THE WOLF STREET REPORT: Housing Bust #2 Has Begun

Some markets are already deep into it, others just started. A sobering trip from the free-money decade in la-la-land, back to normal.

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  228 comments for “THE WOLF STREET REPORT: Housing Bust #2 Has Begun

  1. Bebop Steady says:

    Wolf Richter you are the closest thing we have to a gumshoe reporter in this day and age.

    Thank you

    • drg1234 says:

      I don’t know how long I’ve been coming to this site. Maybe a decade.

      This is the first time I’ve ever watched one of these and heard your voice, Wolf.

      You sound like a James Bond movie evil genius. Or maybe the bad guy from the Smurfs. I now have a whole new axis of enjoyment for your snark.

      Kindly continue to kick ass.

      • Augustus Frost says:


      • CSH says:

        LOL yeah I wasn’t expecting the Bond villain voice or the German accent either. I will definitely have to tune into these recordings more often. Very timely by the way, because it’s clear to me now that the popular consciousness has not caught up to the trends just yet. People are still in the bargaining stage of grief, not wanting to admit that this is a housing bust we have on our hands.

        • Flea says:

          Housing bust is least of our problems,every country in the world is overleveraged. When this shitshow blows up ww3 ,or gonna make depression look simplistic = great reset ,the rich never lose

        • bulfinch says:

          German with a tinge of Texan. It’s a fairly singular timbre.

        • TXRancher says:

          It was unanimously decided long ago that he is a Willem Dafoe doppelganger and probably just as rich.

      • Blam 35 says:

        I’m with you, wolfs’ voice reminded me of a less languid version of Verner Herzog, love Wolf. We live in a desirable area outside Chicago but there are so many homes owned by those in their 60’s and if I were them I’d be seeking better weather and downsizing but they own their homes, pay a fraction taxes and have grandkids, perhaps in area.

        With respect to others, rates being over 7% would seem to delay the price discovery as the pill is too bitter on both sides, I’m hoping prices and rates will drop in 3 years and can upsize a bit as we aren’t changing school systems.

        Anyway, in really financially stable.areas with dual income.professionals I think discovery will take longer because strong cash flow will make you stubborn.

        • anon says:

          Blam 35 writes about the Chicago area and those in their 60’s.

          His analysis is 100% correct!

          Yeah … the weather stinks hereabouts. But we paid off the mortgage a while back and all our grandchildren are in the area.

          We are planning on moving from our single family detached dwelling to a smaller sized condominium. We will still stay within the area.

          I think your upsizing plan is a good one.

          Just be sure to buy the largest garage you can. At least 2 1/2 cars.

          For us … all the stuff the kids haven’t taken is in storage boxes taking up the second car space. sad face emoji here

          Good thing we’re down to one car.

        • josap says:

          Strong cash flow may mean you never need to deal with price discovery. Just stay where you are with your low interest mortgage.

      • Coffee says:

        From now on, when you read a WS article, you will hear his voice in your mind reading it to you.

      • Staunton16 says:

        I think he sounds a lot like Christoph Waltz.

      • Juliab says:

        Wolf, why don’t you write something about the property bubble in Europe? We can only read broker articles or those financed by builders or by people interested in keeping prices high and deals going. There are no objective analyses…

        • Volvo P-1800 says:

          There was a good article in The Guardian the other day. I know Wolf doesn’t want links, but the title was “How low will house prices go? Lessons from UK, US, Europe and elsewhere”.

        • Juliab says:

          I read the article. But as I said, all these articles sound too optimistic to me compared to what I read from the Wolf. This article, for example, concludes:” Savills, the consultancy, expects average UK house prices to fall by 10% this year, “with growth expected to resume in 2024 as affordability pressures gradually ease”.

          This considering that the Central Bank does not talk about a drop in interest rates.

      • Peter Harris says:

        Is “gumshoe reporter” an insult in your country?

        I’ve never heard of that saying.

        • Clete says:

          @Peter: Not an insult at all, it’s a nickname for the hard-working reporter who goes out and gets the story instead of regurgitating talking points and press releases…gets “gum on his shoe,” in other words.

        • Peter Harris says:


          Thanks for the explanation.

    • Dr. Steigenberger says:

      Hey Wolf! Did you see OpenDoor announced a couple days ago they are dumping the majority of their current holdings onto the real estate market! The supply dam is about to burst the freeze you think?

      • Lynn says:

        I would love to know what name they (& Zillow etc) bought homes under as I suspect they were active in my area but none of the realtors I know have heard of them buying. Did they have straw buyers? Do you have any insight? All the realtors I talked to who had ibuyers said they were dealing with individual persons..

        Also seeing homes sold at lower prices which never make the open market. Suspecting bulk sales to other companies.

  2. Phoenix_Ikki says:

    Great data and talking points as always. Personally I am expecting to hear even more of “Not in my neighborhood” or “Billy Bob sold his place for still over market last weekk…” to ramp up over thr next couple of months.

    Have my popcorn out, looks like MSM and shills like Redfin CEO is hyping people to think Spring selling season will be here for the rescue. If we get 8+ mortgage rate by then…it will he really interesting to see how their Spring season might turn into a vaporware.

    • Leo says:

      Zillow was cuckoo enough to say that it sees house prices increasing in 2023, so buyers should just accept the stupid prices it shows in namecof FOMO.

      Made me realize that all Zestimates are crap!

    • IN says:

      Well, I hate to be one of those “not in my neighborhood” folks, but when I was walking around my new development in deep Raleigh suburbs this weekend, I saw another “quick move-in” house with some fliers next to it. It’s a very nice 5br with the 3rd floor and it’s listed for $630k. I guess, it’s not much by California or New Jersey standards, but less than 2 years ago folks were signing on houses like this for $400k.

      Of course, only time will tell how long it will sit in the market.

      On the other hand, what certainly changed is the way builder’s sales staff work – two years ago I was literally chasing the associate, begging for an appointment and only had 2 or 3 lots to choose from (and even those were flying quickly). Now folks are in the sales center every day, they manicure lawns and clean all common areas and, judging by the huge billboard, they are now covering “up to $10k in closing costs” and subsidize the interest rate (I believe, Wolf mentioned some time ago that builders will do whatever they can to keep those pumped up house prices at all costs, even by offering various incentives like rate subsidies, free appliances and other rebates).

      • CrazyIvan says:

        Wait until layoffs start rolling. This hasn’t even really begun

      • Seba says:

        It is similar in TO Canada, the price decline amounts are not uniform across our country or even neighborhood. Wolf had some great data not long ago showing a very large average decline in prices for GTA but they are hard to come by in practice if you’re a buyer, transactions are way down and only those who absolutely want/need to sell drop their prices so some people get the lower prices, everyone else is just waiting and hoping for movement one way or the other.

        Transactions in precon have definately dropped. Couple yrs ago I signed up for a few mailing lists and such and had to hound realtors just for pricing, most units were gone before I could even inquire and some were actually sold off in a lottery system so you picked 3 units and maybe you got to try and purchase one. Well, now my inbox is flooded with precon projects with all the prices available upfront as well as incentives and even rental guarantees of specific amounts for 2yrs (TO condo market is more geared towards investors since locals can’t really afford them).

        • Wolf Richter says:

          What “price declines” mean is that when transactions did occur, they occurred at lower prices. If the seller doesn’t lower the price, there is no transaction. So if you look at a listing with a high price, that doesn’t mean anything. It will just sit, and there is no transaction. If a property is priced right (lower), it will sell.

  3. Bs Ini says:

    Great summary and thanks for sharing your insights . I always felt that the recovery from 2008 was QE forever and asset bubbles then we had Covid and they believable happened unprecedented in history and who knows what the ramification will be unpredictable for sure . The USA recovery was a result of the energy shale NG and Oil deficit going to a surplus with a drop in energy prices in my opinion which held inflation in check.

  4. Gabe says:

    Still bidding wars and buyers offering above asking here in WI. Very few homes on the market, but some sellers are still shooting for the stars. Lots of runway for collapse #2 to play out yet.

    • Bobber says:

      Have you looked at the data, or are you gauging the market based a single sale you saw? Show us a zip code or city in WI that does not show weakness.

      • dao says:

        Same in my area – shortage of houses for sale. Zip 01001. Only 12 single family homes for sale in a town with a population of about 30,000.

        Sellers market for the last few years. Bidding wars still common. Houses are selling 2-6% over asking prices over the last few months according to

        • Fed up says:

          May be a shortage of supply but doubtful there is that much demand either.

        • Bobber says:

          The prices have been pretty steady in that zip code since 2019. There was no bubble, so there likely won’t be a crash.

          In general, many areas in the Midwest and Northeast were insulated from the housing bubble and won’t see big price declines going forward. Perhaps the buying interest is coming from other parts of the country where RE is falling.

    • patrick says:

      just sold a vacation home in northern wisconsin – we thought as family (jointly owned by myself-brother – and sister) of waiting until spring but realtor asked for chance to sell it in dec-jan time period! thought that was crazy ! had it appraised by 2 appraisers – it sold in 3 days with 9 bidders and sold for $11000 more than highest appraised bid ! crazy ! all bids were all cash except one

    • Wolf Richter says:


      “bidding wars” and “very few homes on the market”???

