THE WOLF STREET REPORT: Housing Bubble Getting Ready to Pop – The Big Boys Leave, Waiting for Reset

Biggest investors in single-family houses: “We need to be patient and allow the market to reset” (you can also download the WOLF STREET REPORT wherever you get your podcasts).

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  226 comments for “THE WOLF STREET REPORT: Housing Bubble Getting Ready to Pop – The Big Boys Leave, Waiting for Reset

  1. THEWILLMAN says:

    Basically:

    Price discovery on the way up – a bidding war over the weekend.

    Price discovery on the way down – several weeks of having no offers and lowering asking price by a few percent and trying again. Rinse and repeat until you get a buyer.

    Makes sense to me. See everyone at the bottom of the market in a few years.

    • SS says:

      I know that now buyers are no longer waving any contingencies including appraisal contingency. So given that there is general expectation of significant price decline, why are the banks not appraising the home way below its listed price, while handing a 95% loan in non-recourse states?

      I am asking because if banks start appraising houses correctly, prices will correct faster. It will also ensure that the bank is not holding the bag thereby putting taxpayers at risk.

      The fact that banks are still not appraising houses correctly seems to indicate that either they are not behaving responsibly ore they still believe in both Fed Put and Govt Put.

      • Jon says:

        Banks appraise the homes based on recent comparable sales.
        Nuff said

        • Concerned_Guy says:

          From investorpedia

          “ A qualified appraiser creates a report based on an in-person inspection, using recent sales of similar properties, current market trends, and aspects of the home (for example, amenities, floor plan, square footage) to determine the property’s appraisal value.”

          So SS is asking the right question.

        • Trucker Guy says:

          Banks aren’t keeping the loans either

        • Lynn Nichols says:

          I disagree… if that were true, appraisers wouldn’t get a copy of the sale contract before they appraise the property! Nuff said!!!

        • SS says:

          Jon, so essentially according to you banks are inept at judging the collateral for a 30 year mortgage!

          That makes me feel that this problem will never be fixed and the taxpayers who are on hook for most of MBS will be leached again.

        • COWG says:

          “ Jon, so essentially according to you banks are inept at judging the collateral for a 30 year mortgage!”

          Most housing collateral is appraised for the federal programs under AMC/AVM guidelines… Banks, these days, since they are originating the loan, don’t make the appraisal…

          Research HUD appraisals for more info than you probably want…

        • Jon says:

          Banks are more interested in fees and servicing the mortgages.
          Almost all of the mortgages are sold by banks. They never keep them.

          The system is broken else banks won’t be issuing mortgages at these highly inflated rates.

          Everyone is looking to make a dime.

        • Implicit says:

          Home owner insurance companies use replacement costs that are far beyond the average replacement costs. T
          hey do not use the data from the Census Bureau that has good inflation stats for rebuilding/replacement. And they don’t even include the foundation costs in their astronomical appraisal.
          I was told they use something different for their risk adjusted data. Home owners should be able to see all the stats that the insurance companies use, but it is not readily available.
          Like they are above getting this data for the plebians

      • AbyNormal says:

        @Tguy, correct banks aren’t holding the loans…2017: “Yet the landscape of the lending market has shifted dramatically over the past few years from domination by big banks to a market where more loans are made by non-banks — financial institutions that only make loans and do not offer deposit accounts such as a savings account or checking account.”
        I backed into one of these located in Florida and listed CEO (a retired senator)…holding trillions.
        I can’t even imagine what they’re Trying now.

        • Wolf Richter says:

          AbyNormal,

          “where more loans are made by non-banks”

          making a loan = originating the mortgage. That’s what your quote is talking about.

          Holding a loan = keeping the loan on the balance sheet. That’s NOT what your quote is talking about, and that’s NOT what these “lenders” are doing.

          These companies you’re talking about, they’re originating loans and then selling them to be securitized into MBS. They’re only holding mortgages for a little while until they can sell it. They get paid fees to do this. They have very little risk. MBS investors (pension funds, bond funds, insurers, etc.) carry the risk, and since most MBS are backed by the US government, it’s the taxpayer that carries the risk.

        • SomethingStinks says:

          Not sure how true that statement is…. Wells Fargo financed my mortgage in Dec 2019 in Arizona. They are the one’s collecting the mortgage payments so I assume my mortgage is still on their books. Correct me if my assumption is wrong.

        • Wolf Richter says:

          WF is likely the “servicer” of your mortgage. You send them the payment, and they forward the payments to the MBS issuer that they sold the mortgage to. WF is huge into this.

      • Random appraiser says:

        Because appraisal data is retrospective and banks do not have control total control here. However, they can change the value for lending purposes. I have seen them do this to increase value on properties that did not appraise at the sales price when property values were shooting up.

        • Swamp Creature says:

          Random appraiser

          Total BS. I haven’t seen any of this recently. Why would they want to do something so stupid?

        • Mortgage Underwriter says:

          That is not correct, the lender does no produce or directs the appraisal and does not choose the value they want to use.
          Since the real estate meltdown in 2009, by law, lenders cannot hire or pick a specific appraiser; all appraisalas have to be ordered through an appraisal management company who sends the request to the many appraisers who have signed up to produce appraisals for them. Depending on the property location there may be few appraisers available as well as fewer home sales, which makes it harder to get an appraisal. The appraisal management co. reviews the appraisal before sending it to the client who ordered (the bank or broker) and if they find errors (in the the appraisal itself only, they are not allowed to request the appraiser changes the value) sents it back to the appraisers for corrections; once it is corrected it gets sent to the client and the client’s underwriters review it as well, to make sure the adjustments in values for differences in amenities in the comparable properties are reasonable. Also the comparable properties have to be within a maximum distance of the prooerty being appraised and on a similar neighborhood/location.

        • somethingstinks says:

          Replying to Wolf above, since there is no reply button to his response, I guess the forum only allows a certain depth of replies. Thanks for clarifying that Wolf.

      • PonderingPA says:

        I think the whole appraisal thing is sort of disconnected from anything, especially because they are increasingly foregoing live appraisers to instead to digital appraisals.

        When my husband and I recently went under contract on a house in mid July (yes, I know the timing was likely bad, but we have a lot of factors we’re juggling, and got a slight price cut), the lenders all gave us appraisal waivers because their digital comp appraisal systems were giving them some green light about our good credit and the comps in the niehgborhood. I guess it was maybe good for us (didn’t have to pay $450 appraisal fee since everybody was so sure it would appraise) but it seems like a dangerous thing for the markets on the macro scale, since the lender digital appraisal system is just going to keep pumping out more of whatever the market has been doing…. no actual human eyes on the individual house. Mortgage lenders said this sort of online appraisal is likely the trend for the future.

        • Shiloh1 says:

          I can’t wait to see The Big Short 2 and Margin Call 2. Irons should have won an Oscar for the boardroom scene alone. Liked the casino table scene with Selena Gomez in ‘TBS’ for an understanding of derivatives. Both movies had s- joint scenes, too, but rated PG.

      • Pat harris says:

        Yes, banks appraise reactively. On the way up I still had a difficult time with appraisals so on the way down appraisers cover their buts with history.

      • Amy Liu says:

        Not really! The market is just suddenly cooling off due to very higher interest rate. The current appraisal report can’t reflect current sales’ data that much due to the most market comparison reports are from 2 or 3 months’ sales’s data but they haven’t had a lot of today’s sales’ data yet. That’s why the appraisal reports may still show previous 2 or 3 month sales’s activities with higher price but actually, the real sales’ price should be, at least 10%, or more…

        • Gomp says:

          In the end it should always come down to a ready, willing & able Seller transacting with a ready , willing & able Buyer. Appraisals are only relevant to Investors and Bankers.

        • Augustus Frost says:

          Mortgage rates aren’t even close to high, not even historically.

          If mortgage rates reflected the actual risk (one example being without government guarantees), the real estate market would completely collapse.

          No one would lend their own money (maybe someone else’s) under the current basement level criteria to such dubious borrowers on such inflated collateral.

      • SDEngineer says:

        There is a part of the appraisal where the appraiser evaluates current market conditions, and how fast inventory is moving out of the market as well as how much inventory is on the market.
        I’m not sure how that plays into their software calculations through Corelogic.
        But what I can tell you about the market in Feb. (back when it was lava hot), is that appraisals were coming below market value for many homes in my SoCal area, but people were making up the difference between the appraised value and the purchase price. They’d either have the cash to do it or they would modify their loan and have a higher payment so they could still purchase the home.

      • c_heale says:

        Maybe they would go bankrupt?

    • Lynda Rodriguez says:

      Banks do not appraise property. Banks engage qualified, third party appraisers to appraise real estate.

      An appraisal is based on closed transactions, closed as in the past, of comparable property.

      An appraisal does not adjust for recourse or nonrecourse financing.

      The appraisal process does have flaws. These flaws become more apparent in times of rapidly rising interest rates and market uncertainty.

      Our economy is facing adjustment and market factors that have never been experienced before. Not one person has an answer for what is ahead. The markets which are based on investors actions will bear the results

    • Cas127 says:

      Things moved a lot faster in Fed Disaster 1.0 back in 2008.

    • Brian M says:

      Let’s get real…home prices answer to three masters: supply, demand and affordability. Comparing prepandemic to post-Fed panic, I have YET to spot the riders of the housing apocalypse. By historical standards, rates are still quite affordable only FED isn’t giving away $$$$…Sure, there will be moderate slippage in pricing but inventory is way too low and the reckless lending of 2008 era is not in play.

      • Augustus Frost says:

        It’s psychological. Housing bubble 2.0 is just like the prior boom and bust.

