Entire Housing Market, Buyers and Sellers, May Have Shrunk by 20% to 25% because of the 3% Mortgages

They’re not listing their homes because they’re not moving out because they’re not buying a home to move into because they don’t want to give up their 3% gift from God.

By Wolf Richter for WOLF STREET.

The exact numbers are hard to nail down, but we can guesstimate from the figures we have that the entire housing market, both buyers and sellers, has shrunk this year by about 20% to 25% compared to pre-pandemic years.

Meaning 20% to 25% less demand and sales and 20% to 25% less inventory and new listings, with prices down a tad year-over-year, showing that the market is roughly balanced at this smaller size because buyers and sellers have vanished in equal number.

And we know who they are: the homeowners in 3%-mortgage jail that now cannot buy, and therefore cannot sell.

The 3% mortgages that a lot of homeowners now have after the huge refinancing boom during the pandemic prevent those people from buying a new home because they might have to finance it at about 7%, which would increase the monthly payment on the same size mortgage by 50% or more.

So these people aren’t buying. They aren’t even looking. They have left the market as buyers, and so there may be 20% to 25% fewer buyers.

At the same time, and in equal number, these people, who cannot buy a new home, therefore cannot sell their current home because they continue to live in it, and so they’re not putting their home on the market, and inventory shrinks by the same number as buyers have left. Less inventory and fewer buyers in equal amount.

These homeowners with 3% mortgages don’t want to, or cannot, upsize or downsize, or move to a different location, move closer to the kids or parents, or whatever – unless they want to give up their sacred 3% mortgage that now increasingly looks like a gift from God.

And for Realtors, the 3% mortgage – as much as they loved it at the time – has now turned into a gift from hell, because the real estate industry is making commissions coming and going: One, when these homeowners sell their old home, and two, when they buy a new home.

Each household that is now prevented from changing homes because they’re locked in by this 3% gift from God subtracts two transactions from the market – one when they buy a new home, and the other when they sell their old home. And Realtors are losing both of those deals.

The fact that Realtors are losing both of those deals is why the industry is so upset about these homeowners that refuse to sell – and it consistently blames them for the low inventory.

But the industry fails to state the other half of this reality, though they all know it: That these homeowners who refuse to sell have also vanished as buyers, and therefore this portion of demand has dropped in equal measure with inventories.

This is happening with a fairly large group of homeowners: They have left the market as both sellers and buyers at the same time and in equal number.

Which explains in part why sales volume has plunged so far because those potential buyers with 3% mortgages have left the market. And it explains in part why inventories have dropped because the same people that cannot buy aren’t putting their homes on the market.

That’s the big reason why we have this strange combination of plunging sales along with a national median price that has dropped year-over-year for the first time since the Housing Bust, with homes spending an increasing number of days on the market, amid growing but still tight inventory (all data here from the National Association of Realtors).

To set the scene: The national median price has been down slightly year-over-year for the fifth month in a row, a sign that the market is at a deadlock because mortgage-jailed potential buyers and potential sellers are the same people, and they’re not buying and they’re not selling.

Seasonally, the median prices released by the National Association of Realtors generally increase in the first half of the year, peak in June, and decline in the second half of the year (though part of the seasonality was upended during the pandemic). That’s just the normal seasonality of the housing market. Yesterday, we reported June’s median price of single-family houses; and based on seasonality, prices can be expected to go down for the rest of the year.

But the year-over-year comparison eliminates this seasonality. On a year-over-year basis, the median price of single-family houses dipped 1.2% in June, the fifth month in a row of year-over-year declines.

Second: Sales of single-family houses in June were down by 22% from June 2019 and by 23% from 2018. Since October last year, the declines in the current month from the same months in 2019 and 2018 ranged from -15% to -28%, because the mortgage-jailed households aren’t buying.

Third: New listings in June (396,100) were down by 23% from June 2019 and by 24% from June 2018, according to data from realtor.com, in part because the mortgage-jailed are not listing their homes because they’re not moving out because they’re not buying a new home to move into because they don’t want the payment of a 7% mortgage:

These declines in the 20% to 25% range keep cropping up across the demand and supply measures, compared to pre-pandemic times, indicating that a substantial portion of the normal buyers-sellers have vanished as buyers and as sellers because they got their 3% gift from God, and they’re not going to give it up, and so they’re not buying a new home and so they’re not selling their old home, and the whole market, buyers and sellers, has shrunk by their number. And that may be the new normal for years to come.

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  417 comments for “Entire Housing Market, Buyers and Sellers, May Have Shrunk by 20% to 25% because of the 3% Mortgages

  1. Gumbino says:

    The fed gives and the fed taketh away.

    • Pea Sea says:

      The Fed giveth to some and taketh away from others. If you’re a saver, someone trying to buy a house, or someone who works for a living (and therefore must live on wages rather than the income from a pile of assets), you’re one of those from whom the Fed taketh, and taketh, and taketh.

      • SOL says:

        I feel this, all day, everyday.

        • joedidee says:

          income from a pile of assets

          where they taxest taxest, increase costs/insurance 30%

          all day long

          and remember those who bought pre-covid and have sub 4% have MANAGEABLE mortgages given their income

          with substantial increases in utilities, insurance, property taxes, maintenance of home
          I felt like I’m month to month all year
          saving?? what and for what given rapid decline in value of fiat $dollar
          I have house to finish and will decide to flip or make rental
          $18k v. 25% profit and cash for next one

        • Julie Davis says:

          I wouldn’t want to give up my 4% mortgage either. Even a 5 or 6 looks pretty good right now. Sad for my real estate industry friends.

        • Scoo says:


      • Dick says:


      • BobbleheadLincoln says:

        Yep, the society is called capitalism. Not that other structures have shown great promise on a large scale. I’m not sure democracy is compatible with capitalism. Especially when wealthy elites control the media narrative from both ‘parties’

        • Einhal says:

          No, it’s not called capitalism. What we have is a form of socialism called “crony capitalism,” which is the worst excesses of both socialism and capitalism.

        • HowNow says:

          No, Einhal. Crony capitalism is capitalism. You must be a crony, confusing socialism with capitalism. The oligarchs who control the political system, the news, and the financial system are not socialists. But they do have lap dogs who dole out the b.s.

        • NJGeezer says:

          Hello BH Lincoln, Totally concur with your take on the total corruption of media. But I do concur also with Einhal on his description of “crony capitalism” as a form of socialism. It’s the skimming of the cream by the wealthy elite. and the socializing of the loss and theft from the plebes. Just my take.

        • VintageVNvet says:

          NAH to socialism OR capitalism per above:
          It should be clear enough from the very definitive examples of the 20th century that when corporations and large private companies are in total control of GUV MINT, as is now the case in USA, it is FASCISM.
          Consider the situation of the average German or Italian peon during the Fascism of 20th century, and then compare it with the case for the average Joe and Jane today:::
          Same ol Same ol…
          Now you know what is most likely to be on the way, or maybe, due to the control of the MSM, already here.

        • danf51 says:

          The meaning of words is adrift. I suppose today by “Capitalist” we mean corporatist and/or financier.

          I believe in free enterprise and competitive markets. I’m not sure that I am a capitalist because I am anti-corporate.

          I believe in ownership. The problem with a large corporation is that the enterprise is not longer owned by human beings. At best it is controlled. There is no longer owner liability or an owners vision or humanity. Large corporations are a form of artificial intelligence and could even be considered a alien life form in the manner of a hive mind.

        • 91B20 1stCav (AUS) says:

          …to restate, the goal of contemporary corporate capitalism has been to privatize all profit, and socialize all risk. If not seriously recognized and mitigated by it’s people, there’s a historic PNR for a well-functioning society (…at base: ‘laws for thee, but not for me…).

          may we all find a better day.

        • Dale says:

          Einhal’s take is correct. This is not capitalism. It is crony capitalism.

          Adam Smith foresaw what we are experiencing now as a major weakness of capitalism. He hated rentiers, and suggested that returns of greater than 5% should be taxed away to eliminate the incentive to speculate.

        • HowNow says:

          Let’s sober up about this. Capitalists are not philosophers or good boys while the crony capitalists are underhanded bastards that game the system and are often, gasp, “Rentiers”.
          Capitalists, historically, did not care squat about Adam Smith or John Locke. The robber barons decimated their competitors, cut outrageous deals with government, bribed their way through business, and so on.
          There was never a level playing field. “Capitalism” is not some pure Platonic form that’s been corrupted by cronies. It’s an inevitable pitfall of the system. Laws emerged to put guard rails alongside egregious capitalist behavior and excesses, but, the regulators have been captured and turned inside out, the cronies are the regulators.
          So go on witch your bad self and think that “Capitalism” is this immaculate conception and that only the bad boys are on the dark side.

