Boots-on-the-Ground Observations by 21 Home Builders about the Housing Market They’re Facing

#Phoenix builder: “The positive is there’s light at the end of the tunnel for improving build cycle times. The negative is there won’t be customers on the other side of said tunnel.”

By Wolf Richter for WOLF STREET.

We’ve seen the data from the Census Bureau about the downturn in the market for new houses: surging inventories – 11 months’ supply in July, highest since the worst days of Housing Bust 1 – exploding construction costs that home builders are facing, though some of those cost spikes are now abating; and plunging sales (-30% across the US, -50% in the West). The National Association of Home Builders reported a dismal traffic of prospective buyers. And we’ve seen how home builders reacted: construction starts of single-family houses plunged 18% year-over-year, though construction starts of multi-family buildings jumped.

So here are the home builders themselves, in their own words. John Burns Real Estate Consulting’s Home Builder Survey summarizes feedback from over 300 home builders in over 80 metro areas. The survey results are limited to paying clients. But Rick Palacios Jr., Director of Research at John Burns, when he noted today that the August results were in, posted in his Twitter account some quotes from 21 home builders. These are boots-on-the-ground thoughts and observations from those in the thick of it.

The “top themes” in the August survey, Palacios said, were:

  1. Home price cuts along with other incentives are helping sales (for now).
  2. Supply chain is healing as demand drops and builders quickly slow housing starts.

Here are the builders themselves, as cited by John Burn’s Rick Palacios Jr.:

#Austin builder: “A lot of spec inventory to work through. August was a very poor month for sales across the board. Cancellations spiked from July and buyers showed no sense of urgency.”

#Baltimore builder: “Jumbo loan rates below 5% are helping buyers move forward in that segment.”

#Boise builder: “Construction cycle time has improved over the last 30 days.”

#Charlotte builder: “Sales were fairly strong in August. Increased incentives to help with closing costs and a buy-rate appear to be helping.”

#Cleveland builder: “Build cycle times have been improving over the last 4 or 5 months. Appointments have completely dropped off and traffic is very sparse at the models.”

#Dallas builder: “The slowing of starts is helping front end (foundation/framing) issues. Build cycle time is down and will go down further as material becomes more available.”

#Harrisburg builder: “When mortgage rates dropped in early August, we saw a big uptick in buyer activity. This aligned with a large incentive and price reduction rolled out at same time. Took a big hit on margin to generate sales.”

#Houston builder: “We have slowed starts significantly, as have other builders, and we are confident this will enable us to bring our build cycle times down. Slowing starts are providing some relief to labor disruptions.”

#Jacksonville builder: “Frame material and labor have stabilized. Garage door delivery times also more predictable.”

#KansasCity builder: “Most of our build cycle challenges are starting to ease. Subcontractors on the front end of the building process are starting to call and ask for work.”

#Louisville builder: “Build times are getting better. One of our biggest delays is getting through the municipal permitting process.”

#Ogden builder: “With reduced sales and moderation of starts, build time on the front end has dropped significantly.”

#OklahomaCity builder: “Builders are now fighting for the same customers and systematically reducing prices.”

#Philadelphia builder: “A slowdown in sales helped to relieve the pressure on labor and supply issues.”

#Phoenix builder: “Incentives continue to grow, with some communities pushing 20% in total discount packages. The positive is there’s light at the end of the tunnel for improving build cycle times. The negative is there won’t be customers on the other side of said tunnel.”

#RaleighDurham builder: “Largest schedule constraint is not having electrical power from our local public utility. We’ve built everything with generators over the last 24 months! We have closings held up on finished homes due to not having power.”

#RiversideSanBernardino builder: “The amount of material shortages experienced 6 months ago have started to dissipate, however the current shortage of electrical switch gear has added weeks to our schedule on every project.”

#Sacramento builder: “No urgency in buyers. Large public [builders] with significant spec inventory are winning more of the sales with very large incentives (discounts and closing costs).”

#Tampa builder: “Big spec builders are slashing prices on their inventory homes that will close in 2022. If interest rates get to 6.5% the waters will get very choppy.”

#WashingtonDC builder: “Starts have declined drastically. The new environment is going to cause trades to drop their costs significantly and we expect that to make its way through all of supply chain.”

#WestPalmBeach: “So far, we still haven’t seen what most of America is experiencing [slowing]. Anything under $450K is still selling well.” THE END

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  120 comments for “Boots-on-the-Ground Observations by 21 Home Builders about the Housing Market They’re Facing

  1. 2banana says:

    Better known as the Homebuilder screw the last buyer method.

    “Home price cuts along with other incentives are helping sales (for now).”

    • gametv says:

      The futures on lumber are now back to where they were 2 years ago. Watch them decline even further, although this is somewhat dependent upon energy costs for transportation. All the other home building suppliers will be looking for customers soon.

      The downside on home prices has just started really.

      When you look at commodity prices, many of them are considerably higher than 3 years ago, but some of them have fallen dramatically in the past 6 months and are getting back to normal pricing. It just doesnt look like a uniform picture of inflationary pressures, it is commodity-specific.

      I also read an analysis yesterday about inflation and they broke it down by segment and the vast majority of inflation that was above trend was autos and energy. Both of those are simply supply issues that will be resolved within 6 months.

      To me, the real story in another year will be that the Fed cant get close to historically normal monetary policy without creating a massive recession.

      All of this tough talk and QT from the Fed is only a pre-election campaign to make voters think the ruling party is doing a good job. It wont last long.

