Housing Bubble Getting Ready to Pop: Traffic of Prospective Buyers of New Houses Plunges, Homebuilders Cut Prices, Sentiment Dives

Homebuilder stocks have been wobbling lower all year, now down between 24% and 40%.

By Wolf Richter for WOLF STREET.

Homebuilders have struggled for well over a year with supply and labor shortages and ridiculously spiking costs. In addition, this year, the new holy-moly mortgage rates added to the woes, and unsold inventories surged to levels not seen since 2008, as sales fell. And homebuilder stocks have gotten hammered across the board, down year-to-date between 24% and 40%.

So, not all that surprisingly, the confidence of builders of single-family houses, as depicted by the NAHB/Wells Fargo Housing Market Index for July, released today, plunged by 12 points, the second biggest drop in the data going back 35 years, behind only the April 2020 lockdown cliff-dive, as “high inflation and increased interest rates stalled the housing market by dramatically slowing sales and buyer traffic,” the NAHB said.

It was the seventh month-to-month drop in a row. In other words, it’s been all downhill so far this year. With today’s index value of 55, it is now back where it had been in May 2015. And it’s right back where it had been in February 2006, though it was dropping a lot more slowly back then.

“Production bottlenecks, rising home building costs, and high inflation are causing many builders to halt construction because the cost of land, construction, and financing exceeds the market value of the home,” said the NAHB.

And builders are cutting prices: 13% of the builders have reacted to those conditions by reducing home prices in the past month to boost sales “and/or limit cancellations,” the report said.

Regionally, the Housing Market Index plunged by the most in the West (-16 points) and the South (-15 points), with the West and the Midwest showing the worst HMI levels of 48 and 49 respectively.

Region HMI, July Point Change fr. prior month
Northeast 57 -5
Midwest 49 -6
South 60 -15
West 48 -16


The future looks worse, homebuilders said.

There are three components in the MHI: Current sales, sales outlook for the next six months, and traffic of prospective buyers. Only the current sales component was still at a positive level.

The index for current sales plunged 12 points in July, to a value of 64, which means that still more builders rated current sales as “good” rather than “poor” (an index value of 50 would be neutral).

The index for sales over the next six months plunged by 11 points to an index value of 50, which means that builders were evenly split between those who rated their future sales as “good” and those who rated them as “poor.”

And the index for Traffic of prospective buyers plunged by 11 points, to an index value of 37, after having already dropped below 50 in June. Traffic is an indication of interest by buyers, and buyers have lost interest. That’s a real problem going forward.

For this component, builders were asked to rate traffic of prospective buyers as “high to very high,” “average,” or “low to very low.” Today’s index value of 37 means that more builders rated the market “low to very low” rather than “high to very high,” the second month in a row with below-50 reading:

Homebuilder stocks have been wobbling lower all year, interrupted by sharp bear-market rallies when dip buyers piled in, only to get run over shortly thereafter by more selling. The last rally that had started in mid-June seems to have run its course now (data via Ycharts):

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  266 comments for “Housing Bubble Getting Ready to Pop: Traffic of Prospective Buyers of New Houses Plunges, Homebuilders Cut Prices, Sentiment Dives

  1. All Good Here Mate says:

    Long, long, long time coming.

    • MiTurn says:

      Concur. What goes up, must come down….at least hopefully.

      I’m just glad to seeing an ebbing in the madness. I have a severe case of NIMBY and this downturn is comforting.

      • SS says:

        While all else has corrected >20%, e.g. Bonds, Stocks, Home builder stocks, cryptos etc, still home prices from case shiller are still at all time high.

        Is there any other dynamics in play for home pricing? Is it the result of negative real interest rate? Is it that money is moving from all other asset classes to housing? Or is it that housing is now expected to be “Too big to fail”? Or is it that high inflation implies housing inflation also?

        • Wolf Richter says:

          “still home prices from case shiller are still at all time high.”

          The Case-Shiller is great, but it lags six months actual market conditions, as explained below somewhere.

        • Anthony says:


          House prices tend to drip down, sometimes for years….

        • Billy Howard says:

          It’s simple supply and means economics. Prices will continue to creep upwards until we see a dramatic increase in inventory, which I don’t see happening because we have record equity in homes, people have crazy low rates/payments, and the job market is stable, or a massive (and I mean massive) drop in demand. The fed is trying to slow demand down with The high interest rates and it should continue to stabilize the market. That’s a good thing.

          However, this isn’t 2008/9. Prices will continue to be stable in my opinion regardless of all this fancy math because supply/demand economics is undefeated. That’s basically all we need to look at. Until absorption rates get to 7/8/9 months, prices won’t budge.

          Houses will take longer to sell and there will be less sales overall, but those prices will stay. They just won’t go up as fast as before.

        • Miller says:

          @Billy Howard
          It’s wishful thinking to think that home prices won’t drop or that “this time is different” than 2008-2009, if anything all signs are pointing to the opposite, an even more drastic drop considering the unrealistic home price inflation and the even worse housing bubble we’re in. The simple fact is that the real estate market ultimately has to be in line with American’s incomes and what they can actually afford–this is true of any commodity but especially of an essential like housing that represents such a significant purchase. And if the prices are too high, they will come down one way or another.

          You cite lack of supply as an apparent argument against a major home price drop, but the reality is that Americans will find a way to increase the “supply” of housing in any way they can, unfortunately often in ways that drastically drop the already plummeting quality of life in the USA. I’ve been seeing this all over even with some of my own distant relatives, people moving back home with close or extended family and more room-mates moving in and bunking together (includes even the highly paid professional class in the Bay Area). Or people moving out into tent-cities, or into RV camps. Or just leaving the country (ex. tons of Boomers getting cheap retirement homes down in Mexico or Panama). The cost of homes like other key goods has gone way up past what Americans can actually pay with their incomes and savings, and the massive increases in US household debt and leverage to cover it is just leading to yet another American financial crisis. Those costs have no choice but to come down, and not just by a mild 25 or 30 percent. They have to fall by half, in some cases 60, 70, even 80 percent in some markets to line up with US incomes. Maybe a tiny few markets esp in areas like southern California or Manhattan will stay bloated due to investor purchases and speculation, but the ridiculous prices and rents in markets like Phoenix, Austin and Tampa are already headed sharply down, and are only beginning a long and sharp drop down to much lower levels.

      • RecessionIsAFarce says:

        Loan officer here, Washington state still going strong for now with home buyers and new home buyers. Homes have dropped $60,000 – $120,000 in price from what I’ve seen and it’s giving other people a chance. New cars on the street. Home inventory strong. How other states are fairing I have no idea.

        • Brian pawlak says:

          Same here Howell Michigan, rural small farms premium, everyone here driving new Jeeps, Rams, F150, Telluride, no drop, money flows like usual.

    • Dave says:

      Most people at work marvel at the gains they have made on their houses. I now have a canned response. I tell them I would rather make a $1 profit on my home I have paid off if it would mean my children could afford to buy a home today.

      I bought my home as shelter and it has served its purpose wonderfully. I want my children to be able to buy a home and enjoy it as a home, not a commodity.

      • historicus says:

        or rent it from Blackrock

      • rojogrande says:

        I absolutely agree. I said pretty much the same thing to a colleague who was lamenting the falling price of her home in 2010. In my view, inflating home prices are a sign of poverty, not wealth. If it takes a million dollars (and roughly $300,000 in household income) to buy a 1970s era 3/2 with 1,500 square feet, then that’s awful for all the middle class people who can’t afford it. However, it’s really not much better that that’s all a relatively high income family can afford. I purchased my house to live in and it looks like I’ll ride two bubbles up and down in the last 20 years.

        • Miller says:

          Agreed on everything here, we’ve all found it just infuriating the way the media so plays up rising home prices and the housing bubble like it’s some kind of indicator of wealth, talking about how “the housing market is hot” like it’s something to celebrate. There’s nothing that magically happened to add so much value to that home–it’s a classic example of a dangerous asset bubble. It isn’t even good for the homeowners, for us it’s just meant even higher costs for things like insurance, property taxes and repairs on an asset that isn’t really all that liquid, as one of our financial advisors put it. And due to these asset bubbles, the US has suffered possibly permanent damage to its middle class and professional class–even many in the upper class (ex. successful small business owners) who don’t have quite enough money to “purchase” policy from a Senator. And it’s made it difficult if not impossible for even the most successful young graduates in the United States, in in-demand fields, to settle down and start families. The overzealous QE and ZIRP of the Fed (and not just since the pandemic, more like going back a decade or even 4 decades) has been a wrecking-ball for American society.

      • Lynn says:

        That’s an excellent response.

      • Miller says:

        “I bought my home as shelter and it has served its purpose wonderfully. I want my children to be able to buy a home and enjoy it as a home, not a commodity.”

        Well spoken. If this attitude was more widespread, even with the Fed’s stupid ZIRP and QE excesses over the past 40 years, this housing bubble could have been avoided.

  2. SoCalBeachDude says:

    Market action this year has hurt A LOT of people. Cryptos. Meme stocks. Tech stocks. Some huge percentage declines. Against a backdrop of historic leaps in interest rates and inflation.

    Lifestyles irrevocably changed, not for the better.

    Economists missed it. The Fed missed it. Politicians missed it.

    A few folks got it right.

    • ROYCE says:

      Totally agree about massive changes.

      But…”Economists missed it. The Fed missed it. Politicians missed it”. We can’t give excuses for not understanding what is happening. We’re in this position because the Fed, politicians, and economists, all have ulterior motives. While there are outliers, the bulk of people in these groups are not idiots, they’re either manipulators or mouth pieces. Thankfully bastions of reason like this site exist for those that want to attempt to understand what’s really happening.

      Reminds me of a quote that goes like, “Once you’ve tasted fruit from the tree of knowledge, paradise is lost”. Meh, paradise sounds a little boring anyway. Might as well get out there and have a little fun amidst the chaos.

      • Citizen Zeus says:

        I like the attitude. Why not wade into the current. Life is meant to be lived, not by sitting on a a shore watching the water pass. Water of life is as much metaphysical as it is physical.

        • rojogrande says:

          “If you wait by the river long enough, the bodies of your enemies will float by.” Sun Tzu

          It depends on why you’re watching the water pass by.

      • historicus says:

        “”Economists missed it. The Fed missed it. Politicians missed it”. ”

        The man who started the Weather Channel made an observation that applies to those mentioned above…
        to paraphrase, he said…..If your research does not fit the narrative promoted, you will lose your government grant money.
        So, did these people “miss it” or were they “dancing to the music”?
        Did all the Fed people really “miss it”, or was there a blind eye effect?

        • Bobbleheadlincoln says:

          I suspect that the big money (Corporate, Banks, Billionaire family trusts) could not be prepared for the COVID-19 downturn due to that being a quickly evolving natural disaster.

          Because they were not prepared, they stood to loose massive sums of money quickly. So the Fed steps in and averts disaster (for big money). Huge heavily indebted companies would have gone out of business. The travel industry would have been gutted, housing downturn, etc. Those things had been building for many years and would have seen a natural recession as had started happening in Fall of 2018 as interest rates rose back then until Trump yelled at Powell to lower rates again.

          So averting the rapid and compounding COVID-19 downturn was great for big money. But the cost of allowing them time to prepare for the downturn will be a much harder downturn in a much more drawn out pattern that is harder for us to predict and plan around. I think a sharper and harder recession might have been the better outcome instead of pumping an already unstable economy with unprecedented money printing. I personally benefitted from this policy of the Fed as I owned a house during this time and sold it. I still do not like their tactic here as it seems self-serving. Also it seems this Fed tactic of money printing is now a political apocalypse for the democrats even though it started during Trump times.