        So will the upcoming mortgage and foreclosure moratoriums, just as during the pandemic. A country which is mostly broke believing itself to be rich living off of artificially cheap money and basement level credit standards.

  2. Ghassan says:

    Many still trying to sell the idea that it’s not that bad and prices are not coming down. If you listen to Diana Olick on CNBC, she keeps repeating the same line that there is a shortage and mortgages are solid so no decline possible this time, I don’t know who pays her but it’s definitely not just the network that she works for.

    I’m in the northeast and unfortunately we will be the last to see any decline and it would be the least amount but still it would be better than no thing.

    • SS says:

      Northeast hasn’t gone up that much as Northwest. The Seattle case shiller index for example:
      1. Prices must correct 38% just to reach Prepandemic high 2.5 years ago.
      2. Then it has to correct another 25% only to reach previous housing bubble of 2007.
      3. Then another 30% to reach its real u-financialized value.

      And we should be patient :)

      • Jon says:

        Patience would be rewarded but you need to fight off the mass psychology which is home prices woyke never go down

        • SS says:

          Jon, so essentially according to you banks are inept at judging the collateral for a 30 year mortgage!

          That makes me feel that this problem will never be fixed and the taxpayers who are on hook for most of MBS will be leached again.

        • SS says:

          Agreed

        • SS says:

          The previous comment is in reply to your other comment about banks. I agree on the patience comment.

      • Itsbrokeagain says:

        In Long Island, the average Levitt house in 2016 was going in the low 300s. Now they are up in the high 400s/low 500s for some. For a home with no basement and oil heat, and some with a 110V service still.

        Your average 400k home is now in the 600s. And crazy taxes and high interest rates. Yet somehow people are still buying.

        • Lili Von Schtupp says:

          I’m a bit further out from NYC but most of our houses were driven up by people supplementing their NYC housing costs by buying up suburb/exhurb houses as investment properties & weekend escapes.

          Was hopeful for a hot minute seeing the price drops on MLS but that was fleeting. Still seeing the same 10 overpriced sh*t shacks stagnate and little else worth even swiping through the pics much less view in person or bid on. Lots of condos available here, bit they’re all overpriced, post-WW2 tiny, outdated and in bad neighborhoods or below avg schools. My patience has been extended to the kids flying the nest before I can legally leave this horrendous state. T-11 years and counting.

        • Swamp Creature says:

          I grew up in LI in a Levitt House. My old man Pd $8,000 back in the 50s

        • COWG says:

          Wed Wose,

          Might be time to start looking at that 12 year plan to be somewhere else…… :)

        • SDEngineee says:

          In SoCal the homes on large lots legimately doubled in the last 2.5 years. 900k homes are now selling for 1.9m-2m.
          1.5 m homes 2.5 years ago are selling for 3m. The trend isn’t everywhere, but definitely present for the large lot houses.
          I’m struggling with who is buying these homes? Because the wages in the area have definitely not doubled in the last 2.5 years.

    • Al says:

      “Nothing”…..

  3. D says:

    Know your regional market…….. The current prices cannot be sustained so look for a strong downward trend. Obviously very poor leadership and vision coming out of the federal reserve. The markets (in total) are wonderful in regards to showing our economic trends and money value.

    • Pat harris says:

      I watch investors. Also, rents and ROI. I would purchase cash so mortgages are only important in evaluating ROI if I was using a mortgage. These are very simply value based decisions related to income . I do not buy based on equity plays, way to risky. Rent is whole milk equity is cream.

  4. Dao says:

    What’s ominous about the increase in house prices since 2020 is that areas of the country that have been affordable for decades are no longer affordable. Places like Iowa, Indiana, Tennessee, Idaho, etc.

    Prior to 1975 or so, California had cheap housing. Florida was also once cheap (prior to 2005 or so). Colorado took off in the mid 90s. Now it’s flyover country’s turn.

    High prices are now everywhere. I don’t see this trend reversing.

    • Depth Charge says:

      It’s due to reckless, rampant speculation. Turning shelter into a get rich quick scheme is one of the worst ideas ever, and it’s destroying society.

      • LK says:

        B-b-b-but Freedom!

        • Mark says:

          ” “B-b-b-but Freedom!”

          Freedom to predate.

        • HoldMyBeer says:

          Do you really believe it would be better without Freedom? There are a lot of places in the world you can try out.

        • Augustus Frost says:

          Ultra-loose monetary policy and government guarantees has nothing to do with “freedom” including the “free market”.

      • historicus says:

        Imagine the “small guy” pyramiding that is out there….
        owning two, three , four rental properties…leveraged up.
        we’ve seen this before….
        and it all sprung from the Fed buying MBSs, lending money out well below the inflation rate…for 30 yrs.

        • Winston says:

          As a percentage of household assets, real estate is even higher in China than the US except there they don’t even bother to rent out the real estate they aren’t occupying.

          Just wait until that crash really gets rolling.

      • Swamp Creature says:

        DC

        You ain’t seen nothin yet. Wait till the Chinese start buying houses right next door to you and Blackrock starts picking up all the distress sales and marking them up 100% or turning them into rental group homes for squatters. Americans will be living in cardboard boxes before long.

        • c_heale says:

          I think there are enough ‘hidden’ problems in the economy, that someone like Blackrock is going to do a Lehman in the next year or so.

        • Wolf Richter says:

          Not Blackrock. They’re just an asset manager. They’re providing ETFs and mutual funds and other types of investments for other people to buy and invest in. Blackrock is just raking in the fees. Its client might go belly-up tho.

    • COWG says:

      “ Florida was also once cheap (prior to 2005 or so)…

      Somewhat… there was a big run up until 08-09, then crashed… cheaper with foreclosures, etc, then started back up steadily until 2019 ish then to the moon for the last couple of years…

      Mine was a FreddieMac foreclosure that I picked up for $95k in 2013… Nobody else wanted it….

      “ High prices are now everywhere. I don’t see this trend reversing.”

      Zillow estimate for my house has declined ~8% in the last month (SWFL)….

    • VintageVNvet says:

      FL prices reversed HUGELY in the crash beginning in late ”oughts” Dao,, sometimes as much as 75%…
      Some places there bounced right back up again in just a few months,,, and then went quickly even higher for the premier properties such as ocean and GOM fronting…
      Other places in FL took much much longer to regain their previous high price, very similar to many other bubbles and busts in FL.
      Other places we were in RE over the the last 50 years, including CA, TN, AL, OR,,, have had many such severe drops in prices, both for raw land and SFR.
      RE was an actual ”real market”,,, and may very well become such again IF the FRB and it’s cronys will get out of the way..
      NOT likely I will agree, but perhaps possible some day and in some way.

    • ru82 says:

      IMHO. I live in flyover country. For the past 20 years, my house has appreciated less than inflation. I think some of the places you listed were undervalued. All houses rose a lot during the pandemic, but I think prices will stick in the places you listed. They may drop in price some but not as much as some of the bubbly cities. That is if some form of WFH sticks around.

      Otherwise, most jobs are in the big cities. Small cities have seen little house appreciation the past 20 years. The value of house you can get is crazy compared to big cities.

      • Augustus Frost says:

        Undervalued compared to what?

        Compared to the massively overvalued coasts and big cities?

        3X median household income (or somewhat less) isn’t really “undervalued”. It only appears so due to the extended asset mania and dual housing bubbles.

        Houses are supposed to be shelter, not tradeable commodities bought as “investments”.

  5. We listed a house in Payson that is too far from our office, so OK to sell. Got two offers for pretty close to what we listed it for which I think was a fair price. Payson hasn’t been as hot as Phoenix in terms of price, but I guess there is demand there.

    And then we are somewhat buying Casa Grande, but the Duplex we saw listed at $370,000 that we thought would be OK at $310,000 got a cash offer at $345,000 — so I guess someone is buying — or it will come back around soon.

    I’m not sure how dead it is. Every month we collect rents. Those rents need to go somewhere. And I guess someone else has money coming from somewhere to spend on rentals.

    But, speaking to the title company — closings for July were 50% of what they were in June. So, it’s not an up market just YET. I also don’t see a ton of stuff coming through the auction. Some people out there have money.

    A point I always bring up though (if you know me), our pawn shops are doing very well. Probably 25% of pawn shops in Phoenix have closed over the past 7 years. We kept our stores open — more than a few made no profit. And then COVID cut the loan book by maybe 40%. COVID is gone, gas and food are expensive. Rents are way up. Pawn is back — $150 loans for gas and food are really hot. So, if you’re a renter — these are very bad times.

    If you own a house, your rate is low and your payment is fixed. You’re staying in place. It’s not 2008, but maybe I will be able to get construction workers to show up again — those workers were so happy to see us in 2008. So hard to motivate in 2022.

    • Depth Charge says:

      I’m not sure what your point is, other than talking about yourself.

      • LK says:

        I think the point is that he’s doing just fine, not that anyone asked.

        Thought Payson was a hot market filling up with California expats, the way my family tells it. Great area but it’s got its issues. I think developers there smelled money from the fixed income community that was there and have been doing what they can to exploit that.

      • Mendocino Coast says:

        +1 LOL

      • Mark says:

        “I’m not sure what your point is, other than talking about yourself”

        Right on. Tough enough times for most people , without listening to landlords and pawn shop owners tell us how well they’re doing at the expense of us “little” people.

        • Gooberville Smack says:

          I enjoy hearing stories of how and what people are doing. Interesting stuff. Guess there are sensitive crybabies everywhere.

      • ChangeMachine says:

        Typical that the peons will freak out about a guy doing well offering people a service they don’t have to use, while ignoring the profiteers with government contracts and a world class propaganda machine at their disposal.