      I doubt we return to the type of QE or low interest rate policy we have recently seen, but I also doubt we see much higher interest rates (after one more big burst to the upside in the coming months).

      Sorry, but the overall world economy is going to be very sick very soon. Europe is already falling into recession, yet it has massive inflation. China is going to stop growing and has a huge property bubble issue that will cause havoc, Canada, Australia, New Zealand have massive property bubbles that make ours look small and are already starting to burst.

      The stock markets might rally for a short term, but the pace of QT will start to pull the support out and we will see a bigger downside in the next year.

      The destruction of property values and debt associated with those values is going to be the major theme throughout 2023.

      • Augustus Frost says:

        In 1981, I doubt anyone could have imagined there would be ZIRP, NIRP, and QE since it’s financial insanity. It still happened.

        If the rate cycle bottomed in 2020, it doesn’t matter what the central banks do. Any attempt to prevent rising interest rates will crash the currency. Look at Japan now.

        It won’t take 39 years for rates to “blow out” either since the fundamentals are mediocre to terrible now.

  2. 2banana says:

    A win all around.

    “#Philadelphia builder: “A slowdown in sales helped to relieve the pressure on labor and supply issues.”

    • Educated but Poor Millennial says:

      They just made a fun of themselves. Pay attention to the following words “slowdown on sales”.

    • Bruce says:

      They must have a Realtor license for that level of spin.
      ‘Now is the time to get in on the ground floor – real estate never goes down!’

  3. andy says:

    “Phoenix builder: there’s light at the end of the tunnel”

    Ha ha ha. What a hoot.

    • 2banana says:

      More like a train horn.

    • Wolf Richter says:


      Finish reading Phoenix builder’s statement in the subtitle. Just one-and-a-half sentences more to go. It’s worth it. And it IS a hoot, but only if you read the entire two sentences.

      It’s an even bigger hoot if you read his ENTIRE statement about halfway down the list.

      • andy says:

        Yes, Wolf, totally. Read it now. Thank you. Let’s hope there is a tunnel.

      • WolfGoat says:

        LOL… Now I understand why Wolf gets so frustrated!

        “The negative is there won’t be customers on the other side of said tunnel.”

        So, a “hoot” would be the builder thinking that light was daylight, but the “toot” is the train-wreck that builder seems to know is coming!

        I think 2Banana has it at “Homebuilder screw the last buyer method”!

      • Educated but Poor Millennial says:

        manipulation , lol

  4. Depth Charge says:

    “#Phoenix builder: “Incentives continue to grow, with some communities pushing 20% in total discount packages.””

    So prices are already down 20%. Interesting. Kunal?

    • andy says:

      My friend Kunal is busy appraising Tesla’s 178% month over month production increase in China. After it dropped two thirds the previous month.

      • Miller says:

        The “home prices will never drop” deniers are together with the “Fed will never stop QE” deniers crying in their beer now. Or at least they should be–sustained denial at this level can be a drug, even with the Fed actually doing QT and following through. And until recently to be a bit fair about it, for 40 years really, the Federal Reserve itself was the street dealer of choice with these loose monetary policies. JPow’s own book pointed out how the “2 percent inflation target” never actually made any sense to begin with.

      • Educated but Poor Millennial says:


  5. Roger Dodger says:

    It may be a coincidence, but last week I watched them moving furniture out of a major brand name’s realtor office space. The home listing brochures are gone from the window. I don’t know it they closed shop or moved.

    A Time of Famine for the real estate vultures has arrived. One of the ongoing scams in America is real estate agents. The one time I used one they did their best to screw me over; luckily I stuck to my guns or I would have been. They rank up, or is down, there with used car dealers.

    • Mike r says:

      That is so very true about RE agents. They have been all living high on the hog in recent years with all the super low interest rates. And there are so many of these agents it’s mind boggling. In this day and age are they really worth the 3 to 6% tacked on the costs ?

    • Ricky says:

      Possibly an agent with insight? Cashing out for good or hitting the sidelines for 24 months.

      Sometimes it’s so easy to get blinded by the dollar signs, while cruising down Easy St., that you miss the “Dead End Ahead” sign. Same can be said for any profession that is subject to cyclical markets.

      Anway, well known realtors – the ones with, consistently, 8 or more sticks in the ground and, maybe, a couple of motivated, well qualified (cash) clients on the buyer-side – survive severe downturns as the less established ones bleed out their operations budget allowing them to gain the remaining market.

      Smart move, in my opinion.

      Also, sorry to hear about your experience with that, apparently, transactional Realtor. In a business where relationships are everything, I can’t imagine this guy/gay/other will make it. Hopefully, not a referral.

    • gametv says:

      Roger – I helped my parents sell their home and agree that realtors are swine. Full of promises and lies. Zero integrity.

      I also had to tell the realtor I would just wait for his contract to end and re-list it before he finally produced an offer. I really do believe that he was trying to drive the price down and not showing it because he somehow knew the buyers.

      The problem is that real estate prices have gone up so high and real estate agents get a percentage of that increase, so their comp has risen so much.

    • ElbowWilham says:

      In my limited experience, RE Agents are like Lawyers and Accountants. Most are just incompetent, some are evil shysters, and fewer still are a real benefit to you. If you find the good ones, hold on to them tight.