          Because the pain for the average American is inflation now. Not unemployment that would have spiked from COVID-19 if that recession had been allowed to happen, but inflation that is threatening the working class on all fronts and now threatens the integrity of the economy into the coming years. The value of the dollar globally may not stand up to this.

          The issue reminds me of the Chinese billionaire that got stuck with a massive short position in Nickel this year. Fully bailed out by the Metals Exchange in London because he was too big to mess with and try to collect from.

          “Nothing goes to hell in a straight line” eh? Draw out the pain for years and shift the pain to the working people from the elites.

      • Brian pawlak says:

        As long as you can before the big machinery grinds you up.

    • cb says:

      with unjust rewards come the danger of pullbacks ………………

    • jon says:

      some of my friends got retired, had plans as they were making good money in stocks. Now plans canceled, had to come back to work :-(

      • Digger Dave says:

        I’ve been looking for camper van for a few years but tapped out in the last two as $20k vans became 40k vans and the high end of the market moved from $100k+ to $200k+. I’ve seen quite a few ads of the high end lately that begin “selling because our circumstances have changed,” which I keep interpreting as meaning “my crypto has crashed.” But asking prices are barely moving down so far, maybe 10-20%.

        There’s still too many limited variables out there so this situation may just slowly unwind. There’s tons of people still making stupid money.. There’s tons of inflated wealth in the RE markets. Still highly favorable tax rates for speculation. And that pesky inflationary mindset where people will irrationally refuse to sell an asset at 50% of its bloated bubble value, even if the market goes there, because they can’t let go of that perceived value.

        • COWG says:

          “ And that pesky inflationary mindset where people will irrationally refuse to sell an asset at 50% of its bloated bubble value, even if the market goes there, because they can’t let go of that perceived value.”


          Why you have a “mindset” of worrying about what the asking price is for what you want to buy….

          No matter what it is, houses, vans, or anything else, make an offer based on the valuation you determine and are comfortable with… if accepted, great… if not, move on… eventually, you will find what you’re looking for at a price you’re willing to pay…

          I try not to pollute my mind with useless thoughts of what loss they’re taking…

          Basically, I don’t give a damn what they’re asking…. I do give a damn about what I’m paying…

        • Kyrtsyn Podgajski says:

          I lucked out and bought a 2001 Dodge Minivan for $2800 about three years ago. I have been living in it ever since.

          $20K for a camper van is totally unnecessary.

        • Gilbert says:

          $20K for a van to live in?
          Bought my first house for $22.5K back in 76. Small owner built camp on a tenth acre with 52+- feet of frontage on a clean lake. Low taxes and minimal maintenance with great neighbors. Sold it in 84 for $73K and thought I had done real good. My son told me it recently sold for $850K! Taxes now more than my initial purchase price! Totally insanity thanks to our central bankers.

    • Heron says:

      And the “safety” of bonds. No where to hide in this bear market, except cash!

      • Mark Schultz says:

        There are a few places. The dollar for example. Check out symbol uup. It ‘s up 11.98% YTD and 15% in the past year.
        If the Fed persists with raising interest rates the way they have been in my opinion there’s good odds the dollar will go higher. if you’re not familiar with “charting“ then it’s likely better to stay in cash. At some point, every asset class reverses and if you don’t know how to see when when you’re better off staying in cash or short term T-bills. 90 day to 1 yr. No longer until Fed backs off raising interest rates and “qualitative tightening“. Talk about an odd situation, the one year T bill is paying more than the 30 year treasury bond. This is not meant to be investment advice or a recommendation to buy or sell any investment. The above is based solely on my observations and can change at any time. You should seek The opinion of an investment expert, especially one who is experienced with a long-term verifiable track record.

        • andy says:

          There are thousand of places where you could beat cash, obviously. If you take risk. You could throw a dart at any short ETF and do better than your UUP, in the same time frame.

        • Harrold says:

          I never use “charting” , I prefer to read tea leaves.

        • c_heale says:

          Isn’t the Rouble up too?

        • Guy M Daley says:

          “There are a few places.”

          Name another. Few suggests more than two. Everything has been crushed outside of the soaring dollar. Shorting something doesn’t count as there is too much risk of big boys coming along and squeezing something that has been shorted too much.

          I’d like to hear two more examples please. A case could be made for uranium miners depending on the time frame.

    • 8_mile_road says:

      // Economists missed it. //
      I have zero respect to those so-call “Economists”. Economists should tell us what IS happening in our economy, and explain why. As ROYCE said, many economists are either mouthpieces or manipulators.

      And thus, I appreciate you, Wolf, for telling us what mainstream media won’t tell us.

    • Jon W says:

      The only people who missed what was going on were those blinded by their own greed. You don’t need an PHD in economics to be able to figure out that asset prices going up by 50% while revenues remained stagnant (or worse), and large parts of the workforce were being paid to stay at home, was not sustainable.

      The Fed made a joke out of those of us who work for our dollars. Fair enough, during the pandemic I accept this was a necessary evil, but they let it run on way too long. Now it’s blown up in their face and it looks like they might, with much regret, actually do something about making sure the economy favours those who go out and do stuff over those who sit at home attached to the QE fountain.

      Im still not completely convinced, but it really looks like enough of the ‘losers’ who go out to work each day are getting sick and tired of being beaten down by stagnant wages and ever rising demands on their incomes, that they are going to have to do something to prevent a wider breakdown of the labour market (aka wage-price spiral taking off).

      • historicus says:

        Inflation is theft
        And those who promote ANY inflation are thus thieves
        And those who are charged with preventing inflation (stable/fixed prices) are shirking their fiduciary responsibilities

    • Miller says:

      Yep, economists have been missing these calls on a regular basis and now even the Ivy-League and U. Chicago deans are admitting it. Too much focus on pretty and elaborate mathematical models, too little actually talking to the middle class and working grunts who deal with the economy in the real world.

  3. Augustus Frost says:

    I read the CNCBC article. It also made the comment that homebuilders are offering options to improve affordability which I interpreted as more than just price cuts. Probably rebates to make it easier for their broke potential customers to scrape up enough of a down payment.

    • Pea Sea says:

      I interpret that as “anything but actual price cuts.” Or “stealth price cuts” if you prefer.

      • TK says:

        I hear you the most. Now we will go back to stick homes. Just plywood at all the corners for square. Same as 1978 when my home was built by previous owners. I have since finished adding all the proper materials. But cost cutting is real. Back then, bonds paid a respectable 8% but mortgage rates were high.

        • jr says:

          We have to build for the big earthquake, half the walls in my house have plywood on both sides, not to mention the 14 HDU hold-downs.

        • IanCad says:

          Homes are built to the current codes. They’ve always been quite adequate Let-in bracing is still permitted under the IRC in non earthquake/hurricane areas and is perfectly acceptable.
          OSB sheathing can be a nightmare when it rots.

        • VintageVNvet says:

          This for IC:
          ”Let in bracing”, that I installed for many years/decades as a framing carpenter is not worth much, if anything beyond squaring and plumbing walls.
          Please add some of the now widely available steel ”strapping” for ANY application…
          ANY of these can be scoped and analyzed and ”computed” these days, as opposed to when we, in this case the ”framing carpenter” we, used it extensively in CA, OR, WA, and the entire SE USA.
          Because it was CHEEP/cheepest way to go.

    • RH says:

      Yes, but as in 2008, the prices of too many houses have risen to levels that are not affordable to ordinary Americans, particularly since inflation is making their wages worthless. That RE inflation may decline, while other inflation rises and rises, because it is desirable to some.

      What people forget is that there is a large, parasitic group of crooks that own all of the “Fed” by owning its district banks indirectly, called banksters and financiers, who profit immensely from inflation: this year, if the real inflation rate per year was merely running at 6% over what they pay their depositors (0% to 3%), who deposited $15 to $20 trillion with them, those banksters and financiers are making windfall profits of over one trillion US dollars, because inflation is reducing their liabilities in real terms.

      Events such as the economic collapse of China will reduce demand and thereby, inflation (albeit some of the tactics of the crooks in charge there also reduce supply, like the lockdowns), but ultimately, unless they could take away the trillions of dollars that they have given the parasitic groups (which is practically impossible), inflation has merely been delayed.

      When the parasitic banksters and financiers start enjoying their windfalls, by buying yachts, cocaine, prostitutes, etc., inflation will climb and climb. The measly aid given to ordinary Americans (who could not afford a $400 emergency even before the pandemic) will only enable them to pay down their enormous debts or their rent. It did not cause more than a tiny fraction of the oncoming inflation.

      • Sams says:

        The American dream of beeing a rentieer. No need to work, let the money work and live of the rent. The trouble is that an economy can only be taxed with a finite level of rent.

        After the limit have been reached, more rentieers only consumes what later should pay rent and the economy contracts.

        High interest rates do not help, it just shift how the rent is extracted. High interest rates may bring about demand destruction. It may as well bring supply destruction.

        A lot of US oil production vas viable due to cheap finance and the possibility to use the oil production as a base for financial income. With high interest rates there will be expensive or little oil.

        We may see the same happen with other industries.

        • Miller says:

          Good description. This was something they taught us in Econ101, even the most productive economies can be distorted and lose their foundation when rent seeking and rentiers become the heart of the economy, and what the policy-makers eventually cater to (just like the Federal Reserve over the past 40 years). Rent seeking is always a part of any modern economy, but it has to be reigned in if it starts to intrude on actual productive activities, or to make it hard for workers and producers to get basic needs like housing, healthcare and education. All 3 areas where the US now has some of the worst cost extremes and asset bubbles.

    • Guy M Daley says:

      Let us not rule out 40 year mortgages. Got to keep the monthly payment manageble. It’s ALLLLLL about the monthly payment.

  4. Kunal says:

    I doubt prices will drop by a meaningful. Drops by half a percentage point do not count. Many experts have been predicting housing crash for last 10 years. Most have been predicting over last 3-4 months. They are tireless. But home prices refuse to drop, it only goes in one direction.
    I suspect if home prices will fall by 10% or even 5% Fed will panic and start talking about lowering rates and investors will jump back on the Titanic. The party will go on. Fed has created a new mindset among US citizens and investors, that Fed will always save assets from crashing and investors from losing in US markets, therefore asset prices will never fall.
    Bond market is already predicting Fed U turn in spite of record inflation month after month.
    RE price drop is a wishful thinking at best and really bad financial advice at worst.

    • andy says:

      Kunal, you’d be correct if you had two lives for 60-year morgage.

    • Depth Charge says:

      “RE price drop is a wishful thinking at best and really bad financial advice at worst.”

      Whistling past the graveyard, I see. How…..deluded….

    • Sams says:

      Well, RE assets can drop in prices more than one way. The nominal value can crash and the sticker prise get lower.

      The purchasing power of fiat money can drop and the value of RE relative other goods and services realign. The sticker price may the even rise, but still the price drop.

      Think almost no RE price rise and a tenfold rise in vages comming up. Not likely, but the effect on RE price would be the same as a price drop.

    • Einhal says:

      The bond market and stock market is so accustomed to a Fed u-turn, simply because the past 13 years have made it look like printing money is free, with no deleterious consequences. Now that that fantasy has been exposed, the Fed is starting to realize it can either save the markets or it can save the dollar. It can’t do both. The dollar has gotten stronger against the Euro and Yen solely because the Fed is acting hawkish. If the Fed u-turns, all of those gains go away.

      The money to bail out housing doesn’t exist in the real economy. It would have to be printed. There’s never something for nothing.

    • Lynn says:

      May 17 2022

      “Federal Reserve Chair Jerome Powell emphasized his resolve to get inflation down, saying Tuesday he will back interest rate increases until prices start falling back toward a healthy level.