      So I just looked up the biggest metro in Wisconsin, Madison-Janesville-Beloit, per Redfin, four weeks through February 5:

      Pending sales: -34% yoy
      Closed sales: -34% yoy
      Median days son the market: 68 days, highest in years
      Age of inventory: 75 days, up by 22 days yoy
      Weeks supply: 12.8 weeks, up by 1.7 weeks yoy

      These are not “bidding war” metrics, and “very few homes on the market” seems to not fit here.

      The median price peaked in June/July. Let’s if it gets back there by June/July

      • Tina W says:

        In other areas of the country, small towns near popular larger metros in Idaho and NY (Catskills), homes under 200K are generating all cash bidding wars. We have won two and lost several. I would like to see a comparison based on price range.

      • Billy Howard says:

        To start, I’ve been a real estate agent for 12 years. I say that only to let you know that I am in the industry and I understand everything that’s happening from first hand experience.

        I’m also open to the possibility that I’m wrong and am open to discussion.

        Here are my two cents.

        Stats are the gold standard for reporting and they are essential for understanding almost any complex economic issue.

        But stats don’t always tell us the whole truth and if I’m correct then your argument doesn’t hold water because it isn’t explaining how the stats can’t explain why there is such a separation between good and bad homes.

        So, if we are looking for the best possible answer then we need to look deeper into the individual markets which is hard to do.

        For example, your stat line of 12.8 weeks inventory up 1.7 yoy is disingenuous. 12.8 is just over 3 months of inventory. That’s a heavy sellers market. 6 months is balanced and 7 months starts a buyers market. It seems like you’re completely against traditional supply and demand economics!

        Would you be completely against admitting that you don’t love this stat because it doesn’t fit the narrative your driving?

        Secondly, the median days on market right now is WELL below the 5 years preceding the pandemic. Comparing anything to 20-22 is going to look catestrophic. What am I missing?

        Home sellers are being devastated by bad advice from agents who shouldn’t be advising anyone. When I first started in real estate there were roughly a million NAR members and now there are something like 1.8. The result of which is a lot of sellers getting advice, in one of the most compex markets in history, from a friend or family member who got their license 7 days ago. It’s heart breaking honestly.

        Beyond all of that, the real story, is there is a clear bifurcation of homes that sell and homes that don’t.

        The homes that aren’t selling in the current market had zero problems selling during the pandemic boom, and in my opinion they had NO business selling at all.

        But in the current market they arent selling and these homes are the primary drivers of the negative stats you’re talking about in this article as well as in your response to Gabe above.

        These are the challenge homes. Homes with very poor renovations (flippers who have no clue), homes on main roads, extremely outdated homes, homes that need a lot of repairs, bad location homes, etc. like i said above these sellers are getting a lot of bad advice from agents who frankly shouldn’t be in the business and it’s sad. The market shifted but their mentality didn’t.

        The flip side of that is a strong market for desirable and appropriately priced homes.

        These homes are well updated, clean, don’t need much work, they are on good lots, good locations, etc. you get the picture. These homes are selling even at the higher interest rates and at fantastic prices.

        Wrapping this up, stats don’t always tell the whole picture and your article doesn’t either.

        Would you be completely against interviewing top agents in good and bad markets to see what they think about the stats vs. what is actually happening. That way you get the entire picture instead of relying on a paint by numbers approach to something that just isn’t that simple.

        I don’t say this with rose colored lenses on. Rather, as someone who knows how valuable good advice is and unfortunately for many people, there are a lot of bad agents out there giving some really bad advice. This is a major factor in why the stats looks so bad but don’t feel that bad.

        I love your newsletter because it’s so informative in so many ways and I think your readers deserve better because the housing market affects so many people.

        • Wolf Richter says:

          I stopped reading after that:

          “6 months is balanced and 7 months starts a buyers market.”

          That is a ridiculously outdated statement. Total BS today. Or just a plain lie. That was the case 20 years ago when listings were on printed paper, and it took a month to get them into people’s hands, and people got on their phones and made appointments, it took weeks to get a mortgage, etc. etc.

          The last time there was 6 months supply across the US was over a decade ago (NAR data).

          With all the huge troubles and plunging prices the Bay Area has, supply nearly doubled in January yoy to 2.8 months, from 1.5 months a year ago. So don’t spread lies here about 6 months being “balanced,” and three months being a buyers’ market, LOL, what garbage!

        • American Dream says:

          I don’t think anybody is surprised by what your saying. Good houses in good areas are still selling…duh

          People still have a shit ton of money and people are stupid enough not to see the writing on the wall. Also programmed to buy buy buy

          If anything all these garbage houses are going to negatively impact “good” houses prices when they have to fire sale them as it’ll hurt comps.

          Early innings here still

        • Seneca's Cliff says:

          It seems like the delusional RE Pumper crowd has a new narrative this time. In the last downturn it was location location. Sure prices are going down they would say, but not in certain special locations. Now, it is the “good house” excuse. Sure prices are going down but if you are selling a magical “good house” then the downturn will not effect you. These folks may be delusional but they don’t lack imagination.

        • bulfinch says:

          Billy — Some of these superior houses (which is ultimately subjective, right? — I love prewar tiled bathrooms — a lot of people hate them; I love the sound of a distant freight train — other people can’t stand it) are selling for 200K more than they sold for in 2019 when the market was already off the chain…and that’s with almost a 7% mortgage interest rate! Does that seem appropriately priced or sustainable? Is there an interminable supply of greater fools for whom money is no object? And ok, everyone got a better job and are suddenly loaded now — but that comes and goes, too.

        • grimp says:

          Like moths to a bug zapper they just can’t resist, and… zap.

      • Green Bay says:

        Wolf, Patrick sold his place in an area that is a rural, amenity-rich (forests and lakes) area of Northern Wisconsin that attracts tourists from many surrounding states and has always been a place that the wealthier folks (mostly) from Chicago have looked at to buy second homes. This is why his example doesn’t follow the trends we are seeing across the country or in the large, southern WI urban areas like Madison or Milwaukee.

      • Rob H says:

        Wolf, although the stats you referenced for south central WI suggest a weakening [seller’s] market, these metrics somewhat belie what is an historically low inventory of existing homes for sale.
        Per, there are only 133 existing single family homes actively listed in the greater Madison area/Dane county (population 575,000); during the period of 2015-2020 this number had not fallen below 400. This is a case where a demonstrably ‘slow’ market has nevertheless remained a seller’s market.

        • Wolf Richter says:

          Rob H,

          I just looked it up on In the Madison, WI, metro (CBSA code 31540), which seems to be the area you’re describing, there were:

          1,038 total listings, -2% yoy
          586 active listings, +42% yoy
          378 new listings, -12.5% yoy

      • Shiloh1 says:

        I took ‘northern Wisconsin’ to be north of Lake Winnebago, but that’s just me. Had a great time at Boom Bay in Tomahawk about 45 years ago.

        Beloit’s closest neighbor is Rockford, Illinois.

      • Rob H says:

        Wolf, it’s probably safe to assume the discrepancy in our numbers exists because I was citing active listings for (1) Single-family homes that are (2) Existing/not new construction. Although this criteria may seem unnecessarily specific, these ‘traditional homes’ are the ones most likely to offer both adequate living space and affordability required by a typical, middle class family.

        • Wolf Richter says:

          I was not citing new construction, just existing homes, SFH and condos, with SFH being by far the largest group. Your number (133 SFH) just doesn’t make sense. I could find it nowhere in the data on

    • gametv says:

      This is about supply and demand. Supply is so very limited that some suckers are buying homes at prices that are just stupid. Those people are going to be very sorry. Inventories will build over the summer.

      • Billy Howard says:

        If you do the math, for inventory levels to get anywhere near a buyers market, we would have to have a catastrophic job loss scenario. A very good example of this is San Francisco. The tech layoffs are lately driving the housing market there.

        • Wolf Richter says:

          Billy Howard,

          “The tech layoffs are lately driving the housing market there.”

          Listen to the podcast before you post BS. I blew your theory apart in the podcast. I also blew your theory apart in a prior article about actual layoffs in SF, based on WARN reports.

      • Jon says:

        We need suckers so that liquidity is there and thus price discovery happens.

        With suckers there won’t be any price discovery

      • NP says:

        It’s not just about supply and demand. It’s about affordability. There is no shortage of Ferraris (plenty of supply), but at high prices, people still aren’t buying. High home prices, combined with high rates, drive the buyers away. When prices drop some, buyers will return.

    • Jeff says:

      State has surplus from covid money … Then?

    • Heff says:

      I’m sure RE is down all over. But as you indicated, I’ve been watching Wis. RE for a few years. Try finding a 5 acre property with a decent house, or a small “farmette”. Good luck. They are gone in a week or two. I’m not sure what sort of dynamic you’d call that. But, it’s a real thing.

      • IN says:

        >”Try finding a 5 acre property with a decent house, or a small “farmette””

        Heff, I think you have a valid point that is rarely looked at (and that is very hard to quantify).

        We’ve been driving around the area here in NC a few days ago and my son noticed how _mediocre_ most houses built in the last 3-5 years around us are. This is not the first time I heard a similar statement – my friend was specifically looking for a 15-20 year-old house as he is not happy with what was being built in the mass segment lately.