        • Happy1 says:

          Capitalism has its flaws of regulatory capture and cronyism but is so far superior socialism that it’s laughable to even compare our economy with true socialist economies like Venezuela and Cuba and North Korea, which are all basket cases with no freedom, economic or otherwise, and with far more corruption and cronyism.

        • Democracy wins, 60-40 says:

          Democracy is somewhat overrated, at least in the US and probably in general.

          Here’s just two reasons:

          1. Its limited in the US. We don’t vote for Supreme Court justices, no small thing these days.

          2. It’s pretty typical for an election to be close. Many are 60-40 or closer.
          If just over one in six (17%) of those voting for the winner instead voted for the loser the outcome is flipped (assuming the rest voted the same).
          I’m just guessing but would think about 10% of elections are 55-45 or closer.
          The problem is that its WINNER takes ALL. You lost by 2 or 3 percent too bad.
          And American candidates can be so laughable (not picking on Biden or Trump here specifically)… they will win a very close election and proclaim:
          “The American people have spoken” as if they had won in a landslide.
          I dont even roll my eyes any more.

          But yes, no matter how close the election result, the loser gets nothing.

          I’m not suggesting we get rid of Democracy, just pointing out its obvious (to me if not to others) shortcomings (limitations if you prefer).

        • HowNow says:

          At no point have I advocated that socialism is a decent substitute for capitalism. I’m objecting to the fanciful notion that capitalism, in and of itself, is ideal, while crony capitalism is a warping of that pure system. Readers here are saying, if you criticize capitalism, you’ve got to be a socialist.

          Government needs to have a controlling interest in what capitalists should and should not be able to do. Right now, immensely powerful capitalists are choking the beneficial elements of capitalism. But the notion that there’s a free market out there in never neverland and that capitalists will participate by staying “in bounds” is b.s. Ayn Rand’s hero-characters are two-dimensional cartoons that children would recognize as phony.

          We have an increasing degree of corruption of the system. Ancient civilizations, China and India, are saturated with corruption. Can we prevent it? Not if we condemn Government as the cause. That’s just propaganda from the oligarchs.
          Back in the day, Teddy Roosevelt who recognized and fought the corruption of “trusts” would have been labeled a “communist” by the oligarchs of today. They are now trying to paint any efforts to control excesses of corporations as “socialist” and characterizing those efforts as the biggest threats to our way of life.
          It’s a matter of degree and the need for balance. Not condemnation of government although the capitalists have twisted regulations in their effort to garner power and greater and greater wealth and effectively control regulatory agencies.

        • 91B20 1stCav (AUS) says:

          How – excellent description of our redux of the Gilded Age and pickup of the 7-10 ‘capitalism/socialism’ split. Kudos.

          (…for those unfamiliar with that period of world/U.S. history, again highly recommend Tuchman’s ‘The Proud Tower’…).

          may we all find a better day.

        • I Can't Do That Dave says:

          Thank you for this discussion. I’m an independent, so I don’t like either party, but it always seems like the comment board here is mostly for Libertarians and small government types.

          I hate that our country has been captured by wealthy donors infiltrating both parties AND the media. People who berate the “liberal media” don’t seem to appreciate that it’s by and large owned by the wealthy who don’t want their boats rocked any more than the wealthy on the Republican side. Most mainstream media is very neoliberal (i.e in favor of the corporate state).

          Think back, when was the last time the mainstream media investigated issues that affected the middle and working classes in a way that called out greed, unfairness, and crony capitalism? Or reported on political malfeasance for what it is, rather than turning it into a both sideism circus that doesn’t expressly call out blatant and obvious crimes?

      • old school says:

        Zero interest rate policy consequences going to live a long time.

    • longstreet says:

      For every action, there is an equal and opposite reaction.
      RE brokers made a killing….now the pipeline is empty…for the same reason they made the killing.
      The Fed BROKE the RE market….
      and next is the stock market….

      • joedidee says:

        for bottom 95%
        top 5% moving like always
        flipper put property out and had multiple full price offers within 24 hours

    • Connie says:

      I say the FED gives, not takes. I “was” a newly retired cash buyer for a $500,000 home, but decided instead to rent a townhome apartment, paid by the 5%, 7 year CD I took out at a local credit union. Thank you Mr Powell.

    • Rajat Kaushik says:

      I am from India. Here, we only have floating rate mortgages and not fixed rate mortgages unlike US. ALM problem solved for banks. From the sense I drive from US economy, it might fizzle out with huge banks going bust due to these ALM problems (banks earnings 3% from fixed rate mortgage while cost of liability is 5-6%)

  2. LifeSupportSystem4aVote says:

    “And we know who they are: the homeowners in 3%-mortgage jail that now cannot buy, and therefore cannot sell.”

    The first thought I had after reading this was the quote, “I cried because I had no shoes until I met a man who had no feet.”

    It’s all relative…

    • C# Dev says:

      You could always turn it into a rental. Here in Phoenix, rents are quite high and you can easily pay the mortgage and maintenance with money left over for profit.

      I mean you could sell and buy at a much another home higher rate, but you would really have to have the need to upgrade the home to take that size of a financial hit.

      • josap says:

        The only people around me I see selling are those who have inherited a property and don’t want the hassle of property management.

        It gets sold fairly quickly at a starter home price. The buyers remodel and are happy. Or an investor buys and rehabs to flip or rent it out.

        Phx Metro, working class area. Although there are $1M within a half mile down the street. Very walkable are when it isn’t a thousand degrees outside.

        • josap says:

          Walkable area

        • Einhal says:

          The problem with this is that a lot of people live paycheck to paycheck, so if they lose their jobs, they won’t be able to pay the rent for more than a month or so.

          I do think though that what everyone says is true, that there won’t be any real changes in the economy until job losses start.

        • sufferinsucatash says:

          Oh yeah! Grandma’s memory and her stuff all turn to Cash!

          Pretty sad people do not remember and cherish longer these days. It’s all so transactional.

        • Longstreet1961 says:

          Just sold Grannie’s home in N Scottsdale – just as you stated. List 1.85M (wishful), sale at 1.525M (19 year old home with almost no improvements.)

      • Fed up says:

        Rents are coming down big time, especially in the west valley. New apartments and build to rents came online at the same time. Many are offering two months free concessions. It’s starting to turn.

        • Lauren says:

          Yep I’m seeing that in NC which is ‘booming’ (it is kind of, very strange times we live in).

    • Mark says:

      “I cry because I only have $10 million , and Jay Powell and his friends all have $100 million” .

      It’s all relative.

  3. AV8R says:

    Mortgage Jailed!


    Better get a trademark on that.

    • CCCB says:

      Sorry, but it’s either dumb or one sided, actually.

      I call it mortgage HEAVEN. I would love to be locked into a huge 30 year mortgage at 3% !!!!! And hell no, I would never sell that property either. It’s probably the lowest mortgage rae anyone will see again for 50+ years.

      If that’s jail, please lock me up.

      • mol says:

        Maybe not dumb or one sided, maybe sarcasm or juxtaposition.

      • rojogrande says:

        Nah, “3%-mortgage jail” is an apt metaphor for the situation. Wolf also calls it a “gift from God,” but it has a downside in that it can distort decisions going forward such as whether to purchase a bigger house or move to another area for better job prospects. It’s simultaneously a gift from God and locks the homeowner into a narrower set of options, at least in terms of mortgage costs, if their circumstances change.

        • SOL says:

          “golden handcuffs”.

        • Mike G says:

          Kind of like a grandfathered property tax basis. Moving means a big jump in costs from losing a big windfall.

        • longstreet says:

          We’d all be better off in the past 14 years if mortgage rates had stayed at 5% and Fed Funds had stayed at 2%.
          Flat lined at those rates.
          The Fed first used the 2008 financial debacle, then the COVID to wield their mighty powers to fluff the pillows of their pals, IMO.

        • BobE says:

          Another blog that I follow referred to old timer Prop 13 homes as a “Golden Sarcophagus” since Prop 13 forced people to stay in their homes to maintain their ultra-low property tax rate. That has changed in CA the last few years with changes to allow homeowners to move and transfer their low tax rate to a new house as long as they stay in CA.

          Now the mortgage rate disparity is causing the same effect. Older homeowners cannot move from their 3% gift for god homes without paying a higher mortgage payments.
          They are trapped in their Golden Sarcophagi.