      “If that involves moving past broadly understood levels of neutral we won’t hesitate to do that,””

      I think they have right now finally come to a place where they are under a lot of public pressure to put their money where their mouth is. Even people who had no idea what they were several years ago have been blaming them for what they’ve been doing.. It looks like the party is over and they are slowly boiling frogs’ asset prices.

  5. Phoenix_Ikki says:

    I will be the biggest cheerleader of this bust you ever know if price can bottom out faster this time around than 3+ yrs it took last time. Call me shallow, but to see the smug faces of friends and relatives that have beaten me over the head with their RE will only up disapproval look when I try to explain why I don’t want to overpay for a crap shack turn into a “Oh crap” look will be priceless to me and I will enjoy every moment of it.

    The sad reality of it, in majority of SoCal and NorCal markets, even a 50% drop is frankly still not all that cheap and maybe come closer to income fundamentals. As much as I would love to see it happen, I am just a bit doubtful this market will have a 50% downturn in desirable metro area. Even then Culver City houses now at $2M, 50% is still no where near affordable for most people. Would love to be prove wrong on this as I have said time and time before.

    • Kunal says:

      50% drop is a sweet dream that will never realize. I bet even a 5-10% drop will wake up a deluge of investors and buyers, and music will begin again at the highest volume. You do not know how much hard money is parked at the sidelines, waiting for any meaningful drop, its in hundreds of Billions if not Trillions. Every RE investor in Bay Area I know of is waiting for a drop in prices. All this hard money will be invested with heavy leverage so its unimaginable amounts of dry powder waiting to be plowed back in RE. Not an environment for any sustained price drops, trust me.

      I feel sorry for hard working folks who are waiting for a huge drop in RE prices so they can afford to buy, because that moment will never come.

      • Wolf Richter says:

        That “dry powder” is evaporating under rising interest rates, QT, and market losses. When markets sink, liquidity disappears.

        • Citizen Zeus says:

          Yes, I agree, Wolf. This will drive prices down significantly in the short term, but will we have a retread of what happened in March 2020 with the stock market. Big plunges in any sizable asset class have, it appears, ALWAYS (in late crony capitalism) caused a legislative and executive rescue plan that artificially reflates the market. Are you saying that then fundamentals have finally reached a point of such stark contradiction that no matter what the artificial interventions are, they will NOT be able to kick the can down the road and load a few more trillion dollars of debt on to future generations? Peter Zeihan is likely to agree with you. My own thoughts are that the ATTEMPTS at the old legerdemain will be made and that the will be at least semi-successful in stemming deep dives, but they won’t be enough to stop the OVERALL decrease in asset classes, because there really is a limit to fake liquidity, especially when the Boomer generation is retiring and USING that liquidity to fund their (somewhat lavish by historical standards) expectations and retirement. That takes more money out of the system. I think we might see a retrace of the Great Depression where the initial crash (as traumatic as that was), did not signal the bottom at all, but rather signaled a struggle to keep things afloat for years before the real bottom was reached, Stocks went from 400 to 200 and then upward, until descending to nearly 50 almost three years later and stayed down another year. Could you do an article on liquidity and generational pressures (low population, spiking debt, reduced [material] standard of living, huge entitlement shortfalls, etc.) as making an excessive demand on the liquidity already out there, making money even more scarce and, therefore, desirable. What effect will this have on the price of gold and silver do you think?

      • TheFalcon says:

        Kunal is this a re-post from 2006?

      • jon says:

        Are you a RE investor holding many properties or landlord or a realtor ?

        Everyone is looking at this data with tinted glasses.

      • SocalJohn says:

        Kunal is correct. The price drop will be 49%.

      • gametv says:

        All that money parked on the sidelines will stay on the sidelines for a long time. This is a process. Inventories need to rise further. Then the first batch of lower comps will hit the markets. That gets buyers to pull back and wait for more declines and sellers to cut their prices. We will need to go through wave after wave of lower prices hitting the comps and resetting the “baseline” that is used in every negotiation for a new home, until the fundamentals of montly payments gets rationalized and real demand starts.

        Markets that get this out of whack are all based on psychology. When people think they can put down 100K as a down payment and make 400K in profits, they tend to neglect to ask whether the price is rational.

      • SOL says:

        5-10 is already happening. Today! This party is just getting started.

      • Augustus Frost says:

        There is no such thing as “cash on the sidelines”. It’s a myth.

        Practically all “cash” is actually someone else’s DEBT which must first be sold to obtain actual cash.

        An example is MMMF which accounts for trillions of so-called “cash”. It’s all debt. When the fund sells holdings to give someone actual cash, there has to be another buyer who uses cash to buy it.

        Any other rationalizations?

        • ru82 says:

          Not exactly true.

          In 2010, there was 960 Billion of U.S. currency in circulation. This is paper dollars, coins etc.

          Now there is over 2 trillion currency in circulation.

          It took over 200 years to get to 1 trillion and 10 years to get to 2 trillion.

          The U.S. treasury printing press is cash on the sidelines. When they have me and many other people $2000 in 2020, we all suddenly had cash on the sidelines.

          But I get your point of no cash on the sideline if we had a closed system where governments never printed more currency YOY.

        • Harvey Mushman says:

          I recently transferred an IRA from Equity Institutional to Fidelity. It took two months! I started to get a little nervous.

        • perpetual perp says:

          Debt centric financial systems create the ‘boom and bust’ cycles. It’s baked in the cake. GDP cannot grow as fast as compound interest, which pushes risk taking upwards, along with asset prices. That’s all that is going on. Sooner or later the bubble pops for whatever reason, and the prices collapse. The wealthy get stung but they have enough to make it all back, and more, picking up truly valued assets.

        • Christopher Burrell says:

          Exactly, those who keep screaming about ‘ cash buyers ‘ act like there is literally a bunch of bags of money with billions upon billions of dollars lying around on the sidelines, waiting to be deployed. Yet, most of the cash buyers during this irrational binge buying craze of the past two years were from cashed out assets… assets that have taken a beating so far this year, and no one has yet seen the end to the downdard spiral. It was all built upon cheap and easy fake money that the tides of inflation ,QT, and interest rate hikes are washing away.

        • Miller says:

          Very true. It’s funny how the “cash buyers” have been among the groups disappearing the fastest as interest rates go up. You’d think they’d be unaffected if going in with all cash, but they’re the hardest hit. Because as you point out, the mythical cash buyer was always a myth. It just debt in a different form, often fueled by things like HELOC’s and other questionable “sources” of cash based on nothing more than excess leverage.

      • Franz Beckenbauer says:

        “hard money” is gold.

        Dollars are hardly “hard money”. They can be created by the click of a Mouse and disappear just as fast. They never really exist anyway. To call that “hatd money” is just the Kind of insanity that lead to this mess.

        • Harrold says:

          Gold is down 7% this past month. More than housing, but less than gasoline.

        • Sams says:

          Ukraine central bank is selling large amounts of gold to keep economic afloat. Soner or later they will run out of gold to sell.

      • VintageVNvet says:

        ”Last Crash” K, we were looking at a couple of 1800SF ranch type places on a canal with sailboat water and no bridges to the GOM for $800K or so in 2006.
        They went to auction in 2009 for $225K.
        Keep your powder dry folks, this crash is just in the very beginning innings.

        • nodecentrepublicansleft says:

          I also live in SWFL and saw similar stuff back then.

          My only concern for your statement is that “this time” may not be exactly like “last time”.

          The future is unknown. So we shall see….

      • Lynn says:

        I think “heavy leverage” means that money is not dry, but “wet power” by definition.

    • Not Sure says:

      I’m with you, Phoenix. I wish it would, but a 50% drop is not going to happen. There are just too many fresh dollars out there. Anybody waiting for a 50% price drop in an asset of necessity shortly after the money supply grew 50% in 2 years should expect to keep waiting indefinitely. The value of housing didn’t go up, it’s the purchasing power of middle class buyers that went down.

      • Pea Sea says:

        And the purchasing power of the working class went below zero.

      • jon says:

        There is no such things as cash sitting in the sidelines.
        Also, bunch of my friends wanting to buy home sin san diego postponed their plan as their portfolio took big hits.
        Couple of them retired 2 years back, rejoined work force because of these hits.

        If money supply can grow fast, it can vanish faster. Let’s wait and watch.

        I though the same in 2008, that home prices in socal can never go down and if it goes down , it wont go down by 30-40%. the rest is history as they say.

        I personally think the market has turn big time for all asset classes. Gone are the days of cheap money. Let’s see if and when the FED pivots.

        • Miller says:

          Yep. The “cash on the sidelines” myth is largely just debt showing up in another form. It never was cash in the form of actual savings and earnings in liquid form, which is why the “cash buyers” have been heavily drying up as quantitative tightening enters in the picture and interest rates are rapidly increased.

      • Heron says:

        Wrong, people will be able to buy for 50% off but those will be “real” all cash deals – just like last time when no one wanted to buy. Wont be every property, but a subset of whats for sale thats on the banks books for whatever reason.

        In fact, I know of condos a stones throw from the ocean that went for 10% of the price they were bought at in 2008. Crazy things can happen.

        • curiouscat says:

          Why would anyone buy a condo? Trust the future of your asset to a group of other owners who have no training and a random level of common sense?

        • Gattopardo says:

          10%? Love to see the data, some examples.

        • andy says:

          There were couple of resort towns in Florida that went down 90%-ish the last time. Fort Mayers and Cape Coral I think. Im sure there were others. A guy I knew was buying town houses in his division for $40-45K (also Florida). I think he bought nine.

        • Harrold says:

          Wait until after the next Florida hurricane to pick up houses at huge discounts.

    • JeffD says:

      Even a 30% downturn would only move SoCal home prices back to the outrageous prices they were at two years ago.

    • jon says:

      I live in SoCal and most of the nice neighborhoods in SoCal looks like slums.
      Many families living in 3 bedroom homes, streets are packed with cars. Downtown streets filled with homeless people.

      • SoCalBeachDude says:

        Those are not nice areas in Southern California at all, but there are many beautiful areas like the Pacific Palisades, Palos Verdes Peninsula, Brentwood, and of course, Beverly Hills among many others that have no such issues at all.

      • gametv says:

        There are neighborhoodsd in Torrance that look like slums and are priced at a million dollars. Same thing in West LA.

        What happens all depends upon interest rates and inflation. If inflation abates and the Fed can lower interest rates in another year, then prices will adjust down, but not get cut in half. But if the interest rates must stay high and even go higher, then the prices of properties will get cut by upwards of 35%, maybe 50%.

        • Miller says:

          Yeah I know what you’re talking about. Just honest about it but a lot of Torrance looks like a dump, but with home prices that would rival the richest districts in many big cities in a saner less bubbly period. The truest sign of the extremes of the everything bubble America has been stuck in.

      • Nathan Dumbrowski says:

        My neighbor just shared with me that while I was away in Georgia and renting out my SoCal unit via a management company six people had moved into my two bedroom condo. Wow. I thought the mail I was receiving must have been a mistake. An error. But her comment lined up with the number of mail recipients I had saved.

        • Depth Charge says:

          You’re handling it rather well. I wouldn’t even want to be associated with such a depreciating debt anchor. I can only imagine the wear and tear.

        • andy says:

          Any former chemistry teachers?

      • andy says:

        Went to LA recently. Downtown is full of zombies. Right next to $400/night hotel. They literally all start stumbling towards you like in a horror movie. Never seen anything like it.

      • Iona says:

        Santa Cruz and east side Santa Barbara fit that description to a T. Million dollar properties that are 50-70 year old dumps with 5+ cars in the driveway and on the lawn (beer cans too). Ugly pit bull barking 24/7.