        • LK says:

          I guess spin is a kind of change.

          When the government welfare entrepreneurs and right-wing agitpropists show up in the comment thread to tell us how great things are for them, we’ll dunk on them too. There’s plenty of exploitation to call out and self-aggrandizement in the world to call out for the BS that it is.

      • CCCB says:

        Seems like they’re trying to say it’s better to own than rent, but not sure.

    • Pea Sea says:

      Cool story bro

    • RockHard says:

      The last 2 paragraphs are right on. This is a very bad time to be a renter, and a lot of people have mortgages locked in at rates we likely won’t see again.

      “Those rents need to go snow where” – at 10% inflation some of those rents are going into the QT money furnace. Inflation just hurts less when you’ve already got money to burn.

    • VintageVNvet says:

      Couple good points AL,,, especially about trying to get trades folks to even show up,,, and most are SO overpriced, thinking $1000.00 per day for semi-skilled, that even if they do show up to do the ”estimate”,,, there is NO way to afford their help.
      Actually do NOT remember this being part of the problem in prior bubbles seen since 1956, so, perhaps, just maybe
      IT IS Different this time,,,
      Actually IT IS different each time, but only in some of the details… OK,,, Wright or someone similar in the construction biz said quite clearly that either ”God” or ”The Devil” is in the details,,, so, either way, just more fodder for the fun that’s clearly coming our way!!!

    • Yeah in 2008 the contractors turned on a dime. Part of that is the labor market now is much tighter. Immigration has been in decades long decline. Add Covid deaths, disability. US needs workers and we aren’t even allowing asylum seekers.

      • Brant Lee says:

        “US needs workers and we aren’t even allowing asylum seekers.”

        If you’re needing labor there should be a lot available in DC. As soon as someone comes over the south fence, the Texas governor is loading them on buses with a one-way ticket to Washington.

      • SomethingStinks says:

        Good… We have 300 million people in this country, lets figure out a way to put the working age subset to work. Government safety net should be there for safety and as a net, not a lifestyle. If you dont work, you dont eat. The reason why many Americans balk at work today is because they toil to make the cake and usually the upper management/middleman/ someone else gets to eat it. Need to fix that. Also, education should be available to all legal citizens, at a reasonable price. Ivy league colleges collect massive amounts of fees and spit out the next generation of cr@p that robs the country some more. Education needs to be a national security issue; if it stays the way it is now, other countries are going to surpass us in all kinds of fields, be it military, space, or agriculture. We can be generous towards the world after problems at home are solved.

        • Augustus Frost says:

          Most jobs don’t need a formal degree and never did. Anyone who wants to “self actualize” can do it at their own expense.

          Your proposal would make “education” even more expensive. Get rid of the federal student loan program and the cost would collapse, as no “industry” can price out it’s “customers” as “education” does now.

          There is plenty of resources for what you have in mind now. The university system in the US has a hugely bloated cost structure while many have obscenely sized endowments too.

      • Augustus Frost says:

        You have it all wrong, again.

        US doesn’t need more immigrants. It needs to end the economic distortions that enable so many people not to work.

        The reason the labor market is so much tighter now since the pandemic isn’t because the economy is actually so fantastic. No economy practically shuts down and then magically comes out on the other side more prosperous. It’s entirely fake.

        The economy was also mediocre prior to the pandemic but had low unemployment due to still loose monetary and fiscal policy.

        • SomethingStinks says:

          Completely agree…. The corporations and their minions in Washington push for immigrants because those are easy to take advantages of. They don’t get two fucks about humanity or “bring your huddle masses”, all they see is a cheap stream of exploitable labor. Once the corporations are whipped into line, there will not be a labor shortage. This is an artificially created problem by some of the scummiest lumps of carbon that call themselves human.

  6. SOL says:

    Just 60% off and I’ll feel good about buying.

  7. Evan says:

    So many different macrotrends at work in certain markets – who can say what the net effect in prices will be? For example, the state demographer in Colorado is estimating around 500,000 new residents to the Front Range (Denver, Colorado Springs, Fort Collins, Boulder, etc.) in the next 8 years… Let me tell you, there is no way home building is going to keep up with this pace. That’s going to be roughly a 10% increase in population.

    • Paul says:

      So those people coming are leaving someplace which means that someplace should have more vacancies, right?

      This is what I don’t understand: why is the vacancy rate so low everywhere, but the population isn’t increasing that much? In Los Angeles, for example, population has been declining for the last few years, yet rents are up. It doesn’t make any sense except when you factor in the fact that corporations have been buying and holding properties. Now that makes sense as an explanation because what they’re doing is creating a false scarcity. I know that’s happening in lots of cities in the US.

      • Wolf Richter says:

        The vacancy rate is not accurate. I’ve been saying that for a long time. If a homeowner doesn’t define his empty property as “vacant,” it’s not vacant, even if it’s vacant. And suddenly it’s on the market and vacant, surprise surprise!

        • unamused says:

          The most recent US census indicates that more than 16 million homes are sitting vacant across the U.S., 10.6% of all homes, of which 5.7 million are vacation homes.

          Is that a lot?

        • Wolf Richter says:

          unamused,

          The Homeowner vacancy RATE per Census = 0.8% in the US. That’s what I was referring to as inaccurate. It has been declining since 2012, going from record low to record low. At this pace, the vacancy rate will be negative in about 7 years, which would be a hoot and prove my point

          https://www.census.gov/housing/hvs/files/currenthvspress.pdf

          There are estimated to be 40,000 housing units in San Francisco which as vacant, but not by the Census measure. That’s well over 10% of total housing units.

        • Swamp Creature says:

          Agree that vacancy rates are bogus. 90% of the properties we appraised in the Swamp over the past year were vacant.

        • I have a friend who rents an ADU in a nice beach community, her rent is still low, but she is worried that if the owner sells, the new owner will wants that extra room back as part of the house. Then she faces a stiff inflation shock, either higher rent, or eviction. A lot of people living on the kindness of strangers, but if 1970s are a guide, the duration of this inflation will prove to be very painful indeed for consumers. A drop in home prices will only put more supply on the market and push the cycle to another level.

      • Ed C says:

        “People coming are leaving someplace”? Yeah they are leaving Central America, South America, Mexico and who knows where else. Something like 250,000 a month streaming across the border. How does housing magically appear for all of these people? Guessing that single family houses or apartments are suddenly becoming multiple family (multiple generation). No really. Somebody explain it to me. Mayors of NY and DC squawking when a busload or two show up?

        • Escierto says:

          I live in Texas near the border and no, there are not 250,000 a month coming across regardless of what some handicapped idiot says. Of course you need that number for your narrative.

        • Lili Von Schtupp says:

          It doesn’t take much to get Mayor Adams in front of a camera. Its getting him off the camera that’s the challenge.

          Metro and suburban NYC has long and quietly welcomed and exploited immigrant labor to do what the locals won’t: bus tables, kitchen work, housekeeping, landscaping, construction, etc. Many are skilled workers getting exploited doing hard labor until they weave in and finally make it (a friend of mine is a Guatamalan diamond cutter who went through hell getting his family here legally). The real issue is they’re now showing up announced, in broad daylight, on nice buses, coming from a Red state.

          They aren’t tying up housing around here either. Piling 10-20 into a 2 bedroom Tarrytown apartment was the norm for decades. Most of the ones I know work their butts off to get off the system. Its been a despicable situation for them all around. They’re pawns first and humans second.

        • Trailer Trash says:

          Millions of tourists come to USA every year yet somehow there are always plenty of places for them to rest their heads and plenty of food and medical care.

          But when the tourists are brown, have no papers and no money, the NO VACANCY signs light up.

        • Shiloh1 says:

          Plenty of rooms at the Hyatt in Chicago. Tell ‘em JB sent ya.

        • Augustus Frost says:

          Illegals aren’t “tourists”.

      • Rey says:

        Well said , culprit is corporate greed ,none of those thing media siad and saying about real estate hight price justification don’t make sense,this is the play book big player had played for last seven decades, every twenty years happens, they sell highest price , then could years later but lowest and in the middle Americans get screwed over and over and over.

    • Moonbeamfarmer says:

      Please show me the water to make this possible!

    • Happy1 says:

      The mountain west is growing. But some states are not, IL, CN, NJ, WV. It’s very uneven.

  8. Depth Charge says:

    “The Big Boys Leave, Waiting for Reset”

    This is the problem right now – too many cashed up pigs waiting for a housing crash so they can run prices up again. There’s just too much money in the system. We need to get to a point where nobody wants to touch real estate with a 10 foot pole because it never appreciates and needs lots of work – kind of like the past.

    • VintageVNvet says:

      AGREE TOTALLY DC:
      And really and truly looking forward to the day when I can rent or buy a ”flat” in SF,,, even a RR flat 12 feet wide and 50 feet long, for $50.00 per month as friends did a few decades ago…
      Far Shore you will want to know that I am NOT holding my breath!!! LOL
      Looking at this point that USA will have to ”RE-SET” our money before any such thing can happen, eh
      Bee Prepared is the scout marching song for a very good reason, eh

  9. Jake Bodhi says:

    You just need to buy your stuff (housing, automobiles) when you need it. Pay no attention to markets and timing. I bought my house on the wrong side of town in ’89 for 29k. I bought my new retirement car 5/20 for 25k. I was worried that I made mistake at that time. No worries today, both those decisions paid off. I paid off my house decades ago and the affordable housing let me retire comfortably at 62. Now I think I will be able to afford a New Orleans rental over this winter. Brush up on my swing dancing skills for the jazz swing revival…

    • DawnsEarlyLight says:

      Sounds like a good plan, past and present.

