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.”

By Wolf Richter. This is the transcript of my podcast recorded last Sunday, THE WOLF STREET REPORT.

We’re now getting all kinds of commentary from housing industry insiders and big institutional investors in single-family houses. They’re talking about this during their earnings calls.

American Homes 4 Rent is one of them. The company was founded during the Housing Bust and bought up tens of thousands of single-family houses that it then rented out. In addition to buying houses, in recent years it has started building its own subdivisions with just rental houses, that are specifically built for rentals. The company received enormous amounts of funding over the years from investors, including when it went public via an IPO in 2013.

So American Homes 4 Rent, during its earnings call last week, said a bunch of things that we have already seen in the data. And the data coming from all directions has for months been pointing at a housing downturn.

There is now a huge supply of new houses for sale, in all stages of construction, over 9 months’ supply in total, according to the Census Bureau. In terms of the number of houses, by June, there were 463,000 new single-family houses at all stages of construction for sale, the highest since May 2008, and up by over 30%, from a year ago.

Homebuilders’ cancellation rates spiked to nearly 18% of their total signed contracts in July, more than double from earlier this year and last year, according to data from real estate consulting firm, John Burns. And this cancellation rate was even worse than the cancellation rate in April 2020, during the lockdowns.

The Census Bureau reported that sales of new single-family houses have plunged 17% from a year ago, and are just barely above the lockdown low of April 2020.

The National Association of Homebuilders reported that its index for foot traffic of prospective buyers of new houses plunged in June and is now down to levels not seen since 2014, except during the lockdowns in March and April.

Traffic is an indication of interest by buyers, and buyers have lost interest – at least at these prices.

Homebuilders reacted by cutting prices: 13% of the builders reduced home prices in June to boost sales “and/or limit cancellations,” according to the National Association of Homebuilders.

And based on Census data, prices of new houses have plunged 12% in the two months of May and June, as homebuilders are trying to sell their inventory that is piling up.

Similar thing with previously-owned houses, condos and townhouses that a homeowner or investor is trying to sell. Realtors have been complaining for months about the plunging foot-traffic and showings.

Sales of single-family houses nationwide dropped by nearly 13% year-over-year in June; and sales of condos and co-ops plunged by 25%, according to the National Association of Realtors. This was the 11th month in a row of year-over-year sales declines.

Just an example what to expect: Pending sales in California – an indication what future closed sales might look like – collapsed by 40%, according to the California Association of Realtors.

The sales declines have been accelerating, amid the surge in mortgage rates to around 5.5%, even as inventory is suddenly coming out of the woodwork.

Supply of previously owned homes listed for sale jumped to three months, the highest since August 2020, and up by 20% from a year ago. Supply has nearly doubled from the low in January. The bidding wars are gone.

In some major markets, unsold homes for sale have more than doubled in June, compared to June last year, and there are numerous major markets were listings have jumped by 50% or more.

So pent-up supply is suddenly showing up on the market. No surprise there. We knew it would happen because it always happens when the housing market turns.

Lots of people bought a home over the past two years without selling the prior home, and they now have two homes or three homes, and they’re not renting them out.

The sole purpose of not selling the homes that they moved out of was to ride up the huge price increases with their highly leveraged investments. And now that the price increases are ending, they’re trying to sell their vacant homes, and they put them on the market without having to buy another home to move into. And the so-called “housing shortage” just vanished.

It happens every time. For years there are claims of a housing shortage, and suddenly there’s not, and there’s plenty of supply, and new supply keeps coming out of the woodwork just as buyers have evaporated. All it takes is a downturn in the market.

The median price of previously owned homes across the nation still rose in June. But in some markets, prices have already dropped by substantial amounts and are down on a year-over-year basis. This includes the San Francisco Bay Area, where house prices were down on a year-over-year basis in three Bay Area counties, namely in San Francisco, San Mateo, which is part of Silicon Valley, and Contra Costa.

Sellers are still trying to get these aspirational prices, but many buyers are saying, forget it. And that’s why there is no meeting of the minds, and sales don’t happen if buyer and seller are too far apart.

In other words, price discovery is going on where sellers are having to discover at what price they can actually sell their home. And during the process, sales plunge, as we’re seeing, and sales will continue to plunge until sellers figure out where the buyers are, and buyers are a lot lower.

Sellers are responding: price reductions spiked by 50% in June from May and about doubled year-over-year, according to data from realtor.com.

This is part of price discovery: reducing prices and reducing prices further until a sale happens.

These price reductions are a reset – after the era of those ridiculous bidding wars. More sellers are coming to grips with a new reality: Prices have to go where the buyers are, and buyers are around somewhere, but they’re a lot lower.

So American Homes 4 Rent on its earnings call last week, said a whole bunch of interesting stuff about how it sees this housing market.

In the conference call, it said that it has slashed its purchases of single-family houses by 80% from earlier this year, to “allow the market time to recalibrate and stabilize.”

It said, though interest rates have risen, home prices have yet to come down enough.

It noted that inventories of previously owned houses and new houses are growing, and that, “the time that they’re sitting there is much greater.”

It said, “We’re starting to see some price discovery happening. But we’re still early in that process.”

It said that it’s receiving lots of calls that it wasn’t receiving previously, from owners of small portfolios of rental houses and even from national homebuilders with excess inventory.

But it said there is this gap between where it expects to bid and what the sellers have in mind. These sellers still want prices that “you would have seen in March.” And it said, “so people are realizing that the market is changing, and they are seeing if they can still get a deal done based on the old pricing.”

And it said, that there’s “still some time necessary to get those properties repriced into the current pricing arena with the current interest rates.”

And it said, “the pricing that we are seeing today is still March pricing and that needs to be adjusted.”

In other words, price discovery. Sellers are trying to discover where the buyers are but just haven’t come down enough yet.

And the CEO said: “Rates are going up and prices are coming down. It takes time. We are seeing inventories expand. We are seeing the length of time that homes are on the market expand. We are seeing national homebuilders’ inventories increase.”

He said, “It’s only been in the last two to three weeks that we’ve actually seen any price declines.”

He said, “it’s driven more by the West Coast, but not entirely. And we’re seeing some of those declines in the 10% to 15% range in markets like Seattle and Denver.”

He said, “we need to be patient and allow the market to reset.”

And he said, “It’s all about the fact that capital cost for us as well as for the individual homeowner has changed, and that’s got to get reflected in the marketplace.”

He said, “you can have people on the sidelines, but they also have to be able to afford the offering. And when you think about interest rates rising, and you go with a home mortgage from 3% to 5.5%, it’s a significant increase in the payment, reducing affordability.”

And he said, “So, we still have a fair amount of price discovery and it takes time to get the markets to stabilize. But they’re volatile.”

So, in response to this environment, the company slashed its purchases by 80%, and it’s waiting for prices to come down and for the market to reset.

And those are the pros. They’re not influenced by emotions or, you know, stages of life, as many homebuyers are. They’re just looking at these houses as an investment, and those houses aren’t making sense at current prices with current interest rates, and so these big institutional buyers with huge resources are largely walking away from the market.

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  216 comments for “Housing Bubble Getting Ready to Pop: The Big Boys Leave, Waiting for Reset

  1. Howard says:

    If a house rose 100%, it must drop 50% to get back to where it was with 3% interest rates vs 5% rates.

    A 10-15% reduction in asking price doesn’t seem like motivation to buy, but maybe I’m wrong?

    • Capitalist says:

      I am no expert but wages are growing at 6% rate. So a family with two working members can now afford a house with 12% higher mortgage payments. This is on average. May be some with large wage gains will be able to bid much more on desirable houses!

      • unamused says:

        “wages are growing at 6% rate”

        Relative to the cost of living they’re actually falling, but they’ve been nearly flat since the 1970s.

        “May be some with large wage gains will be able to bid much more on desirable houses!”

        It’s more likely you’re trying to talk up the market.

      • Depth Charge says:

        Wages? Why would those all of a sudden matter? They had nothing to do with the price spikes.

        • Capitalist says:

          Wages had nothing to do with price spikes but I am thinking if housing prices keep declining over several years instead of crashing quickly while wages also keep going up, eventually will the bigger wages be able to prevent house prices from falling and create some form of equilibrium?

      • Educated but Poor Millennial says:

        Sorry, my friend but your mathematics sucks! 2 working people will get total 6% increase not 12%, don’t add percentages,

        • El Katz says:

          Math is hard……

        • Dangerous Dave says:

          Not only is the Math wrong, but I don’t actually know anyone outside of the public sector (admittedly here in the UK) getting a 6% pay rise and prices of everything are escalating fast (inflation and mortgage costs if you will).

        • David H says:

          No one noticed that this is also wrong in the original post? Apparently the comments section needs a calculator next to it.

          “If a house rose 100%, it must drop 50% to get back to where it was with 3% interest rates vs 5% rates.”

        • Tony says:

          How do you figure the math is wrong David H?

          100% of 500k is 1 million. 50% of 1 million is 500k.

          Seems pretty straight forward.

        • David H says:

          “to get back to where it was with 3% interest rates vs 5% rates”

          I could be misinterpreting that but to me this sounds like he was also including the increase in interest in the payment. Confusing sentence though, you’re probably right.

      • andy says:


        I think you meant 6% x 6%, so 36% more affordable! Lol

        • Scott says:

          Rookies. If the house was unaffordable by -10% and now they can afford it with 2% left to spend then the 6% raises x 2 + 2% + 10% = 20% more affordable! But in reality it’s infinitely more affordable because before they couldn’t afford it!

      • rojogrande says:

        The combined income of a family with two working members only goes up 6% in the example. If their combined income was $100,000, and they both get a 6% raise consistent with current wage growth, their income goes to $106,000, not $112,000. They aren’t getting 12% (6% times 2) because both family members work, they are getting 6% across the entire income of both family members. All things being equal, they can afford mortgage payments that are 6% higher.

        Increasing wages should support higher prices though.

        • RealLifeMathisHard says:

          No they can’t.

          You forgot to take out income tax (Federal, state, and maybe city) and social security.

          After tax they are getting a whole lot less than $6000.

        • james wordsworth says:

          To add to that … a 6% increase in wages does not mean a 6% increase in take home pay. That 6% is in the highest tax bracket of the couple … so likely less than 6% increase in total take home pay. Maybe not a whole lot less, but almost certainly less than 6%.

