getting transferred to Miami but can’t afford the $4400 rent for a one bedroom apt. Doesn’t know where he is going to live. Another is about a lawyer renting in West Palm Beach whose rent was doubled from $3K+, and doesn’t know where they will go. Both of these people have what are considered good jobs and are effectively homeless. This is bound to end badly, either politically or financially. Get ready for the fallout.

    • COWG says:

      SW Florida ( Ft Myers’s / Naples) population doubled the last ten years and on pace to double again in five…

      Houses in my neighborhood ( nothing special) are popping up like mushrooms and getting completed and moved into without delay… 3-4 months… lot prices up 4x in the last 18 months..

      Watching valuations, One would think I have an oil well in my back yard…jeez…

    • roddy6667 says:

      North Carolina was very affordable until COVID and civil unrest drove people out of large cities. My nephew lived in the Asheville, NC area. Prices went up fast. He had been in a home for under 2 years, and sold it, netting over $100K.

  27. Swamp Creature says:

    FHA requires the cost approach on every appraisal. That’s why we don’t do FHA. Too much work. When you say you’re financing FHA everyone avoids you like you are COVID positive patient. That may help explain the lack of homes in the lower price range.

  28. DR DOOM says:

    The high priced housing in the pipe line will not be a problem for the Fed. Juice up the stock market to Dow 70k should allow brokerage loans to handle the rise in prices. This is what the Fed had done to get to this point. I do not see them changing course now. Their only problem will be that at some point in the future it will crash and no amount of fiat can pump it back up. Fiat always returning to its intrinsic value of zero is a certain fate. The date is not known. Only collapse will start the process to restore the time value of money. It is a de-moralizing state for a saver such as myself.

    • Softtail Rider says:

      DD,

      Do you, does anyone, remember Military payment Certificate, (MPC)? In the 60s I was in the Philippines when a robbery of the enlisted club happened. As it was MPC we were allowed one day to exchange our money for greenbacks. After that off base MPC was 10 cents on the dollar.

      I think something like this will occur when we reach the stage to which you are referring. Americans will have a few days to convert to the new money and foreign held dollars will be worthless. Any stock in a reputable company will take a bath. Just as my father did in the Depression.

      Not wedded to this just tossing it out. Thanks,

  29. James says:

    to Swamp C:

    What does ig mean that FHA loans “require a cost approach on every appraisal?”

    What is a “cost approach?”

    Would you put VA appraisals for VA loans in this same category?

    • Peanut Gallery says:

      Doesn’t that just mean that appraisals would have to calculate value based on what estimates would cost to rebuild that same house if it burned down to the ground?

      Instead of nearby comps?

    • Swamp Creature says:

      James,

      Cost approach use Marshall & Swift to determine the cost of replacing the structure. Sort of like an insurance company fire insurance estimate. FHA requires this cumbersome methodology. VA doesn’t. But VA requires “as repaired” estimates and requirements. Another cumbersme process that adds work. It’s like another job.

  30. rick m says:

    In northern European cities with tight housing in the late seventies, squatters moved into vacant speculative properties. Civil matter in London, in Munich the police would evict, unless you told them you were just “visiting”, with all your possessions, then no problem.
    In the US, Old houses didn’t disintegrate when shut down without power and water. You could get deadbeats out of them easier then. New construction must be continuously heated/cooled, especially in harsh subtropical or freezing areas. And eviction laws will follow the European model, with extremely long lasting protection for renters and ultimately squatters, discouraging landlords. Because socialism.
    I rent, because the Gulf of Mexico was five feet deep in the kitchen during Katrina. Nothing beats a walk-away sibling-owned rental in a flood area. I admire the optimism of those who built new between me and the water, some 390 paces away. They missed the lesson of Katrina. I didn’t. Their piggybanks are fragile and immobile. Insurance isn’t ever enough to really fix your life after that. Stay mobile and alive, experience costs a brutal tuition sometimes. Houses can float too. After you drive around the neighborhood looking for your missing house (or boat) ,you get it.

    • Petunia says:

      I spent some summers visiting relatives in Puerto Rico. All the locals know, if you can see the ocean from your house, you are going to be in “deep” trouble. Only the dumb money bought ocean view.

      Having said that, my father’s family came from a fishing village there. They owned a big section of beachfront in the town. They built cheap houses on stilts from wood, because they knew they would continually be rebuilding.

      • VintageVNvet says:

        Good one Pet,,,
        and reminding me of my childhood in FL, when an uncle built a ”tar paper” shack on Longboat Key so he could rest after fishing all night, near to his boat…
        Other than the tar paper shacks, only the rich and richer built anything in those days, the 1940s, and until 1974,,,
        because anyone with any common sense knew that anything built on those sand bars, AKA ”barrier islands” would be gone with the next major her or him I cane.
        The hurricane in 1935 had taken EVERY man made structure off of the Anna Maria sand bar, and most of the locals were very well aware of that…
        Enter FEMA, and the whole concept was SO distorted that it is likely never to recover any level of common sense.
        UNTIL and only IF common sense is FORCED on the USA… which IMHO WILL happen sooner or later…+

      • rick m says:

        They were smart. The tribes that lived here on the beach before we did didn’t go crazy building ostentatious housing, probably for the same reason. Commercial/industrial is different. Rebuilding profitable business after the storm makes sense and is a reliable source of income for tradesmen like me. I’m still doing work from a hurricane that was fourteen months ago. But to own on the water… maybe they have to go through a bad storm to believe. I’m a believer for life, ready to pack up and run for higher ground, everyone I know who stayed for Katrina and survived regretted staying. Hard to consider the wealth you’ve got tied up in your house when you’re perched on the roof watching the water rise.
        My cousin lost his new house on pilings to a 31′ storm surge several miles from open water. Very few houses were rebuilt with insurance, most sold and moved inland, and it’s taken years to get something built back on many empty lots. Guess that’s why I like gold and silver. Not perfect, just shiny, quiet, and real.

  31. Mike Murphy says:

    All that on paper supply that is stuck in the pipeline could easily disappear. Especially if we take the delays that are holding up turning that paper supply into ACTUAL housing were removed.
    If there were in fact all those hundreds of thousands of homes available for sale NOW, there would be over supply and prices would have to fall.

    If all that paper supply is priced at ridiculous levels than who can afford it? Who is it really be marketed to because most people who’ve wanted to buy a home have already done that?

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