Sales of New Houses Collapse (in the West by 50%!) Inventories & Supply Spike to High Heaven, Worst since Peak of Housing Bust 1

Forget “housing shortage.” It’s about crazy prices: For sales to revive at these mortgage rates, prices have got to come down a lot — and they’re starting to.

By Wolf Richter for WOLF STREET.

The plunge in home sales is just stunning. Sales of new single-family houses collapsed by 12.6% in July from the already beaten-down levels in June, and by nearly 30% from July last year, to a seasonally adjusted annual rate of 511,000 houses, the lowest since January 2016, and well below the lockdown lows, according to data from the Census Bureau today.

New house sales plunged in every region compared to July last year. Note the West, oh dear:

  • Northeast: -37%
  • West: -50%
  • Midwest: -23%
  • South: -21%.

A similar plunge, but now quite as bad, occurred in sales of previously owned homes, which plunged by 20% across the US in July compared to a year ago. In California, sales of existing homes collapsed by 31% year-over-year; and in the previously hottest market, San Diego, by 41%!

Sales obviously would be a lot higher if prices were a lot lower, and more people could actually buy at these mortgage rates – today, the average 30-year fixed rate is at 5.7% again, according to Mortgage News Daily – but it takes a sustained plunge in volume to hammer the message into increasingly motivated sellers what they need to do if they want to sell: They have to go where the buyers are, and the buyers are a lot lower.

Homebuilders know this because they have been lamenting for months the plunge in traffic of prospective buyers, according to the survey of homebuilders, conducted by the National Association of Home Builders:

Suddenly no “housing shortage”: Inventories and supply spike to high heaven.

Inventory for sale in all stages of construction jumped to 464,000 houses, up by 28%, from July last year, and the highest since March 2008:

Supply of unsold new houses spiked to nearly 11 months of sales, on this surge in inventory and the collapse in sales. This was the highest since the worst months of Housing Bust 1 in late 2008 and early 2009:

By region, unsold inventory jumped in three of the four regions, in terms of the percent increase year-over-year:

  • Midwest: 51,000; +59%
  • South: 272,000 houses; +27%
  • West: 116,000 houses; +29%
  • Northeast: 28,000 houses; unchanged.

Prices must come down at these mortgage rates, and they’re starting to.

The median price of new single-family houses that were sold in July rose to $439,000, not quite undoing the plunge in June. This was down by $20,000 from the peak in April, whittling down the year-over-year gain to 8.2%, the smallest gain since November 2020. In a moment, we’ll look at the three-month moving average, which gives a clearer picture:

The three-month moving average, which irons out some of the month-to-month ups-and-downs of the median price, fell for the second month in a row, the first such declines since the lockdown months.

Note the crazy price distortions since then. And now with much higher mortgage rates, at those crazy prices, sales volume has collapsed, cancellations have spiked, traffic of prospective buyers has plunged. If builders want to bring in buyers and sell houses, they’ve got to cut prices – and by a lot:

Worst construction-cost inflation ever is rising less crazy-fast as demand plunges.

Over the past two years, spiking demand for new houses triggered astounding spikes in prices and shortages of materials and supplies, combined with a labor shortage that have delayed projects and inflated costs for homebuilders, and they passed those surging costs on to their over-eager customers, no problem, until suddenly customers balk, which is now.

Demand by homebuyers has collapsed by 30% year-over-year to multi-year lows. And homebuilders are throttling back their demand for materials and supplies, and suddenly the crazy price spikes abate.

Construction costs of single-family houses – excluding the cost of land and other non-construction costs – ticked up only 0.4% in July from June, according to separate data the Census Bureau released today. Although that’s still big increase (around 5% annualized), it was by far the slowest increase since November 2020. The month-to-month increases had peaked at over 2% late last year, and in May and June were still at around 1.5%.

This whittled down the year-over-year spike in costs to 16.8%. Beyond the spikes this year, it was still the highest in the data going back to the 1960s. The previous high was in mid-1979 at 14%.

This chart shows the actual construction cost index and the cumulative nature of those price spikes. Note that during Housing Bust 1, construction costs actually fell – and this might be happening again as homebuilders cut back and demand sags.

Note that none of this goes into CPI inflation. The housing costs that enter into CPI are based on rents.

Homebuilder stocks: -25% to -40% year-to-date.

The stocks of homebuilders are down between 25% and 40% year-to-date, despite a powerful summer rally, and have by far out-dropped the S&P 500 Index (-13% year-to-date):

  • Horton: -32%
  • Lennar: -29%
  • PulteGroup: -28%
  • NVR: -29%
  • Taylor Morrison: -25%
  • Meritage: -32%
  • KB Home: -33%
  • Century: -40%
  • LGI Homes: -34%

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  223 comments for “Sales of New Houses Collapse (in the West by 50%!) Inventories & Supply Spike to High Heaven, Worst since Peak of Housing Bust 1

  1. Porcelain Economist says:

    Top notch as always! Things look pretty bleak for the new construction market. What are the chances rates stay high enough for long enough to really pressure sellers to lower prices? I’d love to see the 10 year get to and stay at 4% or more.

    • ru82 says:

      Tol Brothers report after the bell today. I twill be interesting to see what they say.

      The builders that reported at the end of july were seeing rising average prices, big backlog, but slowing sales. But that was about 1 month ago

      • Jesse says:

        Yes me too. We’re in contract with Toll Bros to buy our house/Lot (as well as our 3 neighbors lots) to put up new construction here in north Seattle. We’ve been starting to sweat that they’re going to pull out.

      • SS says:

        Real estate agents earn from commissions on sales and the sale numbers are collapsing.

        Sellers agents for home owners are somewhat able to convince sellers to lower price to make sale hence the sales collapse is only 30% in West.

        However builder’s that have higher cost on new construction are just not ready to make any concessions, even to their own seller agents, hence the 50% collapse.

        Why do new home builders remain so disconnected to reality. Do they have insider info on Fed Pivot regarding mortgage rate and MBS sales, or are they just hallucinating?

        As buyers and sellers remain far apart on price, Winter seems to be coming for RE agents.

      • Wolf Richter says:


        Toll Brothers this evening lowered its guidance for deliveries for the year by about 10% from its May guidance, blamed the “softer demand environment,” higher mortgage rates, labor shortages, and supply-chain problems.

        Its new-home deliveries for the quarter were below guidance.

        Orders, in terms of the number of homes, plunged by 60% in the quarter from the prior quarter.

        It said, as the quarter progressed it saw “a significant decline in demand as the combined impact of sharply rising mortgage rates, higher home prices, stock market volatility and macroeconomic uncertainty caused many prospective buyers to step to the sidelines.”

        • ru82 says:

          Not good news. But I am short Tol So Maybe Wednesday will be a good day for me. ;)

        • ru82 says:

          This mornings call was pretty bullish. Tol was down afterhours but shot up and and is positive. They said some markets still have a lot of demand. All the builders are up on Tol’s morning call. Oh well. I was short Tol.

          Our average selling price in the quarter was approximately $945,000, up $70,000 compared to the second quarter and up $163,000 year-over-year. Our backlog at quarter-end was a record in both units and dollars. Backlog was $9.4 billion on 10,661 units, up 55% in dollars and 40% in units compared to last year. As we noted last quarter, we expect meaningful growth in revenue, gross margins, earnings and ROE in fiscal year 2022. We reaffirm these expectations, including a return on beginning equity for fiscal 2022, well above 20%. These expectations are driven not just by the strength of the housing market and our backlog.

          On the supply side, this imbalance is the result of a decade of underproduction of new homes. On the demand side, millennials, who make up the largest generation of Americans, are forming families and entering their prime homebuying years.

        • Wolf Richter says:

          It’s almost funny.

  2. Crush the Peasants! says:

    The West.

    (Apologies to the Lizard King.)

    • Wolf Richter says:

      Ha, no, what I see instead is that buyers finally woke up and went on a buyers’ strike.

      They should have done it two years ago (instead of elbowing each other out of the way to bid up prices), and we wouldn’t have had this kind of debacle: sky-high prices that must now get unwound manually.

      • John Apostolatos says:

        “Ha, no, what I see instead is that buyers finally woke up and went on a buyers’ strike.”

        I still see many sellers who are in denial: “Our house is special so we can ask more than the comparables on the market that sold 6 months ago.”

        I have seen the shift in buyer mentality as Wolf has mentioned many times, but many sellers still don’t budge.

        • SS says:

          In West, RE agents can’t figure out that buyers and sellers are far apart on pricing. I interviewed four agents and only one could correctly point out that a specific house in market for 57 days will actually sell for 20% (i.e. $350,000) lower than list price that was set according to pandemic peak. The others felt that they can save me between 5K to 30K through their negotiations.

          No prices for guessing which buyers agent made my shortlist.

        • Modalita says:

          For most sellers, it is easy to accept a $60k increase in a homes value, but a subsequent $5k decrease is an insult.

          This is true ego investment.

      • DawnsEarlyLight says:

        Vintage FOMO!

        • Educated but Poor Millennial says:

          You just said what I was thinking about, and Wolf was mentioning this for past couple years in his articles.

      • Gattopardo says:

        Maybe it’s time we update the term Mexican Standoff to American Standoff. Buyers and sellers currently have very different and stubborn views on pricing.

        We’ve seen this before in some markets. Rancho Santa Fe (San Diego) was the canary in the coal mine for the last bubble. Around 2003 or so the bid/ask spread was so wide that the market was more or less frozen. That abated maybe 5 years later, but really until 2020 that market still was really tough to ever buy or sell. It’s headed back that way now.

        • Bob says:

          Casually listening to friends and their neighbors who lived in Fairbanks Ranch, the RE market seemed very volatile. First everyone wanted to move in, then all of a sudden everybody wanted to move out.

      • Nacho Bigly Libre says:

        “They should have done it two years ago (instead of elbowing each other out of the way to bid up prices), and we wouldn’t have had this kind of debacle”

        That sounds like victim blaming.

        Unlike a car, purchasing a house can not always be postponed – kids, schools, aging parents and so on.

        There was a crazy Fed that kept buying up MBS in hundreds of billions of dollars in the hottest market. Pumping up prices, creating FOMO. With no end in sight.

        (I don’t have much sympathy for the investor class. They should have waited out the craziness or been prepared for houses losing value)

        • qt says:

          You can always rent.