        • rojogrande says:

          That’s not exactly correct since tax brackets are adjusted for CPI. All of the lower tax brackets that apply to the couple’s income will be adjusted upward with the CPI, so the 6% increase will be taxed proportionally in each tax bracket applicable to the couple. There may be a slight timing issue because the brackets are only adjusted once a year and that may not coincide directly with the increase in earnings, but the taxes won’t go up much, if at all, as a percentage of income unless the increase in earnings exceeds the CPI.

        • rojogrande says:


          No, that’s incorrect. First, look at my response to James Wordsworth. Second, the couple needs a whole lot less than $6,000 to have a 6% increase in take home pay. To illustrate, in the example I used the couple’s gross income was $100,000, so maybe their take home pay was $80,000 depending on where they live. If their gross income goes up 6% ($6,000) their take home pay only needs to go up $4,800 to increase 6%. That leaves an additional $1,200 for taxes from the 6% increase in gross pay. You’re forgetting that take home pay is already a percentage of gross pay, thus it requires a lower increase to go up 6%.

    • kam says:

      Strange World we live in but 2×4 framing lumber has moved from a low of $450 to $600-650 in both cash and 30 day futures.
      And FWIW, in my fully downsized (not working to support the slugs in Government) operation our prices (we are a price taker) have not only gone up 3 fold since last year but our largest customer booked firm orders and pricing to the end of this year.

      • Gattopardo says:

        Yeah, saw that and don’t get it at all.

      • Depth Charge says:

        It’s just endless bubbles right now. Pump and dump, pump and dump, pump and dump. There’s too many trillions sloshing around everywhere. It’s a disgustingly unstable system.

      • Kurtismayfield says:

        I have been up in lumber land all week. The mills are running, the lumber trucks are full, and the stockpiles of cut lumber are very large

    • jon says:

      Ground report from San Diego: Not sure if prices are dropping but I am now getting lot of emails from RedFin about price reductions even from very good neighborhoods.

      Sellers are definitely coming down from aspirational asking price.

      The CPI is at 8.5%, Fed inflation target is 2-3%, so rates have a lot of increase. Not sure why the market went up.

      I’d be surprised if FED stopped hiking rates. Hiking rate is one thing, on top of hikes, QT is coming which would be more impactful I guess as this would impact yields on 10yr treasuries.

      Let’s see.

    • TheFalcon says:

      Howard some will buy into the declining market and perhaps more will sit it out as in the flip side of the FOMO coin – aka why not wait a little longer to buy, prices will be even lower in 6 months.

  2. SilentC says:

    I watched a $1mn house in Denver in a homogeneous neighborhood take a $100k price cut last Thursday and not go under contract. They were clearly the low “ask” for the neighborhood. Buyers have figured this thing out finally.

    • butters says:

      What would be the price in 2019? I think houses will drop to 19 level by Spring 23.

      After that anybody’s guess.

      • SS says:

        The house prices are dropping big time over Pandemic peak in Seattle area (>15% drop now for houses that got sold) now.
        There are many houses that failed to realize trend and are now listed for 60+ days.

        Continuing for thread on video. Clearly the appraising agencies were grossly wrong during on house appraisals during peak Pandemic. This system lacks accountability as banks still created many mortgages that were bought by Fed and backed by taxpayers.

        As taxpayers are on hook for these losses, can we not sue the rating agencies for forcing accountability.

        Shouldn’t the Administration and Government do the same to pressure them in being more responsible and accountable. This would help government as inflation come under control as rents and house prices will drop.

        Government can in future find real estate appraisal agencies complicit in crime against American taxpayers by causing huge financial losses to latter as mortgage rates keep rising and layoffs increase.

        • SS says:

          In essence, I feel that appraisal agencies are the weak link in tha chain that the administration and the government can hammer to break this viscious Rent and House inflation easily.

        • BuySome says:

          National debt is fine since it’s displaced upon the backs of people who aren’t alive yet and have no voice. But moving the land use decisions away from local political bosses to a higher level is just plain “Socialism” since it might cut fat off of “living beings”. They were just joking around about all that General Welfare stuff while writing the Constitution. Besides, they were probably all just drunk during the voting process. Corruption starts at home.

        • Boeblingen says:

          “Government can in future find real estate appraisal agencies complicit in crime against American taxpayers by causing huge financial losses to latter as mortgage rates keep rising and layoffs increase.”

          add Zillow to the list. They seem to be bought and paid for by the government just like Lamestream Media, Big Tech, Pharma & AG.

        • COWG says:

          Jeez… what are you guys smoking…

          In the last two years, these dumba**es threw money at houses left and right while waiving inspections and appraisals which defies all proper procedures for buying real estate…

          The only thing an appraisal can do is to give an approximate valuation of what a willing buyer will pay a willing seller….

          This is based on many factors, as you should know, as well as CURRENT, not guessing at future, market conditions…

          To trash appraisers for doing exactly what they were paid to do is disingenuous at best…

        • El Katz says:


          Isn’t it funny how the stupid things people do are always someone else’s fault? Everyone’s a victim!

        • Julian says:

          Next time you vote ask for elimination of lobbying. You will think me.

        • 91B20 1stCav (AUS) says:

          “…sell the sizzle, not the steak…”.

          may we all find a better day.

        • Joe says:

          Appraiser’s fault? Same ol’ same ol’. Right, the people in the biz who make the least on a transaction are the ones who caused the problem. Follow the $. The appraiser simply takes a snapshot of the market at the time of sale/refinance/value date. Been doing this 30 years. There was never a need to get pressured to hit a value higher than market. Does it happen? Yes. But, you would be surprised as to how many appraiser actually undervalue a property during a rising market – in order to be conservative (which an appraisal should never be – it should simply value at MARKET VALUE, which is defined in every report).

          And during the last two years, there are has been more business than ever in the last 30. There was simply too many jobs to take to risk a license with a higher than market value. Never ceases to amaze me when I read otherwise financially smart commenters assume it’s the appraiser’s fault. I remember Mish Shedlock making this comment back c. 2009 and from then on I took his column with a serious grain of salt. A know it all, who had no idea what he was talking about, but writes anyway. He said something like google “appraiser and overinflated values” just to prove there were tons of results. I told him to google “witches” and he’d find tons of results. It should be embarrassing.

      • Will V says:

        I want to believe the theory that things will revert to the mean but they won’t. Money supply is still through the roof and the FED is dragging their feet on contracting it through QT. We have inflation “peaking” though ridiculously still too high and though the FED “speak” says they will fight inflation, they are doing it SO slowly as the Sept predictions dropped from 75bps to Mary Daly stating 50bps. These are criminally slow moves but they don’t want a true recession and inflation chews down the national debt. Sure $2M condos in Vail will drop but no “real” reduction in SFH pricing until there is “money” destruction. It will just rotate from one asset to another. For example those who bought the S&P dip to 3600 just made 20% and can flip “that” into the more stable slightly “dropping “ asset of housing.

        • butters says:

          “I want to believe the theory that things will revert to the mean but they won’t”

          May not for others, but for housing/autos it has to. Or the interest has to go back to 2% to support these prices.

        • COWG says:

          “ I want to believe the theory that things will revert to the mean but they won’t.”

          What is your mean…

          “ We have inflation “peaking” though ridiculously still too high”

          Inflation hasn’t “peaked”…

          The rate of increase dropped slightly is all…

          CPI-W is still at 9.1% !

          So by Dec, if the rate of increase is down to 7%, would you be celebrating…

          In other words, you are falling victim to a narrative you want to believe, but isn’t true…

          Any inflation, not matter how small, is deadly to the economy in the long run…

          So inflation this year is 8, next year is 5, then 3… you have lost 35% of your purchasing power in 5 years… but at least it “peaked”, eh…

          Until inflation is zero, inflation has not peaked…

        • El Katz says:


          Cars reverting? From August 9, 2022 Automotive News:

          “DETROIT — General Motors has begun requiring all Buick and GMC buyers to pay $1,500 for a subscription service that previously had been optional.

          The mandatory upcharge provides a three-year subscription to OnStar, GM’s long-standing in-vehicle safety, security and connectivity service. It’s included in the manufacturer’s suggested retail price of all Buicks and GMCs ordered starting June 2 and all Cadillac Escalades ordered starting July 18.

          The $1,500 plan is listed on the window sticker as a separate line item along with other additions to the vehicle’s standard equipment, but there is no option to remove it or order the vehicle without it. Customers who decline to activate their OnStar service will not be given a price reduction, GM said.”

          More of this stupidity is likely coming.

        • Wisdom Seeker says:

          Mean reversion has become a tricky concept.

          The US Dollar, and all other major currencies, are not reasonably-stable units of measurement. They all drift down in value, and at rates that change at different times. High-Inflation is quite literally a time when currency values drop faster than normal.

          Mean-reversion of price trends, in dollars, breaks down when inflation is high. For instance, interest rates might return to 1980 levels – but house prices never will. The S&P500 index back in 2000 was incredibly overpriced at 1500. Then again in 2007 it was still grossly overpriced at 1500. But the S&P at 1500 next year would likely be fairly priced or perhaps underpriced – because of the subsequent inflation.

          What inflation does best is to ratify policy and pricing errors, keeping financial asset prices higher than they should be, and avoiding much-needed housecleaning. All at the expense of the public who pays the silent tax of watching as their income becomes worth less.

          Inflation entrenches moral hazard on the grandest scale.

    • AlamedaRenter says:

      House in the Oakland hill just showed up on my search criteria. They dropped it from $1.3 mill to $799K. Total reduction of $549K!!

      Nice-ish place, a bit dated but still wouldn’t need work. 3b 2bth 2,200 sf.

      • BH says:

        A reduction in the asking price doesn’t mean a reduction in value. They shouldn’t have been priced that high, to begin with.

        All of this “price reduction” talk is nonsense. Supply is still low. Houses priced appropriately will continue to sell at good prices.

        If you’re waiting for a huge reduction in pricing, don’t hold your breath.

        • Jon says:

          I thought the same in 2008 2009 :-)
          May be this time is different as well all are millionaires

        • Misenome says:

          Expecting prices to stay where they are is entirely nonsense. Demand and supply are tied to prices. Because of repressed interest rates there was a shortage, because payments were cheap. There is no shortage at today’s prices.