    • Cold in the Midwest says:

      “Pay no attention to markets and timing.” Heh. Reminds me of that scene from the Wizard of Oz. “Pay no attention to that man behind the curtain….”

      Glad to hear your house and auto purchases paid off despite the changes in the markets. However, it did not work out that way for many other people. If an unexpected life event forces a sale (such as job loss, divorce or long term illness) the comparative condition of the market will swiftly become very important.

      I remember the many “underwater” stories from people who needed to sell their homes during the great recession. Not pleasant to have your house be worth substantially less than your mortgage.

      So I think there is value in assessing the condition of the market prior to making a large purchase. And many asset classes now (including real estate) continue to be overvalued courtesy of the Fed’s hyperstimulation of the economy.

    • Mark says:

      Hey Jake –

      “I’m not sure what your point is, other than talking about yourself”

      • ERLE says:

        I went to a state UW and got fed up with the 1969 commie crap.
        Quit and worked grunt and came back for manufacturing toolwork. Cheap but good car, lousy accommodation, but expensive bicycles as I enjoyed it and work was ten minutes. I got yelled at for screwing up the payroll accounting by having thirteen uncashed paychecks.
        I bought a modest 1946 Cessna 140 608 TT A+E for cash, and never carried a debt except once for four months of 24 for a motorcycle. Same now. No debt of any sort other than the taxes.
        Things were easily doable if one had skills that funded the boss’ cars and vacations.
        It is far different now. Low skills and poor work ethic with no curiosity on seeking knowledge that will open advancement easily enough.
        There are too many that do not despise personal stagnancy.
        Gee, I should be pleased that one employee acknowledged the unsolicited 6% cash bonus of last Friday.
        Did I make your point?

        • c_heale says:

          I think in general poor work ethic is slung around disproportionately. The last 20 – 30 years have been characterised by employers treating their workers as disposable garbage. No-one’s gonna make an effort if that’s the only future they have.
          Bad employers deserve everything they get.

    • Einhal says:

      With all due respect Jake, this sounds very much like “Just buy the S&P index steadily and don’t worry about it.” That might have worked from 1981-2021, but I strongly suspect that it won’t be in the future.

      People need to come to terms that the factors that led to a bull market in bonds are unlikely to repeat, and that we don’t really have growth the way we used to.

    • PonderingPA says:

      You sound pretty clueless about the extent to which these timing issues can really help or hurt people who are trying to get up and running in life. That’s nice you are so old and so set financially. But if you are a 30 yr old making $60K and $30K, have two kids in daycare for $10-20K each per year, and you’re looking at all the single-family homes listed at 400K at 5.5% interest rate… then yes, the timing matters a lot.

      • Einhal says:

        His thoughts unfortunately are typical of that time. “I paid my way through school, so can today’s students!” They forget though that a part time job waiting tables could actually pay tuition in those days. Now it cannot. It was also easy to brag about buying a house when interest rates were 12% but house prices were 1/10th the amount.

        I just wish they would realize that the world they handed today’s young people is not the same world they inherited.

      • El Katz says:

        PPA:

        Not to be argumentative, but it appears that there is little inclination of the younger generation to recognize their contribution to the increased costs of education, housing, and other items that contribute to the current cost of “adulting”.

        Others have described the current stead of college housing (climbing walls, pools, maid service, “suites” with private baths, etc.) vs the prison cell version that we had in the 1970’s. I had a desk bolted to a wall, a plastic cafeteria chair, a bolster with a pull out bed frame and mattress (6″ at best), and a dresser that was bolted to the wall. The bathroom was a gang shower. The commode partitions had no doors. There was no maid service or restaurant on premises. We had a cafeteria that was only open during service hours. Snack food required walking into town. That was a dorm. Hot plates, refrigerators and “hot cups” were verboten. We did get away with popcorn poppers.

        Housing: I hear the term “decent housing” bantered about. My definition of “decent” at your stage of life was a 3 bedroom, one bath, one car garage tract whack, that totaled maybe 1,000 square feet. Vinyl flooring or tile (area rugs), no dishwasher, no central A/C, no garage door opener. I paid over twice as much for that house vs. what my parents paid for theirs and their interest rate when they bought was 3% and mine was 8.75%. But the roof didn’t leak, the furnace worked, and the schools were mid-tier. Yes, we could hear the interstate from our yard (it was a mile away, but that was Illinois where it’s flatter than a pancake). I didn’t blame them for the economic conditions. Gas had just hit $1 a gallon – which was 3x’s what it was selling for earlier. The house we bought was 4x’s my gross income without my wife’s. I had an office job and did side hustles to make up the difference. Didn’t have pets because they were expensive. My wife’s nickname at work was “Same Suit Sally”.

        Cars: I drove a bondo’d and baling wired together VW Beetle. Paid $550 for it. Bought a used Opel 1900 (rusty) for my wife when we got married. Did my own maintenance and repairs. Started rebuilding and flipping cars as a side income.

        While mobile phone weren’t a thing, we didn’t have the latest gizmos. No Nakamichi tape decks. No McIntosh tube amps nor audiophile speakers. A boom box was fine. Our TV was a 13″ color. No cable. Rabbit ears. Furniture was from the unfinished furniture store. My daughter has had more iPads and iPhones – about 1 of each per year – than you can shake stick at. She “needs” them. Survey of one, but it’s indicative.

        Vacations: Stayed home and did house repairs or took a bike ride along the lake front. No cruises, bass boats, spa weekends, backpacking in the Alps for these kids.

        The point of all the above rubbish is that it’s more that expectations that have changed than the situation on an inflation based level. While we, too, had dreams of a 4 bedroom colonial with a manicured yard and a three car garage, it wasn’t in the cards as a first house for a 30-ish year old couple contemplating kids. It was a goal. We were good at goals back then – all committed to paper. Plan-Do-Check-Act-Plan-Do in a continuous loop and celebrated with a bottle of Lancer’s rose’ when we hit one.

        And market timing didn’t matter. Honestly, we had no clue what that was. We bought when it was right for us. In fact, at that stage of our life (with the lower volume of information and, for the most part, we lived in our little bubbles – even in suburban Chicago) we only had the “checkbook barometer” of how the economy was going. Stocks? That’s for them fancy folk on Lake Shore Drive. No 401K’s. No pension vesting as I didn’t stay anywhere long enough (back then I think it was a minimum of 5 years before initial vesting – 10 for 100%). Our treat was the Sunday paper for the color funnies. Daily news came from the 13″ teevee at 9:00.

        We could have blamed our parents for the “lot we were dealt”, from the likes of Johnson, Nixon, Carter, but we didn’t. Why? Kvetching about it was senseless. Didn’t know what the Federal Reserve was. Thought interest rates were set by the individual banks. Didn’t know brokers or financial planners even existed. Why waste the effort? Didn’t have anything to put there anyway.

        We also didn’t have the benefit of child care tax credits (which you likely do as they were in one of the last candy dish of freebies in the American Rescue Plan) and, if you’re making $30K and spending $30-40K net on child care, you’re making a financial miscalculation as your working is costing you money – which is similar to the situation that we found ourselves in and made the decision to have less income, but raise our own children.

        So, complain all you will if it makes you feel better. Or you can approach it with the attitude that you’re building a life for a better future. Keep in mind that buying the house is only the first step. Wait until hubby goes to fix a dripping faucet and breaks a pipe (ask me how I know) or water is running out of the water heater closet (and it’s 4:00 on a Saturday). All happened to me (and more) in the first 60 days of ownership.

        • c_heale says:

          Re: the second paragraph. The universities are making bank from all these property investments they made. Not the students.

    • rick m says:

      Jake Bodhi- it might be prudent to check on which New Orleans police district your proposed rental is located in. Apparently nobody showed up for the day shift in the sixth district yesterday according to WWL870.
      Hard to blame them. There doesn’t seem to be the political will to support them or the prosecutorial follow thru to give seriousness to the arrests they do make. The naked vengefulness a cop faces every day from everyone who thinks they know the whole story should bad optics happen to make the news even if he or she (there’s only two) has done nothing wrong personally must be daunting.

  10. bsargent1957@gmail.com says:

    Always local differences to regional and national home prices. The article was quoting a nationwide home buyer and builder who then rents the portfolio.
    Without weak employment we don’t get the drop in price of many areas but vacant homes probably have lower mtg values and owners were making payments before and will continue. Price drops take time and won’t be in the inflation numbers yet but will be as valuations drop and we get deflation.

    • Jon says:

      This time the real estate bubble is not local because cheap money was available to all localities.

  11. nick kelly says:

    Already popped?

    ‘While prices for detached homes have dropped steeply in most regions of the GTA, the prices in King have plummeted, according to data released by the Toronto Regional Real Estate Board (TRREB) Thursday. The township, known for green rolling hills, large, mansion-like homes coupled with suburban amenities amid idyllic country life, has had the average selling price fall from $3,218,42 in February across 38 home sales, to $1,664,046 across 20 home sales in July.’

    That’s a 48 per cent price drop in just three months.

    From the Toronto Star

  12. drg1234 says:

    Right now the Fed is still reinvesting prepayments into new MBS (they should, for the 200+ basis points versus their current portfolio). That ends in September.

    At that point, it will be up to the primary dealers (JPM et al) to absorb new MBS issuance. That will presumably be easier (than it would have been two years ago) since issuance is falling rather dramatically with interest rates going up, so less $ to absorb.

    It is an open question whether the Fed are going to sell their shitty 2% MBS into a market that is at 4.5% or more. But it seems unlikely they can shrink their MBS balance sheet any other way; MBS reinvestment was only $6B in the second half of July. Since everyone sane has refi’d, there won’t be any mortgages maturing for a long time, so forget that.