    • jon says:

      Very true.
      I tried to negotiate with real estate agents when I was buying long time back. The home was priced at ~1 million USD. The conversation went like this:
      Me: I know seller pays you 3% of sold price, Can I get some cash back out of that 3% . 3% is 30K. I know I didnt make you work a lot, and I did all the homework.
      Real Estate: That commission is mine and you are not paying. Seller is paying for it.

      Me: I agree, seller is paying but who is paying the seller.

      Real estate agent kept quiet and I moved on away.

      Real estate agent for normal transaction are completely un needed and not worth their 3% for expensive homes.

  6. BenW says:

    Once the 30YFRM fall back to 5%, the housing market will really start to stabilize. MND has it down to 6.01%, down from 6.24% last week. I suspect we’ll see 5% by early October. Along with price declines in materials & slower demand for durable goods, housing will start to firm up. This means fairly limited price declines, for now, when you look at the national picture.

    I don’t see unemployment spiking over the next 12 months. As such, we’re looking at a real turnaround possibly in housing by next spring. If all goes according to the Fed’s plan, we may see double digit growth again with housing prices by summer 2024.

    • Gattopardo says:

      Where is this guy’s /s tag???

    • SocalJohn says:

      Ben, if you list now with a realistic price you can still get out before the situation gets worse. You don’t have to drink the kool aid.

      • BenW says:

        Unless unemployment spikes upward, the housing market isn’t headed for a full on crash. Let’s say by next spring prices have dropped MAYBE 10% nationally and the 30YFRM has dropped and stayed in the high 5%, then this is the right combination of over prices & rates for the housing market to stabilize. People will increasingly use ARMS to get their rates at or below 4.5%. This will cause the housing market to stabilize. Then, over the next 12 months or so it will move higher, al beit not at the same crazy rate of growth we’ve seen over the last 3-4 years. This will be a very shallow unemployment downturn, unless there’s a black swan event like China’s RE industry hitting a big wall that creates some sort of contagion here in the US.

        • Degobah Smith says:

          Ben, I wish I could live in your world. I truly do.

        • Wisdom Seeker says:

          Ain’t gonna be no ARMs at 4.5% rates with short-end Federal Reserve rates higher than the 10 year. Lenders need a spread to take the risk.

          5/1 ARM already at 4.5 and short rates heading up now down… buyers gonna be spooked about going ARM with short rated heading straight up and no clarity from Fed on endpoint – key is that no one understands endpoint for inflation in time of geopolitical turmoil impacting most supply chains.

        • Augustus Frost says:

          If the interest rate cycle from 1981 turned in 2020 as it apparently did, buying a bubble priced home (national median home is about 6X median income now versus closer to 3X historically) with an ARM is a recipe for future foreclosure and financial disaster.

          Your post implies the economy and financial system is more or less “normal” when it isn’t, not even close.

        • roddy6667 says:

          I lived through an RE crash that started in 1988. I drank the Kool-Aid every day for breakfast. I was a Realtor and kept repeating what you are now saying. Besides having my total net worth invested in real estate, I was my job. I went throught the financial trifecta of divorce, foreclosure, and bankruptcy. Home prices dropped 50% in many CT towns and took a decade to recover, I stopped saying “it can’t happen here”.

        • Lynn says:

          “unless there’s a black swan event like China’s RE industry hitting a big wall that creates some sort of contagion here in the US.”

          Oh. So you don’t think that is already happening? hahaha

      • Ricky says:

        I was joking with my mom, while visiting last May, that we could get into the “For Sale’ sign business and make a fortune.
        My folks live just south of Sarasota in a huge, textbook, bubble-community/city. Construction everywhere at the time.
        My suggestion didn’t go over well.

        • kramartini says:

          So relieved that my baby sister and her husband closed on the sale of their way over-valued waterfront property near Sarasota today. Took the money and ran…

    • Mike r says:

      Yeah sure. The 10 year yield drives rates, and by the time that comes down enough to have an impact, the mass layoffs will be well underway. In a high lay off environment, which we have yet to see in this cycle, the fear of being layed off, will make buyer demand drop off much further than it has thus far.

      Like phoenix builder said. When they get to the other side of the tunnel, there will be no buyers.

      • Harrold says:

        Unemployment is 3.5%. There will be no job reductions in this recession.

        You can’t always predict the future by looking in the rearview mirror.

        • random guy 62 says:

          Just one example, but at our company of 100 in the truck equipment business, we already have the layoff list ready. The pink slips will fly far faster than normal if/when the backlog hits a certain level.

          After the 2020/2021 commodity price mess, we don’t have the spare cash to weather losses. Our backlog is already off 35% from its 2021 peak, and there is plenty of work for another two months. Beyond that… who knows. September orders are off to a HORRIBLE start. That might turn around, or it might not.

          Y’all who think layoffs won’t happen in this down cycle are smoking crack. We will be forced to cut hard and fast to get overhead to a sustainable level if sales slow much more.

        • Wisdom Seeker says:

          They said that in early 2007 too, after housing had peaked but before the actual recession hit. 9 months ago the asset-price markets were at all time highs. 9 months from now we will be feeling the layoffs as the zombie companies die of credit starvation and the economy pivots to businesses sustainable with higher rates.

        • Augustus Frost says:

          I agree with the above post. It’s called operating leverage.

          Concurrently, corporate America is also loaded to the gills with debt though I haven’t seen data for private businesses.

          Public companies will cut jobs to cut costs if and when their stock price stagnates or crashes. It doesn’t matter if it isn’t “necessary”.

          No corporation is a social service organization which exists to provide employment for anyone.