        • Lili Von Schtupp says:

          ‘You can always rent.’

          Yeah, a State Park camp site, for a few days, mid week, if you get your reservation in a few months ahead.

          Good luck finding a rental place without selling half your liver (kidneys don’t fetch enough). Hope you don’t love your dog or cat too much either cuz landlords are funny in their dislike of pets. Kids might be a problem too, that one’s always fun.

        • Cas127 says:


          You are describing the rental mkt of 2021-22.

          Not the rental mkt of 2002-2020.

          Except for NY and CA…which have long been insane by their own hand.

        • Gattopardo says:


          “That sounds like victim blaming.”

          We’re not victims in the textbook sense. The Fed gave us the matches, but we didn’t have to play with them in a dry grassy field.

        • Nacho Bigly Libre says:

          Easy for you to say.

          We are not talking about the crypto market, which one can safely sidestep. Housing OTOH is essential.

          Imagine being the young couple who kept saving every year for their first house and prices outrunning them year after year. Imagine plopping increasing amounts in rent and gaining no equity and no stability. Imagine their fear home ownership will forever slip from their hands. Imagine their horror of looking at continued ginormous stupidity of the Fed fueling up the rally.

        • elbowwilham says:

          So why did people stop buying now if they couldn’t stop buying the last 2 years?

        • Gattopardo says:


          “Imagine being the young couple who kept saving every year for their first house and prices outrunning them year after year. .”

          I don’t have to imagine. That was me (us) for 20+ years. It sucked and was infuriating.

          “Imagine plopping increasing amounts in rent and gaining no equity and no stability. Imagine their fear home ownership will forever slip from their hands. Imagine their horror of looking at continued ginormous stupidity of the Fed fueling up the rally.”

          To that I would say 1) home ownership is not a right, nor the end all, be all, and is not for everyone. Much like college. Renting in many ways is way better. 2) Have patience. Said couple you describe needed to wait for the stupidity to end, because it has to (and is just beginning to reverse). I’m not completely sympathetic to young couples “desperate” to buy in their 20s. Patience!!

        • Jon says:

          One can always rent.

        • LL says:

          You can postpone a car purchase? If you do not own one and you do not live and work in a major city with good public transportation good luck moving around.

      • BenW says:

        But will a bottom rate of 2.66% there’s a lot of incentive to elbow someone out of the way. That’s what FOMO is all about. Be that as it may, you’re point is still absolutely true.

    • BB says:

      Mr Home Joe not risen!

    • Beardawg says:

      Jimmy M is chuckling. ;-)

    • The Real Tony says:

      The Chinese the main buyer of new homes only buy when prices are rising not falling. Seattle should see major fallout.

      • joedidee says:

        In Tucson market – realtor friend said 1/2 sales still all CASH
        even sale that fell thru due to financing in May is now going thru(buyers got real lender)
        and at same price

        as of Aug 1 – still little inventory(19 days)

        • BenW says:

          50% of sales all cash makes sense. With 30YFRM @ 5.7%, probably 85% of people looking to buy can’t afford the still high prices. That’s the problem with this market. The top 10% of income earners still have tons of money to blow.

        • jr says:

          I’ve been following the Tucson market, made several cash offers with no inspections, just a video tour. I’m a retired builder so if it’s got CU or PEX plumbing, 4/0 elec. service and no obvious structural problems I don’t sweat the rest. I finally got an offer accepted last week…..

      • John Stotes says:

        Well, that is fallout false. All foreign buys are 2.6% of the used home market, and the Chinese are only a small % of that rounding error.

        • ru82 says:

          It is higher. Many foreign buyers create LLCs in the US. It allows them to hide their identity.

  3. nick kelly says:

    A recurring theme is ‘tighten ok, but don’t cause a recession.’

    There is no alternative to a major correction in housing, and you can’t have that without a recession. Real estate is not a single industry, it is a constellation of industries, from people handling paper work to people handling drywall. That’s why during the boom the economy is so hot: there is a job for everyone.

    In other times, maybe housing could take a major downturn without a recession at all. Not now, after 10 years of the financialization of housing. We have put too many eggs in that basket.

    • gponym says:

      Interested to hear you say more about “10 years of the financialization of housing. We have put too many eggs in that basket” if you care to. I’m not sure what that means. TIA.

      • John Galt says:

        I think I can elaborate. What Nick is eluding to is that when times are “good”, the demand for homes is so ferocious that it creates massive amounts of jobs in the industry. Suddenly you need more truck drivers, more drywall guys, more painters, more carpenters etc. This demand has been artificially created by the Fed, buying MBS right off the market. This absurd monetary policy has led to an artificial demand in many sectors of the construction industry, due to investors purchasing, building, and remodeling homes. If the values of the homes weren’t being backstopped and artificially pumped by the Fed, you’d see lower prices, but less jobs in the construction industry. The Fed sees this “boom” as beneficial. Its absolutely not, and unfortunately when the Austrian business cycle inevitably comes for this market. . . the Fed will be to blame for blowing up a basic need for Americans into an over invested, over fictionalized, and over jobbed “asset class”.

        • John Galt says:

          Over financialized*

        • Cas127 says:

          And worse, the Fed-induced artificial demand (see ZIRP and “affordability”) really didn’t result in building that many new houses (if it had, the insane rent inflation of the last two yrs would not be occurring).

          What it *did* do was make some homebuilders very, very rich by empowering them to jack prices way up (regardless of production cost) and keep the all important *monthly* mtg payments constant (thanks to DC destroyed interest rates).

          If you want to understand the corrupt dynamics of subsidy, just think student loans and FoS colleges that have grossly inflated tuitions for 40 years.

          (Appropriate analogy on the eve of Biden’s enormous kickback to one of his most doggishly loyal and utterly corrupt constituencies…the limousine liberals of academia).

        • VintageVNvet says:

          IMHO JG, ”fictionalized” FITS EXACTLY the current situation!!!
          Wolf tells it like it is, and the fictions of the overall scam persists until the crash becomes SO predominate that even the liars, including the ”liar in chief(s), cannot overcome the reality.
          That truth, while of course, temporary, is unfortunately and usually hidden very well by the massive propaganda machine of MSM et cetera.

        • Steve says:

          That is the reas{n they are called fake jobs.

        • Medicine man says:

          All true..dont forget the fed reserve also dropped bench mark intrest to pretty much 0. They started dropping in2019 3 times & yeah then bought MBS when stock crashed during trump’s first impeachment Feb 2020 it was all planned artificially stimulated,manipulated,then the planned demic government involvement lockdowns,,moratoriums,,deferrals,,printing $$ supply shortage, labor shortages, & underbuilding last 14 years last depression..all planned by federal reserve world banks..the sheep fell right into there plan!

  4. Augustus Frost says:

    At $439K, maybe the top 20% can “reasonably” afford to buy a new median priced home. By my standards, noticeably less than that.

    • MiTurn says:

      Per a teacher friend of mine, our local school district is having trouble finding new teachers because local housing prices are too high and rents impossible to find.

      • Lili Von Schtupp says:

        Home health care agencies (among other health services) are struggling to find not just home aides but now nurses, Physical & Occupational Therapists, etc. who tend to make a bit more than teachers and still can’t afford housing or daycare, plus all the gas to drive around solving mysteries all day.

        Even the tax dediction per mile has not risen remotely close to the gas prices. And agencies, who usually reimburse an additional few cents above the fed rate, aren’t rising to it either. The NIMBYs are livid they can’t get their elderly parents’ home care services as if a doctor’s order makes a PCA magically appear. Patients are suffering and its just horrible.

        • VintageVNvet says:

          This is a very very bad situation LVS, far damn shore.
          CNAs we know were doing OK in flyoverstan where that job is very highly regarded and valued.
          In our current situation in the saintly part of the tpa bay area, it appears to be so low on the agenda that folks we know changed from home health care to other jobs paying more, in some cases a ton more.
          And, as you say, very elderly folks who would really prefer to stay in their homes of many years, cannot…

        • Melissa Blake says:

          BINGO! Home health aids are non-existent. There has to be a recession with layoffs to regain employees in home health agencies.

        • Lili Von Schtupp says:

          Melissa Blake, as long as aides get paid more to pour coffee at Dunkin than they made doing God’s work, I say more power to every single one of them who quits. They’ve been used and abused for far too long.

      • Lisa says:

        In Chicago, the cheapest places to live are also the worst (high crime, shootings, etc). Chicago public school teachers must live within City limits to teach, to keep the taxes in the City. My husband is a teacher and we are stuck renting to be in a good school neighborhood. The school district would apparently rather hire uneducated teachers for low pay rather than hire qualified teachers who reside the suburbs. The cost of living and taxes are too high here for a teacher with a family to live comfortably. Teachers end up living outside City limits and lying abt their actual residence. Too expensive.

    • Seen it all before, Bob says:

      So what can be done?

      1) Prices could plunge 30-50% in a job-loss recession where people foreclose on their new houses and people don’t have jobs to buy houses. This will primarily affect people who purchased in the last 2-3 years. People who purchased before 2019 are up at least 30%.
      If only people would hang in there instead of walk away (2008), the economy should be stable.


      2) Inflation can raise wages 20% so people can afford houses again. Throw in a 10% plunge in prices to take us back to March 2022.
      This benefits the working middle class. It may hurt the rich with multiple houses if they lose 10% in housing and 20% in the stock market but they should barely notice it since it only takes them back to 2020/2021 with net worth.

      I still think Jan 2022 to Jan 2023, house prices will be flat or up a little.

      • jon says:

        I am in san diego and i can tell home prices either would remain flat or go bit higher as we are special and this time is different than 2008-2012.

        BTW, home prices have to go down quite a lot than 10-15% reduction to make it affordable.

        • Seen it all before, Bob says:


          Since you are special, you deserve that 20%-30% raise to counter the rise in mortgage rates. I’d give it to you.

          If I give you that raise, you can get back into bidding wars just like the good old days.

          My 10th grade daughter is making $20/hour in fast food part time this summer. I think other people with full-time jobs are likely making much more and would love a 20% raise so they can jump right back into the bidding wars.

        • Seen it all before, Bob says:

          Just as an example, the last time inflation was raging I purchased a 200K house at 10.1% interest rate when I was making 30K/year.

          Within 6 years, I was making 60K/year with a 140K mortgage at a 7% interest rate.