        • Mellow Ruse says:

          Another golden handcuff in CA for older folks is the $500k cap gains exception. Many homes have appreciated more than that since the 80’s & 90’s, so the incentive is to stay put rather than face a giant tax bill by selling.

      • andy says:

        You’ll be locked in to underwater mortgage for 27 years. If you love it so much, why don”t you marry it.

      • BobbleheadLincoln says:

        Definitely situation dependent. The person who wants to downsize and move away from a certain area or closer to family or move for a better job, will feel like they are in jail.

        Some people will just be slightly relieved but probably not since people not trying to move or sell/buy their home do not look at interest rates or care how high they are.

      • BENW says:

        Until a real recession comes along and lots of people start losing their jobs.

      • Lauren says:

        What if the home value is also the highest we’ll see for 50 years?

      • I totally agree with you that a 3% locked in mortgage rate must be heaven to those lucky to have achieved that. Hats off! Especially, if they managed a five years lock in or even longer! To call it Mortgage Jail only sounds like envy to me 🤔

        • Wolf Richter says:

          Ingrid L. Larssen,

          You people don’t read anything, do you? Not even the subtitle? But then feel compelled to comment on the article without having read it? It says “gift from God” in the subtitle and in the text. Those are the two aspects: “gift from God” and “mortgage jail.”

        • sufferinsucatash says:

          The mortgages at 3% and less cost someone 440- 460 billion dollars. That is what I read in a fed report.

          So if we add that to the losses the mortgage and real estate industries are experiencing, it’s epic amounts of decline. It’s grinding industry and the economy to a halt. You literally can hear the gears screeching.

          On a side note, there were some who refinanced to shorten their mortgage terms. They used the lower rate (3% of less) to move into a shorter period of payback. These people get their pot of gold after 5,10,15 and 20 years when they no longer have to pay a mortgage. Luckily they won’t spend it all till then.

    • kiers says:

      +1 ! x10 !

  4. Sams says:

    To many homeowners this 3% jail might not be that bad. Less mobility, but other places a lot of people newer mine from their home town. To the banks it is not that bad if the end result is only slowly changing prices. Their collateral then hold the value and the money they have lent into existence is backed. For the same reason the FED is ok with the situation.

    If no other crisis tople everything there wil be a «soft landing».😉

    • gametv says:

      big if. corporate bankruptcies are rising. once the stock market tumbles to fresh lows, and long term rates move higher, the whole thing falls apart.

      • chris says:

        I think you are closer than anyone else but I see it going down when rates are moved towards 0 again not higher which will produce too many screams and complaints.
        20% of companies are zombie cos and many others borrowed at 1% rates to keep their stock prices up but when we see recession with much higher unemployment, more evictions, more foreclosures (while the dollar goes down with lower interest rates) and a deep discount of 80% in the stock market, homeowners will see their values go down slowly at first and then with a whoosh. This is a process and as we head toward a depression that will last at least 5 years with no growth, there will be a stampede out where they will not even consider their 3 % a gift. These downturns usually take about 5-6 years and I think this will be a douzy!

        • VintageVNvet says:

          good comment chris, and after 50+ years working in construction and especially rehab of real estate, I AGREE on every one of your points…
          thanks, and please continue to help us on Wolf’s Wonder on here

      • longstreet says:

        It falls apart from a geo political event, IMO.
        Until then, APPLE, Microsoft, Tesla holders frolic.

      • When interest rates rises and property prices tumble, here in the UK we sing; “And down will come Baby, Rishi and All lol 😂👍🥂

    • Eddoe says:

      What did Japan do when rates were near 1% for like 20 years? That’ll give you the answers you’re looking for and how to invest wisely to take advantage of the current situation 😉!

    • KGC says:

      If you’re in the 25-45 year old range the biggest issue is going to be a lack of mobility if/when your job situation changes. Being stuck in a house you can’t or won’t sell can be a burden. It’s hard to work around when most people only see a promotion or pay raise when they move, and if you become unemployed it gets worse.

      • 91B20 1stCav (AUS) says:

        …and we wonder at a seeming lack of ‘stability’…

        may we all find a better day.

  5. Cas127 says:

    3% mortgage = Debtor/speculator’s “Gift from God” = 0% “Satan’s Anus” for savers.

    For essentially 20 years.

    All effectuated by money printing/currency dilution (inflation).

  6. Jason says:

    Nice observation! I was skeptical of the 50% higher payment until I ran the numbers. For a 30y fixed $1m loan at 3.25% (pretty easy to get at the bottom), the P+I payment is $4352; at 7.25% (the current prevailing rate according to bankrate), the P+I payment is $6822, or 57% higher (!) Looks like 30 year rates first hit ~7% around October 2022

    • Sam says:

      It’s much higher than 50 percent…buying the same house from 2021 to now costs 75 to 100 percent more between higher rates, higher prices, higher taxes, higher maintenance, etc.

      • mol says:

        How tight are people on their payments, in various parts of the country? How many people own, but tax plus insurance increases could force them to sell, even if they remain employed? Did a bunch of people do a cash out refi to get their 3 % mortgage and turn equity into Sprinter vans, so they may be underwater on the house now?

        • Lisa says:

          I am noticed way more listings in Cook Cty, IL-more than ever the last 3 years. It’s the 3 year tax reassessment in 2023. Taxes have gone up and looks like some are dumping their properties. My realtor said many homeowners were hit with a 20-30% tax increase this year. 9k to 11k in one year. Ouch. Higher house price, higher interest rate and bigger tax payment. Renting cheaper now

        • Flea says:

          Lisa what I see coming is property taxes and insurance are becoming unsustainable. People will just squat in houses . Happened in Spain last time ,blackrock got devestaed

        • Gattopardo says:

          @Flea… “Happened in Spain last time ,blackrock got devestaed”

          Where do you get this b.s. garbage???

        • Wolf Richter says:


          I think I figured out where Flea got it: from the combo of YouTube BS garbage and his own imagination and confusion.

        • KGC says:

          This is a problem for those on fixed incomes. It’s why you see retired people selling. If you lived in Seattle (for instance) and saw you property value go up 200% over the past 15 years you also saw your taxes and insurance go up. The mortgage may stay the same, in fact it may be paid off, but the other costs keep going up faster than any cost of living increase those folks are going to see. And when they sell they’re back to being renters or trying to find a cheaper pace to live.

      • Gattopardo says:

        No, Sam, it doesn’t if you’re a seller. You’re hedged on principal. So it’s +50%.

        • Shiloh1 says:

          Lisa, they don’t call it Crook County for nothing. Pay the tollway on the way out and don’t look back.

        • Implicit says:

          The value of replacement cost on your home as seen by inflation in services like house insurance has been brutal.

  7. Bobber says:

    I wonder if employee productivity will suffer because many employees are locked in low rate mortgages and can’t move for a better job. Employers will have more difficulty attracting talent, especially in areas with high RE prices.

    • Paul says:

      Already planning on it yup and we are in that boat.

    • Arnold says:

      Employers will have to increase pay enough to attract employees since WFH is dead. Basic economics.

      • SocalJohn says:

        And that’s inflationary, which drives up mortgage rates

      • Blackdynamite says:

        Moron said WFH is dead 😭😭😭

      • Einhal says:

        WFH isn’t dead. It wasn’t dead before the pandemic, and it’s not dead now.

        I do agree though, that there are many fewer permanent WFH (as opposed to remote) than there were 2 years ago, and much fewer than people expected.

    • Mike G says:

      Or get more tolerant on remote work, as has happened at my workplace. Housing prices are so excruciating here they just can’t attract enough applicants unless they allow them to WFH full time from elsewhere.

      • Lili Von Schtupp says:

        Don’t forget training remotely. I’ve seen employers expecting already experienced, (advertised) fully remote-position applicants to train ‘hybrid’ in office for 4-6 months.

        Nice trap, but I know the job already and have done it remotely just fine for years before the first bat sneezed, hence you want to interview me. But 4-6 months of ‘training’? Lol. Pound sand.

  8. grimp says:

    3% mortgage just means they probably overpaid, if a cashout refi, set themselves up to be underwater.

    • Einhal says:

      Or if they were smart, they bought when rates were 5% 10 years ago, refinanced into a 3% mortgage, did a cash out, and took the cash and put it in tbills making >5%.