        • JdC says:

          As the article details, homebuilding is slowing throughout the country, not just a region. Consider all the construction jobs affected and go from there….suppliers, transportation, mortgage companies, realtors, appliance retailers, and others. Homebuilding is significant to the US economy. Hope I’m wrong, but I think Roddy6667 is right.

    • Kurtismayfield says:

      So you don’t believe a word the central bankers are saying? They are going to keep raising rates until inflation is killed. At this point I would be happy with mortgage rates stabilizing at 7.5%.

      And if the Fed doesn’t have the balls to stand up to the asset class and keep rates high, then they aren’t doing their job.

    • HollywoodDog says:

      It’s hard to take any prognostication that begins with “If all goes according to the Fed’s plan…” seriously.

      • rojogrande says:

        Ha! Very true.

      • BenW says:

        Feel free to look around at what the experts are saying. NO ONE is calling for a housing crash. Why? It’s simple. The labor market is going to remain stronger than everyone thinks it’s going to. And that’s the key. 315K jobs were created last month. The jobless claims just hit a 3 month low of 222K. Congress just authorized almost $2T in new spending which is going to put upward pressure on inflation while maintaining supportive of jobs.

        Could a black swan event come out of nowhere and cause a significant rise in unemployment? Sure! But from where I’m standing that’s less likely than the alternative: The economy continues to slow, causing a very modest drop in housing prices of 10% over the next 12 months. Couple that with interest rates having peaked and sub 5% 30YFRM by this fall will cause the housing market to stabilize by early next spring. We’re looking at prolonged stagflation like the 70’s. However, this time out national debt won’t allow the FFR to return to Volcker like highs. 4.5% tops compared to 19% 41 years ago.

        It’s really not all that far fetched. At this point, there’s absolutely zero signs that a big uptick in unemployment is right around the corner. The labor market is holding up extremely well after almost 12 months of high inflation. Inflation was running 6% in October of last year.

        And here’s exactly what will happen in the next 6-9 months. The Fed will come to terms with a new normal of higher than 2% target inflation. Why? They can’t raise the FFR much past 4% and have it stay there for 2 years trying to beat down inflation. As such, the narrative will change early next year. The new normal target inflation will be something like 3.5%. We have to expect higher inflation to pay for all this climate change bonanza coming our way.

        Everyone understands YoY inflation, right? If inflation in October comes in at 8%, that’s only 2% YoY. And it will continue to drop. How fast is anyone’s guess. But, it’s not staying at 8% for the next 12 months, people.

        • John p lycke says:

          I have been in real estate business for 40 years ( commercial in NYC, and residential in the Hamptons). I am baffled by the lack of understanding from many of the posters here of Debt!!
          The US has 30 Trillion if it, the world has 303 Trillion of it !! The world has Too many people , and many are in poverty, food, medical, water, energy, education scarcity, they need assistance just to Survive, not help pay interest on that debt, forget paying it down.
          People with money do not want to pay for things from the past ( debt) it’s painful yes, but how and who makes it happen?
          The party is over!, we now have credit bill to pay ???

    • ElbowWilham says:

      I agree it will stabilize, but not until the summer of 2029.

    • BenS says:

      Historically unemployment can move fairly quickly from trough to peak. I am not talking 2020 or 2008, but rather almost every recession since WW2 has moved unemployment peak to trough in less than 18 months. Most of the economy takes 9-12 months to feel the affects of rising rates. The slowdown in housing is just the first and most rate sensitive event.

    • Neil says:


  7. ru82 says:

    Anecdotal story I read. A couple sold their home in denver for 600k and moved to phoenix. They are realizing that their 2.5% mortgage was a great deal. Now that interest rates are 6%, they can only afford a $400k home in Phoenix with the same payment they were used to in Denver. They said they don’t want to downsize and will just rent because they believe interest rates will go back down. They need to hope housing drops $200k

    Good luck hoping rates drop back down.

    • Einhal says:

      And therein lies the reason that the “People will never sell because of their 3% interest rate” argument falls apart.

      First, people move for many reasons, like the couple you mention. Some have to move for work, others for family reasons, and many others. I agree that someone with a locked in 3% rate may not move across town if it’s purely discretionary, but many will have to otherwise.

      Second, many people with 3% rates did NOT buy during the past 2 years at bubble prices, meaning that they could sell and still make a “profit.” That’s a big psychological factor. So people who bought at $500k will not likely want to give up their 3% rate and sell at $400k, but the person who bought at $250k, refinanced to a 3% mortgage, and now wants to sell, may very well sell for the $400k. I suspect the percentage of people who bought at the peak is fairly low.

      Third, many people are saying “Well, if prices drop, I’ll just rent it out instead.” The problem with that is that they will have to lower rents, as they’re now competing with more affordable houses being sold. And many don’t realize how much it sucks being a landlord.

      I’m not saying prices will crater, but I also think the delusion that real estate only goes up will be tested, sooner rather than later.

      • Harvey Mushman says:

        Very well said!!

      • Augustus Frost says:

        The only reason I don’t believe housing prices will crater is because of another government mandated foreclosure moratorium and payment forbearance. It won’t solve anything longer term (by making housing less affordable than it should be) but slow any price decline.

        Before this happens though, I still expect a longer period of moderating interest rates temporarily moving against the longer-term trend. I believe the cycle bottomed in 2020 but the up move won’t be unidirectional.

        • Einhal says:

          I agree with that. For all their talk about housing “affordability,” they don’t really mean it if it means that the “gimme gimme gimme” class that comprises most of the electorate these days gets kicked out of their homes because they can’t pay.