        • rojogrande says:

          “Value” is what a seller and buyer agree the price of a house should be. If large numbers of sellers are reducing prices because buyers do not “value” them at the listed price, discussing those reductions is hardly nonsense. It’s an indication the market is changing and market participants need to adjust.

          Perhaps if sellers and their realtors priced houses “appropriately” discussing price reductions would be nonsense, but they seem to be having trouble doing that right now.

    • Curt says:

      Had they originally listed it at $900K, they might have sparked some interest.

    • Educated but Poor Millennial says:

      because, that $1M house needs about $250k cut, to let people buying it with the same monthly payment , meaning that it is still more unaffordable than before, even with 100k cut.

    • Seen it all before, Bob says:

      Housing and stock prices will drop to 2020 levels. With some overshoot into 2019. We can’t keep this pandemic explosion going on forever.

      Since it will be at 2020 levels, the last 2 years of inflation will deflate the bubble without ANY loss of equity for householders or stockholders who purchased in 2019. The banks will be safe. Whew…..

      Soft landing, here we come…….

      • Sams says:

        Now, the US dollar and other currencies can be said to be real estate backed. Now, what impact may a reduction in housing prices have on the currency?

  3. Capitalist says:

    FWIW, good houses (renovated, good neighborhood) in NYC suburbs are still selling 50K-100K over asking but other houses are sitting for months. Houses are in extremely short supply. Sellers are under no pressure to reduce prices. Price is stagnant. With drop in mortgage rates, who knows, prices might start going up again?

    • Kunal says:

      Exactly. There is already rumor of Fed U turn. Under these situations no owner will sell at lower price than his/her neighbor. RE crash will remain a dream for to be buyers.

      • Wolf Richter says:


        Let me just repeat it here to counter-troll you, since you’re so hilarious and provide for the amusement of us all:

        The median price of single-family houses in San Francisco plunged in July, for the third month in a row, and is now down 9% from July 2021. That’s a pretty good start.

        You “Fed U-Turn” trolls are totally delusional, just like you (yes, you Kunal) were last year about tapering and end of QE (“will never happen”), and just as you were early this year about rate hikes and QT “will not and cannot happen because the Fed is trapped”). You’re our local comedian here :-]

        • bayou says:

          This must be a super, super duper housing bubble as you were calling a housing bubble when prices were 80% lower. Of course the Blackrock’s are salivating as high rates always makes buying a home more expensive for borrowers and squeezes out the overleveraged, especially when they lose their employment, while the Blackcroocks are cash buyers and buy the falling assets!

        • Wolf Richter says:


          To document the crazy house price increases, I started in 2017 a monthly series “The Most Splendid Housing Bubbles in America.” My most successful series ever, and still going strong, though the title, which will not change, will take on cynical nuances a few months from now when the Case-Shiller, whose data lags about 6 months, catches up with reality.

          BTW, AS THE ARTICLE SAYS, it’s the institutional buyers that are pulling back now. Why? Because at those rates, those prices don’t make economic sense anymore. The “cap rates” have gone up, which means lower prices to make deals. The pros are in this to make money, not be happy.

        • Andrew says:

          Wolf – where’s the QT?

          Holdings have barely budged. Housing prices are at record levels and the fed hasn’t reduced any MBS assets. Real interest rates have never been more negative. The fed is getting exactly what they’ve wanted for years — inflation — and they’re putting on a good show pretending to be hawks. Talk is cheap though.

          The market is correctly identifying that the only thing you can count on is more inflation.

        • Wolf Richter says:


          “where’s the QT?”

          Don’t post this braindead garbage here (some of which I deleted). READ THIS and don’t comment about QT unless you’ve read every word of this article and UNDERSTAND all of it, including what it says about MBS, which may be too much to ask from a troll:


          The plan of QT is to shed $47 billion per month for three months, and then shed $95 billion per month going forward. QT started in July. By the balance sheet that included the end of August, $91 billion had been shed. AND YOU MUST READ WHAT IT SAYS ABOUT MBS IN THE ARTICLE. You’re done commenting here if you don’t.

        • Clete says:

          “You’re our local comedian here :-]”

          Thanks, he’ll be here all week (apparently).

        • Educated but Poor Millennial says:

          Wolf, where you waiting for Kunal? LOL

        • Wolf Richter says:

          I started to miss him :-]

        • Tyler says:

          “You’re our local comedian here :-]”
          I am going to bookmark this and come back a year from now to see who the “real” local comedian is.

          I really hope it is not Wolf, but when you don’t have a free market economy, it makes it really hard to predict.

        • Wolf Richter says:


          Are you going to come back here a year from now when it turns out that YOU are the real comedian? You see, that’s the problem… you people disappear when it gets inconvenient. I don’t.

        • J-Pow!!! says:

          I am fully prepared to restart QE should the economy faulter. I will stop at nothing to promote full economy and fulempkoymebt and full housing!

      • Seen it all before, Bob says:

        Thank you, Wolf, for supplying real data.

        I am so tired of “I heard on the internet” with no data to back up any claims. It’s as ridiculous as any lout who still claims they won an election without ANY real data or proof.
        What is wrong with people????

    • butters says:

      “Houses are in extremely short supply. ”

      Same ol’ tired argument.

      • Moose Meyer says:

        In my market in Southeast Florida there’s plenty of supply, if you want a condo over which you have no expense control or a $3M plus home.

        High dollar home owners seem to be willing to hold out. How long this lasts is anybody’s guess.

        • Clete says:

          @Moose: I expect that the high-end owners don’t have mortgages, so other than the evil HOA, there’s no risk of being upside down.

        • Anthony A. says:

          Moose, the next hurricane that hits Florida will straighten out the housing situation, at least until everything is rebuilt and the next set of snowbirds show up.

        • Bobby Dale says:

          Homeowners insurance with 2-5% deductible will be the kicker

      • Lili Von Schtupp says:

        Butters, yes and no.

        Suburban NYC is incredibly congested, not much land left to build out without encroaching on the super wealthy’s vast plots so they’re starting to build up. Once upon a time pearls were clutched when a Pizza Hut opened my quaint lil Westchester town. They’ve built large SFHs on all the meadows over the years, turned old decommissioned school buildings into rentals but it still had small town character. Last I visited, they’re literally blasting the two large rock hills left in town to make room and started building, gasp, 5-story+ luxury condos I’ve heard are all sold already. So, yeah, short supply is a thing there, hyper-locally.

        A few counties north, huge woods land cleared for 12 advertised ‘luxury’ home builds (a toilet, sink AND stainless steel appliances! Luxury!). Over a year later the trees remain in the spot they were knocked down, the entrance has a dirt road, and not a thing has gone up. Down the road a similar situation, 10 lots available, over a year later still only 2 sold/not yet built. Across from the hemp farm by Noxon Road, huge land lot cleared that could easily and comfortably fit 15-20 sane-sized homes in a quaint middle class neighborhood, instead going to 5 or 6 Starter Castles for the Upper-Middle that are lingering in various stages of construction.

        The wealth disparity is hyper evident here which is why I always call this neck of the woods its own beast. Short supply has always been a thing to some degree, at least since the 80s/90s.

        • Lili Von Schtupp says:

          “I tell ya, country clubs and cemeteries, the biggest wasters of prime real estate.” – Al Czervik, Caddyshack

          Almost forgot to mention that important contributing factor of suburban NYC.

        • Einhal says:

          Are you talking about the Pizza Hut in Cortlandt on Route 6? I remember people talking about that at the time. I’m dating myself.

        • Cytotoxic says:

          Once again: single-family zoning and other zoning restrictions are keeping us poor.

      • MiTurn says:


        “Same ol’ tired argument.”

        Ask any realtor, it’s a great time to buy!!

    • Wolf Richter says:


      “are still selling 50K-100K over asking”

      Yes, that’s the case anywhere, if the asking is low enough.

    • ru82 says:

      Exactly. Affordable houses in good area are in short supply. Where I live the unemployment is low, schools are good, crime is low. Existing homes that are 3x or 4x salary are slim pickings. They are about 10% of the entire inventory for sale. Sure, they are building a lot of new homes but these new homes are 5x the medium salary.

      Now just a 15 to 20 minute drive is a city with low rated schools, higher crime, and higher unemployment. Plenty of affordable homes in this area. If one would be willing to commute 15 to 20 minutes, they could easily buy a home at 2x to 3x. Just 4 years ago they could have bought for under 1x.

      But nope, people would rather rent in the nicer city. So what has happened, lots of luxury apartments have been built the past 10 years in the nice city. Many would like to buy an affordable home but there is not any.

      • Wolf Richter says:

        “Affordable houses in good area are in short supply.”

        Let mortgage rates go 3 percentage points above the rate of CPI inflation, and home prices will drop 50% — back to where they were a few years ago — and then there will be plenty of supply of “affordable houses.” It’s just that all prices have spiked out the wazoo after years of interest rate repression, and these prices are just not affordable. It’s not a secret.

        • Cytotoxic says:

          They won’t be nice houses. They won’t exist where the demand is.

        • Gabby Cat says:

          Thanks for a ray of hope Wolf! In Central Ohio, like the neighborhood above, houses now sit only two weeks before being purchased anywhere from 10K – 100K more. Contingencies are making a small comeback. The only houses cutting costs are above 700K and not by much. Now these houses prices for Central Ohio are exuberant. The same new build house went from 320K in 2019 to 720K in 2022. Actually, the upper price cut all the incentives like finished basements and upgrades to all interior decor. Our area leaders say this is caused by Silicon Valley moving to Central Ohio. In closing, existing homes in this area usually sit around 300K and now sell for 450K after bidding wars. I take one of your wise points to heart “Wait for the cheaper home. You can always refinance to a smaller rate, but you cannot renegotiate the sale price after the sale.” I just hope it gets here soon.

      • John Galt says:

        “Homes that are 3x to 4x salary” Hahaha I love this. Come to the South Bay area, homes are 13x to 20x salary, and that’s at $150,000/yr income.

        • Gabby Cat says:

          The point, Mr. Galt, is that you are paying for location. Bay Area weather is marketed as paradise. That is why others are willing to pay 10x salary. Ohio, we have corn field and an insane weather pattern. Elevation is very high and the only thing going for it – is cheap land. No one in their right mind would pay 4x salary for it. By the way, when are you going to create that lovely parallel society. I would be happy to board your train to visit. Between my hubby and I, we have 50 patents. :-}

  4. BuySome says:

    Recall those old TV commercials that made you want to vomit on the screen…that human runt who opened with, “Let me say just one thing. Constipation.”? More product than a gut can currently absorb leading to an unwanted blockage we can call “back logs”. When a dam breaks, an ugly mess usually ensues downstream.