  6. Sams says:

    Al Jazzera did give a Zillow representative a soap box to speak from today. He did paint a different picture;)

    • Phoenix_Ikki says:

      Well, will RJ Reynolds ever admit that the product might have harmful/deadly effect on their customers? Same logic goes for Zillow.

      Apply George Costanza logic to them, they say one thing, do the opposite, then you can’t really go wrong

    • Wolf Richter says:

      Aren’t Zillow’s shares down like about 85% :-]

      • Sams says:

        This time is different he said.
        Could be he is right, but I bet not the way he says. The difference can come in a different shape with a different oucome.

  7. 2banana says:

    And builders also do everything they can NOT to cut prices. It is the last concession they give.

    They would rather do the “free” upgrades like hardwoods, granite and stainless appliances, credits for closing costs, etc.

    “And builders are cutting prices: 13% of the builders have reacted to those conditions by reducing home prices in the past month to boost sales “and/or limit cancellations,” the report said.”

    • unamused says:

      “cut prices. It is the last concession they give.”

      They’re going to have to. The Fed has barely gotten started with interest rate hikes, so it may be easy to surmise that residential real estate is going to get smushed as a Serious side-effect of getting cpi under control, which they can’t but are going to try anyway.

      The American Dream of home ownership is dead but could come back as a zombie.

      You might expect institutional investors to gather up the low-hanging fruit and convert vulnerable demographics into rent slaves, so as to avoid the inevitable losses in the equity markets.

      • Sams says:

        Well, the rent slaves may not have the economy to have many children. Slowly that demographics will feed back to the housing market. Note that a shrinking population is poison to an economic system founded on ethernal growt.

        • Miller says:

          Very true to point this out. This has already been happening across lots of regions of the US, the cost of living has gotten so high that couples simply can’t afford to start families, leads to a downgoing spiral of fewer kids, schools collapsing, the few remaining families moving out and fewer still moving in. The usual response by some of the more clueless idiots in the punditry, especially many of the neoliberal economists who think they can just paper over the mess, is that the United States could solve the problem just with more immigration. But they forget that policies like a housing bubble, uncontrolled inflation and massively increasing rent and cost of living also make the USA much less attractive as an immigrant destination, especially for the skilled immigrants who start businesses and actually add to the country more than they take in benefits.

          In fact, these policies are even leading more Americans to leave and become expats. One of our seminars had a stat that for the time in US history, over the past decade more Americans moved to Europe than Europeans came here, and by a huge margin. Same even with some parts of Asia. You can’t paper over failing policies and asset bubbles by just opening the door to mass immigration, because people simply won’t come, and your own people will leave. Bubbles especially in essentials like housing, healthcare and education are the doom of a productive society.

  8. Not Sure says:

    I would love, love, love, to see this housing market brutalized. I would potentially have a lot to gain from it, but I’m starting to seriously question how big this crash will be, or if there will even be a crash. I can’t stress this enough… About a 3rd of all U.S. Dollars ever created (printed, digitally conjured, monetized debt, etc.) were created in the last 2 years. 2 flippin’ years! So one must ask the question, has housing really gotten more expensive in real terms? Or did the little guy just get priced out by having his currency devalued far faster than his income is being revalued? I’m starting to think that maybe, just maybe, the 30% increase in U.S. median house price (price, not value) over 2 years might just be driven primarily by the 50% growth in the money supply over those same 2 years.

    This article focuses on builders of new houses. Of course their sentiment is in the dumpster. The average homebuyer’s income growth has not held up to the price growth of land, lumber, windows, wiring, appliances, construction labor, and everything else required to build a house. So homebuilders are going to have trouble making a profit selling to the average home buyer, especially as we enter a period of time where the value of the dollar is decreasing while borrowing costs are increasing. But if new construction is falling off a cliff while the job market is still raging, and trillions of extra dollars are still floating around trying to find goods, services, or assets to chase… I’d say that doesn’t bode well at all for the little guy like me just trying to find a reasonable used home to own. And if demand destruction is the only way to cool this rig off, guess who’s in the Fed’s crosshairs… It ain’t institutional investors with hoards of cash to continue buying safety in assets, it’s me and others like me in the dwindling middle class. Until we see weakness in the job market, and as long as a vast ocean of cash is still waiting to be burned through, I don’t see any major drops in home prices. I desperately want to see a major drop, but it’s just not there.

    • All Good Here Mate says:

      Today’s WSJ has an interesting article talking about divergence in the job market. Couldn’t read all of it cause I’m too cheap to pay the subscription. Plus, we have Wolf and I think we’re all better off with his research and analysis anyway. I’m one of those little guys myself.

    • SocalJohn says:

      Prices are already dropping. It is happening.

    • PilotDoc says:

      You want prices to drop. Need them to drop? So, you hedge emotionally by saying “It will never happen.”

      It is going to happen. Be patient and persevere a little longer. The herd ran it up, they will trample it down.

    • Augustus Frost says:

      Your premise is a fallacy. There is never a direct correlation between some arbitrary measure of “money supply” and prices.

      There was a lot more “money” when the bottom fell out of the housing market during and after the GFC versus before it. Prices still fell anyway.

      The cause of any housing crash is going to be tightening credit conditions. This is reflected in higher rates now.

      I assume government will at least attempt some idiotic counterproductive policy (like another mortgage moratorium) to keep housing unaffordable. In isolation, it may partly succeed in supporting prices, but the government is going to have a lot more to deal with than just the housing market, again.

      Housing prices aren’t going to decline in a vacuum. It’s not possible to support the housing market in full while concurrently artificially supporting everything else. The housing lobby will be competing against many other special interests, many of which are a lot more powerful.

      • Not Sure says:

        Augustus, Wolf maintains and regularly shares a chart showing the purchase power of $100 since Jan 1, 2000. Compare it to a chart of M2. Where M2 grows, the dollar drops in value. Where M2 grows fast, the dollar drops fast. Where M2 flattens out, so too does the value of the dollar. One chart looks uncannily like an inversion of the other. The effects of the last 2 years of printing are still playing out, so let’s look at the 20 years from Jan 2000 to Jan 2020 right before COVID liftoff. M2 tripled in that period. The S&P500 doubled in size from its tech boom peak, or tripled from its 2002 bottom which sits along its long term trend line. Median house price doubled by 2020, and it had tripled by 2022. Add a year or two of lag time from printing presses to price tags, and you’ll find the money supply growth and price growth share one of the most direct correlations in economics. Inflation is always an effect of monetary policy over the long haul.

        I think we agree on where the American standard of living is headed, but differ on the method that we will use to get there. Sure money was lost on housing during the GFC, but median house price peaked in 2007 and it only took 6 years to regain that peak in nominal terms. We can absolutely expect forbearance again and maybe even some type of forgiveness, tax breaks, or credit toward mortgage debt in the next downturn. Who knows what politicians will cook up next in search of votes? Eventually most Americans will be millionaires, but multigenerational/multifamily homes will be the standard and $1m won’t feel like a lot when a loaf of bread is $100 and an entry level cheap new car is $500,000. Americans will be poor in real terms.

    • ru82 says:

      Good post. I have the same thoughts.

      The M1 money supply was 3.9 Trillion in 2020 and now it is $20.5 trillion.

      It is sloshing around out there. I am not an Money supply expert. How do they reduce the M1. When I look at the historical chart that goes back to 1960, they never have reduced the M1.

      From the FRED: M1 consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (3) other liquid deposits, consisting of OCDs and savings deposits (including money market deposit accounts

      • andy says:

        How is your money supply? Quadrupled since 2020?

      • Not Sure says:

        ru82, the Fed changed their methodology for M1 significantly in May 2020 (look at the notes below the FRED chart), which is why it shows such a huge spike in 2020. I’m looking at M2 which has stayed more consistent. M2 increased by about 40% in 2 years from about $15.5t peaking around $22t.

    • Bubba says:

      If there’s so much cash out there burning holes in pockets, why are so many buyers putting 5% or less down? Something doesn’t add up.

      • Jason says:


      • Pea Sea says:

        A huge account of that cash is borrowed from non-mortgage lenders.

      • Ccat says:

        Because they are leveraging their money to the max expecting to make money via inflation. It has often worked.

      • Lily Von Schtupp says:

        Because the cash isn’t in the pockets of the people who need the low down payment mortgages. We’re out here watching our savings get eaten just sitting there in the bank.

        Some of us aren’t flush nor well-heeled, and never will be so long as we’re stuck paying the bananas rents. 5% down, 20%, whatever. Its not a financial morality lapse to try to break the renting cycle and get a foot in the door, so long as you can afford to do so with stable income and can understand the long term math.

        FHAs are for first time home buyers only, as are many other (not all) low down payment programs. Those buyers tend to have less to put down for numerous reasons. These loans aren’t just passed out like candy, there are employment requirements, income limits, DTI ratios, and restrictions how you can raise the down payment funds and who can gift it to you/how much of the down payment can be gifted, plus documentation of the closing fees and at least 3 months’ reserves. Plus the PMI, which is a brutal throwaway of money. Yes I know what PMI is and why its so high on FHAs, etc, but naw.. at its current requirements its a scam and another tax on the lower income folks.

        Its not a perfect system but the low DP mortgages are not necessarily the irresponsible windfall some seem to make them be. And even after all those hoops to secure the pre-approval, good luck getting an FHA offer accepted in a Cash is King market.

        • Lily Von Schtupp says:

          Almost forgot… those 3.5% down FHA mortgages also have restrictive conditions the property must meet, you have to pay for an FHA inspection, any issues identified (anywhere from peeling deck paint to roof condition) must be remedied in a specific timeframe, if major repair is needed then that goes into the Rehab loans which are another tangle of restrictions and red tape.

          Oh, you’re also a tradesman and can do the rehab work yourself for cheaper? Yeah no, you can’t, has to be an unaffiliated approved contractor. And then you get to pay the FHA inspectors to come out again to sign off on the finished work (6 months time if memory serves me–good luck getting any rehab done inside of 6 months these days much less a willing seller) and if the inspector finds flaws, you get to pay them to re-inspect again.

          Its not completely prohibitive but HUD/FHA don’t make it easy (for reasons, certainly) and most sellers don’t want to deal with the headache of an FHA offer even in a buyers market. Not the only low down payment program of course but certainly one of the most popular.

        • Lynn says:

          Lily Von Schtupp, Yes, absolutely, I agree, have looked into those. These are virtually unicorn loans. There are some who get them but they are few and far between. The USDA loans- same thing, even worse as the funding tends to be depleted long before the year is up going to developers with connections rather than individual families, at least on the coasts.

          On a real estate investors forum I lurked on there were sharks discussing how to access those loans and funds, even though they are not supposed to be the persons benefiting from them.

        • Lily Von Schtupp says:

          Lynn, that doesn’t surprise me in the slightest, especially on the Coasts where so few properties meet the eligibility requirements even if the borrowers do.

          Even the more traditional mortgage/non-FHA/USDA LDP loans have strict guidelines and limits. I see them talked about like the woman who sued McDonalds for hot coffee–frivilous on the surface, but there is far more to the actual story.

          I’m curious how much longer USDA and FHA loans will be viable on the East Coast given how raggedly aged and poorly qualified, if at all, the more ‘affordable’ houses are here. Even the 203k loans aren’t cutting the mustard.

          Sure, you can try to find a fixer upper in Bumpkinville Upstate NY, where the economy is nice and dead dead, but 1) mind the many flood zones, 2) good luck finding work unless you’re in healthcare/don’t mind driving an hour+ into Albany (even remote work, given the poor internet connection and frequent weather related power outages), and 3) the house likely hasn’t had a lick of maintenance since the farm failed or GE/Sylvania/RCA/Beechnut/whoever closed shop, so you might as well bulldoze it and start a whole new house. Failing that, with a little luck it might get hit by lightning or a microburst/F1.