      • Bs ini says:

        Yes sir the 3 percent Mtg crowd has many players including reverse Mtg at 3 percent on paid for home. I considered such when the rates were below 3 percent for my home and had some quotes just did not like the cost of the Mtg. Right now my equity offered (600k) in a 20 year Mtg would be cash flowing me 1 percent on 600k for 20 years. 500 a month ! That’s a 15 percent raise on my social security . But I did not pull the trigger (hind sight ) some may have

        • CCCB says:

          Most reverse mortgages are variable rate loans like the old heloc home equity loans.

          My ederly mother in law took one out and was below 3% for many years. She’s almost at 7% now. You’d be underwater like the banks that just went bankrupt, borrowing high and lending low.

      • Anthony A. says:

        ….Or took the cash out and bought an $80 K pickup truck!

        • sufferinsucatash says:

          … a pickup that is made from aluminum foil and a sizeable pebble on the road puts a $10,000 dent in it. Which will HAVE to be fixed or my gosh the male driver will not be right until it is! Lol

          What happened to rugged cowboys? A pebble dent would not phase them.

      • Biker Chique 01 says:

        took the cash and put it in tbills making >5%. ….
        you describe a tiny fraction of the American mortgage holders who behave economically rationally; however, the vast majority invested its windfall into assets with much greater financial returns – new and used trucks/SUV’s, motor homes, boats, motorcycles, plastic surgery, revenge vacations, and similar.

        • HowNow says:

          Plastic surgery wasn’t a good investment idea for Ivana. She was thrown under the bus anyway.

    • NYguy says:

      For many, this is spot on. The low rates coincided with the peak in price and the largest number of sales, so for those buying during that time (not simply refi-ing) – its not that they cant or wont sell because they have it so good. They may be forced to sell as those payments are very high, even with a low rate. It really comes down to the economy and it seems the middle class is getting squeezed by inflation.

  9. Nunya says:

    I still see people desperately trying to buy a home, even when everything points to wait. These are some of the same people who did not want to buy during the lowest mortgage rates of their lives because prices were “too high.” I explained it’s not the price, it’s the monthly payment. You are still up when you do the math. They said “I can’t buy at these prices.” Today, they tell me “F*ck, I should have bought, the same type of home is now for sale at the same price, but with a 6.5% mortgage instead of 2.75%. My life is over….at this rate I’ll be renting forever!”

    If you are a buyer, take your time, grab some popcorn. I’ve seen this movie before, and it takes a while before it gets good.

    • Bobber says:

      I have first hand experience with young couples buying homes with zero down. They get FHA financing with 3.5% down, then get assistance from local programs to fund the down payment.

      We’re talking about couples in their early 20’s.

      It’s sheer lunacy, at taxpayer’s expense.

      Thankfully, most of this ridiculousness is confined to the lower end of the housing market.

      • Arnold says:

        Why is it lunacy? Young people shouldn’t be buying houses?

        • LIFO says:


          It’s lunacy because the state should not be encouraging anyone to buy a house during the biggest housing bubble in history. Moreover, people who can’t afford to pay for a house probably can’t afford to maintain their house. Do we really want the country’s housing stock to be in the same condition as our bridges?

        • Degobah Smith says:

          And the Pretzel-Logic Award goes to…

          That’s not what Bobber said or meant. Sheesh.

        • MM says:

          The lunacy is the 3.5% down. Horrible debt to equity ratio.

          I’d wager that most sellers would rather not sell to a potential buyer coming in with an FHA loan either.

        • Wolf Richter says:


          I think he was talking about the subsidies from, and the risks to, taxpayers, who carry all the risks and get hit by all the losses.

        • gametv says:

          it is lunacy because if they cant save up for a decent down payment, then they cant really afford the home and they have no “skin” in the game.

          and when the loans are backed by government loans, the risk is transferred to taxpayers.

          it isnt that we dont want young people to buy houses. we just dont want bubble prices.

          these bubble prices are what bankers and rich people want to prop up their wealth. wealth should be based on creation of value, not on massive price appreciation for one generation to steal from the next generation.

        • El Katz says:

          I don’t care if the FHA buyer offered 100K more…. it’s not worth the brain damage to deal with the appraisals, repair requirements (much of which is irrational), and all the delays – only to have the deal blow up.

        • Franz Beckenbauer says:

          Why is that lunacy ?

          Worked like a Charm in 2007 and quite a while into 2008.

      • Biker Chique 01 says:

        Thankfully, most of this ridiculousness is confined to the lower end of the housing market. …. hopefully, few compassionate and powerful politicians facing the threat of losing the next election will band together and solve this “housing injustice” by extending the program to struggling first time buyers with $700,000 annual household incomes and mortgages up to $1,950,000.
        If we forgive student loans to millionaires, donate tax dollars lavishly for TESLA EV purchases, why should not the mortgages of these financially struggling individuals receive a modicum of assistance from the US Government?
        With the proper spin, it could be characterized as a “job creation” program, or “deflation” fighting for the real estate sector.

      • Lauren says:

        Same thing going on with VA loans. A lot of fake disability cases.

    • longstreet says:

      “I still see people desperately trying to buy a home”

      If the 20 to 40 generation knew… KNEW that their future was mortgaged to inflate these assets, they would be outraged. The debt creation and money printing sets a dismal future for them….homes and fair entry into stocks inflated…..yet the wheeler dealers have fluffed their own pillow off the theft from the future of these young to middle aged…with the actions of the Fed. Stealing from the future to “fluff” the present.

      • Carlos says:

        Oh believe me, we know, and we are outraged.

      • n0b0dy says:

        they would be outraged??

        hahaaa.. and do what about it exactly?

        the level of ‘outrage’ you cite here is but a FRACTION of the total amount of outrage IN GENERAL which should be (justifiably) felt about things going on in this country.

        but i think you forget what country this is.. Americans dont do ‘direct action’ anymore unless PUSHED by an outside narrative. do you really think people were that upset about george floyd? seen any antiwar protests lately? seen any protests AT ALL? naah. didnt think so.

        its funny when the french protest for months on end, millions of people, when their pension age gets raised a couple years.. cue that over here. yeah i bet there would be some social media ranting and MAYBE a few phone calls to legislators, but that would be the extent of it.. everyone would be back to ‘doing what they do’ in no time: buying stuff, going to work, watching sports, whatever.. like good little sheep.

        i think perhaps you confuse genuine OUTRAGE with passive indignation. thats about all Americans are capable of feeling these days. its disgustingly pathetic really.

        • El Katz says:

          And that’s assuming they’re paying any attention at all.

        • So true 🤣 only the French know how to kick up a good storm and relentlessly continue.

        • Bobber says:

          The bottom 90% wastes all its energy on spoon-fed controversies, as part of the larger Rep v Dem fiction. They don’t have the background or desire to think critically. They take what gets handed to them, provided they put in the requisite hours of labor.

          It’s the top 10% that has potential to cause systematic change, but they see no reason for change. It’s hard to fight against a system that favors you, and grows your assets 300% every decade.

    • sufferinsucatash says:

      Well they did watch from the sidelines as homeowners were rewarded by an almost 100% equity gift for no other reason than demand and QE.

      Can you blame them? They do not want to miss out when the next “gifts” are given.

      • MM says:

        Its only a gift if you are going to sell. If you aren’t selling the “equity” is actually a burden because the taxman wants a bigger cut.

        I wish my house was “worth” less.

      • Nunya says:

        Sufferin, whoever watched from the sidelines should not be complaining in my opinion. They did not want to play the game and therefore do not get to enjoy the rewards. They also do not get to take any of the risks involved while chasing said rewards. Then some of them complain and say “Wahhh, wahhhh, I want a house, it’s not fair….” Give me a break. It’s silly. It’s like those same people who are “savers” and stayed out of the stock market after taking losses in 2008. Same cry babies. They stayed out of the stock market to avoid the “risks” so therefore you don’t participate in the rewards.

        To answer your question, yes, it’s their fault. They sat out this long, sit out for a little longer. It’s not going to kill you.

    • Nebukadnezar says:

      I built an appartment during the financial crisis and refinanced in 2019 at 0.94% for 10 years.
      When I went to banks to discuss what is possible or not I brought my computer where I programmed a payment plan so I was able to see what a 0.05% difference would mean.
      The man in the bank looked at it and said there is hardly anything he can tell me except the raw number and I’m the first person ever he saw programming this (easy) program in excel.
      He told me that almost everybody he ever talked to in his career had no clue about math.
      Most people in Germany have no skills in math.
      (Most likely this is different for people who do this for a living)

      • Wolf Richter says:

        Payment calculators have been freely available on the internet; you can just Google it. They also show how much interest is paid over the term of the loan, etc. You could have just walked into the bank with your smartphone, pulled up the website with the payment calculator, and plugged in the numbers. The time to do this with your HP 12c or on an Excel are long gone.