  5. Seneca's Cliff says:

    Our new subdivision is situated between two R&D chip fabs and is kind of an Intel ” company town”, with at least 80% of homeowners being engineers or scientists at Intel. All the lots are owned by one of the big homebuilders and already have a particular house planned and approved for each lot. About 6 months ago one of the last unbuilt blocks in the area had all the foundations poured but then all work stopped. The foundations just sat there with weeds growing around them with not activity. Then two days ago when the congress passed the “Chips” act things took off. The next morning dozens of workers showed up , the lumber showed up and they started framing every single one of the houses at the same time. Could be coincidence, but who knows.

    • ru82 says:

      Wow. Thanks. All about location.

      What happens if one or both of those chip factories close in 10 or 20 years? I guess it will all depend on industry diversification over time.

      I now of a small town that Amazon moved a warehouse too about 10 years ago. Creates a lot of jobs, new houses, etc. Amazon moved out to be closer to the major city.

      The Developer/owner of the warehouse who was leasing to Amazon declared bankruptcy right after Amazon moved out. I am guessing the prices of all homes in this small town took a beating.

    • El Katz says:

      The same thing happened out here in the Verdes Foothills. Trilogy aka Shea Homes (along with Toll) did grading and installed infrastructure for a year. Disappeared. Then came the curbs and binder coat for the streets. Sat. Then they poured foundations en mass and houses are popping up like weeds.

      It may simply have been the builder(s) stockpiling materials so, once the crews showed up, they were kept busy, rather than them getting involved in other projects and contributing to further delays. The other section of Trilogy that is nearing build-out suffered from numerous starts and stops as did the new local fire station from material being unavailable.

    • Gabby Cat says:

      We are getting one of those. Our average home prices jumped 45% over 2 years. Due to Chip in Central Ohio – they are anticipating another 40% hike in residential RE. We do not live in paradise, just corn fields with crazy weather. I do not see people willing to finance homes at 8+X salary.

  6. Kunal says:

    Both stocks and Altcoin are coming back. Yields and Mortgage rates are falling slowly again. There is chat on the street about Fed pivot and QE again. RE owners will hear these and hold tight till wind starts to blow in their direction again. That’s why inventory is still record low and there are no good livable homes on the market. Impending RE crash will remain a dream, given the situation.
    Fed has corrupted an entire generation and addicted them to low interest, easy money, debt cancellation, handouts and bailout. No way out of this now without a reset which our politicians will never allow.

    • Wolf Richter says:


      “Yields and Mortgage rates are falling slowly again.”

      Well, that’s kind of old hat. They’ve jumped. 10-year yield at this moment jumped back to 2.84%. Mortgage rate (daily) as of yesterday back to 5.2%.

      Also just for you, Kunal: Got the data yesterday: the median price of single-family houses in San Francisco plunged in July, for the third month in a row, and is now down 9% from July 2021. That’s a pretty good start.

      • Mendocino Coast says:

        So : …`Got the data yesterday: the median price of single-family houses in San Francisco plunged in July, for the third month in a row, and is now down 9% from July 2021. That’s a pretty good start.
        *** 9% is quite a jump.***
        With Still very Hi Inflation & 3/4% Short term Rate increases the Current Market seems approaching a “direction trend”for the better back toward a more normal overall housing market in the eyes of the Common Home buyer do you think its still way to soon to place a Guess what the Fed Rate will do during early 2023 that is rapidly approaching us ?
        Is? the Cut the rate Mindset now something to reconsider in View of what happened During the Trump era .

      • AustraliaRealEstateMan says:

        In your article on Australia real estate you indicated that the median price of home in the big cities was falling.

        In an earlier article you indicated that median prices are not good indicators of actual prices changes and gave an example of where the mix of houses skews the results.

        Here is some real time data for you to “contemplate”:

        1. The median price of houses in Toorak in Melbourne over the past year fell by 9.6% to A$5,187,500. I don’t know what the average price of houses sold there was over the past year either.

        The most expensive house for sale in Toorak is at 17 Georges Street and has an asking price of A$65,000,00 to A$70,000,000.

        And one good thing about all real estate listings in Victoria is the requirement to have a “Statement of Listing” with the property which shows the asking price of the property and if available three comparable properties that sold within the area. With Toorak you are only going to get the asking price as these are all basically unique properties.

        The next most expensive house in Toorak was listed at between A$24.5 to $A26.5 million and is under contract.

        The third most expensive property listed there is between A$14.8 to A$18.8 million.

        (Estimates are that the majority of the fall in median prices in Toorak were over the past three months.)

        2. Prices in another area of Melbourne, in Sorrento, went up over the past year by 29% to A$2,515,000.

        3. And in the western part of Melbourne in Ardeer the median price change over the past year was only a 5.8% increase to A$709,000.

        Now given that the above three areas are all in the Melbourne area and have had very different price patterns over the past year and more than likely over the past three months, is the real estate market in Melbourne in reality going up, going down, or remaining unchanged?

        Furthermore, given the huge median price changes in for example, Toorak, which is about equal to 70% of the median price of a house in Melbourne, how does this data skew the overall result?

        Given the wide range of house prices in Toorak, what is really going on there? These type of super high priced houses get sold maybe once in 10 or 20 years.

        It is a similar story with other near CBD area in Melbourne with recent price falls over the past three months in the range of 7 to 9%. These are the areas with median in the millions.

        With these areas have fallen by that amount and the median for the entire Melbourne area having fallen by about 2% over the past three months, that must mean that other areas are continuing to increase in price or the median for Melbourne would have fallen more than 2%.

        And just for more real estate porn, the median price of a house in Noosa Heads, Queensland went up by only 52.1% to A$2,225,000 over the past year. This is one area that a lot people decided to relocate to as a result of the numerous lock downs in Sydney and Melbourne.

      • Tony says:

        A very good start indeed. Wolf, any idea on what the typical lag time we have seen with increase in interest rate and some decline in home prices? Also, what about firms laying people off? It has seemed modest so far. Wondering at what point it might show up in the labor markets.

    • Einhal says:

      You do realize that there is no chat on the street about the Fed that actually comes from the Fed? It’s all hopium from Wall Street, and they figure if they lie enough, retail investors will start to believe it, buy in accordingly, and then they are the bagholders.

    • Here it comes says:

      Kunal, I’m not rooting against you but I’m fairly certain you are going to be in a lot of financial pain over the next decade.

      Nobody has lived through a bear market like the one that is coming (which I’m still not convinced has actually started yet). But when it comes, perma-bulls are going to have their lunch eaten over and over again.

    • c_heale says:

      Politicians and the Fed won’t be able to stop it. Have seen this play out before. This time it’s different is never true.

  7. Tim R says:

    We ain’t seen nothing yet.

    Having lived through a booming metro area in the first house bubble, the amount of construction in my area now is honestly hard to fathom — remodels, houses, condos, apartments, commercial, retail, industrial, freeways and even a MASSIVE chip fabrication plant. You can drive to literally any part of the city and find large construction projects underway.

    I am not a clairvoyant but when and if this comes to a halt, the construction layoffs will be profound and should lead to profound layoffs in sector after sector, in a domino effect.

    The run up has been so preposterous that the downfall could make some long for the good ol’ days of 2008.

    • Abomb says:

      Sounds like Phoenix metro….

      So now that the cost of living in Phoenix has deteriorated so poorly due to housing and the pending spike in water rates, all Phoenix has going for it is no snow. Hmmm….

      That chip plant has pretty much put a cap on the City’s sustainable water supply with the pending cuts on the CAP that are to be announced in the next several weeks. Tier 2A or B likely announced next Tuesday, but the cuts I’m talking about are beyond that and related to the 2-4M acre feet the Interior is demanding on the river.

      The cities are now racing to drill wells to pump a finite supply of groundwater until they can get direct potable reuse plants up and running in the next 5-10 years. Is the federal govt gonna bail out the metro? Sinema did get $4B in the IRA to essentially lease water of farmers but that won’t last long at the rates they’re rumored to be asking ($1500-2000 an acre ft or roughly 6-8 times what CAP water costs)

      • Tim R says:

        Can’t imagine how awful the rest of the country must be for people fall over themselves to live in…….Phoenix.

        • El Katz says:

          Tim R:

          Please keep telling people that. It’s horrible here. Hot. OMG. We’re all cinders! Heeeeelppppp!

        • VintageVNvet says:

          Ditto the flower duh state, eh?
          95 degrees and 99% humidity,,, not to mention the worst drivers in the whole world all go there and do their very best to kill anyone stupid enough to walk or bike anywhere near automobiles, even on the sidewalks and inside homes…
          But, ”they” keep coming.
          SO, no, I cannot imagine how bad it must be where they come from, far damn shore.

      • Seneca's Cliff says:

        I can’t figure out why Intel thought it was a good idea to build their large production fabs in Arizona. These things use massive amounts of clean water which is going to be in short supply in Phoenix. I think they climbed on the cheap land within a 2 hour flight of Santa Clara horse 25 years ago and are just starting to rethink that strategy with the new Fab in Ohio.

        • 91B20 1stCav (AUS) says:

          Seneca-too many folks-even those who ‘should know better’-think freshwater comes from a faucet…

          may we all find a better day.

      • Apple says:

        At some point they might need to stop growing cotton in the middle of the desert.

      • Tony says:

        It’s not even the cities that are racing, it’s all of the Central AZ agriculture that depended on the cities to send them their CAP entitlements that they could not use directly. We will have to recover more and central Arizona has been recharging in the AMA aquifers since the 90s, so technically it is recharged Colorado River water they are pulling out (or some of it is at least). It’s been a dance since 2014 on when this could occur…every year we’ve had different irrigation districts, the GRIC, and Mexico conserve water to prop Lake Mead up. DPR is likely further off than that, and desal is probably 10 years out and would be an exchange with Mexico on the Colorado River at Morelos Dam. $1,500/AF-$2,000/AF is close to what the treated cost of the potable water is, and that’s their argument. What is the value to industry to have their water supplies? That’s what the ag communities feel they should be compensated for. Even though leased ag land is about $150/acre….and has 3 – 6 AF acre depending on the crop type. So if they get those high $ payments…it will be a killing for them.