      • Not Sure says:

        Something like a 1/4 of buyers are putting down 100% cash. Lots of others have taken the proceeds from a previous sale and are putting down 20% or more toward the next purchase. Entry level or first time buyers might be stuck down at the bottom of the FHA loan distribution for a down-payment, and the working poor are starting to live out of their cars if they can’t pile into a rental with other families to spread the cost. This is the outcome of financializing the housing market, turning houses into stores of wealth rather than places to live.

        • Bubba says:

          Most of those “100% cash buyers” should have a footnote. It might appear that debt wasn’t used to make the purchase, but in reality a loan was taken against another property and the proceeds used to make that purchase. And if it’s really 1/4, woo boy, speculation is running wild. I doubt it’s all just boomers trading one house for another.

        • Lynn says:

          Not Sure I think it is (was?) actually around 20% according to a 2022 article I read. That number is going down, possibly quickly. Still a very high number. A good percentage of that I suspect is ultimately offshore money, some funneled through US citizens or legal resident aliens.

    • andy says:

      To yout point.. Have your cash reserve go up 1/3 in the last 2 years? Same for every other joe six pack signing their life away for a morgage. I dont think those getting that printed cash compete with you for housing.

  9. dishonest says:

    Didn’t this happen in ’08?
    Same old, same old.
    Bubble #3 in what? 2024-5.

  10. SomethingStinks says:

    Can someone explain in layman’s terms what the difference is between currency devaluation and inflation? To me; devaluation would mean if country A’s currency is devalued, then country A’s currency is now less worth than country B’s currency. Is that not the case. Right now the exchange rate of USD to any other major currency is going up, so doesn’t that mean the USD is becoming more valuable?
    People keep talking about currency devaluation, but to me all the side effects they quote of currency devaluation look like our good old friend inflation.

    • Augustus Frost says:

      You’re confusing devaluation with depreciation.

      Only pegged currencies can be devalued. Floating currencies appreciate or depreciate versus other currencies, but this doesn’t consider local inflation which determines the purchasing power for those who use it as their currency of reference.

    • Franz Beckenbauer says:

      “Right now the exchange rate of USD to any other major currency is going up”

      It’s not. The DXY is going up. But the DXY is a scam. Look at the dollar vs russian rubles, saudi currency, look at the dollar vs gold. The “strong dollar” is an illusion. It’s only strong vs the zombies euro and yen.

      • Harrold says:

        Dollar is appreciating with regards to gold. Takes 7% less dollars to buy an ounce of gold then it did 1 month ago.

        • Sams says:

          Ukraine central bank is selling large amounts of gold to keep the economy afloat. That may be part of the lower gold price.

          Soner or later they will run out of gold to sell.

        • Xaver says:

          Right now we have a short “risk-on” move imo. So it’s sell gold, buy stocks. This move should run out of steam. The longer trend is bearish for stocks. I could be wrong of course.

          We don’t have a market. Powell moves the market. How long will he stay the course? How long will people feel the need to buy stocks?

  11. Jim bob says:

    Looking at the chart above the home builders coming down doesn’t that just sort of follow the macro market in that there was a sell-off all across the entire enchilada?

    Also if home builders are going to stop building doesn’t that make supply less and not alleviate the demand?

    Who is going to be selling a house if they secured a 3% or less 30-year fixed mortgage?

    • Wolf Richter says:

      The S&P 500 is down 20% YTD.

      The homebuilders in the chart are down between 24% and 40% YTD.

    • Augustus Frost says:

      “Who is going to be selling a house if they secured a 3% or less 30-year fixed mortgage?”

      Someone who owns multiple houses where one is now empty who wants to get rid of it before prices start falling.

      Someone who has big bubble gains and wants to “cash out” before others do.

      Someone who later loses their job when the recession begins and can’t pay their mortgage.

      I’m sure someone else can come up with additional reasons.

      Prices are set at the margin. It doesn’t take a significant shift to noticeably change market dynamics. It’s happening now.

      • Phoenix_Ikki says:

        Infidelity is another one…just for S$$$ & giggles, wonder how much of that in terms of % force people to sell every year..

      • Mike G says:

        Someone who loses their job, or loses a ton on stocks and needs to sell their “good” high-priced asset to cover other losses and raise cash.

      • ru82 says:

        I will add to the list people who will panic because they think the sky is falling. I have a friend who is a relator. He was part of HB1 and had bought 3 rental houses. The recession hit in 2009, 2 or his rentors e lost their jobs and he sold all 3 for what ever he could get in 2010.

        LOL He regrets selling to this day.

        Same thing will happen in stocks. That is when you buy.

      • Dan says:

        People also die, especially in a pandemic. The estates have to sell.

      • Mike R says:

        I have a 30 year fixed at 2.75. No plans to move, and mortgage is smallish.

        If mortgage rates get over 8%, I would be very surprised. I see the Fed choking before 2024, and reversing course, and eventually going negative. There is no way on this planet that the US can handle much higher interest payments on all the debt it has. Look at all the countries defaulting, and we are early innings in that respect.

        So Powell, is going to be forced to turn tail on rates. It’s inevitable. Congress nor anyone else has the guts to cut way back on their profligate spending.

        • SocalJohn says:

          Fed can’t go low until inflation also goes low. Inflation is 9ne thing that is more powerful than the Fed.

      • MarkinSF says:

        Inflation forcing the hands of AirB&B owners when travel dries up; second home owners cutting losses in a down market; investors who can 6-7% on Treasuries.

        • Harrold says:

          Travel is up in case you haven’t been following the trend.

        • Dan says:

          Yeah, like when travel was collapsed at the start of the pandemic in April 2020. I was sure then that Airbnb forced sales would get me a cheap beach house.

          Instead, much to my surprise, the opposite happened. I have given up thinking this will happen, although it is possible it will start slowly, and the Airbnb owners will go broke all at once if things get really bad on the stagflation front.

          Meanwhile, if you study the Weimar Republic hyper- inflation, you will note holding real estate was one of a few places to be. Ultimately, real estate is one of the ways common folk have to protect themselves in an inflationary world.

    • jr says:

      When homeowners start going underwater they tend to panic. A friend of mine bought a short sale in Henderson, NV in 2010. The PO was not distressed in any way other than the fact that the house he paid $450k for was now worth $160. He just wanted to cut his losses and his $395k mortgage…….

    • andy says:

      Average divorce rate will remain 50% even with 3% morgage. Same with all other human statistics.

  12. Trich says:

    I live in an extreme bubble market — maybe not quite Boise, but not far off either. I sold my house last August. I check the list of sold homes in my zip code and an adjacent zip code, and the price never really went up for a house with my square footage, age, lot size, etc. since August. My wife and I are renting while we wait to see what happens with the market.

    If you look at Boise and Utah, prices have already started coming down a bit from the peak hit back in February, March or April. I would say where I live, any gains that may have occurred at the beginning this year are now gone and probably a bit in decline.

    I feel discussion about the Fed printing x # of dollars and how that means real estate won’t go down substantially is not accurate. The most fundamental issue regarding housing is affordability. If affordability is not there, it destroys demand, period. If the inflation adjusted principal and interest payment should be around $1,500 for a new/existing home purchaser with 20% down and we’re at close to $2,100 then there’s a huge problem. That is a massive gap, not 10 or 20% which could be covered up by a couple bad years of inflation — but 40%.

    The Fed with its recent actions and discussion have made it clear that they WANT housing costs to go down. It’s not a bug of what they’re doing, but a feature. To a certain extent, I don’t think the 10 yr yield matters over the next while because the Fed is just going reduce its balance sheet creating a spread between USTs and MBS that will keep mortgage rates above 5%. A perpetually high housing cost — 40% above what it should be normally– represents an enormous drag on the economy. Additionally, it economically disenfranchises young people.

    In real terms, the median home price actually declined around 10%between Q4 2017 and Q4 2019. Why? Because mortgage rates went above 4.5% for much of 2018. Home prices stagnated in 2018 and even stayed there in 2019. Consider that the starting point for prices in Q4 2017 don’t even approach the insane prices of Q2 2022. Additionally, mortgage rates were past 4.5% and into the 5s by March and were in the 6s during the 2nd or 3rd most important buying month of the year.

    Investors have hopefully gotten the message, and in some markets they’re running for the exits. AirBNB insanity drove much of this increase and a glut of these short term rentals will play no small part in the decline.

    • MiTurn says:

      “If you look at Boise and Utah, prices have already started coming down a bit from the peak hit back in February, March or April.”

      Trich, I live in the Panhandle region and I saw my first ‘price reduced’ placards on the ‘house for sale’ signs in May. So sales surely began to soften then.

      Sales have now just about stopped. But there is an older double-wide down the road from me on 1.5+ acres still asking $499k!


      • Gattopardo says:

        MiTurn….context, my friend. Is $499k a lot? Anywhere on the CA coast, that’s a fraction of what a 1/8th acre costs. If you’re telling me you can get 1.5 acres of ocean (ok, gulf) view, and it’s a good idea, for $499k, I’m moving!!! I’ll even give ’em $510k for it if they take the 2x wide with them!

        • Gattopardo says:

          (good AREA, not idea)

        • 91B20 1stCav (AUS) says:

          Mi/Gatto-think Mi meant ID panhandle, which might have a view of Lakes Cd’A or Pend’ Oreille, but maybe not, and certainly not the Pacific. TX/OK is a very long view to the Gulf of Mexico. (as always, willing to stand corrected…).

          may we all find a better day.

        • Harrold says:

          Lots are $50k all day long on the Texas gulf coast.

      • jon says:

        I am in San Diego and am seeing multiple price reductions. 1 year back, it was all bidding war and every home was a hot home.
        I don’t think prices have really come down but prices are being reduced from aspirational asking price. The sellers are becoming smarter now a days because they now know the trend due to easy access to all kinds of media.

        • Gattopardo says:

          “The sellers are becoming smarter”

          I concur with this in So Cal. Reductions, when they happen, happen FAST now. I’ve seen several within weeks of listing.

        • The Bob who cried Wolf says:

          No supply this time around is a variable that has to be considered. Panic at the fed is another variable.
          Also goofy city policy driving up land costs keeps it interesting. There is a correction in the city of San Diego underway but strange things are fueling this market, very strange things.

        • VintageVNvet says:

          Good comment j, especially your last sentence.
          My hopium is for everyone who wants to take on the challenges of SFR and other residential properties WILL get their wish.
          Especially in places, many many places to what SHOULD BE the SHAME of our oligarchy, that are STILL marginalizing and driving out the very folks needed to do the works needed for a viable municipality.

        • Nate says:

          Re supply.

          I am hearing a lot of argument that supply will be tight and everyone will hold. I am skeptical of this argument.

          Builders can’t hold forever. Life events create supply in the resale market. COVID and government policy caused supply to be temporarily low. There were incentives to not moving (limiting exposure) and government took away rights to foreclose/evict. Otoh, you had tons of demand from WFH arbitragers and desire for more private space during a pandemic.

          The mortgage rate increases clearly reduced demand. If layoffs happen during a recession, expect further decreases in demand. Otoh, divided government almost a certainty in the next election cycle. So government intervention seems to not be guaranteed. Price is always a function of supply and demand.

          Whether we see nominal prices get crushed like the last time, or it limited to real prices covered up by inflation is unclear. All we do know was housing market was weird and now some of those variables are moving in the opposite direction.

    • Augustus Frost says:

      “Additionally, it economically disenfranchises young people.”

      Not just young people but other groups which the “newly improved” social engineering FRB is claiming to help.