  10. MICHAEL BOND says:

    It was a forced gift from savers.

    Given by the Fed pretending to be God.

  11. Lin says:

    Golden handcuffs. Wish we could give them a taste of the 10-14% mortgages some of us had back in the day. Shouldn’t someone tell them that a 7% mortgage would actually be a good thing because then they’d have enough mortgage interest expense to surpass the standard deduction LOL?

    • Rohry says:

      We haven’t had a mortgage on a house since 2001. The LOWEST rate we ever had was 6.9% in the late 1990s

      • First and Long says:

        Anyone commenting about how high their interest rate was back in the day should also mention the average price homes. 10 percent on a $100k mortgage isn’t worse than a 7 percent interest rate on a $400k mortgage.

        • Herpderp says:

          Old mortgages are todays student loans and the futures car payments

        • El Katz says:

          You’re forgetting that the salaries at that time were also markedly lower.

          A $30,000 income in 1984 is the equivalent of nearly $90K today. The $100K mortgage in 1984 is the equivalent of $293,000 today. My payment at that time was $911 a month….. take that chunk out of $30K and get back to me how “easy” it was with a spouse and two kids.

          Yet we still made it work. Ate a lot of beanie weenies, but we survived.

          It’s priorities…. if you’re a “lookitme” and need an emotional support truck to prove your manliness, then you need not apply.

        • Bandon C says:

          Just for comparison to El Katz comment and not to ruffle any feathers, but the median household income for Denver County Colorado (my neck of the woods) , according to the latest census bureau info I could look up is $72,661 (2021). The median price for homes sold on data for May 2023, according to Denver Metro Association of Realtors is $595,000.

          Best numbers I could come up with.

        • Good times, bad times says:

          1986. Bought new home near Dallas.
          89k, 8% mortgage.
          Income about 34k. So after taxes maybe cleared 28k.

          Small down payment on house but dont recall exact amount.
          But 8% on 88k, 30 year loan =>
          about 630 monthly payment.

          So about 7600 in mortgage payments annually. (I actually foolishly (?) made advance payments but nevermind that).

          So my mortgage payments were about 27% of my after tax income. Not bad.
          Unfortunately my new 89k home only sold for 82.5k 10 years later.

          TX economy took a bad hit: S&L fiasco (Michael Millikan, etc) and oil industry problems. TX is a non recourse state and one of my neighbors walked away from their home around ? 1989. Maybe they had to, I didn’t know them (not adjacent neighbor).
          One of the 3 builders in our subdivision went bankrupt (1986) and so we had a few lots that 10 years later were still empty. I’m sure by now they have a home sitting in them.
          Neighbor sold his home for 77k (per new neighbor)… 3 years after purchase.
          Sold for 101k new in 1986.
          My home bottomed out at around 67k in the 89-90 timeframe per appraisal.

      • Bs ini says:

        Rates from 12 to 18 percent in 1980-1983 and I bought 2 homes during that period. My 60k home had 1000 usd payment

    • Lisa says:

      Lin, “Back in the day” men could work with one income and women could stay home and take care of their children without the need to pay for childcare, and the price tag of a house was within reason.

  12. JC says:

    This scenario should definitely benefit the multifamily market.

  13. Bs ini says:

    Absolutely lots of home owners and buyers have disappeared until something gives. Another area of two are reverse mtgs low rates locked in at higher equity prices and like for my case my 600k locked in Texas property tax rate of 10k is now 20k and downsizing if I could find a buyer would cost me the same in property tax for half the house roughly speaking though I would get some equity and reduced cost of living. Several variables to account for the evaporation of sellers and buyers

    • Petunia says:

      A family member on Long Island recently sold his house and downsized to a nearby townhouse of same square footage. Price was lower, lower too the taxes and insurance. I never thought he would sell his house, but it didn’t make sense to keep it anymore at his age and current costs. For now this was the best way to control his expenses and recoup equity.

  14. John H. says:

    How might employment at realtors, mortgage providers and mortgage brokers unfold if mortgage jailed phenomenon is indeed a “new normal?”

    Seems right-sizing might be a logical step for these house-sale dependent industries.

    • Hubberts Curve says:

      If the entire turnover of the housing market has shrunk by 25% then the real estate, and mortgage industries will have to shrink by 25%. Every 4th Realtor@ will have to be taking those “become a bus driver” banners on the back of the school buses seriously.

      • LifeSupportSystem4aVote says:

        It would be poetic justice if those banners are changed to, “There’s never been a better time to drive!”

      • Wolf Richter says:

        Or they just make less money.

        Actually, in times like these, good professional brokers can put deals together and do just fine. But a bunch of the easy-money brokers might drop out.

        • CCCB says:

          Agreed. This is the best thing to happen to good realtors – the top 10% who do 90% of the business.

          Weeding out hundreds of thousands of incompetent or part time or 5 deal a year realtors is good for good realtors and for buyers and sellers too. Theyre left with the best to work with.

      • SOL says:

        Bus drivers here in Bend start at $25/hr. That’s pretty good money if it’s 2019!

    • Anthony A. says:

      My friend, the “successful mortgage broker” who was lighting his big cigars with $100 dollar bills during the pandemic is now unemployed and had to give up his Texans seasons tickets, among other things.

      • LiveLife says:

        Sounds like you’re happy about it.

        • Anthony A. says:

          No, I am just stating what happened to my friend the broker once the ReFi’s dried up. He was one of many around here. Entire mortgage broker’s offices went bust. His wife works for Exxon here so they are OK, for now.

          This is not Real Estate LaLa Land like on the coasts.

          No one wants the Texan’s season tickets anyway. He practically gave them away.

        • Dick says:

          I’d be overjoyed. Schadenfreude is real.

        • Carlos says:

          It’s no different than feeling overjoyed when the bad guys are destroyed by their own hubris.

        • 91B20 1stCav (AUS) says:

          …there’s a reason excess is oft-termed ‘wretched’…

          may we all find a better day.

    • First and Long says:

      I do mortgages for a credit union and it is most definitely like a neutron bomb hit my borrower pipeline. I have friends in the business who have been doing it for a long time and are good loan officers who are considering getting out. I’ve never seen a market like this one.

      • Swamp Creature says:

        Many Mortgage lenders and Realtors better start looking for a new career effective immediately. I saw this happening after the Pandemic ended. They can join the hundreds of thousands of small business owners who went out of business and are now unemployed or had to change careers.

        • sufferinsucatash says:

          They will just go on vacation for 5 years until the next bubble starts building.

          Then they can dust of their rolley chairs, upgrade their laptop, get a spiffy new doo and get on one of the many twitters to advertise!

      • Steve says:

        They’re not alone. Used truck sales are the worst in 20 yrs since I’ve been a dealer this year. I have never seen it like this and expect it to get much worse. I figure the pandemic brought forward years and years of sales now we sit into a crash for how many years for the next cycle?

        • Digger Dave says:

          Assuming we’re taking about “pickup trucks”, not real trucks. Pandemic brought forward years of sales and also amplified idiotic buying trends among a society that is rife with poor consumers. So when you think your truck with 7 years on it, 150,000 miles and rust showing in places is worth $40,000, as a rational buyer, I say no thanks, especially when that was a sub $20k purchase in 2019. Not to mention that the average and largest group of truck buyers are extremely vain, inflation and offerings in this segment is abysmal, especially if you’re like me and it’s a 100% business vehicle.

          My tax lady always raises a red flag when I file because the truck always gets 100% business miles. She says that’s a red flag because “no one” uses their pickups only for business. Well, I do. It’s a regular cab (if those exist anymore) and if it’s not pushing, pulling or hauling something it sits in my yard with somewhere less than 3,000 miles in the typical year. Guess I was raised that these are tools for real men (and women, if they’re laborers, as few as they are) and if you need leather seats and infotainment and a cushy ride, then you’re soft!

        • Herpderp says:

          Amen to Digger Dave.

        • Bs ini says:

          Digger Dave I have had the 2 seat pickup for 4 decades never for business but great for hauling stuff. Yard work tools etc not a necessity but convenient

        • Shiloh1 says:

          I remember when the Dodge Tradesman and Ford Econoline vans were what working tradesmen men drove, not some auto show pickup.

      • Swamp Creature says:

        My local credit union manager said they went a whole month without making a single mortgage loan.