  8. Troy says:

    Talked to a good realtor friend of mine, who has been in the business for a long time.. real down to earth sort of dude. He mentioned how just several months ago new builders wouldn’t give realtors the time of day. And now like it was a flip of a switch.. they’re sending realtors promotions and such

    • COWG says:

      I noted this a few posts back here in my SWFL hood…

      3 months ago no new construction was on Zillow… now all of them are…

  9. Sir Elton says:

    There will be a crash in housing transactions. Sellers will be very stubborn thinking their homes are still worth more due to the “housing shortage”. Housing is the economy and if it dries up for an extended period of time it will eventually spill over to other parts of the economy. You can make the argument to me all day long about how many people are sub 4% in mortgage rates and won’t give that up, but how long are people going to keep their lives on hold. This is America and Americans are impatient and impractical.

    • Sams says:

      The banks just have to figure out that it is to their benefit to let the mortgage follow the house, whoever pay the interest.

      Down payment will then be the sellers part of the value of the house and the mortgage just transfered to new owner. Prices can then be book values with no real price discovery. And no popping of the RE bubble.

      • Depth Charge says:

        What kind of deluded fantasy are you living in? Wolf has already posted massive price declines, yet you’re spinning yarns about how the bubble won’t pop? Thank gawd for Wolf and his facts, because you people are out to lunch.

      • Seen it all before, Bob says:

        They used to call transferable loans “assumable loans” in the 1970’s.

        The current mortgage holder could pay a higher rate/fees to allow them to transfer a current mortgage to a new owner. It would be written in the original loan contract. The new owner would have to come up with the balance between the loan and the selling price and then assume the current balance of the loan with the interest rate.
        This worked when interest rates were rising and a new buyer could assume the lower rate. It helped the seller with a higher prices and quicker sale. It hurt the banks who could not roll off the old lower interest rate loan and start a new higher interest rate loan.

        What bank would allow me to transfer a 2.5% mortgage on my house when the interest they are paying on savings accounts are above this? I don’t have this in my loan contract and it is not likely a bank would allow this for financial reasons.

        • Seen it all before, Bob says:

          If a bank starts paying the normal(from 10 years ago) interest rate to savers of 4%-6%, they’d be highly incentivized to offer 2.5% mortgage holders a deal to pay off the mortgage as early as possible.

  10. BackRoad says:

    In 2019 the US was already at 4 decade lows in housing inventory. And we still have a long way to go to JUST get back to 2019. I see some weakness maybe in some spots like TX cities, Phx, Boise, Vegas. But no way we get a crash. If rates fall again we could even be back to the races with inventory dropping and getting scary low. We just do not have the labor force in America anymore to build enough housing.

    • butters says:

      “We just do not have the labor force in America anymore to build enough housing.”

      Wow that’s like a realtor speak.

      What we don’t have is demographics that will demand housing as it did in the past.

      • BackRoad says:

        It’s not realtor speak. Don’t live on the internet in a perma bear bubble. Talk to contractors who do this everyday.

        I have been hearing about a housing daily since crash since about 2013. I want it to crash badly. I’m renting I want to buy. I just don’t think it will.

        • BackRoad says:

          If you did talk to building contractors, every one would tell you that for years they cannot find enough people to work for them. Young people do not go to trade schools to become roofers, plumbers, electricians, etc… anymore. They want to work from home on a laptop. Thus we do not have the labor force in America to ramp up home prooduction. AND builders became very conservative still post GFC. They are not going to over build.

        • COWG says:


          Not to do your research for you, however…

          The St. Louis Fed FRED data for months supply of new homes says you are untruthful in your statements…

          Actually, Dec 2019 was a good time time to buy a new house…

          Guess you weren’t paying attention back then…

        • Not Sure says:

          BackRoad, we’re in the same boat. Wolfstreet’s “Housing Bubble 2” section stretches back to 2011. And by 2013, the articles were more clearly focused on a housing bubble destined to pop. They were well written with perfectly sound arguments, but here we are a decade later. No pop. Nobody could have foreseen the grotesque explosion of pandemic money printing on the horizon.

          I too would love for housing to become cheaper so I could swoop in and buy, but there will be no catastrophic collapse in prices. The bearish voices around here telling tales of impending deflation all seem to ignore the elephant in the room. When we started hearing about a new housing bubble around 2013, the money supply was half what it is today. M2 has doubled since 2013. Flippin’ DOUBLED. And house prices have almost doubled since then too. But housing’s value hasn’t doubled. The dollar’s power to buy houses simply was cut in half. It’s not a bubble… This is just what it looks like when the dollar’s buying power evaporates.

          M2 has stopped its upward march for now, and we’ll likely see a related cooling of house price growth. Markets that were dependent on cash-burning tech companies will probably feel it the most. But the thing is, M2 rarely stops growing for long.

        • Kurtis Mayfield says:

          “If you did talk to building contractors, every one would tell you that for years they cannot find enough people to work for them. ”

          You forgot to mention “at the price they want to pay”. Employment is always based upon how much the rate is. Tell the twenty something’s that you will make 120k guaranteed and you will get plenty of employees.

        • c_heale says:

          Monetarism was comprehensively disproved back in the 80’s in Thatcher’s Britain. No idea why people still refer to M2 etc.

          The problem is that resources and oil are in relatively short supply and this is a vicious circle. We might have a transition to a low energy society, but this will mean crashing back into a new Middle Ages imo.

    • butters says:

      Just few months ago we had one of the largest housing construction booms in decades….wonder what happened to those workers.

      • BackRoad says:

        Have you ever looked at a SFR housing starts chart over the last 50 yrs? We certainly did not have “one of the largest housing construction booms in decades”. We have not built anywhere near the number of houses the last 13 yrs post GFC than any of that previous 50 yrs.

        • butters says:

          April 2022 we were building as many homes as July 2002. So clearly there’s no shortage of construction workers.

        • Wolf Richter says:


          You people keep ignoring multifamily construction. Lots of folks don’t want to live in a HOUSE. Mid-rise and High-rise living in the center or close to the center is an awesome way of living, and lots of people have discovered it. And there has been a HUGE boom in multi-family construction. In big dense cities, multifamily construction has totally dominated for over two decades. In San Francisco, just about everything that has been built (3000-4,000 housing units per year), has been multifamily for decades. No one builds single-family houses in SF anymore. Same in other dense cities. So when you look at housing supply and demand overall, you cannot just ignore that HUGE shift in how lots of Americans WANT to live – and it’s not in a house out there somewhere, but in or near the center of a big city up higher where they have a gorgeous view. You people need to get out a little.

      • El Katz says:

        The “construction workers” have a significant backlog of work. I personally know of 3 people in our little community who are waiting for contractors to finish other projects to begin working on their homes.

        • Clete says:

          @El Katz: Same in our little mountain town. I’m hearing from people buying lots that the builders are 3 years backed up.

        • Tyler says:

          Same thing here. I have been trying to get my remodel completed for a year now. No one is taking on new work because they are so backlogged.

    • Enlightened Libertarian says:

      It is not the labor, it is the lack of buildable land, and it is going to keep getting worse.

  11. phleep says:

    In ’08, a large project near me, mainly condos, over almost a square mile of area I think, just froze, for 10 years. Then, it re-started, while massive square footage has been built in my area, super-dense. Many of those buildings are brand new, and I have yet to see any significant move-ins. In the more dense (San Diego) city area, whole blocks are transforming into mid-rise housing, much half-completed. I’ve never been a central-urban dweller, and these places seem uninhabitable to me, like horrid cubicles. But evidently, frogs can be boiled, humans can be trained to submit to any crowded indignity.

    It is like the Fed’s moves, it has so much lag: pedal to the metal, then hit the brakes, go into a skid. Very hard to steer a battleship in any event.

    • unamused says:

      “these places seem uninhabitable to me, like horrid cubicles”

      Warehousing for industrial drones.

      “humans can be trained to submit to any crowded indignity”

      The mind is its own place, and in itself can make a heaven of hell, a hell of heaven. People can also be weaseled into buying pet rocks and baitcoin.

      “It is like the Fed’s moves, it has so much lag: pedal to the metal, then hit the brakes, go into a skid.”

      The Fed put the pedal to the metal after the dot-com bust and it took years to get the US economy moving again, although it mostly just accelerated financialization and generated asset bubbles while the real economy was being exported to Asia.

    • COWG says:

      “ and these places seem uninhabitable to me, like horrid cubicles.”

      Down here we call them pre-death crypts…

    • Boeblingen says:

      Nice quote: “I’ve never been a central-urban dweller, and these places seem uninhabitable to me, like horrid cubicles. But evidently, frogs can be boiled, humans can be trained to submit to any crowded indignity. “

    • Wolf Richter says:


      “I’ve never been a central-urban dweller, and these places seem uninhabitable to me, like horrid cubicles.”

      I think the same way about houses out there somewhere. I have no idea why anyone would want to live in a single-family house, especially if it’s out there somewhere, miles away from anything. And you look out the window and what you see is your yard, and the street, and a fence, and the neighbors house, and maybe some trees. I could not envision a more boxed-in existence.

      But hey, it’s a good thing that everyone likes something different or else we’d all be trying to live in the same place.

      • Christopher Burrell says:

        It depends on where out there somewhere is. There are plenty of ugly out there somewheres, but there are also plenty of beautiful breath taking out there somewheres that no big city built by human hands could even come close to replicating. Different strokes for different folks I guess.

        • MarkinSF says:

          Wolf’s just saying that he loves being a central urban dweller (as do I). What’s he’s not doing is judging other’s preferred living environment. He’s responding to a condescending comment that likens these poor central urban dwellers to frogs being trained. Implying that his personal choice of lifestyle is superior.
          And living in San Francisco there ample opportunities to visit a lot of natural beauty.

          “I’ve never been a central-urban dweller, and these places seem uninhabitable to me, like horrid cubicles. But evidently, frogs can be boiled, humans can be trained to submit to any crowded indignity.”

      • jr says:

        I live in a single family house that is “out there” on an Island in the Salish Sea. We can walk to just about everything, although the island is 20 miles long. We have 2 lumber yards, a hardware store, 2 groceries, several bakeries, a ton of restaurants, a hospital, etc. The views are spectacular as well. I don’t feel boxed in at all.