        • PJ says:

          Well, and as long as the RE sites like Zillow keep showing rising “values” (regardless of market fundamentals not supporting any of it any longer), sellers will be hesitant to engage in the necessary deep price cuts that more accurately reflect the market , because of sheer FOMO. Valuations on zillow are still showing ridiculous appreciation on houses that -are not selling-.

  8. Frank says:

    These transition period are painful. The land that the developers are currently building on was purchased when prices were on the up trend and supported by anticipated price points. All is good unless the market turns on you…. Building is a crazy, volatile business. Many a fortune won/lost.

    • MiTurn says:

      Frank, I wonder if you just answered the question I was going to ask. Suddenly, I am surrounded by homes for sale. These homes weren’t for sale during the heady months of FOMO. Now, with the local market tanking, these houses suddenly appear on the market. Why on the down curve?

      Since I live in rural North Idaho, I am supposing that folks bought a place here before they sold the house in the state of their previous residence, generally California, anticipating higher prices. Hoping more gain.

      If I’m correct, they lost that fortune.

      • ElbowWilham says:

        Do you think a lot of the homes in your rural area were bought with the intention to work-from-home? And now they are being called back, or lost that position, so their rural farming dreams have been crushed.

        Just an ancedote, but my parents were working from home for a large insurance company in Chicago during the Pandemic. Before the lockdowns started, my FIL used to take the train from the suburbs to downtown for work. They had a decent townhouse.

        They decided to sell the townhouse and move to northern Wisconsin for more acreage. Early this year he was laid-off. There are no comparable jobs in his rural location. He is looking at getting a CDL license to drive a truck now. My mom really loves the new location, so I hope they don’t have to sell at a loss.

        I just wonder how common this story is.

        • Flea says:

          Trucking is a terrible profession ,

        • tom15 says:

          Chicago has been keeping us cheesers busy long before the
          pandemic. I’m sure he will have local offers with a CDL.

          When the day comes that I decide to close the doors on our business, I will do the same on a seasonal/part time basis….when I’m not on a tractor, or in the woods with chainsaw.
          Check with the local co-op.
          I also have a friend who retired…or at least thought he had,
          and now drives meth addicts to their treatments.

  9. unamused says:

    Um, simply reading the article isn’t always enough. Background is frequently needed from other articles, establishing a narrative, and an academic acquaintance with finance, economics, and geography can be helpful. There’s a lot going on here and serious stuff should be taken seriously. Turn off the optimism bias, the pessimism bias, the confirmation bias, and gear up those hard-earn critical thinking skills.

    I intended to mention this earlier but didn’t want to be careless about comment limits. -sigh-

    The big takeaway from this article seems to be that the US res RE market is so seriously distorted by financialization and economic limitations that achieving stability could prove tedious, painful, and expensive. Disruptive you’ve already got. It’s going to take time to get to new normal, and that may never happen what with all the other bad stuff going on. It’s complicated.

    Oh, what do I know. I’m a begonia.

    • keppered says:

      I agree

    • Kurtismayfield says:

      Ii would argue that the Fed’s 20 years of ZIRP was the most disruptive force of all, and the only tools they have to correct their own mistakes with involve pain. The people who receive the most pain will be the ones that have the least political power.

  10. shandy says:

    Im glad i followed my own drummer.
    That is ive been at peace and a solitary observationlist. Ive left my powder in cash, hedging, bartering, and fibbing like a daughter coming back home after eleven post meridian.
    I dont wont no stinkin rentals.
    You town block belong to me…..

  11. Depth Charge says:

    Starting to see large median price drops month over month in many markets. By December I think we should start to see the year over year drops. Some markets are now essentially flat since January.

  12. Lucca says:

    I think the price drops are going to be much worse than many people are predicting for next year, especially now that interest rates are still increasing.

    • Volvo P-1800 says:

      This isn’t a bear market yet. It’s a beer market – full of bubbles, with a bitter after-taste.

  13. Here it comes says:

    Here in the south OC we are getting more inventory but prices are still astronomical. Sales have picked up a bit over the last few weeks but they are nowhere near the rate of homes coming on the market.

    Overall there is most likely a very large gap between sellers and buyers. The price drops will only come from those who are actually in need of selling. For now I believe most of the homes coming on the market or not from sellers who have an urgent need to get out.

    Until there is some kind of a catalyst like employment dropping I think we could see home prices staying relatively flat until the impact of the interest rates and the inflation starts to trickle into the economy more.

    I don’t believe this will be quick. It could be a period of flat or relatively flat prices for a year or more. The Fed likely won’t lower interest rates but we may be getting close to a point where they don’t raise them either until we wait for more data.

    • Mr. House says:

      Has anyone here considered that the labor market with tons of “bullshit” jobs is the only thing holding this three ring circus together? I’ve been in the same job for the past three years and its the fakest job i’ve ever held in my life. And its also been the highest paying, what does that say about our “society”? What isn’t fake with regards to America anymore?

      • Wisdom Seeker says:

        Higher interest rates and recessionary profit squeezes have a way of squeezing out much of the fakeness.

        When companies have to turn a profit in a competitive market they get pretty good about figuring out which members of the org chart add value and who doesn’t.

        • Anthony A. says:

          How true.

          Reminds me of when I was in a top ten oil company in the mid 1980’s and crude fell to $8 barrel for $50 in a few months. Ever see 6,600 people get “let go”? And then followed by another 10,000? And then see the company get sold off in parts?