        Now, of course, this is not to postulate that ALL houses built lately are bad and ALL houses built 20 years ago are good. Speaking particularly of NC/SC, the thing is that lots of houses have been built over the last 5+ years to cater to folks moving from Northeast. Covid only exacerbated this trend and during 2020-2021 many folks were buying houses left and right without giving much thought about the acreage, build quality, school system, proximity to jobs etc. etc., i.e. many things that are parts of “quality of life”.

        I’m just speculating now, but I already see many people getting more and more disappointed with their choice going forward. When the dust settles (be it 5, 10 or 15 years from now), I see a scenario that many folks will regret their decision to move down south. I don’t want to speculate what exactly will happen to the housing market then, but I already see many of these poorly built houses on 0.15ac of land in poorly upkept communities becoming a huge PITA to sell. By that time many of these houses will develop foundation issues, mold issues, roof issues and other problems that will be very costly to fix, thus impacting chances to sell them and pushing prices down sharply, if this massive flow of transplants slows down.

        At the same time, nicely built houses (or should I say mansions?) on sizeable lots and not HOAs will most likely still stay in a huge demand and will be still flying off the market.

        I guess it comes down to how one defines a “crash”.

  5. renntrade says:

    Biggest Popcorn moment yet….

    • sufferinsucatash says:

      This is better than Reddit for good popcorn moments! Nom nom nom

      Hope I’m never on the wrong end of the double barrel goose gun!

  6. Joe in LA says:

    I’m not sure about this collapse thesis.

    The Fed may make noises about fighting inflation but it’s not going to voluntarily run a positive real rate. Hasn’t done it, won’t do it.

    They’ve already devalued the dollar at least 20% and there’s no obvious reason to stop.

    Eventually that devaluation will meet the nominal housing prices at a new plateau.

    Asset holders win, savers and renters eat it — as always. I’d love to be wrong, of course.

    • TheRealMrDyno says:

      It’s not just a devaluing dollar that is driving the crazy spikes in some things, and those things all have one thing in common: government money on the field. Housing, college, medicine seem to be the big ones.

    • Dazed And Confused says:

      National median house price prior just to the pandemic was about 280K (NAR). It’s currently about 360K. This time next year, cumulative post-pandemic inflation will be just over 20%. So house prices slightly outpacing inflation (as is normal) would mean the median should be about 340-345K a drop of just 5% or so from current levels. Alternatively if prices stay flat at the current 360K for another year, it would take inflation of 4% or so in 2024 for dollar devaluation to catch up. This seems plausible and supports your hypothesis.

      BUT this assumes that all the major factors that influence house prices will be the same in 2024 as they were in 2019 i.e. unemployment of 3.5%, growth of 2+% etc., inflation of <2% and mortgage rates of 4% or less.
      And there's the contradiction because the above calculation assumes 4% inflation in 2024 which means mortgage rates in the 5-6% range.

      According to NAR housing affordability index is currently below the lows of the last housing bubble in 2006 and similar to levels of the late 80s. And on both of those occasions the "reliable inflation hedge" of housing failed to keep pace with general inflation for over a decade.

      • Augustus Frost says:

        Housing markets are local, not national and all prices are set at the margin. I presume you know it.

        People are also buying mortgage payments first. I presume you know this too. The median mortgage payment has now gone up a lot more than the median price. Yes, the bond mania from 1981 is also over and interest rates are destined to later “blow out”.

        If you dig into the data, you will see that the median price has increased a lot more where people either want or need to live due to employment. This is what the individual components of the Case Schiller 20 city index illustrate.

        • Dazed And Confused says:

          Right – the NAR’s HAI is based on the ratio of the median mortgage payment to the median income.

          I hear you about the long cycle of nominal bond yields but in this era of financial repression real bond yields may stay negative on average.

          Real house prices are likely to fall significantly everywhere but nominal house prices may not plunge in some markets.

      • sufferinsucatash says:

        Everything I have seen Inflation is running at 6% average and adjusted inflation is running at 5 average.

        There is no 4% inflation, I do not think! Is that fantasy talking? ;)

    • WaterDog says:

      I call BS on on “Dollar Collapse.”

      Chart the dollar over 5 or 10 years. You can just pull up a DXY chart.

      In fact now is a great time to buy in certain foreign markets due to DOLLAR STRENGTH.

      • Joe in LA says:

        The dollar is valuable just about everywhere but America.

        This is the curse of the Eurodollar system. While maintaining the liquidity of that system, America has transformed itself into a wasteland of overpriced assets and declining workforce participation.

        • Staunton16 says:

          Yes, we literally export inflation.

        • WaterDog says:

          Joe in LA

          What are you even saying?

          A stronger dollar makes imports cheaper.

          Exporters don’t like this or transnational companies (who repatriate less profit after conversion).

          Economists can debate the merits of imports, exports, jobs, etc. Not saying it’s good… just that your logic makes no sense.

          Spanish wine —> cheaper
          French cheese —> cheaper
          German tool —> cheaper

          Oil is denominated in dollars, so shipping costs are also cheaper.

      • Rosarito Dave says:

        Here in Mexico, the Peso to Dollar exchange rate has fallen from above 20 to about 18 pesos to the dollar… That’s a 10% devaluation here for me now. That’s happened over the last 3-4 months….

        • WaterDog says:

          Rosarito Dave.

          BS. It fell from artificial COVID highs.

          Check… Charts…

          USD to MXN says… Exactly the same as 5 years ago.

          It very briefly spike during COVID and has come back down.

          If you do a 10 year chart or go all the way back to 2005 it’s even worse.

          2005 – 10
          2010- 13
          2015 – 15
          2019 – 19
          2020 COVID – 25
          2021 – 19
          2022 – 18

          It FEELS bad because it was briefly really cheap to live there.

          I bet all the homeowners are pissed they can’t get COVID prices for houses too.

      • Escierto says:

        Exactly right. Many foreign currencies have been decimated. The Mexican peso is an exception as Wolf has pointed out.

    • Dazed And Confused says:

      “Eventually that devaluation will meet the nominal housing prices at a new plateau.”

      If that eventually is say 5 years of flat prices, then all those investors holding vacant homes (that Wolf mentioned) will be eating the carrying costs (property tax, insurance, maintenance etc.). If that’s 2.5% a year that could be 13% plus 6-7% fees to sell it eventually. So they’d be looking at a loss of 19%.

      And if they sold now, they could be earning 5% a year in safe T-bills on the proceeds for next 5 years so there’s that missed opportunity cost – another 26% say (including compounding).

      So basically a total loss of 45% in 5 years.

      I think that’s what Wolf meant by “panic first panic best”

      • Blam 35 says:


        Couldn’t agree more and we’ll said. I hope they start listing vacant homes in 2024 and take your advice.

    • longstreet says:

      “it’s not going to voluntarily run a positive real rate. Hasn’t done it, won’t do it.”
      The Fed has convinced everyone that FFR belongs below inflation…
      Of course, that wasnt the case prior to 2009. Masterful job by Bernanke, Yellen and Powell.

      • Kenny Logouts says:

        Now inflation is in salaries and services it’s a feedback loop that won’t end until they raise rates enough to crush demand.

        That’ll mean high borrowing costs and people losing jobs.

        Neither is bullish for house prices.

  7. SOL says:

    Glad to hear that San Fran, Seattle and Boise are falling apart. They are some of the largest sources of equity refugees that have destroyed the market here in Bend. I can only hope this trend continues and there is a bubble that pops. Seems unlikely based off the article you posted a week or so ago, “why the fed can let it rip”.

    • Bert says:

      “Equity refugees” indeed. We were looking for country property here in MO, and were told of all these people from Cali bidding up prices in our wine country. We eventually got priced out. Now with high interest rates, that’s all she wrote.

      • Lucca says:

        It’s interesting how people from California get blamed for all the real estate prices going up. I live in Missouri and I don’t see a large influx of Californians coming to live here.

        • Fred says:

          I have some Cali residents in my subdivision as of about 1.5 yrs ago.

        • El Katz says:

          Every place has it’s problems. We have “weather refugees” consuming our resources, including every medical appointment they can conceive of.

          It’s just a matter of perspective.

        • billybob says:

          It’s all the friggin transplants from everywhere else that have driven up CA RE prices.

        • longstreet says:

          When the Chinese buy our farmland, a bunch of Chinese don’t show up.

        • Wolf Richter says:

          It’s the US institutional funds, including hedge funds, that bought farmland, actually, lots of farmland, for years. This is a huge thing. They buy the land and rent it out to farmers.

      • Lucca says:

        I’m familiar with the wine country area you’re referring to in Missouri. I don’t see a large influx of Californians moving there as you state. Where are you getting this information from other than hearsay?

        • 91B20 1stCav (AUS) says:

          Lucca – back in the (19)’20’s, Cadillac, when it was still leading edge, ran a full page print ad (commercial radio and national electrification still in their youth) entitled “The Penalty of Leadership”. When referring to a position occupied by our Golden State (thank you, Billybob, above), or any other entity perceived to be in a position of primacy in these Newnighted States, it remains interesting reading…

          may we all find a better day.

    • sufferinsucatash says:

      Wonder what the magic dollar amount will be in the San Fran market for a family of 4 to get into a home?