      One of the reasons given for continuing ultra-loose monetary policy was to reduce unemployment and improve the market for low wage labor. I’ve heard that many times.

      They assumed they could continue to “print” and keep money artificially super-cheap with low price inflation because during the GFC, this “printing” went into asset markets.

      The boatload of modern day “bread and circus” approved by Congress (subsidized by monetary policy) as documented here summarizes how that went.

      So, now that the least affluent are getting crucified by monetary policy, can’t use that as an excuse anymore. It doesn’t matter whether they meant it or not, they look bad.

      • Paolo says:

        Amy’s new San Jose Frozen Pizza factory, only a couple years old, has closed because of supply issues and the sanctioned price of oils, grains and other ingredients.

        We’re still better off than Iran or Venezuela however, but with sanctions now aimed inward, rather than externally we’re getting a taste of what other countries went through. My oil, ADM and defense stocks are skyrocketing. Thank you President Biden, or whomever makes the decisions.

        • Wolf Richter says:


          You whole entire comment, every part of it, is BS. You probably don’t even own the stocks you said you own because they aren’t “skyrocketing.” Oil stocks and ADM have plunged in recent weeks. ADM has plunged 25% since April high; and Exxon, to use an example for “oil stocks,” has plunged 16% since June 7.

          In terms of Amy’s Kitchen, there is the story:

          “It has been a very bad year for Santa Rosa-based vegetarian frozen food company Amy’s Kitchen. Earlier this year workers filed a complaint alleging unsafe working conditions at the company’s Santa Rosa factory, leading to calls for boycotts and at least three Bay Area grocery stores pulling the company’s products from shelves.

          “Now the company announced Monday it will close its San Jose production center sometime in September. The Mercury News reports “inflation, skyrocketing materials costs, labor shortages and disruptions in the worldwide supply chain” are to blame for the closure. The 1885 Las Plumas Avenue facility began producing food for the company in March 2021.

          “Fred Scarpulla, acting chief operating officer and chief culinary officer, told the Mercury News the company suffered from staff turnover and labor shortages, and he estimated the facility has lost about $1 million a month over the last six to eight months. Interestingly, the interview with Scarpulla and the report, in general, glosses over any of the company’s labor disputes this year.”

    • Phoenix_Ikki says:

      “Investors have hopefully gotten the message, and in some markets they’re running for the exits. AirBNB insanity drove much of this increase and a glut of these short term rentals will play no small part in the decline.”

      Don’t forget those A$$hat Chinese or foreign “investors” parking their sometimes ill gotten fortune over here. This was especially rampant since 2012 and up until a year or two before COVID. It’s not uncommon to hear stories about these people paying cash, outbidding local buyers with real needs (rather than park their money and leave the property empty). This is all too common in SoCal and NorCal, in SoCal this is the rule in San Gabriel Valley or Irvine.

      For this group, they probably haven’t pull their money out yet but with all the S hitting the fan in China, who knows if that will change soon. One thing for sure, I sure have plenty of contempt for them, maybe more so than mom and pop investors that jumped in during this pandemic boom

      • Mike G says:

        The Chinese government is putting the brakes on money laundering and capital flight in recent years. I have no illusions they can stop it altogether but there seems to be less flow now.
        My anecdotal indicator is the number of exotic cars driven by Chinese students at the college where I work, the number of high-dollar European cars in the lot is way down from pre-pandemic times.

        • Lynn says:

          Thank you! Your anecdotal indicator is probably a much more reliable source than any I’ve been able to find. With all other attempts by the Chinese government to thwart capital flight it just seemed to increase after a short pause. That info is very encouraging! Probably has more to do with fear of future sanctions and money lost in China and offshore in bit-coins than anything else is my guess.

    • Josh says:

      “prices have already started coming down a bit from the peak ” -> This article is about new houses which I am not monitoring but I am certainly seeing a ton of price reductions in the Bay Area. In the last week I also noticed:
      1. house listed for $2.9M in Jan 2022, sold for $3.3M and that same house is now back on the market for… $2.9M. I don’t think anyone is going to bid that up to $3.3M this time and I doubt it gets the $2.9.
      2. house listed for $1.8M in Feb 2022, sold for $2.55 in April and is now back on the market for $2M. I don’t think it is going to get that (it’s a 2 bedroom).

      Those are the extremes. Most other houses listed have been owned for 10+ years and often longer. But it does show that some times people need to sell earlier than they probably expected and those people are going to get crushed.

      • Here it comes says:

        In OC there is a house around the corner that sold for 1.66million in early April (asking was 1.4) and sold in a bidding war.

        It came back on the market in early June for 1.75m. After 2 weeks, drop to 1.66. Another 2 weeks down to 1.5!

        It’s still sitting. A “fair price” for this home (read still overpaying) would be 1 million.

    • Lynn says:

      Unfortunately, for most working families the price reductions as a product of higher interest rates does not make buying housing more feasible unless the reductions far out-range the interest increases.. I mean, it would help me personally to buy a home, but not most people.

      We also need something to drastically reduce large time investment companies- both domestic and foreign and pension funds from investing in residential housing if we want workers to be able to afford shelter and homes.

      Also all the money going towards housing can not be spent on other stuff. We can’t have a healthy economy when housing costs are so high.

      Maybe some of this money subsidizing shelter costs for families should instead be spent on building more low income and worker affordable homes.

  13. A sadistic way to lower the price of houses is to raise interest rates to destroy the demand.

    A beautiful and elegant way to lower the price of houses is to build many more houses.

    Current difficulties suggest that the era of the stick built house with a thin veneer is over.

    We need to re-engineer the house building model, both in terms of architecture as well as the process.

    Surprised nobody has stepped up yet.

    • Gattopardo says:


      The elegant way would be costs > price. Problem there.

      No one has stepped up yet, but some have tried. Lots of hurdles to overcome, and huge momentum with the current way. I do know manufactured housing doesn’t carry quite the stigma it used to, and there is at least some customization possible. But I think the bottom line is that if there’s some “there there” then it would be happening. Hell, if some of these ridiculous “disruptive” companies got funding for whatever (see Wolf’s list of imploded junk), then surely disruptive housing would have.

      • SoCalBeachDude says:

        Well over 100 years ago, folks used to be able to buy complete ready-to-assemble houses shipped to them through the Sears catalog, and Sears might want to consider bringing that excellent idea back.

        • Venkarel says:

          These are still available, just look up kit homes, or prefab ready to assemble (among other terms).

        • 91B20 1stCav (AUS) says:

          SCBD-might want to convince Fast Eddie to bring Sears back, first…

          may we all find a better day.

        • Anthony A. says:

          Sears is long gone.

        • Shiloh1 says:

          Menards has them.

          Also a good movie rarely shown is The Phantom Of The Open Hearth by Jean Shepherd. Has a kit house-by-Sears scene.

        • Random guy 62 says:

          My grandpa bought one of those sears kit houses in the 50’s and still lives in it. Frankly, it is a cheap piece of crap. 2×2” wall studs. Barely insulated. Tiny. Poor workmanship with skewed walls sitting on a lumpy concrete slab. The whole neighborhood was built like this, and all their sewage went into an empty mine shaft. He hand-built an addition in the 70’s which makes the house far more livable.

          My only experience with those old sears houses is helping him on some projects, and observing the neighboring houses, so the sample size is small…But if that is emblematic of the whole Sears approach, there is little to admire other than a low price.

        • Halibut says:


          That doesn’t sound right to me. The Sears kit homes were sold earlier in the century and the quality was actually quite good.

          Most are still standing and quite solid today.

        • Harvey Mushman says:

          My great grand parents homesteaded 160 acres in South Dakota (at the time it was called the Dakota Territory). They lived in a sod house for many years. After some years my grandparents bought a kit home farmhouse, think it was around 1910. I used to spend summers there in the 1970s, driving tractors on the farm. In the 1990s my cousin finally got married. His wife wanted a new modern house. So the new house was built about 50 feet from the old farm house. So what became of the old farm house? My cousin sold it for $5,000. A company came and moved it to another location about 5 miles away. Now somebody else is living it!

        • Dan Romig says:

          1,040 square feet; two bedrooms; one bath; solid basement foundation; nine foot tall ceilings; Craftsman style with beautiful woodwork inside. An 18 foot long, dark oak & glass french door set, with a brick fireplace in the middle, and a three inch thick oak mantle running along the length of it. Galley kitchen with a large farm sink that was set to wash clothes also.

          A Sears, Roebuck and Co. bungalow kit house which was finished in 1921. Mine since 1995. Cost was $71.25 per sq/ft.

          “Life is good in Minneapolis.” -DanBob

        • THRILLHOU says:

          @SC My parents still live in the 1924 Sears house they bought in 1970. We did some research over the years. They shipped by rail, so most were built in proximity to lines. Even their model had all sorts of customizations available from the factory. Well built house. There are probably a dozen within a half mile of it.

        • aqius says:

          first, you might want to bring back Sears. then the houses.

    • Augustus Frost says:

      There isn’t a shortage of houses. Look at the ratio of housing units to population over time.

      It’s entirely driven by monetary distortion.

      • Miatadon says:

        Monetary distortion for sure. I live in the upper Napa Valley. Several homes near me sit empty all or most of the time, owned by wealthy people who seldom use them. One of the rarely-occupied homes is rented out now and then for short intervals for $10,000 a month. A home under construction in my neighborhood will be about an acre in size. We do have a new neighbor who doesn’t have to pay much for housing; he is a poor man who lives under a bridge not far from here.

        • Sams says:

          Property tax and utility frees by the square foot of floor area and lot size may cool down the desire for multiple houses. Throw in a distance factor on the utilities and sprawl get less popular.

          Fun fact, some places the water is metered and billed by the gallon. Other places the number if toilets on the property are counted and water billed by the number of toilets.

    • Pea Sea says:

      There’s no shortage of houses. There’s a shortage of housing for sale, all caused by the juiced up demand of the last twelve years of terrible monetary policy (and the last two years of atrocious monetary and fiscal policy). Cutting prices by reducing this artificial demand isn’t sadistic, it’s necessary and long overdue.

      • Miller says:

        Yep. All through southern California, Travis County in Texas, the “hot markets” in Florida, Phoenix, just about all over New York and Massachusetts, there’s a lot of empty housing sitting around, bought up by investors as a “cash stash” or in anticipation of getting rich as slumlords on the backs of the working and middle class. Plus the big-time Airbnb’ers. Free up this supply for purchase as single-family homes, and suddenly the “housing shortage” disappears overnight. No major new building needed.

    • nick kelly says:

      None of these comments addresses the real bottleneck or limiting factor which is the price of the serviced building lot. I have seen it climb from a third of the price of the package ( lot 20K, house 60 K, 1980) to more than half now. The supply of house building materials and labor (temporary blips aside) can’t be bid up forever until more supply quickly comes avail. See lumber: way up, now normalizing. Not so with lots.
      As for ‘stick built’, I am sitting in a ‘sticker’ house built one hundred years ago in great shape. In modern stickers, however, there is a problem with OSB (the high end of wood chip- and- glue panels, the low end is particle board, or saw dust plus glue)

      This stuff is a time bomb with a long fuse. it should at least be out of the Code for roof sheathing. Around here if a house has to be reroofed, an OSB sheathing MUST be replaced due to safety regs. Not safe to walk on.

  14. Duane says:

    Bring on the forced sellers. That’s when property values will really come down. Let companies like Offerpad do strategic defaults, along with everyone who bought an AirBnB property.

    • Geoff says:

      Friend of mine works for a large ibuyer and trust me, they are making reductions and are in a very bad spot.

      • M J McCurley says:

        Opendoor will go bankrupt in this environment. They listed 600 homes in Phx in the last 24 days. A total of 6 or a smooth 1% are pending. Their pricing model isn’t working. Not sure what their engineers are doing other than waiting for their pink slips.