        • First and Long says:

          There are still loans to be had out there, but it is most definitely a more challenging market for mortgage professionals.

    • John H. says:

      If significant downsizing occurs due to depressed home sales, how big an increase in unemployment will likely be, I wonder?

      Wonder what unfolded in that respect during GFC?

  15. Ivan A says:

    Some have 2.5% or even 2.3% 30Y fixed mortgage.
    And it is gift from US government.

    • SC says:

      I’m at 2.25% for 30 years. Everything in this article echoes loudly in my ears.

  16. Tight Purse says:

    I wonder how many of those three percenters will be forced to sell due to job losses, job changes, divorces, growing families, death and other such unpleasant events. A minuscule fraction? A more significant one?

    • Bs ini says:

      A minuscule fraction will be forced sellers within the next 5 years in my humble opinion. Even foreclosures takes a few years

      • mol says:

        How many would normally sell, in a flat market? How many are going to just really want to sell, for the newness or a greener grass, and only stay because it is logical? Logically it could be a gift, while emotionally it could be a mortgage jail, as it was aptly put.

        • 91B20 1stCav (AUS) says:

          mol – indeed, there are always two ways to look through the telescope…

          may we all find a better day.

      • SOL says:

        I’d be surprised if the government doesn’t stop foreclosures from happening somehow this time around. Seems to be their style these days.

    • Painted Pony says:

      I have a feeling divorces are going to or have been spiking post pandemic. Just a thought…

      • Lili Von Schtupp says:

        Higher inventory of houses *and* singles can’t be a totally bad thing given both markets are dry as charity.

      • sufferinsucatash says:

        Open a gym! Seperated people need to look good for the dating scene. Lol, ok that’s kind of sad actually.

    • MM says:

      Do folks really not have emergency cash on-hand? Not trying sound condescending, but I’m genuinely curious because I keep seeing these “just wait until the job losses” comments.

      Losing my home is one of my biggest fears personally. I keep enough cash and liquid assets (T-bills) on hand to cover the next ~year of my mortgage & other bills, even if all my sources of income dried up tomorrow.

      • w.c.l. says:

        Sounds like you’ve contracted a rare dose of common sense.

        • Cookdoggie says:

          But don’t worry, there’s a drug to cure it. Ask your doctor about Dumshitol.

        • w.c.l. says:

          Judging by the way the world’s acting, they must be handing out free samples.

      • Juliab says:

        During the pandemic, massively, people who would not have been able to buy a home under normal conditions took out loans on the edge of their possibilities.
        In my opinion, they are more than those who buy and have money set aside.

      • elbowwilham says:

        I’m the same way, but just from my small circle of mostly middle-class friends and family, we are the rare ones. Most are leveraged to the hilt and if a crisis happens they borrow to stay a-float. Sometimes that works, and sometimes it doesn’t.

      • sufferinsucatash says:

        You’d get a job and you’d pay that mortgage, even if you had to move your a** to Kentucky and live out of hotels to pay it.

    • Steve says:

      Layoffs. Look at all the strikers not getting that paycheck. Same result. An already crashed economy with so many disguises. I wonder how many get back to work. So so many disguises. For a tad more only.

      • sufferinsucatash says:

        They want to be respected for their work, they want to be compensated correctly.

        They are tired of corporations claiming poverty, when they are rich!

        It’s their right to strike and more power to them.

        On a side note Netflix needs to die. Their stuff is pretty horrible nowadays. Just an opinion!

    • Dick says:

      This is a salient point that has been made for future forced inventory. Maybe not the job changes —that would have to make up for things. Not growing family; just do an addition. And job losses seem not systemic in this labor market. Divorces will force a sale because the other would have to buy the other out. Most don’t have that cash. Death would force the sale if both were needed to cover the note. Disability might be another reason for forced selling, though… between govt and insurance, maybe not. Quick google says 700k divorces per year. This assumes title in both names. Fuzzy. Death would force a lot less selling because it would have to be younger borrowers still owing on the note that they other couldn’t cover alone. Average age statistics. The boomers mostly own their shyt so them dying isn’t impacting that. Interesting thought experiment though. But this forced selling would be the same as it has been for years and probably not noticeable from a trend/RE perspective. This stuff has been a part of the economy for years.

  17. Thunder says:

    Welcome to the unintended consequences of mishandling market forces,
    Over time a divorce, illness, accident, death and the vicissitudes of employment will force the hand.
    Then the real horror of what easy money does cost, will hit home hard.
    It looks like this spinning toy top has the wobbles anyway

  18. old school says:

    It is certainly a confusing time in the debt based economy. What is smart money doing? Berkshire $130 B cash, debt mostly long term at $123 B. Its been the trend for Buffet for a good while to have cash greater than debt. Got to be ready if Fed can’t soft land the plane.

    • Bs ini says:

      And the long term 123m debt is at low cost

    • Ivan A says:

      Most probably they hold cash as T-Bills.
      And it is 4%+ interest.

    • CCCB says:

      Warren Buffet bought big into technology – Apple, and oil & gas – Occidental Petroleum and Chevron

      • Flea says:

        Brk-b shares are probably 30% inflated

        • JimL says:

          30% inflated? Huh?

          I wonder if you realize that for the past 30 years Berkshire has faced terrible headwinds because during that time money was cheap. Insurance is a terrible business when any idiot can set up a Cayman Islands insurer financed by cheap money. For 30 plus years it has been hard for Buffett to find truly cheap companies to buy because cheap money inflated asset prices.

          If money ever gets even mildly tight, Buffett and Berkshire will be kids in a candy store.

    • n0b0dy says:

      ready for what?

      warren buffet is 92 years old.

      one would think, at that age (or earlier really) the guy would like.. i dont know, ENJOY all the money he’s made over the past several decades? maybe transition his company into some younger hands? or do SOMETHING instead of just make even MORE money he cant take with him?

      he’s a great investor, nobody can take that away…
      but there is a pathology here which is alarming, if you really think about it.
      i am nowhere near my 90s and nowhere near being a billionaire, so maybe i have a different perspective.. but not may people make it to their 90s, and only a handful will see the triple digits.

      i guess what i mean to say is.. once you are that old (and that rich), what is the point of making any more money or worrying about investing or any of that stuff? you’re at the end.. the only thing to get ready for is the final departure.

      • El Katz says:

        Maybe he just enjoys the game?

        Maybe he’d rather wear out than rust out.

        • elbowwilham says:

          My sentiments exactly. Its a big game to him. No different then all the retirees at the casino.

        • 91B20 1stCav (AUS) says:

          …indeed, the joys experienced by the human creature are myriad, and oft-inscrutable one human to another…

          may we all find a better day.

      • Bobber says:

        All his personal money is going to charity. He doesn’t believe in leaving huge windfalls for family members.

        • kramartini says:

          Berkshire Hathaway shareholders hope this is true so his estate won’t have to sell his half of his shares all at once to pay death taxes…

      • Blam35 says:

        He’s doing what he most enjoys, and applying the wisdom of his years, money is only a byproduct, sounds like freedom to me. He always seems impishly happy.

      • sufferinsucatash says:

        He has enjoyed it. He’s like an excited school boy whenever he talks about making money. He’s still out there winning.

        Who can say that at 92? Most are feeling the sides of a lazy boy looking at cheers reruns and waiting for dinner.

      • Petunia says:

        If his babymama has to work he’s a zero. Just saying.

      • JimL says:

        Anyone who even knows the slightest about Buffett knows he absolutely enjoys allocating capital. There is nothing on this earth he would rather be doing. He is literally doing something that he enjoys the most. Why would he quit to do something he enjoys doing less?

        As for it being a pathology, please know that he has given away more money than anyone currently alive and at least 5% more is being given away each year. Plus 99%+ of the remaining amount will go to charities upon his death.

        I haven’t done the math in a long time, but I would bet that if the amount of money that Buffett has given away were instead kept in a trust invested in Berkshire, that trust would probably be among the top 30 – 50 among wealthy individuals on the planet.

  19. Slick Willy says:

    But Wolf – this doesn’t address the shadow inventory that you have so eloquently described in the past.

    With YOY prices declining, investors should be dumping real estate – why hasn’t this started to break?

    Is it simply the belief on “this too shall pass”?

    • DUKE says:

      Why would they dump RE if they are cash flow positive on rents.

    • Wolf Richter says:

      One topic at a time.

      • Dick says:

        Me thinks you have a beautiful new article on the way. :) As always, great reporting wolf!