    • Not Sure says:

      Everybody is wired a bit differently. A nice house surrounded by some space with nature nearby sounds wonderful. Don’t have to take a long trip out of the city for hikes and bike rides. Guitars & drums can be played loudly without the police showing up right away. Neighbors close enough to feel like you’re near civilization, but not bunched-in together. Maybe a 30-45 minute drive into the nearest city if you want some urban excitement. There are lots of places like this. But living stacked on top of other miserable people, paying a small fortune in rent for a shoebox apartment surrounded by rampant homelessness. Just awful, yuck. Something about high population density brings out the worst in people… Road rage, rudeness, territoriality, crime. But some people seem to thrive happily in urban environments. Maybe the constant threat of being mugged just makes a person feel alive! To each their own, I guess.

      • AustraliaRealEstateMan says:

        “Something about high population density brings out the worst in people… Road rage, rudeness, territoriality, crime. But some people seem to thrive happily in urban environments. Maybe the constant threat of being mugged just makes a person feel alive! To each their own, I guess.”

        Only in the USA, right?

        • Wolf Richter says:

          In people’s imagination. Worst road rage I experienced personally was in rural Oklahoma.

        • rick m says:

          Road rage is ultimately an individual amateur driver taking the behavior of other amateur drivers personally and responding personally. They may or may not have justification, and it shouldn’t matter. Acting out in traffic is childish, and they normally don’t let kids drive. You never can know what’s going on inside another person’s head. You may well not want to find out. People are stressed, and each responds according to his gifts. It’s pretty obvious that there’s a lot of angry irrational drivers around these days no matter where you live. When it comes to hurt feelings, nobody has any rights whatsoever. Get over it and drive like a grownup. Most people do, because of the backseat commentary. Your kids are watching and learning from you. Country or city is immaterial compared to the ability of persons to control themselves.

      • c_heale says:

        The countryside and the city can both be good if house prices are not too high and jobs are available.

      • Seen it all before, Bob says:

        I think it depends on your situation.


        If you have a big family, space is critical. It is hard to send the kids or dog out to the yard if there is no yard.

        If I was single or a couple, being able to walk everywhere would keep me healthy, active, and entertained.

        Every place has a benefit. It depends on what you want.

        Every place has its detractors. ie driving to anywhere takes too long, too much crime, bad neighbors, too much upkeep, too much to heat/cool.

        Personally, I suppose if I had a 4000 square foot solar-powered fenced mansion on 5 acres walking distance to anywhere in San Francisco, I might be truly happy. :-)

        I’m not there….. yet.

  12. unamused says:

    “For years there are claims of a housing shortage”

    It’s easy to suspect those claims were a ruse to ramp up the housing bubble.

    Market manipulation for fun and profit to screw the general population is big business as usual. There are many examples.

    • Christopher Burrell says:

      Unamused, truth! Morgan, Rockefeller, Carnegie were all master manipulators of the market…nothing new under the sun!

    • Gattopardo says:

      And as Wolf wrote, “For years there are claims of a housing shortage, and suddenly there’s not, and there’s plenty of supply, and new supply keeps coming out of the woodwork just as buyers have evaporated. All it takes is a downturn in the market.”

      We’re going to CONTINUE to hear all about the housing crisis throughout any downturn, too. Especially in “total emergency crisis” states like CA. Please. I’ve never bought into the housing shortage line. Supply, demand, pricing all worked out….just not to the liking of many of us, but those are market forces at work (yes, ZIRP is still a market force).

  13. AK says:

    I think the big point here is that boom times create households and recessions create roommates. That was the lesson of 2008.

    When I go to FRED and divide total housing stock by total US population, I see that we have more per capita homes in the US than in any time in history. I get close to the peak when I do total housing stock divided by total households. This is not mentioning the large amounts of home under construction.

    I don’t understand why there isn’t more of a pushback on the shortage narrative. And as far far as I remember, millennials are and echo generation of the boomers. As they upsize, the boomers will downsize.

  14. I don’t think there will be a pullback in housing prices, or a pullback in stock prices. Loathe to call it the Fed put, the sheer volume of cash in the (global) system prevents any sort of decline in asset prices, other than a crisis in the currency itself. The period of inflation backing and filling will prevent the rapid decline in inflation (or growth and the there will be growth recession). I have far more house than I need and families with children have far too little, and that will all even out, creating a stealth growth industry in housing.

    • Harrold says:

      I don’t see housing going down much, if at all while the unemployment rate is 3.5% and wages are increasing.

      This isn’t 1979.

    • ru82 says:

      I am pretty much in your camp on this one.

    • Wolf Richter says:

      Ambrose Bierce,

      Hate to tell you this, but there is already a pullback in stock prices (S&P 500 -12.6% despite the blistering summer rally) and there is already a pull-back in home prices, that started a few months ago. I posted the June figures for some CA cities a little while ago. In July, house prices in San Francisco plunged and are now down 9% from July last year. Where you are, house prices have also pulled back, but have not fallen below year-ago levels yet. So be patient. You can’t have everything at once.

    • TheFalcon says:

      “I don’t think there will be a pullback in housing prices, or a pullback in stock prices.”

      Ambrose I assume you mean “further” pullback as both are already down from peak.

      • Depth Charge says:

        “Ambrose I assume you mean “further” pullback as both are already down from peak.”

        No, he really meant “no pullback,” because that’s how stupid he is. He’s just like all of these blithering idiots who deny data even when Wolf spoon feeds it to them in the most easy to digest manner. I don’t think they’re even reading what Wolf is presenting, they’re just showing up, burping forth a couple of braindead sentences about how prices will never drop, then slinking off to their fifth of cheap vodka or whatever is causing their brain to malfunction.

        • David G LA says:


        • haha… Looking at the chart of the GS financial conditions, which hit a new low. The Fed is not tightening. They may want too. There is also the historical comparison to the stagflation of the 70s, and with CPI stuck at 8% that might apply to home prices. Not sure what the catalyst for lower asset prices would be with global liquidity in excess. And for housing to come down in my area, a lot of people must put their homes up for sale, (not happening) and the buyers who show up must bid much lower prices. With upward pressure in equivalent rent, lower appraisals are not going to be enough. My head is a bit foggy, but getting better. I had Covid (not mild symptoms) . Two Vax One Booster! OUCH!

        • Wolf Richter says:

          Ambrose Bierce,

          “Looking at the chart of the GS financial conditions, which hit a new low. The Fed is not tightening. They may want too.”

          Because markets are Fighting the Fed instead of transmitting the Fed’s monetary policies to the financial conditions. This is a real problem and will lead to much higher interest rates than expected and a much more hawkish Fed if this continues, because eventually, the Fed is going to shock markets into transmitting its monetary policies because inflation will not go away without tightening financial conditions.

          READ THIS. That’s why I wrote it. It explains how that works and why the Fed will go much higher if markets refuse to transmit the Fed’s monetary policies:


  15. Michael Engel says:

    1) The boomers front end approach eighty years old. They are the
    wealthiest people in the household assets.
    2) In the next decade almost 1/3 of them will be gone.
    3) Fifty percent of US population survive on gov support.
    4) The boomers will leave behind plenty empty houses. There will NOT be
    enough wealthy people to buy their millions dollars houses.
    5) C/S is rising vertically up. Climax never last. If the next few dots will
    clusters near the top, the big whales will not be in the game. They will
    wait on the sideline for an explosive change.
    6) C/S might popup, forming a longer Pareto snake top, or gap lower,
    in a change of character.
    7) Within few years, C/S might decay far below. In real terms RE
    might be badly injured…

    • PonderingPA says:

      I am with you on the population decline issues having some downward effect on housing prices in the long term. I’m in what Richter calls the educational industrial complex, and all that anybody ever talks about these days is the “enrollment decline” and “enrollment cliff “ because the population of college age students is just shrinking… and the post-2008 baby bust coming up in these next years is about to make it worse and see a lot more schools struggling to fill the ranks. Eventually these smaller generations will hit the house- buying ages too.

  16. Michael Engel says:

    1) The Dow breached Jan high. It popped above the cloud, forming four
    of the smallest candles in the last 7 TD.
    4) The Dow might close May 4/5 gap, spike above dma200, do some fighting. Options :
    5) Bullish. After a tactical retreat for rest and fill the tank, the Dow will explode and make a new all time high. In the last 4 TD the big whales are not participating. They are observing the game between bulls a bears, on the side line, doing nothing, waiting for Results.
    6) Bearish. Either way, from the next lower high, the Dow will have a change of character and test June 17 low.
    7) Higher low might be good enough for the whales, at least until Oct/Nov, for accumulations. We don’t know what will happen next.
    8) For entertainment only.

    • WolfGoat says:

      “Bullish. After a tactical retreat for rest and fill the tank, the Dow will explode and make a new all time high.”

      I like it, the fear factor will come out of the Bond Market and the 30Y will head back up above 3.5%… just in time for another Fed hike in Sept.!

      This game is too easy!

  17. Michael Engel says:

    Five asteroids approach earth. Tomorrow blue whale FF 2015 will fly between the moon and earth at Mach27.

  18. ru82 says:

    Banks/financials, Home builders, Energy/ Tech seems to be the hot sectors this week.

    Those are risk on pivot plays.

    We probably hit peak inflation for this year. This has calmed wall street that we do not have run away inflation like we did in the 1970s and we will not be going to 10% federal fund rate. The markets were clearly spooked this summer.

    Not sure what we call it. Pivot play…etc. I think we just see the FED hitting 3% to 3.5% at the most, stay put to see where the economy goes. I would say this would be normal rates

    I think a pivot scenario means they drop rates. I don’t think they do that unless we have a bad recession.

    Anyway, the markets were down over 20% in a low employment, non recession environment which is crazy once you think about it. Part of the 20% drop was just stimulus froth. I think we are seeing an oversold bounce here and with the prospects of a normalization of interest rates.

    At least that is what I hope. For a long term good economy, we cannot have ZIRP. I think long term FFR needs to be around 3% and mortgages at 6%. These are still both on the low end of the historical averages

    • ru82 says:

      I say 6% on mortgage rates otherwise banks will not loan people money for 30 years at less than 6%.

      Once we dropped below 6%, the only entity making 30 years loans was the GSEs.

      Interest rates are set on the amount of risk one is willing to take when loaning out money. There is too much risk for a bank to lend out money for 30 years at 5% or less. Why would they do it…they won’t.