        • ru82 says:

          I just received an letter for one of my rentals this week in flyover land. LOL

        • Gattopardo says:

          They run radio ads here with cheery voices telling you to sell to them. Just a few clicks and get a real bid! So I checked it out. Hilarious. No bid for my property…..of course.

        • Pea Sea says:

          It can’t happen quickly enough.

        • Anthony A. says:

          I get a letter every week from Opendoor asking me to sell.

        • Wolf Richter says:

          They may have contracted with a marketing company to send out these mailers. They may have a six-month contract or a 12-month contract or whatever, and no matter what happens, you’ll get those fliers.

          Happened to me. A Chase Bank branch opened in the shopping center a few blocks down the street after the Financial Crisis (replaced the Wachovia branch). They sent out fliers to “Dear Neighbor” with a $100 credit if you open an account, that eventually grew to a $500 credit if you open an account and put a gazillion bucks into it. Then the branch closed. And for quite a while, I still kept getting the fliers with an invitation to go to the branch that no longer existed.

        • Cookdoggie says:

          Ever since the financial crisis, we’ve opened dozens of bank accounts that give away these huge new acct bonuses. Follow the rules, then close them 6 mths later. Chase has allowed us to do this at least 5 times. Cumulative bonuses just passed $7k.

      • Pea Sea says:

        Not bad enough. These companies need to be wrecked, and so do the individual Facebook BRRRos and TikTok investors who have been buying up residential real estate a property at a time to build their little fantasy empires.

        • Harrold says:

          TikTok investors?

          Zhang Yiming owns TikTok.

        • Franz Beckenbauer says:

          Looking at social media these days, you do get the impression that the percentage of financial geniuses in the population of the U.S. is at the very far right end of the bell curve.

      • Max Power says:

        I still get about three of those annoying, time-wasting, “we want to make you an offer” unsolicited live-person phone calls per day per rental property I own in Florida. There has been no let up in this nonsense. There still appears to be strong investor demand out there.

  15. David Hall says:

    There were price cuts before the pandemic too. I do not see how rising land, materials and labor costs means the housing bubble is bursting. The number of active listings increased over the past six months. Not sure about price changes yet.

    Windows are imported from China and Germany.
    Germany had its natural gas shut off and China has Covid problems. 50% of German homes are heated by natural gas. 15% of their electricity comes from natural gas.

    • SocalJohn says:

      Not hard to figure this out. Vast majority of house purchases are done with a mortgage for the vast majority of the purchase price. For every 1% increase in rates there is roughly a 10% decline in the amount that can be borrowed for a fixed payment level. That is a huge effect, and it is the driving force behind the changes occurring in the market. With mortgages approaching 6% this causes roughly a 30% decline in the amount that can be borrowed for a fixed payment level relative to what was going on during the bubble peak. And if the Fed doesn’t get their act together soon we’re gonna have rates much higher than 6%

      • Augustus Frost says:

        Not to mention the other ownership costs that are rising also: property taxes, insurance, utilities, and maintenance.

        • HowNow says:

          Yep. These costs are seriously underestimated, and you can add the costs of buying and selling. Huge costs, 8 – 9%. Replace an A/C unit or two, or reroof, new flooring, upgrade expensive areas like kitchens or bathrooms, buy a new fridge, or prep-, replace bad facia boards, then paint. These costs of ownership aren’t considered. God forbid you have an HOA fee – those NEVER go down.

      • David Hall says:

        They will be asking for raises in order to be able to afford the rent. Some retirees will downsize, especially if too many medical bills arrive. Builders have shifted towards building multifamily housing, buildings with more than four units. So far the monthly sales data indicates housing prices have been rising. A one month drop in inflation is nothing. The next month inflation rose. Most short term traders lose money.

    • Miller says:

      It depends on how much redundancy is built in with other supplies coming on-line. Lumber and steel prices have actually been correcting a bit, though it’s true that as long as these bottle-necks persist, it can brake the correction in housing prices somewhat. For a while at least–because the ultimate driver of reduced prices is the way the US housing bubble has pushed on ahead of incomes. It just has to come down one way or another, and as buyers don’t materialize, that will do more than anything to bring down prices of not only finished homes, but the supplies to build them. As for the overseas suppliers, Germany and neighbors are now getting most of their natural gas from the North Sea and Scandi fields and some formerly de-emphasized pipelines that were headed for de-commission, and the re-activated nuclear plants are picking up slack with the electricity. Plus a lot of natgas now coming in thru LNG terminals–a lot of our firms partner with big and small Euro manufacturers, and the factories are actually going stronger than they were earlier this year. (Though that maybe partly Covid-related–right now everyone’s having Covid problems with this new strain)

  16. Michael Engel says:

    1) The charts above contradict the positively biased Case/ Shiller.
    2) If/when SPX breach Feb 2020 high, shaken speculators might be forced to liquidate positions when the market is about to go up. .
    3) Shorting TLT is crazy.
    4) This whole bs might reach it’s terminal point in 2030 area.

  17. Michael Engel says:

    Owners of obsolete small old office buildings might rent mini/ micro apt,
    with bathrooms down the hall, because the banks will force them.
    Narrow 6-15 floors, can find plenty desperate apt seekers looking for a room for themselves in NYC, for half prices, even illegally.
    Landlords options : fill the vacancies with whore houses or minis.
    It’s against regulations, but mayors don’t care.

    • Shiloh1 says:

      People were talking about having sleep pods for the office workers in the Willis Tower.

  18. Gabby Cat says:

    Central Ohio has not gotten the message. Home builders are not building or opening new divisions until current sells. They are simply idling. They are tightening the market to ensure most $$$ out of the sale. People are dropping out like flies and they are selling those houses within days. Until actual prices fall – many are embracing JOMO (Joy Of Missing Out). We are hitting the sidelines for an additional year.

  19. tom21 says:

    Building spec homes?
    Maybe if you are new to the industry, or one of the big boys.
    My business is tied to construction. I know ZERO builders who would do a spec. home. They are survivors of the GFC.

  20. Ben Sargent says:

    Lots of new spec builders in small markets.
    Horseshoe bay Texas near austin to mention one. Hundreds of building locations left. When I say lots maybe 10 spec builders. On a nationwide scale not that many since some areas are dominated by the home Builders u mention

    • COWG says:

      Here in my hood in SWFL…

      Couple of months ago, I commented that the new construction here never hit the Zillow…

      Fast forward today… every new construction in the hood is now on Zillow…

      I think the mortgage rate increase is starting to impact the builders here…

  21. Spaceman says:

    I’ve lived in NW Colorado for 41 years. Our current home was purchased in 2014 for $400,000. Current estimated selling price ~$770,000. Two of my neighbors just sold their homes, one in less than a month and the other sold before the owner could list it. Both sold for their asking price with similar increases in value. Heard an advertisement on the radio from a mortgage company in town offering mortgages for full purchasing price, zero down with a credit score of 580 or greater. People never learn from other peoples mistakes. We’re quickly turning into California and only those of us who have lived here a long time seem to care. Problem is we can’t figure out where to go to escape this madness!

    • Harvey Mushman says:

      ” Problem is we can’t figure out where to go to escape this madness!”

      Why go anywhere, if you don’t have to? Colorado is a nice place!

      • Cold in the Midwest says:

        Still nice in some ways but very changed over the past 15 years. Much more crowded and expensive now.

        I lived in Denver from 2004 – 2018. The city I left was a very different place from the one to which I moved. The 2012 passage of Proposition 64 brought a flood of people into the state. Denver traffic is now capable of getting on your very last nerve.

        I’d go back to visit but not to live again. I don’t regret leaving.

        • Spaceman says:


          As I mentioned above, only those of us who have lived here for a long period of time care. We see the changes and prefer the ways things were. Folks started moving in and then started complaining about the lack of services. No place to eat, no where to shop, etc. They wanted to turn the place we loved into the place they came from. We may have been lacking in some things but we liked it that way. Today you can’t swing a dead cat without a new subdivision, strip mall, gas station, etc being built. The mountains around us are being over run by morons. The CDOW has to send their employees out to pick up poop and toilet paper along popular hiking/biking trails because people are to stupid to go off trail to do their business and bury their trash. If you didn’t live here 30 years ago you don’t know what I’m talking about. Friends I have who have been going camping for years are talking about selling their camp trailers because they can’t find a spot to camp in especially during the summer season. Crime (aggravated assault, robbery, destruction of personal property, etc) are at all time highs. We moved here because there was little of this going on at the time. Spare me the “Colorado is a nice place”. You sound like nothing more than a tourist who thinks Colorado is your playground and who thinks we’re here to serve your needs when you come to play. Some of us came here to live, work and raise our kids. Our kids were raised in a small town that reminded us of Andy Griffin’s Mayberry. Now its the home of foreigners who supply cheap labor for all the rich folks up valley. Sorry, but I was born and raised on the south side of Chicago. Left as soon as I got out of high school in 1972. I want nothing that even remotely resembles that sh#&thole.

        • The Colorado Kid says:

          Spaceman, you sound like you live in Craig or somewhere near Steamboat or a ski town. – Winter Park?

          There are nice places in Colorado still, but I’m not telling anyone about them. 4th generation Coloradan here, and much of the state has been ruined, like you said. The ski towns started it all. I’ve been here 71 years except when I head to Utah and Montana to escape it all, and they’re being ruined, too. Not by me, as I camp remotely and leave no trace.

        • Anthony A. says:

          It sounds like all the nice places left in the U.S. are being ruined by people with no moral values who are moving in.

          I left Connecticut back in the early 1980’s. My recent visits back there to see remaining family proved to me that the towns that were great places to live and raise a family are turning into crime-ridden slums.

    • Kracow says:

      I would recommend Spain southern coast if you can retire. Taking a trip next year to start scouting for a 2027 landing.

      Colorado is still nice the prices will come down it’s a cycle. Sold all assets minus 2 properties by end of 2021. Most high net-worth friends have dumped all assets by end of 2021.

      Few folks I know selling in the last 60 days are still on the market and facing price reductions, yes it’s still overinflated but it’s coming as the amount of buyers is drying up.

      Days of 10 – 20 buyers showing up to bid in 2021 are over. I’m still amazed that 11 crazy people bid on one of our homes to crazy proportions it’s like they thought that was the last home to ever be sold in Evergreen.

    • Nate says:

      SoCal is full. Good weather keeps people trapped. Also, folks say that any day now we’re all going to die, as we deserve. Believe me, it’s hell on earth because all the (insert group you don’t like here). Definitely stay away.


  22. ru82 says:

    Michigan consumer sentiment is the lowest stretching back to 1975. That was as far as the graph would go.

    It is now lower than the Great Recession which bottom with the market lows.

    It is now just a hair below the Volker Peak Interest rate in 1980ish.

    Are we near a bottom in the markets?

    Michigan Consumer Sentiment: Mostly Unchanged for July Prelim
    Surveys of Consumers chief economist, Richard Curtin, makes the following comments:

    Consumer sentiment was relatively unchanged, remaining near all-time lows. Current assessments of personal finances continued to deteriorate, reaching its lowest point since 2011. Buying conditions for durables adjusted upwards, owing both to consumers who cited easing supply constraints and those who believed that one should buy now to avoid future price increases, which would exacerbate inflation going forward. Even with the adjustment, buying conditions remained 26% lower than a year ago.

    Consumers remained in agreement over the deleterious effect of prices on their personal finances. The share of consumers blaming inflation for eroding their living standards continued its rise to 49%, matching the all-time high reached during the Great Recession. These negative views endured in the face of the recent moderation in gas prices at the pump.