          15 years later, I was making 90K with a 90K mortgage balance at 5%. The house was selling for 600K.

          The equivalent would be a 100K wage and a 600K mortgage today. It is possible. Especially if the wage inflates to 120-130K within the next 2 years.

          Don’t tell anybody, but wage inflation was my friend back then. Thanks to wage inflation, every year was much easier. I would have been hurting if I had still been renting.

          It is true that I had helpful parents who co-signed and I had to drive a $300 1966 Opel Kadette, and live off ramen and Taco Tuesday Buffet Happy Hours with similar friends.

        • TonyT says:

          Bob’s a genius…when rates are going down, and he had a steady job.

          But what if you buy a $1.2M house on $120K, and rates go from 5% to 6% to 7% to 8% to 9% to 10%? And house prices go down, because at >10x median income, they were already bubbalicious. Oh, and you lose your job because your company’s sales are down 30%?

        • Seen it all before, Bob says:

          Bob’s a genius if rates are going up from 5% to 10% and he has a 5% loan.

          His payments are fixed. If he’s lucky, his savings accounts might start paying over 5%. If he is even luckier, he can refi at 2.5% in 5 years.

          Who cares if the house goes down in value? Bob will be there for 30 years because a house is a place to live and not an investment.

          As a bonus, if the house prices go down, property taxes will likely decrease.

          Keeping a job may be the hardest part but Bob planned ahead and has cash reserves to cover this for 1 year.

          Bob will not panic if his house goes underwater for awhile.
          He knows walking away is the worst financial decision he could possibly make. Even though rents may seem lower at the time, that historically has always changed. When it does, walking away means he has no credit for 7 years. He would pay higher rent and not be able to buy another house due to a poor credit score.

          You are correct. Bob needs to keep working to pay off the debt.

          Be like Bob. :-)

        • TonyT says:

          And Bob had the 1 year cash reserve and such when he bought at 6x income! That’s great!

          BTW, I wonder how Bob qualified, since a $200K mortage at 10.1% is $1770/month or 70% of gross income.

          Let’s look at reality in 2022 Silicon Valley, using some real numbers for a 3/2 SFH. Rental cost $3500/month, purchase price $1.6M.

          Let’s assume 20% down (ha, ha!), 5.75% mortgage

          Buying: $9100/month ($7500 mortgage, $1600 property taxes), plus maintenance and such

          Renting: $3500 a month. But rents go up! Well, actually they haven’t, but assuming one could stretch to buy, one can stretch to save, so the real situation:

          Buyer: $9100/month, all money going to a single, illiquid asset with high chance of asset price decline in the near future

          Renter: $320,000 to invest (the 20% down payment), and are adding $5,600 a month to savings.

          So, yes, buying a home can make sense, but not always. Especially in in a bubble, or if you are likely to move, or don’t have a stable job, etc.

        • Seen it all before, Bob says:


          Slight correction to your numbers. I saved 40K for the down payment so the mortgage was 160K. I also saved another 15K as a buffer. Ramen was 20 cents back then. It is now 25 cents. I was a new engineer and hiring was strong. Similar to now. COLA and inflation were causing rapid wage increases. Similar to now. Inflation was my friend after I bought the house with a fixed rate loan.

          At 10.1% the payment was 1400/month=16,800/year on a 30K salary.

          16800/year was mostly interest so it was fully tax deductible off the 30K. I did not pay any income taxes in my 20’s. No copays back then on health insurance but I still had SS. I lived off $12,000 per year. That’s a lot of ramen and free tacos. Gas was so expensive at $1.00/gallon so I rode my bike.

          I don’t know the SF Area market but 3500 rent for a 1.6M house seems a little cheap. 1.6M houses from information from co-workers rent at about 5K-6K/month in Mountain View with multiple co-workers. It is true that if you pack 4-5 engineers in a 3 bedroom house, rent will only be 1K/month. It may pay to wait to buy.

          It is hard but doable now. Ramen inflation is very low and bikes are cheap.

          You are right. If you expect a crash, it may pay to wait.
          If you don’t wait, you will likely be OK buying now as long as you have the buffer and intend to live in the home for 10 years.
          However, I think there may be a 10% drop in house prices and inflation (with rent and wage increases) will take up the rest. The last thing the Fed and government want is a repeat of the Jingle mail from 2008-2012. They’ll let inflation run hot for awhile along with 10%-20% wage increases to avoid a crash. Otherwise, the Fed would have raised rates much more rapidly and the jingle mail would have already started.

          Since the mid-1970’s it has ALWAYS been hard to buy a house in CA. It has always been better to buy at a low, but prices at every high have been far exceeded at the next high within 10 years.

      • Apple says:

        Unemployment is 3.5%.

        • Mark says:

          “Unemployment is 3.5%.” The fake statistic …..

          Labor Participation Rate has never been lower. The truth.

        • Harrold says:

          You may not know, but women did not enter the workforce in great numbers until the 1970’s. Single earner families were common prior to 1970.

      • Melissa Blake says:

        Don’t count on it. Idaho, the state that was the top migration state starting 2020, has now lost 50% of value in home pricing.

        I cannot wait until these $600,000 homes, bought with cash, drop in value to $300,000 homes, where they should be.

        And then, employers wanting their employees back in the office. I can’t wait to see these people fall flat on their face.

        Home prices will decline, as well as rent prices will decline.

        Greed is good until it’s not.

        • Bozeman-Belgrade says:

          Yeah, lots of people escaping the insanity of California moved to Idaho and Montana. This definitely inflated ID and MT home prices, which hurt the young locals looking to start a family. From what I saw a few years ago in MT, housing affordability was similar to the SF Bay Area. House prices lower than SF area but low-level professional salaries even lower than SF area.

        • Zodi Foxworth says:

          Amen Melissa. Amen.

    • The Real Tony says:

      In the greater Toronto area up in Canada you’d be hard pressed to find any building lot for a price as low as $439 thousand Canadian.

      • jr says:

        I bought a gorgeous 1.4 acre lot earlier this year in Tucson, AZ for $100k it’s in an old neighborhood with mostly houses built in the 1940’s. There’s no HOA or other restrictions, I’m building a modest 2 bedroom home but the some of the neighboring homes are quite impressive

      • james wordsworth says:

        … and so you see either monster homes in the outer suburbs that are simply grotesque, or what look to be jail like developments with units packed together like in some third world slum.

        The developer either has to plunk a monstrosity on a lot at an astronomical price, or put 25 jail cells on the same lot.

        … and so more and more valuable farmland gets plowed under to grow houses because we think that adding 1% to the population by immigration is good for the economy.

        It may be good short term, but ultimately we lose green space, houses become unaffordable for locals, and gridlock gets worse because infrastructure can’t keep up.

        Driving in Toronto these days is only for the insane.

        But the governments (local and provincial) remain beholden to developers. After all they have the money … and they want more of it. The BofC ain’t helping either.

  5. Ben says:

    So what’s next in horizon for plunging prices?

    • Felix_47 says:

      As much as it pains me to think it as a citizen it means regime change and if Trump is elected expect rates to plummet and prices to recover. Asset inflation helps those with assets. Those with assets vote and give assets to politicians. The government gets more taxes with asset inflation and the national debt goes down and there is an open checkbook to fight Russia and China. If Biden is reelected rates will drop but not as fast as with Trump….everything will look more organized but will be the same CF with better actors. The savers are going to get crushed until there are none left.

      • AlamedaRenter says:

        Regardless of who wins in 2024 and would be in office in Jan 2025 and couldn’t even strong arm the Fed into lower rates until late 2025…this housing down cycle will have likely finished.

        • VintageVNvet says:

          dream on AR:
          Last three or four crashes we been in, took a lot longer than that to just finish going down…
          Think 1929 to 1936 or even 1942 in some places…
          Think 1955 to 1958 and even ’59 or 60 in some places…
          Think 2006 to 2010 and even ’11 in some places.
          Certainly, a little study beyond a quick glance at Wolf’s wonderful charts will make that clear, eh?
          From what I read, it appears that some of WE the PEONs who have been through this cycle a time or two have been putting the cash formerly designated for the now paid off mortgage into ”dry storage” and are ready once again to buy when and IF…

  6. Wisdom Seeker says:

    To amplify that final point – it’s rents that are in CPI, not house prices. The effects of new-home sales on rents are indirect and slow.

    Short term, the sales-rate collapse for houses (both new and existing) constrains supply … that won’t reduce rents.

    Longer term, sellers will have to drop prices unless rates come back down. A downward price trend motivates holders of 2nd homes to sell, so that will increase supply.

    But the Fed moved too late. Now we’re heading into the winter quiet months for house sales. Owners will sit tight until next spring’s selling season, and pray for a Fed Pivot to save their profits. If no Pivot, prices will be lower by spring and maybe we see more supply come out of the woodwork next summer.

    Lower-priced supply will eventually maybe pressure rents, but there’s a lot of pent-up demand. At best it seems like it’ll be at least a year before rents fall and feed into CPI.

    Maybe other parts of the economy will have more immediate effects on CPI…

    • Not Sure says:

      It’s not just YoY numbers that the Fed and others are watching though… MoM numbers do tell us where inflation is heading. If prices continue to increase, that impacts the monthly numbers pretty quickly. But if rents simply flatten out and stay the same from one month to the next, that’s effectively 0% inflation in rents. Asking rents may take a little while to follow housing prices down a bit, but they’re pretty sensitive to economic conditions, namely wage growth. If people can’t afford the rents being asked, they won’t rent or they shack-up together which increases rental inventory. Landlords don’t want to simply sit on empty houes and apartments with carrying costs, so they’ll adjust to meet the market. And that market has already started to cool significantly.

      The Fed moved as they intended to move. They would NEVER intentionally target a decrease in prices of products, services, and assets (deflation). They don’t like too much inflation, but deflation is their worst nightmare. They are gunning for disinflation. That is less and less inflation until we return to their arbitrary target of ~2% annualized. It’s a one-way ratchet effect… Just look at the buying power of the dollar over time. It has never meaningfully retraced its losses post Bretton Woods (even the GFC was only a small blip). The trend is unmistakably a downward slope and it will continue that way.

      • JeffD says:

        Is this really how it works? Doesn’t CPI have to “catch up” to current rent levels, even if month over month price increases are 0% for the next 12 months?