          Yeah, fake jobs and even real ones get creamed when things go south.

      • Em says:

        Would you mind sharing the general nature of your job?

      • OTH says:

        Thank you for bringing this up. I’m a carpenter (real job) and I’ve been looking for someone to hire to no avail. Had a 19 year old helper over the summer but he went back to school for the year a few weeks ago. He didn’t have a single friend looking for this type of work (real work). There are too many fake people with fake jobs. Influencers, podcasters, crypto traders… that’s just what we see in pop culture. The whole quiet quitting phenomena everyone has talked about lately is an outgrowth of this, you can’t quiet quit being a welder or an engineer. You actually have to produce something tangible at the end of the day. Quit your job and work for me if you still want to live a real life.

    • jon says:

      People won’t sell unless they are forced to, from the high prices of 2021.
      Once people are addicted to high price, they’d resist as long as they can.
      During last downturn, my friend took 2 years to sell his home chasing down the market from initial asking price of 780K to finally sold at 480K.
      He was in no hurry to sell :-).

      But home prices in a neighborhood are decided in the margins like stock.

      I see FED not lowering rates at all unless inflation comes down big time.

  14. Bobber says:

    If the housing market is stable with 5-6% interest rates, why did central banks push mortgage rates below 3%?

    • Ronald Reagan says:

      Im sure that these bankers did not have my best financial interests in their ledger sheets.

    • unamused says:

      Housing markets aren’t necessarily going to be stable with 5-6% rates either. There are other variables. And CBs don’t directly set mortgage rates and don’t make mortgage loans. That’s done downstream by mortgage lenders.

      CBs pushed rates offered to other banks downwards to increase yield spreads and motivate customer borrowing so the banking industry could recover from the Global Financial Crisis, the result of their own blind pleonexia and terrible judgement. Bankers may seem stolid but they’re frequently rather reckless in their pursuit of global domination.

      Like I said earlier, I’m a begonia, and you really shouldn’t need this sort of explanation from a recently repotted house plant. Besides, my comments are frequently deleted because I’m an uncommonly reckless begonia, so you should probably just ignore me.

      • rick m says:

        I was reading my Doonesburys Greatest Hits and recognized the begonia reference. Gary Trudeau’s humor is dated and immortal at the same time. Lots of 70s political and economic commentary that resonates today.
        Why do those Raleigh Durham builders not have temporary power poles? Unless they’re building beyond the reach of electrical utilities which doesn’t sound right for the area, but who knows. Duke Energy, Dominion, and the gaggle of electrical co-ops have no load issues, capacity factor better than industry average, didn’t have any significant summer overloads to speak of, and a nice balance of energy sources. Municipal inspections are required for utilities to connect temp power poles and there may be local political delays, easy for the city to regulate a contractor out of profitability and make him her comply or quit. Generator start to finish would suck. I’ve installed diesel gensets on pumping stations beyond utilities, but there wasn’t anybody to annoy. Pissing off the neighborhood with your noisy new build seems injudicious. Reading electrical blogs that whole area and Florida has gone crazy regulating trades. It’s in response to all that money, but when the tidal wave of fedcarebucks recedes the regulations will still be there choking profits for builders. Many small towns are informally closed shops, husbanding the available work for the locals. A state license doesn’t grant immunity from local tradition or authority.
        Pandemic-excused bureaucrats are feeling their Cheerios.

        • unamused says:

          Good catch rick m. Still, I’m confident that other oblique references to more obscure authors will remain inscrutable.

          “Many small towns are informally closed shops”

          A medieval guild mentality, but can you blame them? A single big box store or RE developer can ruin the lot in entire counties. Call it socialism for the precariat.

        • IN says:

          >>Why do those Raleigh Durham builders not have temporary power poles?

          Sounds quite… strange. I live in an actively developed community in this area and I think I’ve only seen contractors with a generator only once when we had a storm-related outage for almost a day. I haven’t seen any generator-powered building sites when I was touring other local developments back in 2020.

      • Ricky says:

        Can’t ignore you. I agree with your point of view.

        However, I think the banksters know exactly what they are doing. Most of the, if not all, the financial crisis’s we’ve experienced almost always result in a huge transfer of wealth. You could also argue that it doesn’t have to be just a financial crisis.

        Actions that lead to events that, somehow, always seem to benefit the ones committing those actions, doesn’t seem like the result of terrible judgment to me.

        Unfortunately, for the rest of the population – unless an act of God forces these G-SIB’s aka “too big to fail” banks, with their ISDA members creating financial derivatives like mad scientists, to lose that status – they will continue blazing this reckless path.

        The G-SIB status means a bail out is coming so, with no real consequences to suffer, they’ll continue to blaze that path until the wheels come off.

    • The Real Tony says:

      Who knows? I’ve always said the easiest way to prevent China from becoming a superpower is to kill the housing market with higher worldwide interest rates.

  15. THEWILLMAN says:

    Inflation and rising interest rates are non-linear in their effect on markets.

    As these comments show the line between adding a few more incentives and empty spec houses and total lack of demand is very thin.

    This soft landing stuff is a fairy tale.

  16. Beardawg says:

    The various developer comments are telling. They have been through this before and karma is sorta with them. Between labor and material challenges, finishing homes has been tough, but with the market cooling, it allows them to find a steady pace. Prices will moderate, but a crash….nah.

    • Einhal says:

      What’s your basis for saying this?