    To put today’s report into the larger historical context since its beginning in 1978, consumer sentiment is 40.3 percent below the average reading (arithmetic mean) and 39.6 percent below the geometric mean. The current index level is at the 0.1 percentile of the 535 monthly data points in this series.

  23. SocalJimObjects says:

    The sun will NEVER set on So Cal’s housing market!!! People will pay any price to live near Socal Jim!!!

    • The Colorado Kid says:

      Haven’t seen him around for awhile – are you sure he’s still there? Maybe he moved.

      • Anthony A. says:

        He’s probably so busy selling high priced RE he hasn’t had time to brag about his successes here.

        • Alku says:

          Would be really interesting to hear his opinion now. He was expecting a mad rush in the spring – and it appears he was right again.

      • Spaceman says:


        I’m 67 years old. We sound like we’re on the same page. You’re somewhat close to guessing where I live. Like you, I keep all my secret places to myself. I made the mistake years ago telling a fellow from the Denver area where one of my favorite fishing holes was located. The next time I hiked back into it he was coming out with more fish than the law allowed at the time. I never caught another fish out of that hole and I’ve never shared with anyone where I go fishing, hunting and camping since. I still have a few hidden places I like to go and I still like to pitch a tent. A couple of years ago a buddy who owns a small cabin inside the national forest ran into a guy from out of state who purchased some land nearby. The guy was falling trees inside the NF so he could ride his 4 wheeler from his property to a watering hole during hunting. My buddy is truly a modern day mountain man. He told the guy to stop and if he ever caught him doing something like that again he’d put a bullet in his 4 wheeler. I guess I’m just to old fashioned. I made my living hard rock mining and working in the oil and gas industry. It was hard, but I truly enjoyed it. I always felt like I was providing a valuable resource for all. We need to enjoy what’s left while we can.

  24. Michael Engel says:

    1) Case Shiller lag time is ok, but when a young couple bought a house in So Cal in the 60’s for $60K’s, sold this year for $2M, it positively biased.
    2) Few pairs bought/sold : 1995/2022, 2012/2022…skew C/S charts.
    3) Boomers are moving on, selling at peak prices.
    4) Pairs like : EUR/USD, USD/RUB, USD/ JPY, USD/Gold…are high freq pairs, moving faster.
    5) A pair : DXY 2008/DXY 2022 up 50% after 14 years, DXY 1974/DXY 2022 up only 5% after five decades, DXY 2015/ DXY 2022 is up 9% after….so it depend when u start.
    6) When DXY is weak, foreigners can buy a lot of stuff in US, like houses, stocks.
    7) When DXY is strong we can buy a lot from them.
    8) DXY LT trading range is : 95/105. The current DXY is luke warm.

    • HowNow says:

      ME, you raised a good point about the C.S. index – how do they adjust for homes that haven’t sold for X number of years but went up in price by 900% or similar. Here’s what I found on “Investopedia” – evidently they weight the older, more extreme price changes to some degree:
      “The index weighting methodology lowers the weight of the 10% to 15% of sales pairs with the largest price changes, and of those with more time between the two transactions as more likely to reflect non-market factors.”

      • Michael Engel says:

        C/S lower the weight of Pareto top 10%, adjust for renovations, but Pareto top bubble is so extreme, C/S adjustment isn’t good enough.

  25. unamused says:

    I disapprove of the use of homes as poker chips. They’re supposed to be nice places for people to live, not opportunities for profiteering.

    Financialization does that to everything, regardless of the costs.

    GPENewsdocs has recently reported on “The Capitalist Solution to ‘Save’ the Planet: Make It an Asset Class & Sell it”

    It’s about the financialization of the earth as a new ecological regime. A regime where the rapid financialization of nature is promoting a Great Expropriation of the global commons and the dispossession of humanity on a scale that exceeds all previous human history. And which is accelerating the destruction of planetary ecosystems and of the earth as a safe home for humanity.

    All in the name of pretending to ‘save’ nature by turning it into a profit extraction mechanism.

    “We want all of you off the planet by the end of the month. We have a buyer who’s interested in the property.”

    No signs of panic yet. I guess that comes later.

    • Tim R says:

      Welcome to Amerika.

    • Lily Von Schtupp says:


      Of course, as long as the media convinces the average idiot that the Dutch Farmers, Canadian Truckers and Sri Lanka rioters are just more Rebels Without a Clue it’ll keep happening unchecked. We’ll have nothing and we’ll be happy.

  26. Michael Engel says:

    1) UK heat wave caused over 700 death. Temps are rising to between 30C and 35C, on the way to break a record of 38C. UK is burning.
    2) In 2021 Russia exported : 155 bcm NG to EU, Nerd #1 : 55 bcm, or about a third.
    3) A perfect storm : heat wave/ NG embargo. Germany might reactivate three nuke plants. Azerbaijan might increase it’s export from 8bcm to 20bcm in 2030.
    4) Madam ECB might raise the deposit rate from (-)50 to above water, while EU is short of NG.
    5) If 750 expired in UK because of the heat wave, how many will perish in winter 2023. BA-5 and winter storms
    7) For Afriq and W. Bengali people in UK 35C is no big deal.

    • unamused says:

      It’s a good thing there’s no such thing as Catastrophic Climate Change or it would be REALLY hot.

      That’s the punch line. Want to hear the joke?

      Fossil fuel flacks have assured me that it’s perfectly possible to dump tens of billions of tons of CO₂ into the atmosphere every year for decades on end and it will have no effect whatsoever.

      • Michael Engel says:

        unemused : co2 is food for the flowers and the trees. The dark clouds cover the sun and cool earth temp. In Pittsburgh 1880’s, during the steel mills boom, the birth rate was the lowest and the death rate was the highest in the nation, but Carnegie didn’t care.

        • unamused says:

          I used to care, but I take a pill for that now.

        • 91B20 1stCav (AUS) says:

          ME-if the ‘flowers and the trees’ are massively reduced in arable growing area and/or access to reliable hydration you have then an excess of CO2 from ‘demand destruction’. That unused CO2 then finds other things to do in the atmosphere, not necessarily beneficial to many species, including ours…

          may we all find a better day.

      • Christopher Burrell says:

        Climate Change or no Climate Change, Battery Powered EV’s is merely a stop gap at best. The environmental impact in terms of the massive amounts of water consumption it takes to mine lithium, and the destructive strip mining involved in the making of other components of EV batteries isn’t much better for the earth than the drilling of oil…long term there has to be a better way to produce power for electric cars than corrosive and toxic batteries.

        • unamused says:

          The Bentley runs on hydrogen. We haven’t gone much of anywhere this year, mostly because we’re already there, and it hasn’t been refueled in weeks, so I had my chauffeuse turn off the hydrolyzing equipment, and no, she does NOT want to talk to you.

          Anthropogenic fusion, of course, is the Energy of the Future, and always will be. Life on Earth runs on a natural fusion reactor, which I happen to own outright, but I’m more than willing to share it with everybody for a very reasonable licensing fee, non-refundable.

      • Happy1 says:

        Too bad all the political proposals to address climate change, ie “The Green New Deal”, are boondoggles that benefit specific industries and would have essentially zero effect on climate change.

    • Anthony A. says:

      35 C is no big deal here in south Texas either. Actually, it’s a bit cooler than now!

  27. Mario Furtado says:

    Hey Wolf,

    I was interested to know if you’ve been following the ending of the foreclosure moratorium and upcoming rental evictions as signs of stress in the housing market. If you are, that would be a great article also. It would help us understand if the stress we’re seeing in the construction/purchase flow side is finally flowing into stock side of this bubble.

  28. Tim R says:

    I live in one of the hottest metro areas in the country (both weather and housing market wise) and have been examining the expanding inventory on zillow on a regular basis the past month. It’s evident that the investor speculation is RAMPANT. There are neighborhoods where every other house is a quick flip, many times the flipper having paid top dollar for the home and then listing it for an outrageous price. It would be of zero surprise to me if a significant number of homes have gone from flipper to another flipper.

    Funny that there was no talk of a housing shortage in 2019.

    Regarding new homes, reliable sources tell me that these home builders have been engaged in speculation of their own by building spec homes and NOT selling them until they are nearly complete, offering the eventual buyer a minimal level of customization. Who knows how much land these crooks have purchased in anticipation of an endless appetite for crappy cookie cutter homes on lots not even large enough for a pool.

    God Bless Amerika.

    • IN says:

      >>building spec homes and NOT selling them until they are nearly complete

      I would say this is very much the case here in Raleigh NC.
      I signed for a new build back in the beginning of 2021 and I had a chance to choose pretty much everything.
      Several months later my builder pulled all prices from their website and – allegedly – halted all new sales because of MASSIVE supply delays.
      From what I’ve heard, they resumed sales in the end of 2021, but for spec houses exclusively with the most expensive materials inside.
      My house took almost a year instead of promised 5-6 months, and apparently I am the lucky one here – some folks have been waiting for anywhere from 14 to 18 months.
      And your last statement is probably correct too – the builder bought a huge lot adjacent to the existing development and rumor is they are starting to build there soon.

      This area seems to be crazy still – it’s almost every person here recently came from either NJ, PA, NY, CT or MA.

    • Bobber says:

      In Seattle, I just saw a house on Redfin that closed June 6 this year (probably purchased in April) for $1.7M, and the new owner listed it for sale at nearly the same price this week. If I had to guess, I’d say the new owner realizes he bought at the top, is panicking, and now wants to quickly sell before the financial damage occurs.

  29. Marty Milner says:

    Remember the 3 generation 100 year mortgage? If you think the banks with their huge reserves aren’t sharpening their OREO knives for the victims of the next recession you are new to the game. As rates rise families fail and equity passes to long term investors. That is the pattern the game just gets tweaked. American workers are on the move. Next they buy homes- then the go underwater- then they get laid off. New twist: if you have a job you can take out a 100 year mortgage.

    • Turtle says:

      People refinance to 30 years often enough that they basically do have a lifetime mortgage. It has been interesting to see new construction in SoCal marketed to three generation households.I guess that’s what it takes. Three and a half incomes!

      • Sams says:

        Is not 100 years mortgages possible in Japan?
        In essence, the house is rented from the bank.

  30. Lynn says:

    It seems that buyers for older homes are going the same route. Chilling out a bit more. I took a very long look 2 days ago at homes listed vs homes sold in the last 30 days and in the last 14 days on zillow across country. NY, Conn, Ma, NH, Ohio, Ill, Fla, Idaho, Tx, Oregon, Ca. etc. Both city and rural, sampled several places in each state and 3-4 neighborhoods in each city I looked at. In this random sample I found only 2 smaller areas had slightly more for sale than sold. All others had more recently listed than recently sold. Idaho in particular looks like they are in panic mode.

    Most places seem to have past the balance point 30 days ago or better. The ones that didn’t mostly passed that point 14 days ago or better. I’m sure I missed areas, but you can check the sales vs newly listed in the past 14 or 7 days yourself- there is an option for that in the “more” tab on zillow. You need to drill down below 500 houses as that is as high as zillow’s computer will count for areas.

    One of the 2 smaller areas that had slightly more listed than sold is an outlier. The local college there was renamed as a “tech” school. I know people in that area. Nothing else seems to have changed but the name but it produced a flurry of sales from investors. As of the past 7 days that is now slowing down. In the past 7 days as of 2 days ago there are now more that came on the market than had sold.

  31. Bobber says:

    Anecdotally, I heard the prices to rent a U-Haul truck in Seattle are sky high because so many people are moving OUT of Seattle right now. The truck inventory is very low relative to the demand for moves. That comes from a friend of a line worker at U-Haul. I haven’t checked it out myself, so I cannot confirm it.

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