        • Cas127 says:


          You are correct, there will be a lag in CPI inflation, as leases expire and (grossly) inflated rents take their place.

      • VintageVNvet says:

        ”Just look at the buying power of the dollar over time. It has never meaningfully retraced its losses post Bretton Woods (even the GFC was only a small blip). The trend is unmistakably a downward slope and it will continue that way.”
        Other than the losses of value of USD never actually retraced ( for long ) since 1913 initiation of the Federal Reserve Bank instead of the Bretton Woods conspiracy,,,, AGREE totally…
        Unfortunately, in spite of my life long attempts to provide solutions to many clients,,, I do NOT have a magic wand for the obviously needed resolution of, and now very clear criminality of the FRB.
        Maybe WE, in this case WE the PEONs can come up with some resolution that will protect our savings, and hence the very basis of capitalism without the crony part???
        IF WE cannot come up with a peaceful solution soon,,, very clear that there will be, at least, majorly ”social” upset, etc., until the situation comes to a boil, in spite of the slow boiling frog, etc…
        Best of LUCK and Blessings to all y’all who are at least willing to get up every morning and ”try your best.”

    • Seen it all before, Bob says:

      Good observations.

      “Short term, the sales-rate collapse for houses (both new and existing) constrains supply … that won’t reduce rents.””

      It depends. If the housing supply is increasing and most are vacant, then an owner/seller has to either eat the monthly cost of a vacant house, or they can rent it increasing the rental supply.

      “Longer term, sellers will have to drop prices unless rates come back down. A downward price trend motivates holders of 2nd homes to sell, so that will increase supply.”

      How many houses are second/third homes that are not already rentals?
      I think 2nd home owners own in resort areas so these areas may get some relief for long-term rentals. Unless the seller still sees a market for short term renting. It depends how many people are going wild with spending on postponed vacations.

      • Wisdom Seeker says:

        More of the “it depends” stuff:

        1) 9/10 of “new houses for sale” aren’t completed yet, and some aren’t even started (just permits). Without a buyer, they won’t get completed – so they won’t get rented either. Actual inventory of completed new homes is tiny (41K).

        2) A fair number of people had a home in a place they didn’t want to live during COVID, so they leveraged their equity and insanely low rates and bought another home elsewhere. But instead of selling the first home, they hung onto it. The price was going up so fast that it paid them to own 2 houses and become investors. And maybe they wanted to return at some point “when the pandemic ends”. Official US stats on this seem to be stuck in the year 2018 so no help there.

        3) I could see a lot of multiple-home-owners choosing not to take the risks of renting. Prices were going up so fast that renting wasn’t needed to make things pencil out. Renting is a hassle and may damage the property, so it’s also a risk. Finally, the government pretty much screwed all the landlords over with the pandemic eviction moratoria… logical unintended-consequences outcome being more people on the margin choosing not to rent, and

      • Lynn says:

        Just looked and saw one air BNB I know of listed for a long term rental. I hope it’s going to be a trend. Although the rent on it is outrageous.

    • The Real Tony says:

      Rents should start to fall around March 2024.

      • Harrold says:

        Rents never go down. Landlords would rather a place sit empty for a few years.

        • TonyT says:

          B.S. I’ve personally had a 30% rent decrease (after the dot-bomb bust). And I’ve seen landlords drop rental prices on Craigslist this year.

        • Eugene says:

          True. Probably,5% of rentals in NYC sit empty,waiting for a responsible tenant.It may take a year or 2 to evict in NYC.

  7. Flea says:

    Housing markets in west usually correct first then east coast then south then Midwest about a 2 year process

    • DawnsEarlyLight says:

      Wow, that’s quite a long span.

      • rojogrande says:

        It takes that long for some people in the midwest to realize the west is affordable again and make the move. ;-)

        • Wisdom Seeker says:

          It also works the other way – prices in the boom-bust serial-bubble states shoot up first, causing people to flee the high cost of living, which pushes up prices everywhere else.

          But only when the entire nation is overpriced does the political will show up for the Fed to start hitting the brakes.

      • Cas127 says:

        It probably won’t take that long this time around, real estate data and dynamics permeate the populace in a way they have never done before.

        (Fast reactions are the point of Wolf’s post…the Fed only started hiking 5 months ago and there has already been a huge collapse in demand).

        A much higher percentage of owners thinking about selling, know exactly what interest rate hikes do to housing affordability/demand…especially at idiotically high “plague boom” prices.

    • Seen it all before, Bob says:

      From Wolf’s excellent Case-Schiller chart,

      Housing prices

      Peaked in 2007
      Bottomed in 2012
      Regained the 2007 value in 2017.

      A 10 year cycle. The Mid-Westerners had about 5 years to notice that prices in the West were going down.

      • Cold in the Midwest says:

        Sometimes it takes this part of the country even longer to catch on. Legend has it that Mark Twain once said something to the effect of “if the world came to an end, I’d go to Cincinnati and live for another ten years.”

        That is a Twain-ish observation even if he didn’t say it. Change is not embraced (or acted upon) quite as readily in these parts.

        • Seen it all before, Bob says:


          That is true. I stayed in a hotel in Wichita in the early 2000’s that amazed me.

          1970’s shag carpets in all of the rooms, Magic Fingers bed that still cost a quarter, and a pull cigarette machine in the lobby.

        • Harrold says:

          The bad thing about playing for the Bengals is that even if you win, you still have to go back to Cincinnati.

        • VintageVNvet says:

          not so fast Harold:
          Worked in Cinci for a while in late 2002, and really liked that city…
          Lots of ”live wire” folks doing some good and better upgrades to the city and the amenities therein, including moving the Museum to the train station so the TV station could move to make room for the new ball park as a start…
          A really good small winery that sold out locally all they wanted to make, many other good creative proceedings, etc.
          Sure, it snowed an amazing amount for the location a couple of times, but so what; snow day for all meant a lot of fun on every block, etc…

        • Scott Mitch says:

          Not falling in southeast. Market Definitely still has low inventory compared to others which helps, but if you have a good home and priced just at the market, it’s gone within a few days. Nothing has changed here, yet. And it’s hard to see how prices will come down when most people in an existing home have a ~3%mortgage. (90% of homeowners mortgaged or refinanced over last few years)
          The only way they’re selling, is at a premium.

  8. butters says:

    “Inventory for sale in all stages of construction jumped to 464,000 houses, up by 28%, from July last year, and the highest since March 2008”

    How’s that possible with such a chronic shortage of labors?

    • Wolf Richter says:

      Other way around: the huge boom in construction (demand) over the past two years CAUSED the labor shortage and the other shortages. As construction is now getting throttled back, the labor shortages loosen, and the spikes of materials prices abate.

      • Tim R says:

        Really great observation. Anyone who can swing a hammer or has minimum construction credentials are doing better than ever in my city.

    • Roger Dodger says:

      There may be a building permit, but that doesn’t mean the house is anywhere near completion, or ever will be completed.

      Locally there is several commercial projects that are advancing along at a snail’s pace. As threat of layoffs increases, progress will likely decrease even more. Even with all the projects in the works locally, several new ones are just beginning. They must expect the Fed and Government to continue to bail out EVERYONE. Well, there is always an election just around the corner!

      Lots of single family homes under construction hidden away in the trees around here.

      I suspect we will see a huge increase in homelessness, as rents and mortgages are too high for many. Just ask young folks, who aren’t living on student loans they expect to government to pay for.

      When layoffs begin, hopefully not, then the number of homes on the market with skyrocket even more.

      Home builders never seem to learn. How many homes will never be completed? Shades of Housing Bust 1.0.

  9. DawnsEarlyLight says:

    The Rapids and Falls of the last chart look treacherous!

  10. Franz Beckenbauer says:

    Once greed turns to fear noone will buy no matter how low the price.

    That’s what you get from turning yoir housing market into a casino.

  11. MiTurn says:

    Sales are way down, but some people must still be buying. I wonder what generational cohort it is. Probably boomers — they got the money.

    • Wolf Richter says:

      No one should be buying at these prices. But builders have lowered prices — they said so themselves to make deals, and they’re making some deals.

      Millennials are now in their prime earnings years, and they’re making lots of money, and they’re running companies, and they’re cashing in on stock options, and they’re buying. GenXers are still buying too. But Boomers are largely done buying (not all but increasingly).

      • ru82 says:

        Plus Toll Brothers and Lennar are offering 3.99% on a 30 year fix.

        If one was to buy a $550k home with 10% down, a 3.99% vs a 5.5% would knock off $500 off the monthly payment. From $2800 to $2300.

        Lot of people go by monthly payments and not total long term cost. Thus the 3.99% might be pulling in some people too. Just guessing.

        • Wolf Richter says:

          Toll’s orders in terms of number of houses plunged by 60% in the last quarter from the prior quarter. So they’re going to get creative without having to cut prices. But ultimately, they’ll have to cut prices. Subsidizing a mortgage might work too.

        • Hardigatti says:

          Increased builder/vendor financing is always a bad sign but it could explain the insane new home construction still going on in the western suburbs of Portland, OR.
          In lieu of a price reduction, the builder buys down the interest rate. Not a bad strategy if you have a lot of unfinished homes in the pipeline.

    • Lynn says:

      Sales are halved in my area but it seems some are still being bought by “investors”. My guess is those “investors’ are not doing their research or are doing way too much cocaine and relying on channeling “positive energy manifestation” for their decisions.. Spoke to someone today who was complaining about housing prices, she noticed they were going down but still thought RE was a good investment. I said “but the prices are going down”. She said “oh… yeah…” and looked confused. I think it’ll take a minute for some people’s paradigms to shift.

  12. Nate says:

    But but but I thought it was impossible we could have a repeat of 2007-2008 because there wasn’t enough supply. There Is A Shortage! And here we are with things looking 2007-2008-ish.

    The other plank of the denialers is that this time it wasn’t the poors this time but well qualified buyers who would rather pay their mortgages than take less money.

    Of course, if that was true than the stock market would never go down. It’s almost all owned be the wealthy. Instead, it is even more volatile.

    What people forget is while a lot of folks during the last downturn could have kept their mortgages current, perhaps with a bit of sacrifice, but didn’t because they were underwater. In at least some states, the lender is limited to just the secured interest in foreclosure, not the entire mortgage balance. This creates an incentive for folks to trade their credit history to get out of bad debt. Add on top of it a real recession that everyone seems to be expecting, and history may rhyme a bit closer in time than they thought. Financially savvier people are more savvy.