    So that means the Fed is going to have to take a loss and sell their MBS into the market. Not a problem for the Fed (they just book the loss as a “deferred asset,” which means they can print cash against that loss later; it’s good to be the Fed).

    The primary dealers will, of course, take a bit of spread between what the Fed pays and what the market offers. It’s even better to be JPM.

  13. Depth Charge says:

    I wonder what kind of lies Kunal is telling himself right now…

    • COWG says:

      I think he’s on another site posting under the name “Depth Charge”…. :)

  14. Daniel says:

    The big displacements in real estate are always finance related. It’s always an efficient market unless that happens. I was a big developer in industrial RE in Ontario CA 1991 S&L crisis. 2008-2009 bought a $2.5m home for $875k cash short from bank in Seattle area. Inefficient home prices always require illiquidity from financial system being gummed up.

  15. The Bob who cried Wolf says:

    I’m not sure that San Diego got the memo. Maybe it was redacted. There are some corrections here and there but things are still being listed and sold for stupid amounts

    • Wolf Richter says:

      I have news for you. In June, sales in San Diego collapsed by 30.5% year-over-year, according the California Association of Realtors. I don’t have July yet, but from pending sales in June, it’s likely worse.

      The median price was down 2.1% for the month, but was still up year over year. As I discussed in the podcast: price discovery! Sellers cling to their aspirational prices, and buyers are saying, f**k it, and there is no meeting of the minds and far fewer deals, and sales collapsed 30%. Eventually sellers will drop prices enough to find some buyers, but it will take time and much lower prices to get sales volume back to normal.

      LISTEN TO THE PODCAST!!

      • 2banana says:

        Or…

        DYLTTFP?

        Ha!

      • The Bob who cried Wolf says:

        I listened to the whole podcast and got the point of it. Just saying that things here are still goofy, despite price corrections. Peak price followed peak sales back in 2005/6 and I’m sure the same thing will and is happening here but we seem to be arriving late to the party. Folks with money are still moving here in droves and I attribute it mostly to the work from home revolution. Just yesterday my wife and I met a nice couple who had recently moved from Ohio. They pulled up in a new bmw and definitely weren’t posers. This has been a regular occurrence of late. There’s an obvious money demographic shift going on in this country right now and it seems folks with dough want out of some areas and into others.
        I realize I tend to get into trouble here with anecdotal observations but it is what myself and others are seeing here in San Diego. Don’t forget, it was me who back in May of 2020 pointed out that there seemed to be a strange uptick in housing pricing and I even pointed out a specific house (and got flagged for it). At the time I didn’t realize how big that uptick was going to be, nobody did, but it sure happened.
        All that being said, I’m not saying I’m right about this, nor am I saying you’re wrong, just pointing out strange things I’m seeing here in San Diego.

      • Michael C says:

        Or more like San Diego got the memo but then threw it away two weeks ago. After getting a big bump in recent months. Active listings have been levelling off in the last two weeks, July 23 to August 6, (SFH, SD county, raw numbers, daily). Percentage of price reductions have also been holding for the last week or so. Given that SD also has one of the fewest upcoming new home inventory, SD appears poised to skip this upcoming housing correction.

    • Jon says:

      Multiple price reductions in asking price in San Diego.
      Sellers are coming down fast from their aspirational asking price.

      Market has slowed down considerably.

      Real estate is a slow moving train.

      You need to wait for at least a year I guess.

  16. Noel c. says:

    You are wrong that all the institutional finds have stopped buying. They have reset their pricing and are still buying at a slightly slower pace. Pricing doesn’t have to adjust much more for them to really accelerate buying. I have seen with price adjustment, the funds are able to execute at the higher cap rate.

    You are off on the 9 months of new home inventory. Only a .4 of a month of move-in ready homes. The rest are in some form of construction and many are on pause or delayed.

    It will be interesting to see if the inventory can get up to 6 months for a balanced market. We have a lot more homes to go before getting there. A lot, around 700K+ homes.

    What data do you have to support the story about all these home sellers who bought a new house and kept their old one? Seems very unlikely that this is a enough homes to move the market.

    I follow your content and appreciate your insight. I feel like you use too much acdotal evidence and take data out of context..

    • Wolf Richter says:

      1. “You are off on the 9 months of new home inventory.” BS. New house inventory = 9.3 months, spread over various stages of construction. GO LOOK UP THE DATA!!!!

      2. “Only a .4 of a month of move-in ready homes” = total BS squared. Just a blatant lie, really. Here are the Census numbers: 41,000 completed homes were for sale in June. Sales of completed homes = seasonally adjusted ANNUAL rate of 155,000 in June. For an average monthly sales rate of 12,900 houses per month. Applied to an inventory of 41,000 houses = 3.2 months’ supply

      Either you’re trolling my site with lies or you’re just ignorant. If it’s the latter, listen to DR Horton’s earnings call. It will open your eyes.

      • JeffD says:

        “ANNUAL rate of 155,000 in June”

        This implies that one person out of 1000 buys a home each year. Seems low, given that 8.4% of the US population changes residence ach year. 8.4% of households is about 120 million, so that’s about 10 million households turning over each year. If you assume 90% of that is renters moving, that would still be a million a year. There is a glaring disconnect in the math somewhere.

        • JeffD says:

          Meant to say 8.4% of movers with the number of total households being about 120 million, comes to about 10 million residence changes a year. Sorry for the garble.

        • JeffD says:

          I guess most moves are existing home swaps, and only 10% are new home puchases?

        • RockHard says:

          This is all public record. If you don’t like the stats, you can’t replace them with back of the envelope calculation if the data is wrong, then we’re all deluded.

          Also, I think you’d be surprised how often renters actually move.I have a friend who’s on his 3rd residence this year so far.

        • JeffD says:

          I followed up and found the data vs my guesstimates above. 11% of homes are new purchases, and renters are responsible for about 80% of the moves.

      • The Bob who cried Wolf says:

        San Diego is producing housing, gobs and gobs of housing, but it’s virtually all multi family. There are not many single family residences being made here at all. The existing inventory is being bought up at record pace, even in this slowdown. Only the really crappy locations are seeing big dips in asking prices. In the city of San Diego specifically, local ordinances have been drawn up that make most parcels price from land value and the highest and best use. The city has made it possible to build unlimited ADU’s on almost every parcel, and the ones that can’t do the unlimited are allowed up to 5 (including 1 JADU). This is causing investors to flock to the area and buy what they can. There are forces at play in the city that aren’t in the rest of the county, state, and country.

  17. Adam Smith says:

    1. After watching this website and learning how to collect data at zero cost I have been following the housing prices on Zillow (retail homeowners), Realtor.com (three price data trackers over time), and the best of all being RealtyTrac.com which shows the value POTENTIAL for investors/buyers (note: ATTOM Data, curator of nationwide real estate data for land and buyer, just sold RealtyTrac and HomeFacts which are the best of all three as you can see the maximum values factors by a credible source and I hope they don’t change much).

    2. Now that the regional home price differentials are becoming more dominant I am trying to put together a simple math algorithm with all other quantitative and qualitative factors on a one page analysis sheet that would include property taxes, state taxes on retirement income, medical cost/quality, fuel prices, all utilities, demographics especially political in anti tax, anti liberal, anti socialist, anti property tax, anti liberal educations from K to PhD, then, add are they pro small business(less regulation), pro law and order, pro religious freedom and more….

    3. Then, once I have completed this personal preference sheet compare what the % differential in housing price is to determine the value of choose to buy elsewhere.

    4. Of interest to me is how the liberal professors I have encountered all love their social policies but last week one moved to conservative Indiana to buy a house on one acre. So, he left the sh*t hole L.A. area to live with the Conservatives he so disdains.

    5. Freedom to enterprise means must be able to jump into the “testosterone pit” and give and take the hits and rewards a not be a “p@$$e about it. Freedom of speech means I can tell you I do not like how you think and why as long as you have the bxyz to let others tell you the same. William Buckley did this, respectfully and quite well and it is the best modern representation of the Western Civilization traditional systems of political discourse. I am disappointed the young woke sheep can’t take it as I know them well as I am at the UC system school about 5 times a week.

    6.Quantitave factors are dominant in importance but qualitative is much harder to gauge and even MORE important not matter if you are a home buyer/investor.

    Changes that were are seeing are happening so fast that most of use can’t see it like Wolf and if not for this website I would not get the kind information your financial whiz brother would give to save your ass.
    Years ago I told my doctor to talk to me like a brother; not like doctor/patient. This get interesting when he asks meet what my cholesterol is get my immediate reply of “what’s your cholesterol.” We have interesting talks just like the one’s I have seen here over the years.

    Keep up the good work WOLFMAN….

    • Shiloh1 says:

      Whoa!!! Thanks for the heads-up. I will be on the lookout for that idiot professor showing up in Indiana. He should have moved to Crook County Illinois. Nice high property taxes due to public pensions, like his.

  18. JoshWx says:

    While housing price corrections are inevitable in a lot of markets over the coming months, strength in the job market should provide at least some relative floor as it will prevent a huge spike in forced/distressed home sales. However, if the only means at achieving lower inflation is through a “controlled demolition” of the job market, this could lead to a domino effect of increased inventory and weaker demand resulting in a full implosion of the housing market. The fed has already achieved a cooling of the market by increasing rates; compounding this with a weaker employment situation could spell disaster. Rather than a “soft landing”, Powell and Co will achieve a “hard splatter”.

    • Jon says:

      Lays off news becoming more and more prominent especially in tech sector.

      Also job market is not as strong as numbers are showing.
      A huge demand for $20/ hr job can’t sustain this grotesquely over priced housing market

      • Gabby Cat says:

        It’s sad when triple that salary is needed for 2 bedroom and 2 bathroom new build starter home.