    • kramartini says:

      Who would an investor sell to? If the home is to stay as a rental, then the sale would be to another investor and there would be no net reduction in investor ownership. Would the investor not renew the lease in order to allow the house to be sold to an owner-occupier? Would this get a better price than selling an already leased home to another investor? Would an investor sell to a current tenant? Or perhaps wait until the tenant decided not to renew?

      I am curious as to how disinvestment in housing works in the real world.

    • Flea says:

      It’s starting just that manipulated media = owned by rich isn’t reporting it .

  20. Random Intime says:

    This is a gift to builders. Prices are staying at bubble levels. Commodity prices back to pre pandemic levels. So builders will be happy to build new homes with good margin. Eventually will result in over supply.

    • Wolf Richter says:

      Prices of new houses = green line. Builders have been cutting prices and building at lower price points, and they’re buying down mortgage rates to get volume. And now the median price of new houses is the same as the median price of used (existing) houses. (I mean look, folks, the price of “existing cars” is something we watch carefully).

      • mol says:

        So churn in the used market is minimal. New supply from builders controls the market price right now. If builders can drop home prices to 2019 levels, how many homeowners become underwater? How much of a unemployment rate increase would equal twice that same number of underwater homeowners? … Assumes that half the newly unemployed would own an underwater house.

        • seb says:

          Fish gotta swim, birds gotta fly, builders gotta build.

          They can keep driving the price down and compete with existing homeowners until the point it doesn’t make sense for them economically.

          Cause you know – *housing shortage*

      • Random Intime says:

        Thanks Wolf.
        What I meant is because existing home sales volume is low, that sets good floor for new home sales right now. If median price of existing homes falls then new homes also need to fall, which is not case right now and advantage builders.

  21. Nick says:

    Let’s make some ballpark calculations:

    Let’s assume that there are only two classes of interest rates: above 5.5 percent and below 5.5 percent. So, 11,207,000 homes are at or above 5.5 percent, and 48,407,000 homes are below 5.5 percent.

    Let’s further assume that all of the 48,407,000 homes did no-cash-out refinance at 2.75 percent.

    Now, assuming that the average price of the house before the virus was $300,000(median price pre virus), and everyone who is below 5.5 percent has bought the house at $300,000 at 5.5 percent before the virus and then immediately refinanced at 2.75 percent, this would give us the maximum theoretical amount saved by every one of those households in interest payments.

    The 30-year payment for a $300,000 house at 5 percent is $579,000, excluding property tax. Whereas, the 30-year payment for a $300,000 house at 2.75 percent is $440,000, excluding property tax.

    We know that not everyone got the house at exact moment before virus but $139,000 is the maximum difference between above two payment plans for any average household.

    Let’s assume that by forgiving $139,000 per household, the fed has created a deficit of $6,728,573,000,000.00.

    Now, it’s safe to assume that property tax, insurance, etc., on the average house, went up by $3000. So, for the 48,407,000 homes below 5.5 percent, the total increase over 30 years amounts to $4,356,630,000,000.00.

    48,407,000 x 3000 x 30 years = $ 4,356,630,000,000.00

    Additionally, for the 11,207,000 homes above 5.5 percent, the total increase in property tax, insurance, etc., over 30 years also amounts to $1,008,630,000,000.00.

    11,207,000 x 3000 x 30 years = $ 1,008,630,000,000.00

    In summary, the $6,728,573,000,000.00 deficit will be turned into a surplus by $3,294,858,000,000.00 payment from the above 5.5 percent group and $4,356,630,000,000.00 from the below 5.5 percent group. This would create a surplus of about $900 Billion.

    This is assuming the perfect world. However, like any murder mystery we don’t know all the details about the crime scene but we know that federal reserve will not get away with murder.

    These are some broad assumptions. Feel free to poke holes.

  22. Alex says:

    And now you’ve found the true source of inflation and the continued spending. All the sudden people refinanced their 4 or 5% mortgages to 2 or 3% unlocking additional monthly cashflow. This isn’t going away and these people are not moving. This extra cashflow needs to be eaten by other expenses before inflation will return to normal. I think we’re just starting to get their with the extra amount groceries and utilities cost.

    • Flea says:

      Property tax and insurance increases = poof it’s gone

      • Herpderp says:

        Dont most towns adjust the mil rate once theres mass appreciation? Round here they do. Property taxes largely stay the same

        • crazytown says:

          You don’t live in Illinois, that’s for sure!

          (Neither do I, thankfully, but I know from family)

        • Bs ini says:

          Not in East Texas prop taxes have increased 50 percent in 2 years but their homes have been flat lined priced for a decade

        • Gattopardo says:

          Nor Texas.

  23. Debt-Free-Bubba says:

    “And that may be the new normal for years to come. ” YES SIR Mr Wolf. I also believe a lot of crazy new normals is aheadin our way. Lots and lots of them….. Higher for Longer should be real interesting……..Bring it FED……

  24. Miatadon says:

    Some creative genius will come up with homeowners able to retain their mortgage, but move the security from present home to another home. Fees would be added, maybe even a little boost in interest, and the new house would have to offer the lender more security than he had with the initial mortgage. But it would end with a homeowner able to change homes without losing so much. And it would cause a big boost in sales compared to the way things are now.

    A similar scenario: In California, you can under Prop 13 in its present configuration, if you are over 55, you can sell you home and buy another (smaller home) in the state, and keep your tax basis.

    • Debt-Free-Bubba says:

      Howdy Folks. My 2 sons purchased starter homes ( less of a home than one can afford ) needed work, refinanced at the low rates. HELOC s allow other real estate investments….. NOT Mortgage jail but heaven for some……

      • Dick says:

        Free money from pops (you) always helps with those starter homes. Hope they appreciate you. Most are a long ways away from that heaven.

        • El Katz says:

          Son and DIL bought their starter home all by themselves. No FNBOD (First National Bank of Dad) involved.

        • Debt-Free-Bubba says:

          Howdy Dick. Most of my sons friends and inlaws told them NOT to do what they did. Too much work, and should purchase something else. Am sure the friends and inlaws still feel the same way. But , my sons know they did it their way and are very happy. Financially secure with a large amount of Real Estate Equity because of the extra labor intensive work… Real men and very proud of them…….. Once they left my home, they were one their own……..Thanks for letting me type about my sons…….

        • bulfinch says:


          The overblown pseudo-libertarian myth of the rugged individual is a cliche which begs for retirement. Not even Teddy Roosevelt was as much the self-made maverick as what some on here allege their children to be.

          I’m certain you helped your kids in various material ways that helped accelerate their pursuit of happiness, even if it wasn’t in the form of a Halliburton attaché case chock full of C notes.

        • 91B20 1stCav (AUS) says:

          …have always wondered at the sketchy balance of the three-legged stool of ‘generational wealth’, ‘inheritance taxes’ , and ‘Murican chest-thumping belief in the ‘rugged individualist’…

          may we all find a better day.

    • Harvey Mushman says:

      “A similar scenario: In California, you can under Prop 13 in its present configuration, if you are over 55, you can sell you home and buy another (smaller home) in the state, and keep your tax basis.”

      What does this mean exactly?

      • Apple says:

        You buy another house at the same price or lower and you keep your tax basis. Eg if you bought your house for $100,000 in 1979, you can sell it for $2,000,000, buy another house for $2,000,000 and your taxes stay the same and do not increase.

        Instead of paying $16,000 a year in taxes, you continue to only pay $900.

        This is limited to only certain counties though.

        • whatever says:

          No, carrying your property tax basis is now statewide in CA if you’re 55 or older. I want to downsize and take advantage of this but can’t find anything to buy. I don’t care about interest rates, just can’t find a smaller house in the area I want, so I sit here in a giant house with kids gone and lots of empty rooms waiting and waiting for something to come to market that I like.

      • ft says:

        CA property tax resets when ownership changes and is based on purchase price. Prop 13 simply limits the percentage that property taxes can go up each year thereafter. Props 60 and 90 allow an over 55 to, if they are in the right counties, sell their home, buy a cheaper one, and keep their old, lower tax basis. These props have saved me a pile of money over the years, and I am grateful for them.

        • Harvey Mushman says:

          Thanks, I was completely unaware of this.

        • blahblahbloo says:

          But those props also help necessitate California’s income tax, and they heavily favor certain groups for dumb reasons.

          “I got mine,” I guess, right?

    • Sams says:

      Or the mortgage follow the house. As long as there is a large mortgage on the house, it is the bank that own the house anyway. Just a different kind of leasing/renting.