    When you have low activity, the transactions that do happen are the price. There are plenty of motivated sellers. Estates don’t want to hold houses indefinitely. Builders don’t want to hold houses indefinitely. People that need to move don’t want to hold houses indefinitely. People that didn’t buy during the bubble so only would lose paper profits that were never real.

    • Alku says:

      @Nate: great reasoning, thanks!

      I would also add multiple home owners to the category of those who don’t want to hold indefinitely

    • Wisdom Seeker says:

      Not a repeat, but a Sequel.

      Housing Bust 2.0, live-streaming soon to living rooms nationwide!

    • tom20 says:

      In the industry. Went through 08-10.
      Rinse & repeat. The difference? The backlog of work.
      NOT more work than 05-07….just fewer people to do the work.
      Housing industry will certainly be in recession by fall.
      The number crunchers can not even keep up.

      Will it pull the Country into recession? No idea. I will leave that to Wolf.

      • Ricky says:


        “Will it pull the Country into recession? No idea.”

        Same here.

        Partly due to the attempts to redefine the word and manipulate the indicators as, what may end up being as , routinely as the OS on your mobile phone.

        Also due to the bizarre spins on market conditions like the TOL Bros. call that was discussed above.
        TOL either consulted with the public relations spin doctors from Evergrande or they know something 99% won’t know until late Q4ish.

        I think most are aware of the 269K acres of land acquired by Gates for his farming ventures. So while those types of events keep eyes on the screen, I wouldn’t be surprised to see Blackrock, Vanguard, and maybe Goldman slip in to start scooping up blocks, if not all, of these stalling, new housing developments before the market corrects – as some have speculated.

        Fink has already fed all the bond, equities, and crypto data available to his personal version of Skynet. Why not mix in a little RE?

    • Lynn says:

      I think almost everyone who owned just one home did everything they possibly could to keep paying the mortgage in the GFC. It was usually investors who threw the keys in because it was underwater.

      • Harrold says:

        A lot of 0% down house flippers got caught when the market turned. My neighborhood had 2 half flipped houses that stayed empty for almost a year.

  13. Educated but Poor Millennial says:

    We are in summer season now, and schools just opened up in Los Angeles, wondering what will happen in winter.

  14. Beardawg says:

    Been saying it for 2 years – this “correction” will be slow and minor IMHO – even in the West / SW. Winter slow sales season coming, wages / employment holding firm and interest rates still historically low and not likely to raise much more. 2008-2012 saw SFH median prices drop 35% (ish) and more like 45% (ish) in the West / SW. I’d bet we’ll see 1/2 of that (or less) within 2 years. Rents will climb steadily for the next 2 years.

    • TonyT says:

      Why do you think rents will climb?

      They haven’t been in the SF Bay Area.

      • Augustus Frost says:

        Probably because he has stated previously that he is a landlord. Same denial I see from many homeowners who don’t want to admit their housing equity is fake wealth.

        As the motto of this forum states, “nothing goes to heck in a straight line”. Concurrently, if the 39-year bond bull market from 1981 ended as it appears to have decisively, (mortgage) interest rates are destined to ultimately blow past the 1981 peak since the actual fundamentals now versus then are absolutely awful.

        With the amount of debt and leverage in the US economy and financial system, long-term trend in higher rates means that increasingly broke households will be less able to afford new mortgages as properties sell. Some here have claimed (or certainly implied) that most current homeowners will stay put but that’s not how life works. Many will have to sell due to life events, including higher unemployment which is coming later.

        This isn’t the 1970’s when housing prices relative to household incomes were a lot more reasonable.

        This is the second housing bubble this century (mania in some cities) and housing isn’t affordable to the “traditional” (as in pre-bubble) homebuyer, except with artificially low rates, very low credit standards, and inflated housing equity.

        • nightdipper says:

          “housing equity is fake wealth”, thanks for the laugh.

        • Wisdom Seeker says:

          Yep, gonna be lots of people getting reacquainted with the classic J.K. Galbraith concept of “bezzle” – the difference between what you think something is worth, and what it’s really worth. The perceived value gets inflated in bubbles based on fraud, deception or delusion, or what Wolf has called “consensual hallucination”. Then reality pops the fantasy and trillions of dollars in perceived wealth vanish, first gradually, then suddenly as a few people wake up and raise awareness, and then everyone wakes up with huge financial hangovers.

        • ru82 says:

          In the urban core near me, they are floating the idea to let home owners people build tiny homes in their back yard to rent out. That is their idea to combat lack of affordable housing near the downtown area.

        • MiTurn says:


          ” they are floating the idea to let home owners people build tiny homes in their back yard to rent out.”

          Sounds like a great idea! Imagine the congestion with that many more automobiles to find parking spaces for.

          And the city can rake in even more $$ for permits and taxation.

        • Seen it all before, Bob says:

          “Same denial I see from many homeowners who don’t want to admit their housing equity is fake wealth.”

          It is fake wealth until you refi or HELOC all of the wealth out of it.

          This seems to be happening.

          This could be a problem for the rest of us if housing prices drop more than 20% and they take the HELOC wealth and walk away.

      • Beardawg says:

        Tony T and AF

        I don’t have the bigger financial picture view like AF – and defer to AF’s recitations of other variables. I know RE, as AF states, as a landlord (17 years), then lender (past 5 years).

        To answer your (Tony’s) Q? – I saw “non-leveraged” (no loans / pay cash for rental prop) rental returns of 10-17% net in the absolute best of times (homes bought 2008-2013). Prices have exploded since then and margins have disappeared. It’s been “bank on the equity appreciation” for 5-6 years now andvespecially since 2020.

        Landlords who leverage-invested in the past 7-8 years got killer interest rates. Paying cash for a prop (like I used to do) pretty much died since 2016 or so.

        Those leveraged investors are seeing inflation all over, from prop taxes to repairs and in some cases, their borrowing costs. Also,, renters are making more $$$.

        Those landlords will see their equity squeezed as prices drop. Not saying they will panic, but if other economic factors remain strong (jobs, low rental inventory), landlords will keep prices moving up to shoot for cashflow because “banking on the equity” is no longer viable.

        As for SF, there are many urban pockets across the USA that are going to act differently than the macro trend. SF is a beautiful city but it suffers trend shifting more than most cities.

        • TonyT says:

          It doesn’t matter what the landlord’s costs are. It matters what renters CAN pay and are WILLING to pay.

          So, yes, sure, if there’s a strong job market and low inventory, rental prices will go up. That’s true no what the landlord’s situation is. But, if the job market is deteriorating, renters’ income is being eaten up by inflation in other areas (gas, food, etc), and more rentals are coming on the market, then rents are going down, no matter how much the landlords want them to go up.

    • Not Sure says:

      Agreed. Whatever dip we experience will be papered over within a few years. We printed too much money, and the outcome is the simplest and most predictable of all concepts in economics: Create money out of thin air without commensurate value added to the economy, and prices will go up. We expanded our money supply by about 30% and median house price went up about 30%. In the 70s back when “it was different,” we roughly tripled the money supply and house prices roughly tripled. Easy. I can’t understand how anybody is able to talk themselves out of seeing that rock-solid connection. Or funnier still, that our Fed has somehow magically changed its stripes and will now valiantly do what is morally right… Crush the financial power brokers and come to the rescue of responsible savers whom it has forsaken for 4 decades. Sorry, that’s just not reality.

      • Augustus Frost says:

        This isn’t the 70’s. Look at the ratio of home prices to incomes.

        As for the FRB, key data point is FX value of the USD. It’s at DXY 108 giving them some room to “print” if they choose to follow the same insane path, but contrary to what practically everyone believes, the markets, economy, and public will be “thrown under the bus” to preserve the Empire which cannot survive in current form without USD as global reserve currency.

        Believing elites (the ones actually in charge, not the mostly irrelevant majority of billionaires) will trade real world “hard power” for fake paper wealth is idiotic and it isn’t going to happen.

        • Not Sure says:

          AF, I always agree with your sentiment that the average American is destined to become poorer, but I think we see two different paths to that eventuality. I see an eventual inflationary collapse of the dollar just like every other reserve currency before it. The Fed will never allow a deflationary collapse. DXY is just a measure against other also-inflating currencies. It doesn’t say much about the actual purchasing power of the dollar.

          Look, most of the world does not get to have 4-person families in their own sprawling houses on a quarter or half acre each. A lot of the world lives in multigenerational households packed-in with aunts and uncles and in-laws at 10-15 or more people to a dwelling. That or small apartments. It’s totally possible that we’re entering a future where the average couple simply does not get to own a house by themselves. This is already becoming the case where I live in Southern CA. Try to find open street parking in my neighborhood… You can’t, because many houses on my block are now boomer homeowners with at least 1 gen-x or millenial kid + son/daughter in-law + grandchildren. That is how people afford to live here these days. At least 3-5 or more wage earners contributing to the mortgage or rent in single family homes. The majority of new construction around here is connected housing or apartments. I’ve heard the claim that CA always leads and other states follow… That might, unfortunately, be true in this case. Home ownership is not a right, and nobody said that the average couple HAS to be able to afford the average single family home in the average city. Alternatively, the 1990s saw median house price go pretty flat for 5 years while other stuff caught up a bit… That’s a possibility as well.

        • Ernie says:

          The DXY mainly reflects what is happening in Europe which is a basket case and getting worse.

          The other main competent is the Yen which is now a victim of massive hedge fund speculation on hoping for its demise and fall.

          Home prices to income is basically irrelevant for most real estate markets.

          Maybe you could do some research and actually tell us why…..

    • Digger Dave says:

      Wishful thinking, perhaps. Inflation will not abate until assets are deflated. Interest rates will continue to rise until enough asset holders feel enough pain to unload at significantly lower prices. Asset deflation will trigger job losses. Maybe not great recession numbers, but a downward trend will begin. So much of the economy is psychological, and so many participants go which ever way the wind is blowing. Too many people still believe that assets will hold value. But not enough. Once the downward spiral begins (it has already) more and more will jump on the pessimist bus until the bottom is found. Just like every other economic cycle.