      If we stay below 6%, I see the only lender in town going forward is the GSEs. They are essentially the biggest owner of residential properties in the U.S. as they theoretically, I think they are backstopping over 40% to 50% of all loans and this is growing.

      If they ever back out of the MBS guarantee, then you would see mortgage rates shoot up to 6% to 7% for quality borrowers and 8% to 10% for high risk.

      Easy money has distorted all rates of risk the past 10 years.

      • Augustus Frost says:

        If it wasn’t for the GSE, the only “natural” buyers for a 30YR mortgage would be someone with offsetting long-term liabilities, like pension funds and insurance companies-maybe. Everyone else brave enough to buy it would be buying it to speculate on interest rates.

        It isn’t an accident 30YR mortgages didn’t exist in the US prior to the 1930’s and don’t exist hardly anywhere else now.

        The US housing market today and recently is ridiculously overpriced meaning the “traditional” 80/20 loan is badly undercollateralized, except under the current artificially inflated economy. Credit standards are abysmally low, doesn’t matter that it’s “tight” compared to pre-GFC. Lending long-term at fixed rates with institutionalized inflation at anything close to current interest rates is a virtual sure-fire way to lose money “big time”, even assuming the borrower doesn’t default.

        Modern technology and credit modeling improve risk evaluation versus the past, but it doesn’t magically turn what are actually predominantly poor to basement level credit risks into sound credits.

        • Lynn says:

          It’s never about the odds of paying, only about the fees a bank can collect. Try getting a $26K mortgage with 87% down and excellent credit. It’s impossible. OTOH banks are ready to loan people amounts of money they can’t possibly repay, especially commercial loans.

    • Einhal says:

      Runaway inflation begins with non-runaway inflation. We’re not out of the woods yet, and the markets being down 20% is not so crazy when you consider that they went up by 20% in 2021 based on nothing but Fed printing. What the Fed giveth, the Fed can taketh away.

      • jon says:

        People would realize this but only in the hindsight.
        Most of the people are high on hopium at this time.
        This would be true for all asset classes.

        • Christopher Burrell says:

          Very true, the hope porn of QE, interest rate repression, and a ever rising housing market has many delusional and inebriated.

  19. Libdis says:

    Just an aside from Tampabay. My cousin in law was the number one salesman in the state for large homebuilder the last two years running.

    He just went on a draw……

    He likes to live like Rockefeller so I am sure he is now sleepless.

  20. David Hall says:

    There are over 150,000 vacant lots in SW Florida from North Port to Lehigh Acres. During the 1950’s land companies were buying large parcels, subdividing them into 1/4 acre lots. Most of these are on paved streets. They were marketing lots to people all over the country. People are trying to sell vacant lots and unsold inventory is growing. In 2004 Hurricane Charley tore down homes and made people pack up and head north.

    • CrazyDoc says:

      If there is a major hurricane in SW Florida this season I wonder what the impact on housing will be with the WFH crowd.

      • Clete says:

        We rode out Charley (’04) and Wilma (’05?) and the power was out all over town for extended periods — offices and gas stations as well as homes. So everybody got time off, except then there weren’t so many people working for companies whose HQ’s were in another state.

        It sounds like a lot of PTO may get burned in the next one.

  21. BenW says:

    June YoY price increase was 17.3%. Housing is not about to pop. 30YFRM will be below 5% within 30 days at which point housing will stabilize.

    • Einhal says:

      What’s your basis for saying that the 30 year fixed will be below 5%, and what’s your basis for saying that housing won’t drop to prices that existed when rates were 5% in past (2017 or whatever it was)?

      • BenW says:

        At one point last week, it had dropped 110 basis points from its peak of 628 in about 6 weeks according MND. Likewise, the 10YT is trending down which the 30YFRM generally tracks. Inflation is easing as well and will continue to slowly decline. Two weeks may be a little aggressive, but it’s not likely to take more than about a month, once the July data is reported in early September. Once those numbers come in, especially since both inflation and the jobs will most likely
        going to soften, the goose will be cooked.

        Without the Fed selling MBS, the 30YFRM has no chance of staying above 5%. The economy will continue to soften, creating further downward pressure for it to stay below 5%. Even if it stays in the low 5% range, housing will stabilize. Housing can easily handle 5% mortgages, because ARMs will continue to grow & dominate the market.

        My main point is that I personally don’t see the labor market turning negative anytime this year, especially if housing stabilizes. Without significant layoffs in housing, everything else will just chug along in a stagflation regime. For the US economy to really turn into a recession, it’s going to take something external to create that downward pressure towards a real recession with real job losses and unemployment ticking up notably. And by that I mean 5% or more. There’s just too much money in the system still especially in terms of government spending top to bottom (fed, state, local) for things to go sideways or down.

        • Einhal says:

          Here’s the problem with this logic. Inflation will not ease unless the Fed meaningfully reduces its balance sheet and continues to raise rates. I believe the idea that the economy will soften, lowering demand and inflation, but without impacting interest rates and asset prices is a fantasy. There was never going to be a soft landing.

  22. Russell says:

    Wolf –

    Where are the usual charts and graphs? I actually had to read the article. My attention span – squirrel – couldn’t handle it.

    • Wolf Richter says:

      This is the transcript of a podcast, as it says at the top. There are no charts on a podcast, just spoken words. This is my chance to talk out loud and take a break from charts :-]

  23. Farah says:

    Love this site and I’ve been following it for over a year. I live in San Diego and the prices are crazy high. We’ve been looking to buy since June 2021 but have been getting cold feet thinking prices will correct. The prices are now 20% higher than last year. Supply of existing homes has increased but only for the crappy homes. The nice homes don’t last on the market. Still a very competitive market for nice homes even where I live in the suburbs. Getting pessimistic about buying in the near future. It seems like it will take years for a meaningful price correction in SD. Yes the sale volume plunged but there are a lot of buyers loaded with money who are buying the good few homes. So much money still floating around.

    • Wolf Richter says:

      In June, sales in San Diego plunged by 30%. The median price dropped 2%. I don’t have the July numbers yet. I’ll get all this stuff by mid-month, so I’ll probably do an update.

      • Farah says:

        Thanks, Wolf. I look forward to reading your update. Really appreciate the content of your site. The best site I’ve come across to educate myself about the US and world economy.

    • The Bob who cried Wolf says:

      I think price discovery is relative to the location. Crappier places see greater levels, better places see less. San Diego is seeing less in general, but crappy places in San Diego are seeing more. Also, those crappy cubes mentioned above are all over and somewhat validating what I’ve been saying for a while, single family homes aren’t being built here in anywhere near the numbers needed. Cubes are, lots of cubes. That cube market will tank soon.

      • The Bob who cried Wolf? says:

        Replying to my own moderated post. Am I on a moderate blacklist?

        • Wolf Richter says:

          You’re not. A comment may get caught in a trip write. Or the spam filter doesn’t like the server that the comment is coming from, etc. In this comment here, you hit a trip write, I can see that :-]

      • Farah says:

        I agree with you. There’s definitely a shortage in good homes in SD. There are many flipped homes sitting on the market along with homes in horrible conditions or located by the freeway. Seeing price cuts on those only.

    • TheFalcon says:

      Farah you are going to have to be very patient. I’m guessing if you are going to see substantially lower prices it won’t be until ’24-’25.

    • Here it comes says:

      In the south OC sale prices may not have dropped yet, but that’s because almost nothing is selling. I estimate 90% of properties on the market right now have a price decrease on them, most over $50k and many over $100k – and no sales.

      Every new home coming onto the market is priced aspirationally at March-April numbers, then the price drops come along. It’s exactly as Wolf says: price discovery is starting to happen.

      It will come, but it may be a few years – maybe more.

    • ru82 says:

      Farah – go to sdar.com and then go to Fast Stats in the red highlighted row.

      On the this new page click on the monthly indicators. You will get more information than you need but it will give you San Diego month and yearly stats and trends.

      • ru82 says:

        I was looking at the Median and AVG house prices from the site above. They have the trends back to 2012. It looks like San Diego could fall 20% to 30% to get back to the historical growth trend. Will that happen? I have no idea.

        They even have an affordability index. Just since 2020 the attached it has dropped from 86 to 48 YOY. Ouch

      • Farah says:

        Thanks for the link. I’ve been searching a lot lately for trends and stats of the housing market in SD and the link you provided will be very handy.

      • The Bob who cried Wolf says:

        I just went to that site and checked a bunch of city of sd zip codes and then checked some county zip codes, primarily for SFR’s. Wow, what a wealth of knowledge. It seems to be backing up what I’ve been seeing here, especially in the city…there’s way less inventory than last year. That substantial reduction of inventory has to be a huge driver in keeping prices up. Maybe the rate of increase has slowed, but it’s definitely going up. I only checked for July.
        Speculating here, but I think that the folks who’ve locked in at anything less than 4% aren’t gonna be selling for a long long while.

        • Farah says:

          From what I’m seeing here in east county (around Mt helix area), most transactions are for the nice homes over 1.1m. The ugly small boxes are not selling fast and getting more price cuts. Still high competition. We just got outbid last week. A house was listed for 1.2m which was the Zillow estimate and it received multiple offers way over the asking. I think there are a lot of people waiting to find better homes and once one shows up, the competition starts. Bidding wars are not over but maybe less intense than a year ago. Is it because interest rates are not high enough or because there are people with cash from earlier sale transactions waiting to buy? Probably a combination of both. I also hear a lot of LA residents are moving to SD skewing the home prices higher for SD residents. I haven’t seen any stats on that influx though.

  24. Michael Engel says:

    SPX entered Jan 24 fractal zone, but closed below.
    NDX failed to reach Jan 24 low.

  25. Michael Engel says:

    Andrei Vyshinsky is coming from hell on a blue whale FF 2015 at Mach 27.

    • HowNow says:

      ME, I’ve always read your comments and been somewhat fascinated by them. It’s as though I’m trying to read hieroglyphics with no training whatsoever. Your comments are like verbal black holes that draw reason into them and disappear due to the increase in gravitational forces.

  26. Dazed And Confused says:

    So this morning the NAR released their Jun 2022 HAI (Housing Affordability Index).

    The figure was 98.5 which is the first time the monthly HAI has been below 100 since the 1980s so at least a 32 year low. Housing during the entire 2000s housing bubble was never as unaffordable as it is today.