      And do we need a double barrel investor Broom to shoo away investors/AirBnBs?

      I’m in the Raleigh market. Which is dropping about as fast as frozen molasses. Just curious about San Fran cuz it’s this site’s home turf.

  8. Neuron says:

    Please give us insight to the US Foreclosure Activity and Rates. Saw a recent chart by ATTOM where it looks like the foreclosure rate doubled from 2021 to 2022. Not sure if that is a credible source. I guesstimate that foreclosures will surpass 2009-2010 levels but know not when. Could spike at anytime. Keep up the good work. God Bless.

    • Apple says:

      There were 164,000 foreclosures in 2022 ( 65,000 in 2021).

      In 2010, there were 1.6 million foreclosures.

      So many people are locked in at 3% mortgages, I doubt it will spike to that level in the foreseeable future.

      • Phoenix_Ikki says:

        Foreclosure is lagging indicator and not leading just take a look at the last bubble and see how that unfolded. Btw, so tired of these people locked in 3% mortgage so they will stay forever narrative, once again this is discounting everyone will know about human behavior..sure when it goes up irrationally, people can act irrational and that’s all fine and dandy but in the way down we will all be orderly self restrainted….

        • American Dream says:

          Once people start losing jobs is when mortgages will go into forbearance

        • grimp says:

          Ever heard of a “strategic default”?

          Once the real estate went significantly underwater the behavior changed.

        • grimp says:

          Oops last comment was meant as a reply to Apple.

        • longstreet says:

          If a person bought a 1 million dollar house with a 3% mortgage and the house dropped to 750K, he is paying the equivalent of a 4% mortgage….STILL a good deal and STILL below inflation.
          These people are in a sweet spot.

        • QQQBall says:

          @Phoenix Nikky I agree with 3% retarding foreclosures and keeping influencing people to stay put. If you are in a home at 3%, to trade up would mean accepting a 6%+ mortgage and incurring the commish on the sale of the existing home. We are selling our property and moving to a lower cost of living and more conservative area. The problem is: Alot of people from the NE, Chicago, California, etc. are doing the same thing. We plan to rent, but after paying the sales costs and taxes on cap gains, renting and seeing a loss of purchasing power over time is no joke. Our annual rent of almost $15,000/Year is 5% of a home price. Nothing pays like patience but remaining patient is hard and we could be wrong. We have also started looking at other cities in our target state. Our primary target town isnt seeing almost any price slippage; other areas are although that could be related to over-aggressive asking prices. Prices are up 30% since 2021 and 40% since 2020 based upon my read of the market(s).

          There was a comment about price-points earlier; price-points are important factor in sales and OM times.

      • Augustus Frost says:

        I don’t either, but not because of 3% mortgage rates.

        It’s because I consider it virtually certain that the government will impose or attempt forbearance and moratoriums, again.

        This won’t keep the market from freezing up due to a poor economy or interest rates “blowing out”, but it will reduce the supply.

        The interest rate “blow out” should come later in the decade.

        • BENW says:

          Rent & mortgage forbearance 4eva, agreed 100%.

          The Fed & Congress have hog wild about MMT-based market solutions.

          Is this interest rate blowout in 7 years or less that moment where capital markets lose confidence in treasuries? Are you talking crazy inflation? What’s going to cause this blowout?

          In general, I agree with Wolf. High yields solve demand issues. With treasury yields so high, I can’t imagine there’s a demand problem going forward.

          If and when the Fed starts yield curve manipulation, everyone holding 4.25% 20YT are going to get rich once the prices shoot higher.

        • Lucca says:

          Why do you feel it’s “virtually certain” that the government will impose or attempt forbearance of moratoriums again? I thought the only reason the government did moratoriums was because of the pandemic. The government can’t keep bailing everyone out of a crisis.

        • OutsideTheBox says:

          Read AF past commenting.

          He makes his “philosophy” quite clear.

          Ebenezer Scrooge would love him !

        • Randy says:

          Concur with Lucca below… why is forbearance a given ?
          I dont want it but that is totally irrelevant .
          Because 65% of the country is homeowners … politically useful ?

          Renters only got forbearance during the pandemic as far as I know.
          Lots of economic evictions prior to it as rents shot up. Portland Tenants United and Oregon rent cap (partial) a fallout.

          Supposedly a guy broke into his neighbor’s apartment (a year ago or so) where I live, they know he did it, but they couldn’t evict the person because of pandemic related restrictions (Washington state). I dont know this is true but its what I was told.

      • gametv says:

        When people go 100K upside down, we will see alot of people just handing the keys back to the bank.

        • longstreet says:

          3% payment on $1Million = 4% of 750K
          still a deal in today’s inflation
          The 3%ers locked in the deals of a lifetime.

        • longstreet says:

          QQQ touched on an important point.
          People cant afford to move if they have the 3% mortgage.
          Explains the lack of inventory. Even if the can afford to “move on up”, the “new” financing numbers would certainly give one pause.

        • Shiloh1 says:


          I’d wait for the privilege to be personally escorted out by Jamie Dimon.

      • Thunder says:

        “So many people are locked in at 3% mortgages, I doubt it will spike to that level ” ..Unless they lose the income stream or have it severely cut.
        The strange thing about humans is they tend to live beyond the next paycheck or assume they can dispose of asset for the price that is in their head.
        In the last Recession of 90-92, I purchased a New display home from a mortgagee in possession Bank. for less than the vacant block next door.
        If the next one gets worse than that one, no one will survive intact

        • 91B20 1stCav (AUS) says:

          …the question posed sounding an impossible to assess predictive metric: how many of the 3pc mortgage crowd have purchased longterm/’permanent’ shelter vs. purchasing an ‘investment’ strategy?

          (MV the ever-present constant…).

          may we all find a better day.

    • Lune says:

      Foreclosures tend to stay low until a significant number of people are underwater on their mortgages. As long as you still have some equity in your house, it’s always better to sell it yourself then hand it to the bank to foreclose. Why take that hit to your credit rating when you can sell it, pay off the loan, and walk away that way?

      As big as the real estate bust has been so far, even in the hardest hit areas, it’s only taken prices back to pre-pandemic levels at best. That means anyone who bought a house more than 2 years ago still has equity, probably a lot since many of them would have been paying down the mortgage for years.

      So even if say a recession hits and you lose your job and you can’t make your mortgage, you’ll still sell the house, payback the loan, and pocket whatever equity remains. No reason to let the bank foreclose.

      Foreclosure rates will start skyrocketing when significant numbers of people face financial stress *and* are underwater on their mortgage. So far, neither has happened.

  9. How much “worse than normal” do you expect, before “back to normal” sets in? This is always my question, the continuing wild swings in asset markets (housing being just one of those markets), with a historically pretty reckless central bank, and with plenty of big-spending, vote-buying, pandemic-fuelled collaborators in the Capital City.

    I heard you say “higher rates for longer,” “shadow inventory,” “biggest housing glut ever,” “this thing is moving fast,” “the clearing price is reality,” “toxic mix of several factors (lots of people lost lots of money),” “they will go over 5%,” “the unwinding of the biggest asset bubble ever,” “governments spending like there’s no tomorrow,” “the rapid disappearance of free money,” “layoffs are still low,” etc.

    That is, we’re “not even back at January 2020” yet. You’ve been consistent on that…. It’s hard to imagine that this thing stops at “normal.” Then there is the question of how long “worse than normal” might last, especially if for any reason, the Fed can’t go back to its rate-cutting, money-printing, easy money ways the next time “worse than normal” happens….

    • josap says:

      Define normal.

      Then figure out worse for who? Who cashes in?

      • sufferinsucatash says:

        The MBS holders, they cash in on buyer’s speculation gene. And a new generation gets to dig their crampons into Everest 2 of housing bubbles and hope they do not fall to an icy financial death.

    • Karl T. says:

      I hope you’re right, because orange county CA is still having bidding wars. Inventory is miserable, and prices haven’t budged down since June/July. Some SFR’s have gone up.

      • Phoenix_Ikki says:

        There’s certainly special level of FOMO stupidity out in OC and LA…probably unmatch by any region in the US..

    • dog says:

      “It’s hard to imagine that this thing stops at “normal.”” I think you hit the nail on the head. Even if this is a simple “correction,” how much correction can this economy take if so much debt has been written on the back of future expected GROWTH, not “correction?”

      • dog & josap:

        You’ve raised topics dear to my heart.

        josap: Unlike many, I think the deflating of the Fed’s latest (2009-2021) bubble will (eventually, after a recessionary episode of severity not yet known) be good for the middle class and working people in general. That is, the big holders of big assets will sustain the most damage, and it will force the economy out of Wall Street and back to Main Street. I dug into this, and the 1930s saw a similar process. There were subsequent decades where America’s story was more about working people than the ultrarich.

        dog: As to what is “worse” than normal, I’d really hoped to get Wolf’s view of that. I do see defaults setting off a cascade of broader economic problems, some of them possibly catastrophic. That is, I think the debt market is what the Fed is going to break. But I respect Wolf, and I’d love to hear his thoughts on the topic!

  10. Sleepy says:

    Hearing lots of anecdotes about packed open houses in places like Seattle, Bay area recently.

    I guess nothing goes to heck in a straight line.

    • Wolf Richter says:

      Anecdotes? By whom? Realtors? Nothing ever changes.