  15. ru82 says:

    I wonder why house supply peaked at 12 months at the beginning of 2009 and dropped to 8 months during one of the worst stock crashes in 20 years. Were people buying during a market crash and financial crisis? Maybe many of the new homes for sale where going into foreclosure and taken off the market. It seems like the peak was at the beginning of a recession. I would have thought people would not have been buying houses in 2009, 2010, 2011 but months supply was dropping

    Maybe it is in the way a months supply is calculated which I do not know. Inventory divided by average sales volume?

    • nightdipper says:

      It was a very good time to invest in SFR’s. I was buying then. I’m a buyer anytime I can find a ‘good’ rental that meets my min ROI.

      • Beardawg says:


        If you read my comment above – I agree – that was a great time to buy rentals. Those days / margins are gone. This is why rents and home prices will not drop (much) regardless of market forces. Margins for landlords can’t go too negative – they (landlords) will try like hell to protect their cashflow.

        When I bought some condos in 2005-2007, they dropped by over 50% in value – but they were rented out, so I didn’t care what they were worth – just had to make a profit.

        • TonyT says:

          Hell yes rents can drop based on market forces. If the choice is between no rent or lower rent, the landlords will rent at the lower price.

    • El Katz says:

      We bought a home in the Bay Area in 2010. The previous owners lost it to foreclosure because the sucked all the equity out of it, he lost his job, and the rest is history. We bought it from the bank after the multiple lenders fought over the crumbs. We paid cash. Did a cash out refi when our daughter mortgaged her portion after closing.

      The house was over improved and I recall commenting to my daughter that we couldn’t duplicate it for what the asking price was. We bid $5K over asking, all cash, with only inspection contingencies.

      I didn’t/don’t care what “the market” does because there is no “market”. It’s machine trading. Until the machine trading goes away (and it never will), these “markets” are nothing more than a bad joke. I recall standing in an airport (SLC, I think) and looking at the ticker on the TeeVee and commenting to a fellow traveler….. “Vegas meets Wall Street”. That was probably 18 years ago and nothing has changed.

  16. smashsc says:

    I mentioned before about a local 55-lot DR Horton community where they are hurriedly building it all out with spec homes. 18 of the homes were posted on the MLS on 8/10, and all have been lowered by 4%-5% in price since then. Watching with fascination at the turnaround in the market.

    • ru82 says:

      If you go to the Tol Brothers website, they are offering a 3.99% 30 year fixed. They are probably not lowering the price much but instead paying down the interest rate?

      • El Katz says:

        They have access to money that most don’t. The other ploy is to play with the “options” by offering the $250 can lights at $100 each or offering enhanced interior trim, granite, or other high profit items. By not lowering the prices, they don’t risk inflaming their recent buyers who paid similar amounts for homes with less content as the “sale prices” do not appear to be falling off a cliff.

        Empty houses don’t weather well. The equivalent of automotive “lot rot”.

        • El Katz says:

          PS: During that period (2010), the government was offering a $10,000 first time buyer incentive as a tax credit. That’s where we took the money from for the $5K over. She qualified as she had never previously owned a home.

  17. Michael Engel says:

    1) New Single Families Houses Sold look like 1929 to 1936. The 1937 recession might be next.
    2) The seventeen years of trading range to 1949 haven’t reached it’s half line.
    3) The next high in 1946. at about 50% retracement followed the 1942 low.
    4) If this analog correct, new home sales will breach the old peak
    in mid 1955…26 years after 1929.
    5) The best time to buy was mid 1949. The best years 1957/59 up in a straight line.
    6) $2K for u $2K for me and student loans jubilee wouldn’t matter.

  18. CCCB says:

    Better sell now if you need to sell. Prices are still high and rising in some markets, but the next step after inventory buildups is reduced prices.

    I lowered prices on my new builds 6% and got half of them under contract within a week. The rest will be gone by the end of the month. Most other builders are still trying to hold out for early 2022 prices. Good luck.

    With the exception of luxury homes, there will be very few new single family homes started with land prices high, building materials up 36+% from pre pandemic and anemic buyer traffic. It doesn’t bode well for buyers once the cycle turns up again.

    • One and a Penalty says:

      To state the obvious, the economy has been punch drunk on cheap, easy capital (“Funny Money”) for years, well before the pandemic. This in turn has artificially impacted asset prices, especially RE. The only reason this has come to light is that the Fed has been forced to deal with high inflation which will tighten underwriting and strangle liquidity. The individual that will make it through this is one that is liquid, debt free (except perhaps on a primary residence), and well diversified.

    • Augustus Frost says:

      “It doesn’t bode well for buyers once the cycle turns up again.”

      If the interest rate cycle from 1981 turned in 2020, the cycle you reference won’t be at the same artificially low rates which existed for most of the period from 2002-2020. Incomes aren’t about to explode higher for most households to make up the difference either.

      So, while it might not be good for buyers, it’s not likely to be good for sellers either.

      The primary constant I expect to see is continued government mortgage guarantees. That won’t change any time soon. Depending upon the political environment, I can also see “housing affordability” tax credits which will (of course) make housing less affordable, except for those who get it.

      By my reckoning, at still current artificially low mortgage rates, somewhat more than 20% of the population can “reasonably” afford the median priced home now. That’s without becoming a defacto debt serf and using any housing equity they have now plus any fake wealth from the asset mania in other asset markets.

  19. gametv says:

    Changes to the housing market happen at a slow pace. Buyers and sellers always look at the comps and it takes multiple rounds of changes in the comps to drive changes in prices.

    I dont see inventory numbers for resale homes, I dont think the numbers are actually that high yet – this will take time and it will be very painful.

    Sure the market has changed dramatically from a few months ago, but it is nowhere near affordable for most households in many areas, the West in particular. Markets like Boise ID and areas of Utah are still outrageously overpriced relative to incomes.

    • MiTurn says:

      “Markets like Boise ID and areas of Utah are still outrageously overpriced relative to incomes.”

      And they’re collapsing rapidly. Boise now leads the nation in housing price reductions. Zoom up, zoom down.

      Quickly becoming more ‘affordable’?

  20. JeffD says:

    I applaud the buyers strike. That said, 107K of that housing “supply” hasn’t even started construction, and only 45K completed new homes are out there as of this report, pretty much the same as last month. Completed inventory is still at historic lows. Until that changes prices are going to move sideways, regardless of sales.

    • Wolf Richter says:


      1. Completed inventory WAS at historic lows and has been rising for months as under-construction inventory becomes completed inventory and is still not sold.

      2. When completed inventory gets too big, it will kill the homebuilders, as it did last time.

      Completed inventory = spec homes: that’s where the risks are.

      The second layer of risks are with under-construction homes.

      Homebuilders have GOT to sell those, or else.

      Both of them have absorbed a huge amount of cash, and have large carrying costs, and if they cannot be sold pronto, the homebuilder topples.

  21. Genti says:

    I’m a San Diego resident that observes the market here quite closely & I like that Wolf references San Diego in most of his housing articles. For good reasons – we have holy-moly prices down here & given the holy-moly current borrowing costs, it’s unattainable for affluent families, not to mention the lower income families. Something has to give. The inventory has not crept up that much, but you can tell sellers are slashing prices because, as Wolf says, “buyers are a lot lower.” It will be interesting to see when we hit the other end of the bell curve and reach 2020 prices. If we ever do. I think we’ll have a clearer picture by the end of the year, as we all know real estate has a lag factor.
    Cheers – keep up the good work of reporting.

    • gametv says:

      The whole reason prices went so high was that people viewed homes as investments. Hopefully, with a 3 year decline that wipes out 50% of home values, buyers will look at a home as a cost of living and pay the appropriate amount.

      If we had a decent central bank, they would realize that the majority of their stimulus money goes into asset appreciation, not the real economy. Honestly, we could all live better if we had an economy based on LESS consumption and improving our lives through a much lower cost of living that allowed all workers to live a decent lifestyle.

      The way to put our economy on the right path is to make changes to the business rules – taxation, trade relations, investment laws, government spending programs, regulation, etc. Those are what are holding our economy back, not monetary policy.

      So basically the opposite of everything we do now.

      • Harrold says:

        When you take the long term view, housing is a good investment. You have to live some place after all.

  22. DDG says:

    Hi Wolf;
    Why is it that the ETF XHB remains so persistently high? Granted that the security has had a June/July wobble, but it is higher now than it was at the beginning of April. I would think that with all the latest data, it would be going downward rather than up/sideways.

  23. All Good Here Mate says:

    It’s finally here!!

    I feel like I’m 7-years old and it’s my birthday.

    “ Sales of New Houses Collapse (in the West by 50%!) Inventories & Supply Spike to High Heaven, Worst since Peak of Housing Bust 1”

    Not sure I can read the rest of the article cause of the grin on my face getting in the way.

    • PhilinMA says:

      is this schadenfreude or are you looking to buy?

      • QQQBall says:

        We are looking to buy and have been since 2019. We are in vulture mode. The target market is all blue city/state escapee buyers. The multiple overbids have stopped, the 1-day OM sales are gone and starting to see price reductions, although admittedly the price reductions are lower than we want. We are leaving a $500-$600/SF (minimum) market for a $125/SF to $150/SF with higher quality and larger lot areas, and I suspect I’ll solve a seller’s problem near $100/SF or less all cash, 10-day close. Argue all you want, prices are coming down. I think I posted before when we looked at Sparks/Reno. Dont over -complicate it; it’s just simple maff. Nothing pays like patience. We dont have to sell to move. Son in NYC is looking to buy. I told him that its just getting started, to identify his target area, research and track it, and when SHTF for real to step in and buy.

        • VintageVNvet says:

          WE did just that at $90/SF later during last ”recovery” in ’15 cued.
          Would have been $50 if we were a bit earlier in cycle.
          Zillow now says well over $300, but we suspect that. More likely mid to low $200 at this point in time…
          In any case, are blessed to be where property taxes rises are capped.
          Wish that were true for monopoly utilities.
          If wishes were horses, every beggar would ride.

    • rojogrande says:

      At first I thought you received the Wolf Street mug. I felt that way when mine arrived yesterday!

  24. Jon says:

    I am looking for a home in the Northeast. One appeared on Zillow last week with an asking price identical to its assessed value. It’s already off the market, under contract.

    Meanwhile, dozens of other homes have been available for a month or more. They have asking prices 100-150% above assessed value.