  19. Pea Sea says:

    Wolf, where on earth are you getting the idea that people who bought second homes to live in are not renting them out, but rather leaving them vacant and eating the carrying costs? Do you have anything resembling actual evidence of this?

    You’ve made this claim several times over the last year but you never supply any data to back it up, even when asked. Are there surveys? County or state data? Anything at all?

    • Pea Sea says:

      …not renting the first homes out, that is.

    • RockHard says:

      He talks about vacancy rates above. I expect that some of this shows up on AirBnb or longer term rentals. I was doing property management up until about 3 years ago, one place I managed was that exact situation until the owner got an offer that he couldn’t refuse. Seemed crazy to me at the time but I didn’t expect the last couple years to happen either.

    • Escierto says:

      As I have mentioned before in my condo complex in San Antonio of 105 units, at least 25 to 30 are vacant and owned by Mexicans parking cash or laundering money. Tons of empty single family dwellings here as well.

      • Ethan in NoVA says:

        Would it be common to have empty housing units with phantom renters? Fake rental income to launder cash?

    • All Good Here Mate says:

      So…. I finally started looking at houses again. Called up my old relator from a few years back about one I was interested in. I went to go see it alone yesterday with the wifey- drive by style. Was blown away when realtor got back to me after talking to listing agent that the house has been vacant for about 3 years. Place was immaculate, albeit outdated, but clean as a whistle. So, there’s one anecdotal piece of evidence.

    • Wolf Richter says:

      Pea Sea,

      This is everywhere. It’s huge. And you’re now seeing those homes come on the market — which is proof of how it works. The NAR last year also did a thing on second-home buying, not-selling – but it thought that those homes would come on the market starting late 2021. This didn’t happen, but it’s happening now.

      I know several people who did this. It has been a very profitable strategy over the past two years. But now they do want to sell.

      When someone puts that moved-out second home on the market, that’s a net addition of 1 home to the inventory, without subtraction because they already have a home and won’t buy another one. So that’s why the inventory numbers are going up.

      But someone buying a house while selling the old house has no net impact on inventory (+1 -1 = 0).

      • Arya Stark says:

        An interesting analysis would be of these second homes, how many are in the money vs. have to pay back a mortgage. If folks are walking away with 100s of thousands in cash then that money goes into other investments. If they are paying off a loan then not so much.

        • Wolf Richter says:

          They’re walking away with money, the buyers has to put in the exact same amount of money, and the net effect = 0.

          In terms of loans, you also need to look at both ends of the sale.

        • arya stark says:

          That’s a good point. Thanks

      • Pea Sea says:

        That’s not data, Wolf. I understand that people are buying new houses and not selling the old one–that’s obvious and happening everywhere. But I find it hugely implausible that they’re not renting the old one out. “Just rent it out” and “Just Airbnb it” have become mantras on real estate forums. Why would anybody leave their house vacant and absorb those significant carrying costs when they could rent it out? Where’s the data to suggest that people are doing this in significant numbers?

        • codedude says:

          Many reasons. Onerous lead laws in commie states like MA. Wear and tear, damage by renter can exceed the rent income, especially for a short term rental like 1 year.

          We were in this situation, we bought new house one year ago and just took sweet time to move and do some deferred updates to the old house. Seeing how the market started to turn around, we put it for sale in June, just closed, with an excellent result, but mostly due to a dumb luck. Had just two offers, one at ask, one like 10% above. Took that and ran.

          Anecdata, of course.

        • Wolf Richter says:

          Pea Sea,

          “Why would anybody leave their house vacant and absorb those significant carrying costs when they could rent it out?”

          Let’s do some recreational math here:

          Feb 2020: house value = $500K – John lives in it. Mortgage for $450k, $50k in equity

          Dec 2020: house value = $550k – John buys another house and moves. He already doubled his money on this house: equity = $100k. He sees the crazy market and says, I’m going to ride this thing up all the way. But I can’t rent it out because then it turns into rental property, with all the problems that this causes, and that’s a different market.

          Dec 2021: house value $680k – the house has been vacant, equity = $230k.

          June 2022: house value: $730k – but market is turning. Equity = $280, up from $50k. Gain of $230K, minus interest (3% of $450 = $13,500 a year), taxes, etc. This is a huge gain after expenses because it’s so leveraged. His $50k turns into something close to $200k, after costs, by just sitting there.

          July 2022: John puts that house on the market to cash out.

          You know this is happening because it is THIS behavior that causes inventories to drop when people don’t sell their homes, and then to rise when they do sell it. Because neither the population nor the housing stock itself changes that quickly. And remember: when I buy a house and sell the old house, the net effect on inventory = 0.

          As I said, the NAR had some data on this last year.

        • cooldude says:

          Bingo. Had we sold last fall we would have left easily $100-150k on the table vs. selling last month. I can only wonder how well we would have done if we put the house on the market in the spring before the market got spooked. Maybe we could have gotten another $50k.

        • Gomp says:

          Personal residence sale tax free up to $250k /$500k if sold within two of 5 years residence. Switch to rental, any gain is taxed at 15%

        • David H says:

          Pea Sea,
          I agree it is not data in terms of a survey or otherwise but I think any survey of vacancies would be highly flawed and useless, as pointed out by Wolf and others above.

          But ask yourself this – what else would cause this type of bull whip motion in inventory in such a short period of time? Don’t say demographics, that takes way more than a couple years. I have tried to think logically about any other scenario that would cause such a sharp down and then upward trend in inventory and cannot come up with one. Would love to hear yours or others thoughts.

        • IN says:

          >I find it hugely implausible that they’re not renting the old one out

          I guess it depends on your mid-to-long term goals. Based on my experience as a single-unit landlord in the other country, I can only attest to two things: 1) Your average renter’s profile deteriorated significantly over the last decade and pretty much went down the drain since the start of covid, 2) Bad tenant can ruin your place beyond imagination within months, not even years.

          That said, if I was a property owner AND I anticipated selling a property within the next 2-3 years AND the market was at least stable (let alone going up), I would’ve personally thought twice… or maybe even five times before letting anyone in my house/condo.

        • Pea Sea says:

          “what else would cause this type of bull whip motion in inventory in such a short period of time? Don’t say demographics, that takes way more than a couple years. I have tried to think logically about any other scenario that would cause such a sharp down and then upward trend in inventory and cannot come up with one”

          I can. Demand. Demand all by itself can cause these kinds of movements in inventory even when the number of new listings stays relatively constant. Don’t believe me? Think long and hard about what “inventory” actually means.

          Then think of the toilet paper shortages at the beginning of the pandemic.

        • David H says:

          Pea Sea,
          Yes of course demand. That is not the question. The question is what is the driver of demand. You seem to be skeptical of Wolf’s proposed driver of demand but can you think of anything else?

        • David H says:

          Also, toilet paper is consumable and not an appropriate analogy. You don’t buy a bunch of houses and then wipe your a$$ with them and put them down the toilet. They remain houses available for resale.

    • Wolf for Fed Chair says:

      I’d say 1 in every 20 open houses I attend in SoCal actually appears to have a homeowner or renter currently living in it.

    • Pea Sea says:

      “Yes of course demand. That is not the question. The question is what is the driver of demand.”

      No, that’s not the question. The question was, and is, what is the driver of low inventory? The answer is, in fact, demand. Specifically, very unusually high demand caused by interest rate suppression, money printing, free pandemic money (PPP “loans” etc) and “wealth effect” as a result of asset bubbles that are the result of those things I just mentioned. And then further demand as speculation into the housing bubble caused by all that earlier demand*.

      Please don’t confuse inventory with supply. Supply is the amount of stuff coming on to the market; inventory is the amount of stuff “on the shelves” at any given time. That’s why I said “Demand all by itself can cause these kinds of movements in inventory even when the number of new listings stays relatively constant.” I said “new listings” for a reason. I also asked you to think about what “inventory” means. I’m asking you to think about it again.

      *I agree with Wolf on this point–why wouldn’t I? Of course people are buying or holding with the expectation that prices will keep going up. That’s how bubbles keep bubbling…until they don’t. I only question his assumption that the holders’ houses are being left vacant rather than rented or AirBnbed, which he asserts without evidence.

  20. Old school says:

    There is a real need for smart designed small homes coming in at about half price of current median home price. A lot of young couples and retirees need a better option than what is out there.

    • butters says:

      Small homes yes, but they don’t need to be “SMART.”

    • RJon says:

      Yes, very much so.

      This sentiment does not get made sufficiently.

      I suggested to our city housing planners that subdivisions 700 to 1200 ft² be built.
      I was not taken seriously.

      There are a lot of single people and childless couples who could benefit from this.

      • IN says:

        >>I suggested to our city housing planners that subdivisions 700 to 1200 ft² be built.

        I don’t remember exact numbers off the bat, but when I was choosing a new construction in 2020, the choice was basically this – relatively small ranch, 3br 2ba, ~1700ft² = $330k; one of the biggest houses, 5br 4ba, ~2800ft² = $390k – both in the same development from the same builder.

        I ended up going with the latter option not because I needed 5br, but simply because I was obviously getting a much bigger bang for the buck (and much lower price per ft²) with the larger house.

        That said, if a 700ft² small house would end up having a price tag of 70-80% of a “regular” 1600ft² house, I doubt it will see many buyers. And I don’t expect it ever reach ~40% of a bigger house price simply because some costs of construction are fixed and don’t really depend on the square footage.