      • The Real Tony says:

        In Canada they always build houses a lot faster when prices are falling and a lot slower when prices are rising.

    • Jon says:

      “Prices will moderate, but a crash….nah.”

      Alot of people thought the same in 2008 2009.

      So it is normal to have price increase by 40 percent in last 2 years but a price cash is a nah ..

      • Depth Charge says:

        “It is difficult to get a man to understand that which his financial interests are dependent upon him not understanding.” Or some such. Beardawg is a house horny speculator. Do the math.

        PS – It’s already a crash. Imagine losing 1/5 of your house value when the builder sells to the next sucker for 20% off. It’s already happening.

        • El Katz says:

          The remedy for the 20% off sale by the builder is to stuff the house with low cost options at no additional cost and keep the price visible to the public the same. Added pot lights, outlets, trim packages, granite, appliance upgrades, etc., would be included but reflect no adjustment to the base price of the home which disguises the discounting from the market.

  17. LordSunbeamTheThird says:

    Even though expectations affect them personally there is an underlying theme of honesty from the builders as they describe the situation, maybe putting a brave face on it.

    In contrast, the statements of every single global central banker are 100% manipulative deceits.

  18. Pablo says:

    I know this is going to be gut punching painful for all those folks who bought at the very top of the market, but this correction is long overdue. If you have millions of folks who are priced out of buying their own home, and their rents keep spiking, what are we going to do? Have them all live in “BidenVilles”, like its a new Great Depression?

    Look, I’m saying this as someone who has seen his home increase in “value” by over 250% in the last eight years. So what? Its just paper until I sell, and I’m not selling. I’m also not gonna use my home like its an ATM………. I know way too many folks who’ve gotten burned playing that game.

    Bottom line: we all live in this country. My countrymen living rough out of doors with their families is going to impact me sooner or later

    • Grover says:

      Well said Pablo. Greed is in play big time. Unbelievable! A roof over your head should not be played with.

    • The Real Tony says:

      In places like Brampton, Ontario Canada 20 to 30 people live in the same rental home. About half live downstairs and half live upstairs. Other cities like Scarborough, Ontario Canada are the same.

    • ru82 says:

      Good point. But it will cause some behavior modification regarding buying, selling, renting.

      I read an article of a person
      There is plenty of housing units. The past 10 years i have seen many large (200 plus unit) apartment complexes built near me.

      I think in one of Wolfs graphs it illustrated the surge in multi-family construction.

      The new normal is that families below the median family income will most likely not own a home but rent. I read only 17% in this demographic owns a home down from 26% in 2010.

    • Jesse says:

      Couldn’t have said it better, Pablo.

  19. Old school says:

    Seems like the biggest mistake made in the last 100 years is to let the price of money be determined by the Fed. Just look at how Fed policy turned housing market into an unstable boom and bust industry. You control price of money, you can destroy society if you get it wrong.

    • MiTurn says:

      “Seems like the biggest mistake made in the last 100 years is to let the price of money be determined by the Fed.”

      Old school, that’s an interesting point. But might the inflection point have come later with replacing gold-backed currency with fiat currency? Might this fact simply be independent of Fed policy and be the actual monkey wrench in the gear works?

      • Old school says:

        Seems like governments can not be trusted with money and in modern they can fund their short term goals by having central banks manipulate value of money. Probably biggest problem is it allows society to live beyond it’s means until there is a systemic collapse.

      • Harrold says:

        Gold, Bitcoin, its all the same. There’s no need to peg your currency to anything at all.

        • Augustus Frost says:

          Look at the growth of debt and credit since the USD’s last link to gold was severed in 1971. That’s the root cause behind most supposed increased “wealth”.

          Then when the credit mania really bursts, you will understand your error.

    • Augustus Frost says:

      That’s what happens with price fixing which is the correct description for monetary policy.

      There is no “correct” interest rate any more than there is a “correct” price for anything else.

  20. Jackson Y says:


    Unrelated & possibly stupid question … but when august CPI is released next week, the data is not as of August 31st, but some point in the middle of the month, right? If so, do you know when that data cutoff is (eg Aug 15?) For prices that are volatile eg oil, do they take a monthly average or is it the price as of that cutoff date? Thank you

    • Wolf Richter says:

      From the BLS:

      Prices used to compute the CPI are collected during the entire month. CPI data is published monthly, with the index value representing an estimate of the price level for the month as a whole, rather than a specific date.

    • WolfGoat says:

      I’ve been tracking for a bit now.

      It’s an attempt at real-time tracking of the CPI. It seems to indicate that inflation has slowed a bit since Mar/Apr, but still around 9%.

      It will be interesting to see what the BLS CPI Report comes in at.

      • The Real Tony says:

        My guess is a tenth of a point higher than last month’s CPI.

      • Old Ghost says:

        For what it may be worth, one of Wolf’s favorites, the Weekly Economic Index (WEI) has been declining since Jan. 2022.

        • WolfGoat says:

          And the Chicago Fed’s National Financial Conditions Index (NFCI) has been tightening and looking to go positive. It’s interesting that you can almost see the ‘resistance’ to tightening in it.

          Don’t fight the Fed!

        • Wolf Richter says:

          Actually growth has been slowing — if that’s what you mean. Still growing but slower.

  21. Halibut says:

    I think we’re in for a long bumpy ride. Gradually, home prices will fall. More in some areas than others, but prices will have to adjust.

    Millennials are going to be buying a lot of houses over time, but something has to give to facilitate that.