  25. CreditGB says:

    House prices to incomes comparing today to yesteryear, are apples and oranges. When buyer’s incomes are shunted to energy and food, and soon to higher taxes, the income available for housing ‘improvements’ shrinks.
    Currently at 8.3 to one, it is at all time record high. Post this against a shrinking budget do to rampant inflation and you get not a buyer’s market nor a seller’s market, but a dead market.
    Oh sure the higher incomers are OK but that isn’t the biggest part of housing.

    • Old school says:

      Been watching development and factory production of Incredible Tiny Homes 8 x 16 home. He has got a design he sells for $19,500 and has gotten labor down to 80 man – hours. That works out to about $2400 labor cost per home.

      He just hit production rate of five per day.

      If you don’t want a $500,000 mortgage then you have to think outside the box.

      It’s very inefficient to build a traditional stick and brick. Around 4000 man hours I think.

      • Digger Dave says:

        4,000 labor hours is extreme for stick-built, unless we’re talking about massive houses.

        If we’re talking 1,500 – 2,000 sq. ft. houses, then your builder isn’t trying if the total labor hours are above 2,000.

        I work in the trades & have my part in many new home builds. I know a lot of crews that dedicate 2 or 4 carpenters to new builds. The 2-carpenter builds all take about 4-6 months from start to finish, with a lot of down time for those two laborers when other trades come in to do their part. The 3-4 person crews can get build times to 3-4 months.

        • IanCad says:

          Far less if the GC undertakes the entire assembly process. In states, like CA, that allow it.

        • Wolf Richter says:

 uses MLS data. So any new houses (under construction or completed) would only show up if the builder lists them on the MLS. Big builders — this includes condo towers — have their own sales offices and don’t list their properties on the MLS unless they can’t sell them otherwise.

        • VintageVNvet says:

          You wandered off a bit DD.
          Likely framed at least a hundred small single story ranchers of 15-1800SF back in the day.
          From CIP footings/foundation walls, with anchor bolts already inserted, to nailed off roof sheathing took one week with 4 workers; two journey level, one apprentice, one laborer.
          That was in CA, FL, and OR in late ’60s- 1970s.
          Wages very different in those states then,,, somewhat merging these days in some areas from what I am seeing, but latter two still way lower.
          Keep in mind we were building the very best constructed houses in Naples, FL area in early 1960s for $12.50/SF; many of those now selling well over $1,000.00/SF including the dirt, etc.

  26. DarkMatter says:

    Wolf, looking for your opinion. I had a friend who mentioned something eye opening that I hadn’t heard before regarding the last financial crash and why it can happen again. He said home prices are up 2-3x from where prices were in 2007 and that 1 home in default today (peak) equals 3 back then.

    What do you think?

    • DawnsEarlyLight says:

      What were the prices in 2007 verses pre-2007?

    • Wolf Richter says:


      You just need to look at the mortgage balances. That’s where it’s at:

      But defaults are historically low for now:

    • Old school says:

      There is a certain delusion and denial in a bubble or they wouldn’t form. We will all probably be cursing modern central bankers when they land this plane.

      • Bulfinch says:

        Or fatalism & resignation. When you’re socking away every spare nickel you’ve managed to hustle in order to purchase a domicile for you & yours, (not a home; home is a feeling), only to watch the goal posts move from one quarter to the next like they were going downhill on greased banana peels, it becomes a Herculean feat not to feel FOMO. All manner of what-ifs and rationalizations tempt one toward the madness of the crowd.

    • MiTurn says:


      Those collapses are great buying opportunities. I lived in a rental for six months free because it was repossessed by the bank and they didn’t want it vacant over the winter. So no rent!

      We then bought a very nice home in an ideal location, as the owners were desperate to sell and they had gotten few offers on their property. And we bought our current (and final, knock on wood) home that sat on the market for four years.

      Dips are great!

      • COWG says:

        “ Dips are great!”

        Especially the one who bought way overpriced FOMO mania houses…

        These internet housing geniuses are going to find out the hard way that property should never be undertaken as an emotional purchase…

        Property, whether land, houses, apts, or whatever, should always be looked at, in my opinion, with the lens of situational buying…

        Does the purchase work for my situation? But additionally, will it work for the foreseeable future based upon the illiquid nature of real estate…

        If not, I pass… the last thing in the world I want is an albatross around my neck sucking up resources I can use elsewhere for a better life or until the right situation comes along…

  27. ru82 says:

    I came across another fintech that probably has been helping juice the all cash buyers market.

    It is called zerodown. They buy the home for you with all cash and then you rent to own it from them and eventualy buy it. Thus this lets you outbid people and you can get into a home with zerodown.

    What a great time to be buying a house. LOL All kinds of ways to get into a house without the historical 20% down of the pre 1980s.

    • PhilinMA says:

      lol, I put 20% down in 2018.

    • gametv says:

      I would think the business model for zerodown breaks down when home prices crater below a certain amount. They have to be using debt to finance the purchases and even if they are cash flow positive, the debt will be called if the asset prices fall far enough.

      I also question whether opendoor can survive the next 3 years, even though i do think the opendoor model can succeed in the long term because it can eat up the profits in the real estate industry (agent commissions and financing/transaction fees) in exchange for a swifter, better buy/sell process. Agent fees of 5% on million dollar homes is ridiculous.

  28. Ringo says:

    The charts that Wolf has included suggest that there is a few more months left before peak new single house or new house supply is reached at 12 months of sales from the present 11 months of sales

    This makes sense when considers more FED rate rises to come

    Jan 2023 looks like time for the Supply charts to start their 5 year nosedive once again

    Current lenders must be worried

  29. David Hall says:

    Housing inventory measured in months of sales is not the same as the number of unsold homes listed for sale. According to a FRED housing chart, the number of U.S. active listings in July 2022 was close to 800,000 homes. In 2016 the number of active listings was close to 1,500,000.

    The U.S. population grew by 22 million 2010-2020. Over 2,000,000 people were added each year. The southern border has seen increased immigration this year.

  30. jon says:

    The inflation is at 8% plus. Fed still has to tight a lot and hike rates. The show has not yet begun properly. I wonder how things would look after 6 months.

  31. SOL says:

    I wonder how the Chinese property crisis will impact us on the West coast?

    • The Real Tony says:

      Contagion hasn’t spread yet to the west coast of Canada. Not many sellers in the Chinese cities in Canada. If prices fall far enough in China or in Canada the Chinese will unload amass in Canada.

  32. beatleme says:

    First of all thank you Wolf for providing this information, so helpful in analyzing the state of housing. I looked at your “Median Price, New Single-Family Houses Sold” chart and saw the price bounce higher in July and thought, how did that happen when pretty much every other chart you have would lead me to think price should not have bounced to the upside? There is one chart that may help explain this and its the 30 year fixed rate mortgage chart ( If you look at this chart, since the peak of 5.81% around June 23, mortgage rates have been trending lower to a 5.13% around August 18th (the most recent data point available on the chart). My take on all this is that housing demand is there waiting to pounce, but since it’s extremely rate sensitive this will not occur as long as the FED continues to battle inflation and puts pressure on mortgage rates to remain elevated. As pressure eases and mortgage rates trend downward, expect to see further upside to the median price charts.

    • Wolf Richter says:

      In terms of your connection to July median price and July mortgage rates — You got this wrong. The median price ALWAYS bounces UP and DOWN. Look at the chart. It’s very volatile, always, everywhere. You don’t get a trend from one month. You need to have several months to get the first indication of a trend.

      The three-month moving average is a better indicator of a trend (below the basic median price chart).

      That’s why the median price is not a good measure, and I prefer the Case-Shiller but there is no Case-Shiller for new houses, and the CS lags 4-6 months, and that’s not great either when the market turns. So median price is what we have to use.

      Average 30-year fixed fluctuates from day to day. Today, it’s back at 5.73%. These day-to-day fluctuations have no impact on home prices. You need bigger trends to impact home prices, and the bigger trend is 5%+ mortgage rates, instead of 3%.

      • beatleme says:

        Wow, five days later and mortgage rates jumped from 5.13% to 5.73%, talk about volatility! I see the fluctuations and I agree, it is very difficult if not impossible to identify a trend so quickly, but looking at it since the runup starting in 2020, the clearest trend downwards was May and June of this year, and I would have expected July to follow that trend, especially considering that most if not all of your other charts continued their trends. So other than identifying a trend, I looked at this as a possible indication of how rate sensitive housing demand is at the moment. So the next question is why? I think home prices are at or near a ceiling at these mortgage rates, and if you want to know where housing prices will go next, look closely at mortgage rates.

  33. Erik Levy says:

    Slower in Seattle but not seeing prices drop, and houses are still selling, especially in Wokeville, USA Capitol Hill Seattle. Those libs are still roaring bulls.

    • Jesse says:

      Are we monitoring the same Seattle? I get price drop notifications all day on my multiple RE apps. Maybe I should add “wokeville” in my search criteria.

  34. EatNoPig says:

    So would it be fair to say that during the 2007 crisis, the market crashed because people could not pay their predatory loans, whereas this year, people for the most part can pay their ridiculously large loan (or are too flush with money to have one), but are now simultaneously running to the door as interest rates rise to cash out on their golden egg? Who knows how deep prices can fall in the race, in California houses can loose several hundred thousand $ (or a few million $) in value in a few months, MLS comps are going to spread the hurt. Welcome to early retirement for the lucky ones, or home slavery for bag holders.

    • beatleme says:

      I think you have a good point comparing 2007 to today – they can pay their ridiculous loan because they still have a job and got the loan at a 2.5% to 3.5% mortgage rate. I don’t think they are running to the door – inventory is increasing because there is not enough demand to buy houses at current prices because fewer people can afford a ridiculous loan at a 5.73% mortgage rate.

    • gametv says:

      The last housing crash was driven by sellers who could not afford mortgage resets. This one is led by a buyers strike, based on monthly payments being unaffordable. There are still some buyers who are willing to make those payments, but my guess is that most of the buying and selling are not new home buyers, so they are transferring equity from one home to another.

      The big question is really whether interest rates will fall in the future, thereby bringing in a new wave of home buyers.

      I would love to see a chart that showed exactly how many potential buyers can no longer qualify for a given neighborhood at different interest rates. My guess is that 75% of the potential buyer pool has evaporated over the past two years. I think the people left in the market are people who still somehow believe that real estate will always rise and believe that these small declines are a bargain.