        • Old school says:

          I know there is high demand from watching “Incredible Tiny Homes” company. He can build about 1000 homes per year all at prices between $20k and 100k. He has been forced to become a developer with hundreds of homes on about 150 acre property as permitting is difficult in most places. As he says, he is a builder and not a developer and can’t provide lots for 1000 homes per year.

          Most buyers are older single women trying to make it on modest income. Some come from Seattle and LA site unseen to purchase and live in a 300 sq home because that is all they can afford.

  21. butters says:

    Are you a realtor?

  22. Mark Stoneweapon says:

    The cost of building a home keeps going up and so do the development fees ($100K here). I’d rather sit on the property and rent it than sell below replacement. If you can’t rent it then you have a big problem!

    In the greater Toronto area there is no land and no severing. A piece of dirt is a million+ bucks now if you can find it.

    What’s with the 50-100 year mortgages in Japan and UK?… in Canada we are 25 max. Are the banks going to reach in the tool box?

    Personally I would like to see the market crash, but I won’t put it past the fascists to employ capital controls like they did during Covid. . . .free market price discovery is fading away and we need defaults with liquidation to correct the market.

    IMO – The ruling class want’s to keep people in their payment systems at all costs.

    • Jon says:

      Home prices are not determined by cost of building and other cost.
      Only one thing determines home prices: monthly payment affordability.

      • Mark Stoneweapon says:

        If you want to build a custom home…. the builder is going to price the cost of the build plus his fee period or it’s not going to get built. Monthly payment has less to do with the base cost of a new build but it has a lot to do with liquidity and inflation/deflation of existing dwellings.

        • jon says:

          I am not talking about custom homes. This is about run of the mill sfrs.

          IN the end, it is all about affordability.

          I have seen many homes being sold for less than the cost to build.

  23. historicus says:

    Real Estate is one of the most illiquid of all markets…
    all buyers one day…..
    zip the next.

    • Mark Stoneweapon says:

      Real Estate accounts for 62% of household assets held in China compared to 23% for the US. Way too much capital has been sunk into this speculative bubble…..a liquidity crisis from Fed hikes is brewing.

  24. David Hall says:

    The number of active listings in my town has been increasing since January. There are more homes under construction. Prices are too high.

    Population growth seems to be shifting to Texas. They have a border problem. Habla Espanol? Part of California moved to Texas. Elon Musk mandated a 40 hour/week work in the office policy.

  25. Color Catalysts says:

    I have seen this even in the last sub prime BS.. circa 2008ish.

    I used to be an exclusive closer notary for Ameriquest Mortgage thru a title and signing company.

    As soon as the sub prime market hit the fan so did my relationship with ameriquest which was very profitable although I did not sell loans I just serviced them then came the subprime BS.

    Here we are in 2022 with a worse calculation of what the market is I have no clue but it doesn’t make sense to me I need to buy a small country house and I’d like to pay for it with my equity meaning in full.

    I think it depends on your geographical location and a lot of other factors but I think banks in the Federal reserve need to get their act together no matter what then lend money fairly to most people when that happens maybe we’ll have something that makes mathematical sense.

  26. COWG says:

    Jeez…

    Do you look in the mirror each morning and say, “ Wow, you are the smartest person
    I know”…

    The things you espouse ( as newly proclaimed) have been standard operating procedure since I bought my first house in 1979…

    But you missed the one about buying the crappiest house in the best neighborhood….

    Speaking of talking in generalities…

  27. BuySome says:

    Housing market? First of all, there is no “free market”…it’s all just a fixed-up game based in bad assumptions that things do not change…like looking at Russian tanks parked on your border and assuming they won’t be driving through your tomato garden next week because the seed packet had not reached its’ expiration date when you planted! I don’t see guys with briefcases full of actual cash money coming to the site of the product for sale and laying down bids for what they want. It’s all just BS projections of a stream of money that doesn’t even exist yet. All made up by unamused’s FIC, which has itself become The State. Secondly, this is no more “housing” than a boxcar or gondola sitting in a railyard can be equated to “transportation”. Show me a place where you walk in and toss your blue national jumpsuit in the vaccum chute in exchange for your alloted “apartment pants” payamas next to the sleep chamber and I might accept that this is housing. In lieu of that, this is “warehousing” for all that stuff you aren’t using while you’re off at the job. A museum without patrons. To assume that none of this is likely to be going away in the future is like being in 1985 and thinking the malls will be here forever. The product here is warehousing, and the market will be whatever the clowns running this state sponsored shtshow thinks it must be while they extend further controls over how you should exist to serve their ass fattening on a daily basis.

  28. Island Teal says:

    Wolf….thank you for your analysis and reporting.. It takes a strong person to tolerate the bozos 🤡🤡 that comment without even reading or listening to you work. Thanks again 😉👍

    • BuySome says:

      Most, but not all, commenters do RTGDFA or LTTGDFP. Some not only read the comments too, they re-read them and try to make sense of what constructive fallacies others are believing. And oddly enough, a few can even spell “your” correctly before hitting that post comment button, irregardless of the spellchicks tendency to polish her fingernails while on the clock. Other than that, Have a Nice Day!

  29. Arya Stark says:

    The big boys(hedge funds) are supposedly still short this market. Sometime the big boys are wrong.

  30. Not Sure says:

    Food for thought: In 1970, per FRED, the national median home sales price was $23,900. By 1980, it had grown to $63,700 (2.7x)! From 1980 to 1990, it doubled again to $123,900. So in 1990, the median price was over 5 times what it was in 20 years prior in 1970!

    The 90’s saw prices only up about 35% over the decade. Then in the 20 year period from 2000 to 2020, prices “only” doubled. Think about this… House prices nearly tripled in the inflationary 70’s despite massive interest rates, but they “only” doubled in a more recent 20 year period.

    Sure, house prices could soften or even collapse (but the job market has to weaken significantly first). Anything could happen, but the idea that this is a bubble that HAS TO pop is nuts. Look, 1/3rd of all dollars ever created were conjured into existence in 2 years! It’s such an unimaginably large amount of money, and so much of it is still looking for ways to be spent or stored. It has skewed every market and changed everything. The real value of everything has become impossible to pin down. And if that new money is left in the system (and most of it will be), prices of everything will continue to go up. RE will remain local, but the nation-wide median price will likely be higher in 2032 than it is here in 2022.

    • Steve says:

      That logic does not take into account that all that money sloshing around is fake and will disappear as fast as it was created. Fake means unearned and it went went out as debt which now must be counted against it more than ever. The great balance sheet reconciliation commences. Defaults maximus totalis.

    • rojogrande says:

      Per Fred, in 1984 the real median household income was $53,337. In 2020, it was $67,521, after peaking at $69,560 in 2019. (I would guess with recent wage inflation it’s back around $70,000 or a little higher.) This means median household income went up less than 40% in 36 years. Median household income and median home prices have completely detached from each other since 1980. Interest rates had to go down radically to maintain any level of affordability. If interest rates continue to increase, or even stay at this level, house prices will need to go down to remain even remotely affordable.

      However, if inflation, particularly wage inflation, remains high I can easily see the nation-wide median home price being higher in 2032 than 2022, but that doesn’t preclude a collapse in the interim. After all, prices “only” doubled from 2000 to 2020 because of a collapse from 2006-2011. Another problem for the housing market is that median prices have continued to surge since 2020 making the market more vulnerable to a collapse.

      • Not Sure says:

        Rojo,

        I’m talking about unadjusted nominal house price growth, and you’re countering with real income growth (income adjusted for inflation). These are not comparable. If we look at nominal median income growth, it has more than tripled since 1984 while house prices are a bit above 5 times what they were. Indeed, house prices have out-run wage growth, however, interest rates are still much lower than they were in 1984 giving homebuyers more buying power in terms of monthly payments. And that’s pretty much the direction in which the Fed has forced the system, isn’t it? A household’s ability to cover monthly payments with their paychecks is the loose foundation upon which our economy is built. Love it or hate it (I certainly don’t like it), that is the mindset that has been dominant over the last few decades. The Fed is not going to be able to get anywhere near 1984’s 11% fed funds rate before we dip into a real recession and the Fed backs off. In a recession scenario with actual job loss, house prices probably drop some, but all this talk of guaranteed 30 or 40 or 50% drops in prices… Good luck with that outcome. On a national scale, the median price only dropped about 20% from peak to trough during the GFC as some markets were hit hard while others stayed stable. We roughly tripled our money supply over the course of the inflationary 70’s. The median house price followed suit and roughly tripled as well despite massive interest rates. We recently expanded our money supply by 30% in 2 years, and big surprise, house prices went up by about 30%. If you want to know where RE is headed, follow the money supply.

        • rojogrande says:

          You’re correct about comparing real versus nominal prices. With median real incomes up 3x and median real house prices up 5x (per your comment) since 1984, that is a huge spread and is only sustainable with very low interest rates. I watched the crash in the GFC and the markets that generally crashed the most had gone up the most. Las Vegas and Phoenix particularly come to mind. Some big markets, such as Dallas, didn’t have price booms which limited the decline in the national median home price during the collapse of the bubble.

          One problem now versus the 1970s is that wages kept pace with price increases better in the 1970s. The money created now seems to be staying at the top fueling a level of inequality that didn’t exist in the 1970s. Price increases based on an increase in money supply are only sustainable if that money reaches a broad segment of people. We’ll see what happens in the coming years.

        • Not Sure says:

          Totally valid points Rojo. I would caution that there is always some lag between money creation and wage growth… We’ve seen wage growth strengthen quite a bit recently (albeit slower than inflation). It’s hard to say how that will play out in the coming decade. My expectation is that we see a slowing of money supply growth accompanied by an anemic housing market for the next few years much like we did in the first half of the 90s while wages catch up a bit. But M2 has never slowed down for long, and it’s only a matter of time before it resumes its upward inclination. Asset prices tend to follow.