      • Squanto says:

        Personal experience from my explorations in Southern California is that there are still bidding wars for the “cheap” homes of around $1m or so, plus some crazy overbids by people who seem to be unaware the market is turning.

        I saw three houses last month. One house was listed at $1.05m, and had 18 offers. One house was listed at $1.3m and one at $1.4m. Both of those went $100k over asking to the only bidder.

        • Jon says:

          I am in san diego and not seeing or aware of these bidding wars.
          We all know last year winners of bidding wars are loser this year .

          Sd is going down in price and wolf has published an article citing this.

    • Randy says:

      Couple days ago a utube presenter showed a graph of home sales prices for Woodenville a few miles northeast of Seattle. Last spring prices were 1.4 to 1.7M over what looked like a 4 month period. Most recently 915k about 45% less. As Wolf points out this could be due in part to a different housing mix of sales (more low end, less high end…okay lowER end). Prices definitely out of my affordability as is everything from Seattle to Burlington to Bellingham to Sumas. And they (homeowners, businesses and government) are quite proud of it you can be sure.

      That said I have no idea how many people are currently looking to buy a home in Woodenville at these reduced prices. Maybe a lot.

  11. Gary says:

    You are the best thing that happened to journalism

  12. Gen Z says:

    One thing I like about America, is that free markets always tend to be more freeer than in Canada.

    What the politicians are doing in Canada is lying to us and telling us that we need more people to fill some mythical labour shortage while more and more Canadians are becoming homeless.

    You become homeless because you don’t have a job or you can’t afford shelter because you are under-employed.

    Now, the PM has stated that we need this mythical half a million humans a year because that will fix the healthcare system where provincial medical regulators make it very hard to become licensed, and that takes years, if not decades to catch up to Canadian licensing and regulatory laws.

    • Gen Z says:

      Before I get asked how it relates to my comment, housing bear Garth Turner explains that there is a melt-up in the Canadian real estate market.

      My thesis is that the Canadian central bank pausing rates and the rumours of the half a million arrivals a year are breeding a new speculation.

      In the USA, it’s very hard, even with the current political leadership to just pause rates and open the floodgates in a desperate bid to create mania in housing.

      On social media, every Toronto realtor is saying that home prices will go up because of demand from the half a million a year coming to Canada.

      In the USA, this phenomenon is minimal and doesn’t affect national house prices to that extent.

      • Wolf Richter says:


        “melt-up”? Turner was talking about February, but there is no solid data on February yet. There was no melt-up in the January data, on the contrary.

        There is however, every year, the spring selling season, when listings and sales jump from the holiday period. The selling season starts around January/February. The data he cited for early February was showing increases in listings and sales activity, from prior months, which would be natural for this time of the year, particularly from the super-depressed levels of December and January.

        This is through January:

        • Gen Z says:

          Interesting. It seems that the Canadian housing bear is onto the speculation gravy train then.

          A lot of realtors are hoping for another summer boom here in Canada. To the extent that if you disagree with them they flag your comment or falsely report your FB or Twitter account.

      • Danno says:

        Take everything Turner shills about with a grain of salt.

        Remember he is usually talking his book and is a commission based broker…

        No more, no less.

        Add in a former politician and you know where he is coming from and defending 99% of the time.

        Compared to Wolf who has integrity, Turner likely is 180 the other direction.

    • The Real Tony says:

      Maybe its because so many are leaving Canada to retire abroad or working in another country due to the high cost of living in Canada. The 500 thousand a year that comes to Canada just pushes wages down and the standard of living of all existing Canadians.

      • Gen Z says:

        The major issue is that the politicians, realtors and home investors only want this phenomenon to fatten their portfolios. They are not doing it for altruistic reasons.

        Now even the housing bear who got kicked out of Harper’s cabinet is on to the speculative narrative for the summer.

        • Billy Howard says:

          That is such a broad and overarching statements. There are plenty of great hard working agents who are true advisors. Present the facts and let people make their decisions.

          It should be harder to get a real estate license.

        • Gen Z says:

          In America, or Canada?

          Americans will know of the “Brampton mortgage”, and CBC did a documentary where a realtor was alleged to have committed blatant fraud on a mortgage application. The profits are too hard to resist in Canada.

          In Canada, they would rather jail a young woman who took student loans on welfare to die under house arrest than to go after the real fraudsters.

    • Petunia says:

      Canada wants immigrants who buy their way in through residency programs. I think you can buy yourself a passport/permanent residency for about C$500K, invested in real estate or bonds. Most of the buyers lately have been parents of college age children who then qualify for free/cheap college tuition and medical care. When looked at it this way, it is a bargain for the investors because they get to educate their kids cheaply and still own the “asset” they used to buy into the country.

    • Escierto says:

      Fix the healthcare system? Maybe they should try allowing Canadians who studied abroad to practice medicine in their home country? There are literally thousands of Canadian doctors in places like Australia and Ireland who cannot practice in Canada! They would dearly love to come home but the screwed up provincial licensing boards refuse to change! How about fixing that!!!

      • 91B20 1stCav (AUS) says:

        Escierto – would enjoy a discussion between you and BillyH., above, on the nature of licensing…

        may we all find a better day.

    • Bobbleheadlincoln says:

      Large amounts of immigration will eventually radicalize a portion of the Canadian population towards xenophobia. This will make our population more like the United States and the UK. We are much easier to distract from real political issues when we have a common enemy. Real political issues which are financial issues have nothing to do with the color of people’s skin or their linguistic or cultural differences and more to do with financially fleecing taxpayers legally but without their consent.

      How many people are railing about central bank reform for instance? Lots of people will demonize some “other” group because they are confused about who to blame. That seems perfectly sound from the perspective of those in power. If you can keep playing people off each other in a 2 party system, they might not notice that there is really only one party when it comes to the issues that matter.

      I really wonder if the intelligent leadership actually think these things through in meetings or their misguided approach to macroeconomics just naturally leads to such dynamics.

    • Lynn says:

      Same thing going on here, although the cost of living seems more in Canada. Met more than one illegal Canadian immigrant who lives here because they can’t afford to live in Canada. All are working age. Most live out in the hills with no electricity, but I think they have to chop less wood.. A little warmer here.

  13. Dazed And Confused says:

    As of Nov 2022 (latest Case-Shiller figures until next week):

    US house prices are still up 40% since Dec 2019 (just prior to pandemic)
    US stocks are up only 23% in that time period (SP500)

    Inflation (CPI) up 16% in that time period.

    Bitcoin is up 140% albeit with a lot more volatility.

    Of course that’s just a snapshot – who knows how this will look in another couple of years …

  14. Spencer says:

    The census bureau says there are 15 million vacant housing units. Just where are these located?

    • Wolf Richter says:

      The Census Bureau didn’t provide addresses. But I know where a whole bunch of them are, including in the condo building down the block that was completed a few years ago, and sold out before completion. I have perfect view of the entrance and one side of the building. I see the other side of the building when I pick up my mail. And practically no one lives in it. A few units seem to be used as vacation rentals every now and then. Otherwise the condos are vacant “year-round.” They may well be investment properties bought by investors in China. That’s a big thing here. They’re betting on massive capital appreciation and have been bitterly disappointed.

      • Antonym says:

        That or they are simply laundering their Chinese currency into dollars at any price. The CCP is after local rich Chinese, so the latter are pulling their foreign parachutes.

      • Mitry says:

        Wolf, my wife claims most of the new condos built in Minneapolis are vacant. I thought it was odd at first but she might be right, I never see people going in and out of what look to be 50 to 100+ unit buildings. No one out on their balcony. The first floor commercial/mixed use areas are vacant. Foreign investors is a plausible explanation, but whole buildings sold to absentee owners? Does anyone on the forum have any additional thoughts on these vacant buildings that seem to be popping up, in the Twin Cities and elsewhere? If they are foreign investors, are these likely to be sold any time soon?

        • Bobber says:

          Who would go out on their balcony in Minneapolis in 10 degree weather? The best indicator of vacant homes is zero lighting at night, around 7:00PM.

        • longstreet says:

          The decisions to build and the financing likely were done at least a year ago. Remember the environment then? Nearly no return on money. SO people were looking for any kind of return and throwing money at ventures such as condominium complex construction etc.
          Thousands of condo going up where I live, and I live in a state that has a sharply declining population. Who would do such a thing as build housing in a declining population area? Someone tired of making nothing on their savings (one year ago)
          Again, the planning and financing happened long ago.

        • Lynn says:

          Yup. Whole ghost buildings in North America. Whole ghost cities in China.

          An internet search will find many articles on it. They are also buying up SFHs and piling money into international REITs. Or were. Now, not quite so much. There seems to be more money from Russia and Russian sympathizers now in the US RE market (just anecdotal info) , but not nearly as much as the Chinese spent. There is also a very interesting article about Miami in particular based on a study done of all cash purchases after FINCeN did an pilot program there requiring real beneficial ownership disclosure on sales. Cash sales went down, I think was 70%. That program is now being extended and enlarged across the country.

          With all that plus the downturn of the market and the possibility of sanctions and confiscation of assets in the US, it has put a bit of a damper on things. Thank God. People need places to live. Empty building hoarders need to just go away.