  35. TheFalcon says:

    Peak buyers (spring ’22) in my SoCal zip code have lost at least 10% and in a few cases 20% of equity. Factoring in the higher interest rates, monthly costs are not down of course, but the fact that homes are losing noticeable value and trending down is a great sign. Long way to go but it’s early.

    • Kracow says:

      It’s going to be awesome watching this slow march downhill.

      I’m watching an neighbors house what it finally sells for..
      5,500 sqft, had to list it down to 1.45M, 78 days on the market had to mark it down from 1.79M, he picked it up for 1.2M in 2020. If he would have sold it in Late 2021 or real early 2022 he most likely would have got 2M+ with 10+ bidders thinking they are getting a bargain.

      This was in Evergreen, CO.

      • gametv says:

        if interest rates remain high, i think that home goes under 1.2 million within 6 months and then the owner has a decision on whether he wants to cut the price to sell it or try to hang on and then maybe do a short sale in the future. either way, it provides more downside momentum to the whole market.

  36. Butters says:

    Reading comments I get the strange feeling that Kunal is posting with multiple handles.

    • Kunal says:

      No there is only one Kunal and Wolf deletes his comments because Wolf does not like his opinions that contradicts him.
      Silence those who disagree and preach liberty and free speech to everyone else.

      • Wolf Richter says:

        There is only one Kunal, and Kunal is a troll that spreads BS. Kunal likely belongs to the army of trolls that is paid to spread BS. And Wolf tolerated that BS for too long, but apparently no longer does, according to people familiar with the matter.

        • Lynn says:

          If companies are starting to pay trolls it’s a clear sign the companies can’t pay enough politicians and that everyone thinks the market will crash and it will.

      • RockHard says:

        Kunal could start his own blog and not bitch about “censorship” on a site where he doesn’t pay the hosting bill. Try it out a while and see how you like liberty and free speech.

  37. nsa says:

    Race to the bottom? Deflating existing home prices denominated in rapidly depreciating dollars. Inflation adjusted charts may be in order.

  38. Ray says:

    Here in Brisbane, Australia rising construction costs appear to be wreaking havoc on builders. I was walking my dogs this morning through the new development close to us, and happened upon a couple whose home construction seems to have hit a standstill, I chatted with them and it seems nothing has happened at the site since early June, the builder apparently wants them to approve a variation for $80 000 AUD, but they are rather trying to opt out of the contract. It appears that they will be the proud owners of a new concrete slab with a steel frame on it for some time to come.

  39. Anthony says:

    I guess it’s not a recession as people are still spending

    (as if that had anything to do with a technical definition lol.)

  40. AD says:


    Toll Brothers only down 2.59% in the after hours after its earnings report today after closing.

    Closed at $45.63 today, down about 40% from its all time high / 52 week high.

    It was $55 in July 2005 :-/

    I don’t think it will crash more than 50% from its 52 week high.


  41. Michael Engel says:

    1) The new houses today are shadows of the 2006 Mcmansions and the micro/minis of 2036/2046, chicken wings with spices.
    2) Since existing home prices descent first slowly then faster assessment pain will rise faster along with maintenance and energy cost. Neglect will dominate, because the cost is too high, owners will give up.
    3) $2K for u and me and $40K students loan jubilee, puppuccinno for the elite, that cost $1.2T to collect $1.7T. Who cares, zoomers and millennial will pile higher debt, mortgage debt, to forget.
    4) Regression : 50% student loans jubilee up to $10K debt. Additional 33% between $10K and $20K, and the last 20% write off between $20K and $30K. Doctors, MBA grad and lawyers can pay. Colleges should regress because they became useless.

  42. David says:

    After reading this article, the ad at the top of the website was for a bank: “great loans for your dream home!” I think Google’s ad algorithm is funny sometimes.

  43. anon says:


    This is entirely anecdotal from the western suburbs of Chicago.

    Early this year lots of older homes were being “scrapped” and replaced with much larger 3-car garage ‘Starter Castles’.

    Now, it appears to us as we drive around, current projects are being completed.

    BUT, since the middle of June or so, NO NEW homes are being started. It may be we are simply observing the wrong places. But soon, I believe, things are going to slow waaayyy down.


    I love Wolf’s posts and the comments are fun to read also.

    Stay safe everyone!

  44. ru82 says:

    Biden to forgive $10k student loan and extend forbearance to 12/31/22. If we are walking into any type of recession at the end of the year, forbearance will be extended again.

    I am guessing student loans will never have to be paid back.

    Takeaway: Do not save for college. Take out Student loans.

    Honestly, every problem is met with more debt or more printed money.

    • Wolf Richter says:

      That’s why I questioned why we still call them “loans.”

    • tom15 says:

      Economy is to hot. To many jobs. Hence loan forgiveness.

    • Not Sure says:

      Takeaway: Do not save for anything. Take out loans for everything. If the Fed doesn’t have your back, the politicians will. Savers will be punished and irresponsibility will be rewarded. I feel like such a dope for getting it so wrong all these years.

      All the necessary precedents have been set for moral hazard to become standard procedure. Foreverbearance, bailouts, and money printing are the new paradigm!

  45. Nemo 300 BLK says:

    Here in the rural Red sticks in the South, where we have been building client-financed custom-built homes as fast as we can build them since 2017, I had a county inspector tell me the county issued the most home building permits ever for a month in May. I’m currently building a four-car barndominium on a lake lot and plan to build the home sometime next year.

    My neighbor is the lead loan guy at a community bank that has 80% of the bank business in this county, and he told me today that home construction loans are off about 25%. He said the folks on the margins who are hoping building costs come down or are afraid they won’t be able to afford the interest rate on the home in a year are the ones taking a breather.

    The folks coming in from out of town who just sold a home in S FL for a million and are looking to build a $750K home aren’t phased because they think they are getting a deal compared to where they came from.

    My banker neighbor also said that his bank, along with three other branches of his bank in three other nearby counties, all opened up an average of 800 new personal banking accounts in Q1 22, which is unheard of for these rural counties.

    Real estate is local.

    • MFS says:

      I really hope you are not located in rural NE GA where I am at. My spouse and I have been looking to buy since moving here a year ago. I’m flabbergasted that homes in “chicken country” are selling for almost double what we paid for our FL home in 2014.

    • jon says:

      The show has just started per my understanding.
      Just wait few quarters and this won’t be local anywhere.

      I hear a lot in my hood as well that m y hood is different, this time is different and real estate is local so prices won’t go down in my hood.

      Cheap money was universally available, so difficult to believe this is local.

      Only time would tell.

  46. Educated but Poor Millennial says:

    Maybe a repetitive question for you, sorry if it is. But I like to know if there is any effect from Chinese housing crisis (tsunami effect) that slowly approaching US homes and will add to the current mortgage affordability crisis here?

    • Wolf Richter says:

      There hasn’t been any cross-pollination in the past of these two housing markets. There are other connections. For example, if consumer demand tanks in the US (maybe because of a bid housing down-turn and other factors), it hits the Chinese manufacturing sector. If this comes on top of the housing crisis over there, it’s going to get interesting over there in a hurry. But the US housing market is impacted by US events.

  47. Not Interested in USA Real Estate says:

    Why would any sane foreigner buy real estate in the USA now?

    The USA is one of the least favorable places to put your investment dollars as far as real estate is concerned. (Well unless it is all from illegal means and you can hide it there!!)

    When looking at real estate as an “investment” you have to look at a huge number of factors.

    The carrying costs of real estate in the USA is huge in terms of real estate taxes, compliance costs, and the costs related to buying and selling.

    Reporting costs and capital gains taxes also make the asset less interesting in many regards to many other countries.

    The pandemic has also shown that when it comes to “rights” the state can take them away at any time. The US government can and will reduce the rights of landlords. Illegal? So what. Even the US Supreme Court said it was illegal and the Biden Administration extended it anyway. Nothing happened.

    With the US dollar at a recent peak and the future uncertain with regard to its movement in the future the foreign real estate investor also faces a foreign exchange rate risk that may be expensive or hard to hedge.

    And recent events also point to a new area of added risk in form of property rights: ask any Russian about the safety of investing in the USA.

    Are Chinese going to risk their money in the USA in a fixed investment that can’t be moved given the possibility of action being taken against them if China moves against Taiwan?

    Individual states are also getting in on the act.

    Take a look at the recent action Hawaii has implemented with regard to short term rentals and taking away previous enshrined rights of real estate owners there. (Currently the subject of a lawsuit.)

    And the USA is not alone.

    Real estate investment in a foreign country is a risky event now.

    Ask any foreigner (one who doesn’t have permanent residence) that owns property in Japan about the ability to access their property there. Too bad you bought a holiday home or condo in Japan.

    They can’t and haven’t been able to do so for years now. They still can’t enter the country even for tourism unless it is a “guided tour” and the numbers for even that are limited.

  48. michael earussi says:

    Hasn’t affected Portland.

  49. Anton says:

    Wolf, I think there is an issue, and a big one with looking at this data. its all new home sales you are referencing. I can tell you that I am living in San Diego and actively looking for a new home to potentially purchase. I am not looking at new single family homes because San Diego has NONE. Zip Nada. If you want a single family detached home here in San Diego County you are going to have to go to the US Mexico border. So like everyone else who wants a house in the city I have to look at homes in exiting neighborhoods. The inventory there is still non existent. I would buy, but there is nothing to buy, there is almost no inventory except for absurdly overpriced homes that have sat on the market for months.

    • jon says:

      I am in San Diego and seeing multiple price reductions.

      Realtors are scaring me saying that this is the best time to buy as inventory is low and zoning restrictions means sfr homes are hard to come by.
      So buy now or be priced out forever.

      Recently, I am also getting calls from realtors saying market has turned around.

      I am not really in the market for next 2 years. I want to move out of CA.

      I believe, patient home buyers would be rewarded.

    • Wolf Richter says:

      There’s no problem with the data. There has been no single-family house built in Manhattan in many decades. In San Francisco, SFH construction essentially stopped two decades ago. It’s all multi-family. That’s just the nature of the city as density builds up. If you want a NEW SFH in San Francisco, you need to leave the city and go to the suburbs. That’s just how it is. San Diego is getting closer to that model. New SFH construction is moving to the suburbs and further out in many cities.

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