    • jon says:

      I don’t think RE would remain local. All these appreciation happened due to availability of cheap money which was available to all locales.

      If the cheap money is going away, it’d impact all.

      This time, most of the good affordable locales have been made unaffordable.

      I agree: It’s a bubble only in hindsight and if it burst.
      From what I see, it’s all a game of interest rates. Inflation is high -> Fed is forced to take actions -> It increases mortgage rates -> affordability drops.

  31. Nate says:

    Lots of folks took out a lot of low interest debt to buy an asset that inflated a lot in a short period of time.

    Maybe it will all turn out great this time! Shortages! Well qualified buyers! Generations coming of age!

  32. Steve says:

    Get ready. So many many investors of all sizes riding everything on the renter. Rent prices were never sustainable and now the renter(bottom 80%)is under extreme duress no matter what you read. A renters collapse/exodus will form in this recession and create the total housing bust. Alot of their jobs are fake only from printed money and will be gone. The housing mania was a Fed made ponzi, by making too much money is all that will disappear because it was never real(earned) to begin with. Watch your local renter listings explode as renters find it too hard to live. They’ll drop out to the street, cars, friends, family, cheaper states and countries. Unwillingly mind you. I would not be surprised to see a national renter strike, and allowed by the Government which would expedite the housing bust by making owners subsidize renters further. Only this scenario can take down the mighty house investor class, so this way it must go, as every ponzi ends in the way that makes it end.
    A slow painful death on both sides that no one wants, but one that no one can escape. The Fed created this mess but in reality, the greedy and financial inept took the bait hook line and sinker. When you look at the chart, the 08 bust was just a warm up. There was no precedent in history to make wise investing decisions as the Fed and Washington put this country in no man’s land with hazardous interest rate repression, zillions of fake currency(unearned) and helicopter currency. And that is where we all will find out where we are, and who we are, and who we will be.

    • Yes, renters are being abused by housing speculation.

      Which is why national income tax should be abolished and national consumption tax implemented.

      When asset hogs have to pay consumption taxes on their hogging, they may think twice about it.

      • codedude says:

        Quite a nonsense. Rents are a function of supply/demand, nothing else. Sure supply is affected by investors buying houses for short term rentals or hoarders (people letting houses sit vacant). Demand is a function of local job market.

        In most bubbly areas monthly rents are much less than what it takes to service debt/taxes/maintenance of the very same property. Aka negative cash flows. Landlords who engage in that of course not due to the goodness of their hearts, but due to the speculation betting on further appreciation.

        • Yes, rents are a function of supply and demand.

          But!

          I am not talking about rent.

          I am talking about buying.

          Less competition to buy, when speculators find the fixed and unrecoverable costs of consumption taxes unpalatable, means lower house prices and more people can afford to buy instead of rent.

          Then, less renters. The rent supply demand equations changes.

          Ok?

          Bottom line: Income tax promotes inflation. Consumption tax inhibits inflation.

        • Wolf Richter says:

          Avraam Jack Dectis,

          Consumption taxes KILL low-income people that spend every penny they make on necessities. But they’re great for high-income people because they only spend a small portion of what they make. And they’re avoiding paying taxes in their high incomes as per your plan.

          Quit posting this billionaire promo crap here if you want to keep commenting. I thought you got the message, but it seems to you didn’t.

        • Howdy Wolf!

          Sorry, not backing off, feel free to ban me.

          But!

          Just because you have consumption takes does not mean you cannot also provide a subsidy to poor people to compensate them for the regressive effects.

          Get the message?

        • Wolf Richter says:

          Yes, I get the message: you’re a troll for a certain tax policy that HUGELY benefits people with high incomes and lots of assets, and wipes out everyone else.

        • questioner says:

          Curious to get people’s take on this scheme (proposed years ago to curb petroleum consumption): put a large ‘tax’ on necessities that are suffering from inflation. Collect all this money and re-distribute it evenly to the entire population (it isn’t spent on anything) with exceptions for special needs cases (might be the flaw, not sure). So for example, those that ride bicycles get a free check in the mail, large recreational consumers pay a premium for the privilege. Owning a non-gas economical car is a privilege etc etc.

    • COWG says:

      “ The housing mania was a Fed made ponzi, by making too much money is all that will disappear because it was never real(earned) to begin with”

      The Fed was complicit by forcing interest rates low…

      But the price spike was due to the mania crowd…

      The Fed is paying the price via inflation…

      The mania crowd will pay the price via asset depreciation…

      • butters says:

        “The mania crowd will pay the price via asset depreciation…”

        The worst thing is many good people got sucked into it….they will lose their hard earned savings. Fed must have known this would happen and still didn’t pause it. Criminals…. every one of them!

        • Steve says:

          Just like they didn’t know about 2000 and 2008. Rinse. Wash, repeat says the hidden owners of the shares of the regional banks he-he. While the chair says like Shultz on Hogan’s Heroes… “I know nothing, I know nothing”.

    • Gomp says:

      I wanna be a Pirate.

    • jon says:

      A lot of stories in the media about how hot the job market is and how millions of positions are not yet filled and thus this is one of the support line for home prices. The fact is: Most of the jobs which are not yet filled/open are low paying ones <%20/hr and I don't think people in these jobs can really support median home prices in USA.

      High paying job market usually is not hot and now we hear waves of hiring slow down/freeze and even lay offs from big companies.

  33. smashsc says:

    AHR’s land development company completed the site prep for a new (all rental) 9-lot neighborhood near my home over 6 months ago. Wolf’s summary of their conference call makes me believe that it will be sitting there undisturbed for a while. Also, a major builder is quickly throwing up homes in a 55-lot community around the corner – only 4 have “sold” signs on them – the rest are spec houses. Watching to see when they finally cave & start lowering prices…

    • Shiloh1 says:

      Going back to yesterday’s post, I’d rather get a nice government loan to live as a student on a college campus on the gulf then go out in an old folks home community.

  34. Michael Engel says:

    The big whales first, pops piggyback last, first slowly then faster :
    Mid America Apt down, Camden Property down, Avalon Bay down,
    Equity Residential Property down, Equity Lifestyle down, Essex Property down, United Dominion Property down, Sun Community down…

  35. Nate says:

    Curious as to their capitalization. How much pain can these guy handle? Are they like REITs or leveraged like mom and pops?

  36. TheAltonRoute says:

    The housing-industrial complex, the educational-industrial complex, the medical-industrial complex…welcome to the United States of Industrial Complexes.

    • 91B20 1stCav (AUS) says:

      TAR-at last, a definition of the complex i’ve suffered from for fifty years!

      may we all find a better day.

  37. Tom H says:

    Wonderful report.

    Where are the FORECLOSURES?

    The market can pull back as a few owners of multiple houses cash out near the top, but this doesn’t seem necessarily like a bursting bubble. In ’07, ’08 we had systemic issues in the financial system from sub-prime lending standards and wild speculation. This is a much different situation. Houses are being used as tangible stores of value, like gold. Durable goods have been selling strong for months and months. Cars and things people can use have been bought up as fast as they’re made.

    This looks to me like preparation for a currency collapse. Cash rushed into real estate, especially productive farm land. Hopefully we just see a small correction here. If the correction is sharp enough it should attract buyers and stabilize quickly, especially since existing mortgage holders at low rates will be staring down higher rates. Unless the layoffs go exponential, things are somewhat anchored, stable, and again, of an asset class which is tangible and useful.

      • Tom H says:

        Thank you Wolf!

        We are still even better than the “Old Good Times Normal Range” above, which can quickly go to heck in non-linear fashion, though without some sort of cascading systemic collapse I just don’t see housing as being a major risk. It’s still fresh in people’s minds what happened after the crash- housing came roaring back. There are people today still paying on mortgages and re-financed mortgages that were previously underwater back in the late 00’s and early 10’s. I bought a house in a short sale in Ft Lauderdale in 2013 for 160K and sold it in 2016 for 310K. Today the Zillow estimate on the little 2br/1ba w/pool is $620,500. The current owner bought from me at 310 and hasn’t changed much of anything… (minimal upkeep)

        Lending standards since the housing bust have been tighter. We haven’t had Greenspan & Bush out front promoting the virtues of Variable Rate Mortgages for the masses and the “Ownership Society” respectively. Sure people may have splurged and taken out HELOC’s but many likely used those funds not to party, but to make renovations and improvements which add value.

        Another thing to mention- renters. If you look at the population of borrowers who lost their homes in the housing crisis today I believe you will still find a majority of those previous mortgage holders still renting. If they repaired their credit and got back on track they probably have some equity in their homes now. This leads me to expect a correction coming but nothing like what we saw before in housing.

      • Wes says:

        What’s happening to the mortgage forbearances from 2020 and 2021?

        • Wolf Richter says:

          Most of them exited by April 2022, either through sale of the home (at a higher price) or through a mortgage modification or through refinancing it.

  38. Steve says:

    There will be no foreclosures until layoffs cause the renters collapse, which will take down the investor class as it did in 08. If the inflation cycle does not lead to layoffs then another external event like something geopolitical will be doing it, as the unsustainable Fed made ponzi bubble will find it’s pin. It is not financially practical to buy property when it’s a losing investment, as in no guaranteed renters and a stagnant to declining market. Don’t assume that housing can’t stay depressed for long periods of time. We have not even started talking yet of a possible long depression, even though WW3 is now a conversation.

  39. notdeadyet says:

    The big institutional buyers need to walk away from the single family rental market… they helped drive up prices more than anyone else. It is going to take a few years for this market to settle down and reality to sink in.

Comments are closed.