    • Wolf Richter says:

      BTW, here is the article where I discussed the vacant housing units per Census data:

      • Moi says:

        Huh we called them “see through buildings” in Miami, 25 stories with no lights on. and the state bird was the “crane”.

        • Juliab says:

          At some point these vacant homes will come on the market and if they do in a short period of time it will be very interesting to see

    • Petunia says:

      New York City has always had a huge percentage of vacant apts used as second homes or company apts. Many are rent controlled and really hurt the affordability of the city for real residents. I knew of some apts on Gramercy Park that were rent stabilized and used by companies from out of town.

  15. Bobber says:

    I was interested in finding out who is selling right now, so I took a look at the listings.

    In Seattle suburbs, it appears retirees are taking on a big share of the listings, as many of the homes being listed were purchased 20-25 years ago. These sellers are likely empty nesters trying to downsize and preserve their nest egg in the process. The prices on the homes are being dropped on a mechanical basis every 2-4 weeks, so they appear to be motivated sellers in search of market price.

    Interestingly, I don’t see a lot of flips in the listings right now. Perhaps flippers saw the carnage coming and sold last year at top dollar.

    All of the homes in my immediate area that were purchased last year are down 20-40%, according to Redfin data, which tends to overstate the market values. I recall driving by as people flocked outside the open houses last summer. As it turns out, they FOMO’d into a quick 20-40% market value loss. Their 20% down payments vaporized in an instant.

    • Dazed And Confused says:

      “These sellers are likely empty nesters trying to downsize and preserve their nest egg in the process.”

      Interesting – you hear so much talk of all the homeowners with huge mortgages fixed at <3% that will never give them up and so will never sell but there are vast numbers of long-time homeowners with either no mortgage or a tiny mortgage where the rate is irrelevant either because they can pay it off after they downsize or it's monthly cost is insignificant compared to upkeep, taxes, maintenance, insurance etc. on their current place.

      "preserve their nest egg"

      that's interesting – does that mean that they think there are better places to park their nest egg or that they are expecting house prices to fall from current levels or not keep pace with other investments?

      • Ethan in NoVA says:

        They may have already bought the retirement home in Florida, and are selling primary in a hot market.

      • Lynn says:

        Are they having to pay more taxes as their house value went up? I suspect a lot of people have gotten priced out of their home towns and had to move.

  16. David Hall says:

    Tens of thousands of people left San Francisco creating vacancies, while hundreds of thousands arrived in Florida creating shortages.

    I know people who bought vacation homes as they saw others getting rich. They do not rent them out for positive cash flow. There has been property hoarding.

    Someone in Europe sold property that had been in the family 400 years. Over the long term, it rose in value.

    Rental vacancies are near a 40 year low. There are a record number of multifamily homes over 5 units per building under construction. Single family home construction is not as robust.

    The cost of health insurance is not a bubble, is it?. The cost of homeowners’ insurance in hurricane alley is not a bubble, is it?. The long term trend of PCE inflation has been increasing prices for decades. Housing prices might temporarily go down, not as frequently in places like Zimbabwe and Venezuela where inflation sometimes spiked to over 100% a year.

    The Nikkei Index started to sell off in 1990, but has been rising since 2009. Their population aged and declined suppressing the need for new home construction, but increased the need for robots.

    • Dazed And Confused says:

      “The cost of health insurance is not a bubble, is it?. The cost of homeowners’ insurance in hurricane alley is not a bubble, is it?”

      No – they are consumables not assets and so are not prone to speculative bubbles.

      “There has been property hoarding.”
      Isn’t that expensive if or when properties stop appreciating? – I mean those carrying costs add up along with the opportunity costs.
      Will be interesting to see how things work out for these hoarders.

    • Dazed And Confused says:

      “Housing prices might temporarily go down, not as frequently in places like Zimbabwe and Venezuela where inflation sometimes spiked to over 100% a year.”

      USA probably has more in common with Sweden, Canada, Australia, New Zealand etc. than it does with Zimbabwe or Venezuela. Those countries have already seen double-digit percentage drops in home prices with plenty more to come.

  17. Citizen AllenM says:

    Real estate is slow to fall, then it goes quickly. Please go back and read Calculated Risk from 2005-2008. It took forever for the mainstream to get the picture. And industry professional classes were obdurate in their optimism. This will take years.

    Years. Years before interest rates begin to fall again.

    Tell me when inflation is dead, and I can begin to see an end. Our political class is even more insane.

    • Dazed And Confused says:

      “Years. Years before interest rates begin to fall again.”

      Difficult to know where we are in the bond market cycle but if we’re in a similar spot to 1972 you won’t see a lower rate than today’s for 20+ years i.e. 2043 and you won’t see a significantly lower rate (1% or more lower) for 30+ years i.e. 2053.

      • sunny129 says:

        Dazed and Confused

        Who is going to pay the interest on the accumulated DEBTs both in private and public sectors. Mind you NOT the debt itself.

        National debt will be reaching 35T and 40T soon.A global banking crisis from any where can start the fall of ‘house of cards’

        • Dazed And Confused says:

          “Who is going to pay the interest on the accumulated DEBTs both in private and public sectors.”

          My best guess is bondholders and other savers via financial repression i.e. negative real rates to slowly liquidate the debt.

        • longstreet says:

          Student loan forgiveness followed by Govt loan forgiveness.

        • gametv says:

          if you look at the calculations of future interest payments as a percentage of GDP, it is much higher in 10 years from now, but those numbers are calculated with low interest rate assumptions. if interest rates remain very high, then the interest expense over time will become incredibly high.

          the Fed will need to rachett up rates very quickly to try to cause a recession and then allow interest rates to fall.

          going to get FUGLY

      • sufferinsucatash says:

        We were a much more successful country then. Post WW2 Kings of the World. There’s no way interest stays high longer than 5 years or the next crisis, whichever comes first. That’s the nature of the Beast nowadays.

      • Truth says:

        If. But we’re not close to 1972. So moot point. Rates will drop as the forward real rate spread is already positive and MS growth has been hammered.

        As for housing markets, there will be a correction in most US markets but no crash (except in specific pockets, like SF). The US benefits from overall good affordability, unlike many parts of Europe, Canada, Australia, etc. Much of it driven by the cleaning house of 2008-2012. Anyone who knows any of the data in those markers can recognize the massive differences vs the (generalized) US situation today.

    • JoshT says:

      Is Calculated Risk a book? If so, who is the author?

    • Dr Duration says:

      Re: calculatedrisk

      That was an incredible period, following along everyday, with nonstop amazement as the world fell apart.

      The early days with Doris “Tanta” Dungey were magical and Bill remains iconic. That was a wild west experience, and as you mention, nobody was paying attention, and the mainstream media was clueless as well street pumped their lies and ponzi to any rube that would listen. Fond memories of staying up late watching epic news from Asia. Crazy times, and here we go again I think.

      My latest dark theory has to do with all the trillions in passive investment funds, which all have concentrated leverage exposure — and everyone buying dips, thinking about cost averaging and acquiring cheap shares, are going to have a collective heart attack, after their net asset value drops like an elevator in free fall.

      All that money passive investors are counting on, isn’t gonna be there down the road, oh well. Leverage and negative equity, the equivalent of passing out while driving on a freeway.

  18. Daz says:

    Decisions… decisions. Hold on to that 3% rate with a death grip and see your equity flushed away or sell up to preserve the remaining cash? Hmmm?

    • josap says:

      If you are simply going to buy another home, sit tight with your 3% mortgage. If you have an investment property, sell and put the money to work in some other risky area.

      Will you keep your income? Or will your job go away?

      Each person will have their own choices to make.

    • Bobber says:

      The impact of those 3% mortgages is overstated. Sure, it’s an incentive to stay in the home, but there are lots of counter incentives to consider.

      -Refusal to move can limit job opportunities, which impacts future income and career growth.

      -Prices appear to be moving down rather rapidly. Of particular note, as Wolf notes, median prices are dropping more rapidly than the 2008 RE bust.

      -Money tied up in a home could be earning 5% guaranteed interest today.

      -It doesn’t make financial sense to rent a home in most markets, even if the rent is paid and there is no damage.

      -Many home owners don’t have mortgages.

      For these reasons, don’t believe the hype about 3% mortgages. It’s a factor, but not a very strong one. In three years, it won’t even be talked about.

    • Shiloh1 says:

      When I was in Illinois about $15,000 / year was flushed down the toilet in property taxes on a 50 year old 2200 sqft house, 50 x 135 lot.

      Took advantage of the 2020-2021 market to flee like it was the last scene in The Sound Of Music.

  19. sufferinsucatash says:

    There is some noise on seeking alpha about the financial times. It is about the Global countries who are still printing money affecting the US Market. This apparently, is what has kept some of our Markets inflated since October.

    Just wondering has anyone heard about that?

    Great YouTube offering Wolf! I’m keeping my ears on the train tracks.

  20. AV8R says:

    Shhhh. Dont tell anyone here in NH prices are dropping.

    I thought the Long Islanders were delusional.


    Wasted weekend.

    • Escierto says:

      Go to the Northeast Kingdom in Vermont or Downeast Maine up to the Canadian border. Cheap houses galore!