    Last month the HAI was 102.2 which was a 16 year low but still slightly above the lows reached in 2006.

    The strange thing is that there was no fanfare around its release – it didn’t even appear in the headlines on NAR’s own news page and no media outlet seems to have covered this at all.

    • Dazed And Confused says:

      In terms of the implications for the future trajectory of house prices, everyone knows what happened after the bubble burst shortly after the 2006 HAI low.

      The aftermath of the late 80s HAI low was much less spectacular at least at a national level – nominal house prices stayed flat for five years from 1990-1995 while increasing family incomes and falling mortgage rates gradually improved the HAI.

      Will be interesting to see what mix of flattening/falling house prices, falling mortgage rates and/or increasing family incomes combine to lift HAI off the Jun 2022 low.

      • Augustus Frost says:

        If the interest rate cycle bottomed in 2020 after 39 years, it won’t be from lower rates. This will “blow out” later, exceeding the 1981 peak years from now.

        I expect real (inflation adjusted) median incomes to decline noticeably at some point, for years.

        Rising nominal wages with mostly flat or declining prices for multiple years will improve housing affordability though.

      • Malthus says:

        That is why there is always a bid price and an ask price!

  27. Cytotoxic says:

    ” And the so-called “housing shortage” just vanished.”

    No it didn’t Wolf. It didn’t in 2009 either, that was just transient and the worst price declines were in localities with the *least* amount of construction prior. We went back to shortages no later than a few years later. The numbers you give are a drop in the bucket of the US housing shortage. You make a fool of yourself with this contrarian narrative of yours.

  28. Enlightened Libertarian says:

    For what it’s worth.
    From the latest WSJ:
    Home prices continued to climb across nearly all the U.S. in the second quarter, when buyer demand started to fade due to higher mortgage rates but still exceeded the housing market’s unusually low supply.

    The median sales price was higher in the quarter compared with a year ago for 184 of the 185 metro areas tracked, the National Association of Realtors said Thursday. The only metro area to post a decline was Trenton, N.J., where median prices fell 0.7%, NAR said.

    More of the country also experienced double-digit-percentage price gains than earlier in the year. Median prices rose by more than 10% from a year earlier in 80% of the 185 metro areas, up from the first quarter when 70% of metro areas reported double-digit-percentage growth.

    Home prices have hit new highs in recent months as the inventory of homes for sale held below historical levels. The median single-family existing-home sales price rose 14.2% in the second quarter from a year ago to $413,500, a record, according to NAR.

    Potential sellers have been reluctant to list their homes in the past two years because they didn’t want to then have to buy in the frenzied market. New-home construction has also been slowed by supply-chain issues and labor shortages.

  29. historicus says:

    It was nice to see Larry Fink (Blackrock, the Fed’s first ever partner in open market activities) and Neil Kashkari (I’ll do anything to be Fed Chair) together Aug 10 at the Aspen Institute.

  30. Steve says:

    Hello underwaters. Those institutions see the writing on the wall and are scrambling for upcoming survival already as so many are so overleveraged. I wonder if Wolf knows the percentage of jobs, like plumbers, electricians, handymen, mortgage originators etc. tied directly and indirectly to the housing market that might become at risk now. I’d imagine it’s massive. In Anaheim by Disneyland there are blocks and blocks of nothing but big tile warehouses. Yikes. Sellers are now in crunch time and this is early inning one. Let me say, in my used truck dealership, I have all new pricing at up to half of what the old big dealers are advertising. They are mostly still locked in the crazy covid pricing at insane selling points. Yes supply is limited in a few items, but it does not matter. People won’t pay anymore like they did. Im not getting much calls even at my super low prices on most things. That should tell everybody something, rather some things.

    • John Galt says:

      Yes. We often forget the economic destruction brought on by a fall in asset prices. When most of your consumer based economic structure is dependent on rising prices, but they reverse and fall. . .the consequences are absurd. This is a bigger problem than our funny money dollar, our political differences etc. Think of all the industrial sectors affected, from lumber, paint, tile, glass, rubber, chemicals, insulation, transportation. . .etc The collapse becomes all encompassing as the assets plunge, and job losses mount, it feeds on itself. I know, I was a young man in the trades from 2006-2015, and it was rough. Interest rate manipulation was the only thing that got it back up and running. I don’t think that will work again, at least right now it’s not a viable option.

      • Einhal says:

        Runaway inflation (including in asset prices) also causes economic destruction. There are no non-painful solutions left.

      • Wolf Richter says:

        John Galt,

        Hahahaha, your paragraph could be from a script of a satirical movie where everything gets twisted into the opposite.

        You got it all wrong. Lower asset prices hit 10% of the population hard (the wealthy), but the real economy only barely if at all. So the wealthy hate it.

        People who live in their homes and are making payments have no reason to worry about the price of their house, and lower is fine, if they just quit looking on Zillow every day and instead get a life.

        Stock market declines have very little impact on the real economy.

        During the Financial Crisis, it wasn’t a stock market decline or the housing decline that caused the issue, it was a financial system based on a house of cards that collapsed.

        • El Katz says:

          I find it amusing that people have their panties in a bunch about what their house is worth. I live in mine. The cost to do so is less (even with our reserve payments to ourselves for maintenance / repair) than it would be to rent an apartment nearby – let alone a home here in the foothills with them fancy folk.

          What’s next? Going on KBB to figure out what your car is worth on a daily basis? How about cataloguing the contents of your freezer and comparing the value of those pounds of frozen hamburger to current store prices?

          There’s only two times that you should show any concern about the value of anything… when you buy it and when you sell it. The rest of the time it’s just air. Stonks, gold “stacks”, bonds, beannie babies, homes…… values are locked when you sell. Then you can count your spoils. Until then, it’s just mental masturbation.

          Most people live within a budget. We do. The “zillow” value of our pile of bricks and sticks doesn’t matter squat in what we do from day to day as long as we remain within our budget.

        • John Galt says:

          I appreciate the response Wolf, and I say this with the utmost respect for your writing and podcasting. I read all the articles.

          I have to disagree, in that much of the “wealth effect” that I see spent in the economy is from the massive pump in asset prices. Whole niche industries are built on serving those with absurd amounts of cash. Cash that was recently only produced by selling or borrowing against things like overpriced real estate. This is a generational issue as well. To think that the people out buying inflated homes, RVs, expensive cars, etc are doing on wage earnings right now is simply wrong. I have many friends and associates whose whole wealth is tied up in homes, or stock options from their employer. Knock 40% off the value of their homes, and guess what, no new equity line to build that new deck, or remodel the kitchen, and hey, maybe it’s time to sell the RV. Coupled with job lesses in the corporate sector, it gets real bad, real fast.

          I was building custom cabinets I’m 08, in the South Bay area, for the highest end homes in Silicon Valley. For around 2 years, work was tight, but for the first 6 months, work nearly evaporated. None of our general contractors had any jobs, no one was busy. It’s like dollars suddenly vanished overnight. I saw a lot of people lose their livelihoods because their place in the economic ladder of the construction industry was predicated on constant growth.

        • Seen it all before, Bob says:

          A house should be treated as a home. Not an investment.

          A work of art should be appreciated for its beauty.

          The price of either should not be considered unless buying or selling.

          I admit, if the price of a house reaches an insane level, I start second-guessing whether I should cash out my home. Then I’d be homeless with a lot of cash in the bank. I don’t think I’d be happy living in a tent looking at Zillow waiting for some crash that may or may not happen before my cash is inflated away.

  31. Derek S says:

    Hi Wolf, Great Website, I got a question about the neighborhood i live in, I am in Texas and bought about 10 years ago into a 300 lot neighborhood, at the time there was only 10 houses including mine, now its about 90% full with two primary builders not associated with the neighborhood building luxury houses for the past five years, about 2000 sf but on the high end in look. By doing so they have increased the property taxes in the neighborhood alot compared to what was smaller houses 1300 – 1500sf. The question i have and why i have become suspicious of the builders and there intentions is the houses have a high turnover rate, someone will pay the high price, live there about 1-2 years and then leave, the house somehow goes back to the same listing agent and avoids foreclosure, how does that happen? all the houses they sell are listed by the same listing realtor who happens to live in the neighborhood and owns two houses, each one built by one of the builders. The deed records are available online and what i have found is that all the mortgages sold by the two builders are purchase money mortgages, with the box checked off on the document. I looked and mine and mine does not have that box checked and i built mine with an outside builder and local bank. All i can gather about purchase money mortgages is that is some type of owner finance product that qualifies people who dont qualify to buy such a high price house because of income and when they cant pay it goes back to the seller which is the builder and avoids foreclosure. Is this correct and isn’t this type of leasing basically because they know they cant keep up with the payments and just relist the house over and over. The listing agent is also part of PRG, which he list on his sign, which is a real estate owner, operator and fund manager company, thinking like they buy houses to rent. Thanks Derek

    • Wolf Richter says:

      “…live there about 1-2 years and then leave”

      Lots of people sell their homes every couple of years as they move to different jobs. It’s a hassle, but people do it.

      ” the house somehow goes back to the same listing agent…” “who happens to live in the neighborhood”

      Makes perfect sense that the Realtor markets his services directly to his neighbors and tries to become their listing agent. It’s super-convenient for him. For a showing, he just moseys down the street to his neighbor’s house, and meets the potential buyer there. A lot better than driving an hour across Dallas to get there.

      “… and avoids foreclosure, how does that happen?”

      There is no foreclosure unless the homeowner defaults on the mortgage. As prices have shot higher over the past 10 years, the defaulted homeowner can sell the house for more than the mortgage balance, pay off the mortgage, and walk away with extra cash. Foreclosures are never a problem unless home prices plunge for a long time. Then the homeowner cannot sell the home and pay off the mortgage, and the lender then takes it and sells it in a foreclosure sale.

      In terms of the rest, I would say, don’t worry about it, quit checking into this stuff, and do something fun instead.

  32. Why so little mention of China? The housing market there keeps deteriorating and though there is no direct connection between capital markets, there is a connection between the HVAC, appliances, building materials, etc. you will need replacing–and those workers in China. China will no longer subsidize Western low cost house maintenance in the future. I say that to all who will listen! That be the 2nd shoe to drop. Ultimately, all house values are rooted in maintenance. Mother Nature does not provide an environment for you to invest and forget. Mini-rant over!

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