    I expect equities will continue to go to heck in a crooked line while this plays out. And that will will hammer a lot of 401ks, exacerbating the pain.

    I fear that, unlike many of us boomers, most millennials haven’t taken strong defensive actions. They just haven’t lived through enough sh*t yet to realize how bad this can get. And many will learn a painful lesson as their 401ks get crushed. That will destroy any “wealth effect” they might have had further delaying home purchases.

    Things will shake out eventually, but it’s going to be like having a stone in your shoe and walking all day — for all of us.

    • ru82 says:

      I don’t think equities or housing is going to drop as much as people believe.

      If we enter a recession, both will fall. But I believe the fed will always choose employment over prices. I could be wrong but what is worse. 10% unemployment with businesses closing and people losing their homes versus low unemployment and high asset prices? That may be what the Fed has to ask themselves.

      I think The Fed will choose low unemployment over high asset prices.

      People out of work and no home get angry. People with a job but rising CPI prices will just complain a lot.


    • VintageVNvet says:

      Maybe you meant ”all of us boomers?” Eh halibut?
      Does NOT MATTER what generation or anything else,,, only matters if,,, repeat, IF you and yours, if family or only you can do the ”SELF DISCIPLINE” absolutely needed to SAVE your money(s) from the current trend of spending for WANTS,,, rather than NEEDS…
      That many many of WE the PEONs have been and continue to be partially and totally ”distracted” by the HUGE amount of propaganda, otherwise known as ”advertising” is very very clear…
      YOU can have your corn and eat it too,,, but only if you personally get beyond the propaganda from all sides..
      Wolfstreet. com WILL help you understand some of the propaganda/control that is being disbursed daily through the various and sundry and extensive TV and now WWweb.
      Good Luck, and may the Great Spirits Bless your efforts…

  22. Crush the Peasants! says:

    What is the profit margin on a new home these days?

    • ru82 says:

      In my flyover area I am told 10% to 12% for the mom and pop builders . I thought it would be higher.

      It is higher for the big builders. Maybe 15% plus

  23. IanCad says:

    When materials and labour supply exceed demand, cost to build will drop like a rock. Unfortunately government imposts will not. It will get tough – I’ve been there.

  24. Jon says:

    Thanks Wolf for putting thr list in alphabetical order.

  25. Ricky says:


    GREAT article!
    A variety of additional insights, POV’s, opinion, and takeaways in the comments. This article may have hit the “comments” sweet spot. Easy to engage.

    I can’t help laughing at the last comment from #WestPalmBeach.
    “So far, we still haven’t seen what most of America is experiencing [slowing]. Anything under $450K is still selling well.”

    I’m not a builder and I’m fairly certain that anything priced to sell at $450K or less, in West Palm Beach, must be a 1000sf apartment on floor 1-2 of a 20+ floor building. Using sales data from the lower tier of the price spectrum, in that market, as a comparison with other markets seems silly. Has to be a joke.

    Maybe that quote was put in to add humor? A “save the best for last” kind of thing. Or it could be my warped sense of humor =)

    • All Good Here Mate says:

      I grew up in WPB. Got priced out decades ago. Am now getting priced out of Central Florida too (but no real loss because it sucks thanks to the Mouse minions).

      Your insight is 100% correct.

  26. BobtheBuilder says:

    Stepping back and looking at the bigger picture:

    Isn’t it interesting that the gang-buster realestate market that was spinning just a few months ago has come to a halt all because the Fed raised rates on financing.
    What it looks like is … people don’t really have any money. They are dependant on financing to buy housing.
    If there were organic interest, people would have the money and need and would be buying regardless of interest rates.
    it’s not that the Fed raised the rates outrageously. A 5% mortgage rate is still reasonable. But if raising rates by just a couple of percent was enough to deter this many people it means they really don’t NEED and probably really can’t AFFORD these over priced houses.

    Throw in the declining real population of buyers (demographics) , something Wolfe has covered in previous posts, and we see how it’s doubtful things will be returning to the way they were.

    The day will come when the Fed reduces interest rates again but when buyers still don’t show up that’s going to put the chill down ones spine.
    And that’s already happening in other countries like Japan.

    We’re not used to that in the U.S., not yet anyway.

    • Valerie from Australia says:

      One reason people don’t have the money to buy, and are dependent on financing themselves to the gills, is the system is set up to work against savers and people who are risk averse. With the Fed bailing out the stock market (at tax payer expense) and interest rates being so recklessly low people feel safe to speculate. I was hoping the rising interest rates might stabilise the Western economies but the wealth effect and the easy money gained – particularly during the pandemic – has made a lot of people impervious to inflation. Sure, renters and those in the Lower Middle Class are feeling the pain, but a lot of people just seem to be going on their merry way.

      I really see this in Australia – partially due to our strong safety net – but mostly due to the wealth effect of the increased value of RE. Houses might be selling for less than they did – bidding wars at auctions were common in South Australia – but they are still well above what they were before the pandemic. Tradesmen/women are still booked months in advance and they just keep raising their prices. No one is worried that the European economies are in big trouble and that this might have an adverse effect on our economy. Yet, I have a bad feeling. I hope it is a slow spiral down rather than a crash.

      • BobtheBuilder says:

        I’ve been saying for about a year now= stagflation.
        That will prolong an actual correction.

  27. RemoteWorks says:

    Isn’t building housing in Phoenix already a complete lack of foresight?

    That’s one of the US cities in the west that will run out of water.

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