  21. Tight Purse says:

    Pro tip: if you look on Zillow and see very few houses for sale, check how many are listed as rentals. I was shocked at what I saw in the Boston suburb where I live. I believe this 100% confirms one of the things Wolf mentioned in his report.

    • Depth Charge says:

      Speculators descended upon housing and bought everything up over the past 3 years. And the FED funded the loans.

      • Randy says:

        Washington Post article 2 years ago or so.
        Investors bought 5-6% of homes sold 2000-2001. Slowly increases.
        2012 to 2019 around 11% on average (not too much deviation if memory serves me right). Not sure 2020, but 2021 about 19%.
        Some counties 40 to 55%. Atlanta 33%.

        Not at this website but elsewhere commentatos complain about investors.
        And thats it, just those greedy investors.
        Not me.
        I complained that the government didn’t regulate it to some extent.
        Democrats hardly talked about investor home purchases during their 11 debates in 2019-2020.
        I was pretty upset, but so it goes.

    • American Dream says:

      New monthly stay Airbnb’s popping up left and right in the two areas I follow Portland and new Orleans. Supports the idea that if you can’t sell there trying to hold on for lower rates. Time will win this battle though as rates are staying higher for longer

  22. Pants Relief says:

    Today’s sellers believe they have plenty of time, money and equity to keep reaching for fantasy prices.

    For what it’s worth, all I do is talk to homeowners and realtors for my profession.

    I operate in 3 cities:

    Phoenix, AZ,
    Charlotte, NC,
    and Tampa, FL.

    “Not in my neighborhood.”
    “We’ve already got 2 offers over asking.”
    “I don’t NEED to sell it…”

    In 2008, there was fear in the air. By 2009 there was actual seller capitulation.

    In 2023, these sellers are dug in deep, and will fight to the bitter bloody end for every penny they wish they’d gotten in 2021.

    And there are sufficient sales happening to keep them clinging on.

    Transaction volume is dropping, the market is in an induced coma.
    It’s also true that prices are lower (for the few transactions that are still happening).

    Despite that reality, we won’t have a crash until these stubborn, dug-in, “I will get my million dollars or die trying” sellers bend the knee.

    Also, if the house is a place you’d be proud to post yourself buying on instagram, it’s still selling like it’s 2021. Lines out the door on a Sunday, etc.

    • longstreet says:

      What is different “this time” is that the replacement costs of housing has soared with the inflation. Rates STILL below the inflation rate. People tend to clutch their largest hard asset in periods of inflation.

      • Truth says:

        I can get over 5% on 1Y t bills. You think house prices, car prices, and TV prices are going up more than 5% from where they are today by Feb of next year?

        Odd. Seems many are seeing price declines in housing already. Some big declines. Economic outlook must be really strong to see the rest push YoY to 5% and up from YoY today…

        • longstreet says:

          “I can get over 5% on 1Y t bills”
          You, me, Wolf……everybody can.
          And what is done with that money flow that wasnt there 12 months ago? It is spent.
          Fair returns are a great economy driver that is often overlooked.
          All the central bankers want to drive rates below where they naturally should be, essentially putting money into the hands of the debtors…which they then go spend.
          But when money is put into the hands of the lenders, then they spend as well, so often overlooked.
          The great difference is that the largest borrowers (govts) control how the money is spent from rates that are too low.
          They don’t/can’t control how the money is spent by those receiving a fair return. Hence we unfortunately reside more often in a condition in which rates are below fair return.

      • jon says:

        “People tend to clutch their largest hard asset in periods of inflation” Yet the home prices are falling.

    • Bobber says:

      As I said earlier, look at the mix of sellers. It appears older boomers are now starting to take on a greater share of listings. They are selling because prices are great, they need to downsize, kids have left the house, they want to preserve their nest egg, and they don’t want to leave a mess behind when they leave this world.

      • Bobber says:

        This is anecdotal, but in the past two years I have seen lots of home sales in my family related to boomer late life transitions. Lots of boomers hitting their 80’s now, and that’s when change is forced upon them. This activity will only pick up speed.

        Many of the homes being sold are in Florida, Arizona, Vegas, etc., and this will magnify the existing crisis in those cities, given millennials aren’t known to be big buyers in those locations.

        • VintageVNvet says:

          IIRC bob,,, ”so called boomer generation” started 1946, so not ’80s yet…
          OTOH, my gen, called ”war babies” ”silent generation”,, whatever,,, are in and rapidly approaching ’80s and, IMHO are not only wanting, but actually needing to ”downsize”,,,
          and then, a few years hence come the boomers,, my young and younger siblings, etc… ALL of whom are ready to just live on the beach in Cuba or Costa Rica or where some ever life is good and simple…
          Hope all you young folks can do so too when you are done with ALL your duty, etc.

      • Pants Relief says:

        Ok, the more boomers there are, the more financial cushion they have to comfortably wait for top dollar, or as wolf mentioned, take the vacant house down, put it up as a rental, take it down again, list it for sky high price minus $1, for eternity.

        • Lune says:

          Not really. The giant sucking sound approaching Boomers is healthcare costs. It’s all well and fine to hold on to your home while you’re healthy. Then you have a stroke and your 2 story McMansion isn’t really fit for a disabled person. Or your health declines and you need assistance. 24hr nursing care at home is ridiculously expensive, so you end up in a nursing home (only slightly less ridiculously less expensive) and your kids sell your home.

          Slowly, the nursing home eats away your assets until you’re poor enough to qualify for Medicaid. At which point — by law — you will have no home, no savings, no inheritance, nothing. (If you think this is rare, consider that the majority of Medicaid payments isn’t to poor people: it’s to old people in nursing homes).

          I think this is the type of stuff that most Americans underestimate. The chances of a major life event wiping out everything you own is quite high in America, with our lack of social safety nets. Recessions tend to increase the number of those adverse life events (including health declines), but until then, everyone assumes it won’t affect them.

        • Anthony A. says:

          Lune is spot on here. At 79 years old, I am watching a lot of my friends go down that road. I’m still on the sidelines with good health. Dodging the bullets, for sure.

        • 91B20 1stCav (AUS) says:

          Lune – so very-well said. (My wife and i are 71 and have been the 24-7 care, in our home, for her mother (who just clocked a century last week) since 2014. My daily concern, even as relatively fortunate as we are, is dealing practically/mentally/spiritually with our collective decline, which despite our best efforts, advances relentlessly…).

          may we all find a better day.

  23. Jcohn says:

    The more interesting question becomes what is the driver behind housing prices
    Housing prices have increased from 322,800 in the fourth quarter of 2018 to 467,800 in the 4 th quarter of 2022

    Long term mortgage rates hit a high of 4.94% on 11/18/ 18 and recently hit 6.43%. The last time that 30 year rates were this high was in 2002.
    Obviously higher interest rates did not affect housing prices in this period
    Median household income was 68700 in 2018 and was 70784 in 2021. It is hard to believe that this small increase in family income could account for a considerable rise in housing prices.
    The Feds balance sheet recently stood at 8.44t s vast increase from 4.1 in 11/18.
    US government debt exploded from 21.5t in 2018 to the current 30.8t.
    It seems obvious that the massive increase in US debt and the increase in the Feds balance sheet were the factors behind the rise in housing prices .

    • Wolf Richter says:

      In the time period you mention, end of 2018 to end of 2022: Mortgage rates started falling in November 2018 and kept falling and then stayed at or below 3% until Dec 2021. And home prices exploded during that time plus the first few months in 2022. We didn’t get 4% mortgage rates until March 2022. The 5% mortgage rates started showing up in May 2022. By this time prices stalled. We didn’t get the 6% mortgage rates until September 2022.

      • gametv says:

        lag effect. there is a core problem in real estate. everything is priced on a comp basis. so if a house sells for 900K, it is assumed that similar houses are worth the same. but that does not account for changes in the supply-demand curve based on interest rates. so we have falling demand, as fewer and fewer buyers are willing to reach for that home that is now overpriced.

        i think the process is basically just working through the stupid people. there are still alot of stupid people who will pay way too much for a home. those are the people who will be getting foreclosures in the future, with all their equity wiped away.

        real estate values need to be looked at on a monthly payment or cash flow basis versus rental, or based on incomes in a given area. by those measures, it is easy to see that prices are headed MUCH lower.

  24. John says:

    Thanks Wolf! I’m seeing pre-for closues or foreclosures up here in Maine! One sold a year ago around the block. Some listings for sale also on foreclosure sites. Money no longer trash! The Fed and J Powell will protect the dollar at all costs no matter what.Finally! Thanks again Wolf! You the Man!

  25. John says:

    All that forbearance on mortgages and rents comes to mind. So you buy a house and don’t pay the mortgage or rent it out cheap and still don’t pay.what a racket. Too annoying to even think about. Alameda county still has rent forbearance. Un friggin real! Real estate is done. Values on everything out of wack. Stagflation!

  26. longstreet says:

    The Fed has broken the real estate market’s functionality
    They have made it so illiquid that it ceases to be a market at all.
    The sellers want the prices they enjoyed when rates were 3% for a 30yr.
    The buyers want the prices of a 6.5% mortgage.
    Both those rates have occurred in a very short period of time…..all due to manipulation by the Fed.
    By my observation there is very little actually changing hands. SO we have low volume, wide spreads between bid and ask. All this points to an extremely illiquid non functioning market.
    IMO we would have been better off with FF staying around 2% for the past 13 years….and 30yr mortgages around 5.5%. The whipsawing rates, all due to malfeasance by the Fed, is the cause of our condition.
    It is time for a “hard rail” formula driven monetary policy.
    Let’s start with FFR = to a 3 month moving average of a legitimate inflation metric.

  27. JG says:

    Wolf – I just do not see any type of “crash” in my market other than a crash in sales transactions, refis, mortgage purchases, etc. Prices are still incredibly high (after going up a ton in just 2 years) and inventory along with new listings are dismal. If a home comes onto the market, it seems to go fairly fast. We may have a correction in prices, but in good areas I just do not see anything near where we need to go after prices went up so very much in just 2 years. Brutal.

    • jon says:

      I heard the same things during HB1. Home prices would go down but only in so called un desirable areas.

      At least in san diego which I follow and reside, multi million dollar homes in high end coastal areas took 40% plus hair cut.

      Cheap money was available to all areas thus all areas would come down.
      Matter of time.

    • Depth Charge says:

      I don’t see anything in your comment which supports your hypothesis, just wishful thinking. Are you a loanowner on a house? I’d bet you are.

      Local wages support house prices over the long run. That’s where we’re going – house prices which represent what local wages afford.

  28. Bubbajohnson says:

    Great report Thanks

  29. Chris says:

    Thanks Wolf. Are you planning to do more video/audio-only posts in the future? My preference is for text. Just wanted to give you a data point and advocate for my preference. Thanks again!

    • Captive says:

      Hi Chris.
      He usually types out his video/audio posts after a few days and posts a text version. Keep an eye out for another post with the same headline later this week.

  30. Zaridin says:

    Here in the mid-atlantic things are just starting to from flat to bad. Listings and number of sales are down, but prices haven’t really started to tumble…yet. It feels like we’re about 3-6 months behind other markets, but trends aren’t hard to extrapolate, and I don’t see how these insane prices can hold for long. The Bright MLS analysts, however, think the market has “bottomed out” and everything is soon to be rosy.

    Hopium is an addictive thing, ain’t it?

    • Zaridin says:

      *just starting to go from flat to bad*

    • Juliab says:

      For three years I have been reading publications about real estate markets around the world, especially in Europe. Every article contains at least one of these statements ”but don’t expect the bloodbath of 2008” or ”prices may fall slightly but will recover soon” or ”prices won’t fall because there is a lack of inventory”
      And the prices are 100 to 200 percent higher than 2018 and I wonder which idiot buys at these prices with these interest rates and at what price he thinks he will sell. I think the real estate markets are overvalued by 30 percent in the very long term

    • Wolf Richter says:


      As of December, the big mid-Atlantic markets were down 10%-15% from the peak last summer. Per BrightMLS, that someone sends to me periodically:

  31. Beardawg says:

    Nice podcast Wolf. Many factors at play here but the Fed / Govt Stimulus induced housing bubble is clear. If the job market can hold strong for a couple years, the “landing” can hopefully be a bit softer.

    If, as other commenters have theorized, the Fed / Gubment steps in with forebearance as a market stabilizer after a modest drop in RE pricing at the mid/lower tiers, then the emperor’s clothes are truly off and capitalism going forward in the USA will arguably be dead for real.

  32. Lune says:

    So Wolf, here’s a hypothetical situation. First, my assumption is that you need a recession or some other financial distress to *force* people to sell their houses. Otherwise, as long as they can make their payment, even if in a strictly financial sense it doesn’t make sense to do so, most people will do it. Either for psychological reasons (they don’t want to move if they don’t have to), or for non-psychological reasons (you may no longer qualify for a mortgage to buy another house, so better to keep your current house even if theoretically the monthly payment on a new house would be less). Maybe this assumption is wrong?

    Assuming I’m right, then without that market clearing force (of essentially forcing people into the housing market), markets can remain frozen since neither buyer nor seller is really motivated to complete the transaction.

    So… what does the housing market look like if the Fed manages a soft landing, or at least to push out a recession for a year or longer? Everyone was predicting a recession this year, but there are no signs of it yet, and it may take a year or more for financial excess to be wrung out before inflation comes down. (IMHO, the Fed should slow down in the rate increases and ramp up the QT if they really want to attack the problem, but that’s a point for another article :-).

    In that scenario, say mortgage rates go up to 8%, but the economy is still reasonably strong, maybe mild recession at most, so no forced selling pressure. Would the market just freeze? Would it unfreeze when there are enough underwater mortgages for significant numbers of people to start defaulting strategically? Or do places like SF show that even without financial pressure, the market will start to find clearing prices?

    Just spitballing here, because in the last housing bust, we had a pretty significant recession to go along with it, and that definitely led to markets moving much faster than you would expect. Lots of people lost their jobs and had to sell their house no matter how much they lost on it. And even with that financial pressure, it took a couple of years to find the bottom. So I wonder what this housing bust will look like…

    (NB, to other readers, I’m not advocating that people lose their jobs. I actually am in the market for a house at some point soon, so I’d love for prices to crash, but I don’t actively wish for people to lose their jobs or have their children thrown out on the streets so I can save a few bucks on a house).

  33. Swamp Creature says:

    The housing bubble 2 crash will be rolling in by Zip code. I noticed many areas here are not seeing any decline in price yet, while other are seeing housing sitting and not selling. The market is frozen. There is no incentive to sell. Those with 3 1/2% mortgages are holding on to their investment. Cash buyers are sitting this out until prices decline substantially. No listings and no buyers. This will go on until the whole market collapses worse than 2008. I expect to see Realtors working at car washes to make ends meet.

  34. Dr Duration says:

    As you look through your 3-d glasses at economic tea leaves, keep this tidbit in mind:

    “In the past year, cost of capital has increased for borrowers at the fastest pace in over 40 years” –JPM

    Oh wait a minute, it’s going to keep increasing, hmmm

  35. dang says:

    I thought your presentation was a very professional presentation of the available data by a master analyst. Emotionally, I felt like a surfer dude that just caught a monster. The ride down is where all the action is.

    Seriously, I expect the price of housing to decline as the housing bubble 2 deflates, as bubbles do.

    One thing that you said, again, is that there is a market for housing at an affordable price. I agree and add that the market at an affordable price is enormous.

    What the hell was the Fed thinking, oblivious to the giant bubble gum bubble in asset prices they were blowing. Doesn’t seem innocent.

    • dang says:

      Real rates of interest are about to solve the impending pension crisis, so vividly demonstrated by the leveraged funds in Britain.

      ZIRP forced them to accept unacceptable risk. Just like the rest of us. A trickle of money to all but a few.

      • dang says:

        Too me, the hand writing is on the wall, MMT type macroeconomics is a disaster as Uncle Milty always claimed ! Inflation is always and everywhere caused by an excess of currency. ( Paraphrasing etc.).

        The only insight he ever really had except the lifetime cycle of expenditures. In the end, if I were too judge his contribution to economics, a science running neck and neck with psychology;

        Is that history has disproved the complete radical agenda that he promoted beyond the several concepts that were worthy of evaluation.

        • dang says:

          Each moment of one’s life eventually becomes valuable.

          The housing market is caught between a hard place and a rock, from the business point of view. The financial pressure is significant and I applaud the Fed’s response to the explosion of they’re science project, once again.

          How does an asset based company deal with a loss of liquidity and the commitment to continue development ?

          It can only be described as an illogical optimism, throwing caution too the wind. Unless they know something I don’t which makes me suspicious.

      • dang says:

        I have to laugh about the generous mortgage interest rate of 6.88 pct. The first house I bought at an interest rate of 14 pct plus a half for PMI.

        Just after Volker, after fiddle faddling with interest rate policy as a brake for the raging inflation realized that the only way too arrest an anchored cancer of inflation was too raise interests several percentages above the measured rate of the increases in price, inflation

        The nesting instinct overcame us, including my generally sensible, smart. wife.

  36. Dr Duration says:

    Random values related to housing and inflation. It’s interesting to see the impact of inflation on value. The big question is, what’s the normal range of growth over a certain period.

    According to the U.S. Bureau of Labor Statistics, prices for housing were 46.56% higher in 2018 versus 2001 (a $60,064.36 difference in value).

    Between 2001 and 2018: Housing experienced an average inflation rate of 2.27% per year.

    According to the U.S. Bureau of Labor Statistics, prices for housing were 70.56% higher in 2022 versus 2001 (a $91,023.12 difference in value).

    Between 2001 and 2022: Housing experienced an average inflation rate of 2.58% per year.

    According to the U.S. Bureau of Labor Statistics, prices for housing were 16.37% higher in 2022 versus 2018 (a $21,123.39 difference in value).

    Between 2018 and 2022: Housing experienced an average inflation rate of 3.86% per year.

  37. Swamp Creature says:

    The “Property Listing From Hell” is still sitting one block from my house. They dropped the price from 2.1 mil to 1.9 mil and still no takers. I haven’t even seen anyone go in there for a month except a Realtor who was listed on the sign. Back in April 2022 these properties would be snapped up in days. No more. Those days are over. To top it off the property is a dog. The builder put a monster home on a small lot with no green space or backyard. No one with children would want this piece of crap, as this is a family neighborhood.

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