  25. Tergus says:

    I understand this article from Wolf totally. I usually have a hard time with the complicated (to me anyway) articles. Thanks.

  26. Captive says:

    The reduced supply and reduced demand happening in tandem makes sense.
    But two questions eat at me.

    1) if supply isn’t a problem, why haven’t home prices meaningfully dropped in the last year given much higher interest rates. I mean it’s nearly sideways in most areas YoY.

    2) if supply IS the problem, why is supply low? It makes sense in Canada with how high immigration currently rests (and their values have still dropped more significantly YoY), but in the US I’m just baffled. Investors holding multiple properties?

    Or is this just a long lag effect?
    Respect and thanks to any who reply.

  27. William Leake says:

    Imprisoned at 3%. I hope their neighborhood does not decline, their neighbors stay reasonably sane, the school district does not go to hell, they don’t need to relocate because of jobs, they don’t get barking dog(s) for neighbors, property taxes don’t go through the roof. Other than that, they should be okay.

    • SOL says:

      I moved into this rental in 2019. Opened my bedroom window the first night to let in the cool high desert air. In came my neighbor’s cigarette and bong smoke.
      I haven’t slept with my window open in 4 years.

  28. Gary says:

    Don’t underestimate the power of society. A married man with a 3% mortgage is still a slave to many masters.

  29. Random Intime says:

    Fed might bring back 3% loans during next down turn. For any problem Fed solution is ZIRP+QE. Oddly the solution for this problem is to have recession so that Fed can do its work.

    • Augustus Frost says:

      If your belief were remotely true, interest rates never would have peaked at 1981 levels.

      The FRB or other central banks don’t have any new tools and there are no wizards behind the curtain either.

  30. vecchio gatto veloce says:

    My local newspaper published this online @ 2:13 PM CDT today.

    “Afraid of high interest rates, Twin Cities area homeowners stay put — creating a bottleneck. New home listings are plunging as higher mortgage payments scare off move-up buyers, who don’t want to pay twice the interest of their current rate.”

    Maybe it’s not a bad thing to slow down housing turnover rates?

    Here’s a good quote at the end of the article in my newspaper:

    “While I worry that our dream home may become more and more expensive the more we wait, this payment comparison just makes me realize that our current situation is just so easy and comfortable,” he said. “Who doesn’t like easy and comfortable?”

    • Gattopardo says:

      “Maybe it’s not a bad thing to slow down housing turnover rates?”

      Possibly. In lots of countries, turnover is much lower. I don’t have stats, but it’s pretty obvious that in Italy you don’t really move much. Even renting, the norm is a very long stay.

      There’s at least one significant benefit to low turnover. Less money burned in transaction costs (realtors, lawyers, escrow, appraisal, mortgage banking fees). None of those are value-add, only de facto taxes, dead weight losses for society.

  31. BobE says:

    Wolf, another great entertaining article.

    I love your “3% Gift From god” vs “3% mortgage jail/golden handcuffs” analogy comparison.

    It is a classic “Glass Half Full” vs “Glass Half Empty” that forces decisions that are not comfortable but either is a good position to be in.

    For example, You purchased in 2000 with an 8.6% mortgage but refi’d without cash-out every time the rates dropped 2%. You now have 7 years left on the mortgage(you refi’d a few times for 30 years and finally refi’d at 2.1% for 10 years at the low in 2020).

    Is the glass half full?

    1) You can live comfortably for the rest of your life at an affordable payment (barring taxes and insurance). Do you love your house and the area?
    2) Have you planned to move in the short term anyway? Why not sell now and buy a smaller house and use your equity to buy down the mortgage?

    Is satan luring you from god’s gift making you think the glass is half empty?

    1) Will house prices crash tomorrow?? Gasp!
    2) Have you been tempted by a RE agent (satan? :-) ) to sell now and pull out 1M in equity making you a REAL millionaire overnight?
    3) Have people been shaking their heads and looking down upon thou because your 1.5M house is smaller than thars? Nevermind they can’t walk to the beach and it is currently 120F in Phoenix.

    Temptation is the root of all evil. Don’t let satan lure you from god’s gift and make you think you are trapped

    All humor aside, these decisions are hard. You are never trapped but the decisions often come down to money vs quality of life. I try not to let peer pressure drive my decisions (except for my ultimate peer spouse).

    Retirement is another one of those hard decisions.

    1) Do you collect SS/pension at 62 or keep working for the golden payoff later?
    2) Do you leave before all of your RSU stock has vested even though you are working 80 hour weeks and sleeping on a cot in your office? Satan already has you working in heck.

    So many hard decisions.

    • mol says:

      The glass is half full
      The glass is half empty
      The glass is at half capacity

      The glass is always full, half by water
      Half by water vapor, nitrogen, and oxygen
      But water, nitrogen, oxygen and the glass itself
      Are all made of atoms, which are mostly empty space
      So the glass is almost empty
      And the glass itself, barely exists

      • Steve says:

        lol. So how then should I think of myself? I am either a half brain, an airhead or a jarhead!

      • 91B20 1stCav (AUS) says:

        mol – to reprise the punchline from the old engineering joke: ‘…the glass is the wrong size…’.

        may we all find a better day.

        • NBay says:

          Defining something and then measuring it always did seem sorta “circular” to me….I see the joke possibilities.

          I also wish the Ancient Greeks had REALLY become totally fascinated with static electricity and magnetism. They could play with/see/feel both happening very easily….but…….nothing.

          Newton’s model (I read he was a big bully, btw….but I have a newer, stronger, and also more unpleasant worldview about bullies since 45 got in) and trial and error will do nicely as a shared worldview for as long as we are likely to be around, if nothing really BIG changes. Maybe this nasty heat/storm thing will open closed eyes?

        • 91B20 1stCav (AUS) says:

          NBay – 102’F here at 1500ft and 1230hrs five crow-flown miles from the blue Pacific…best.

          may we all find a better day.

        • 91B20 1stCav (AUS) says:

          …re: the Greeks-kinda like archaeological finds of wheeled kids toys in digs of societies that didn’t appear to employ those round things on anything larger…

          may we all find a better day.

        • MM says:

          Scientifically, the glass is at 50% capacity.

      • longstreet says:

        The GLASS is twice as big as necessary

    • Craig says:

      I made my decision in 2001 when a 38-year-old -colleague of mine dropped dead while we were chewing the fat on the options exchange. I closed up shop and moved to the southwest of France.

      • longstreet says:


      • Shiloh1 says:

        Do you know The Chief on Stocks & Jocks in Chicago? He’s still going strong at 70, hanging out at neighborhood gin mills and suburban supper clubs.

      • BobE says:

        When I started working, 6 of my 50+ engineering mentors and co-workers had heart attacks within the next 5 years. Fortunately, only 2 died.

        I was only a stupid 22 at the time and believed it couldn’t happen to me. Now I am pushing 60. I remember.

        Family history plays a big part in longevity. However, work stress likely subtracts from that significantly. How many take-out Chinese and cheeseburgers can I eat while working 80 hour weeks and make it to 60? Should I wait for the first major heart attack to retire like many of my peers? Decisions….. Money vs Quality of Life.

        I read a story that back in the 1940’s workers at a WW2 munitions factory had achieved the golden age for retirement. Within a year of retiring, they all died. That led to the scientific discovery of nitroglycerin to save people from heart attacks. Their work had kept them alive. Just a side note. I don’t think cheeseburgers will keep me alive.

    • William Leake says:

      1. Breakeven when taking SS at 62 is age 84. See how old your parents and grandparents lived.

      2. Try to work until vested, no matter what. Then quit.

      • 91B20 1stCav (AUS) says:

        WL – …hopefully with management that doesn’t terminate the pension plan sixty days ahead of that vestment date (my experience with my last suit ‘n tie back in the ’80’s)…

        may we all find a better day.

      • Petunia says:


        Take the money as soon as you can stop working full time. I took my SS early because I needed the money and it has been a good decision.
        My 27% reduction will be made up somewhat when my husband retires and I can get a spousal bump up. Overall, I expect my reduction to decrease to ~10% with 5 years of benefits already banked.

    • Bs ini says:

      Decisions are great including having them . The SS decision is very personal and depends on many health income factors and location and spare time commute etc. for those I know that retired on SS at 62 made the right decisions I personally plan to wait until max age something around 70 counting on a long healthy old age life . All personal decisions and remember no decisions are decisions.

  32. Micheal Engel says:

    If the Dow will plunge below Oct 2022 homeowners will be free… in a jail

  33. makruger says:

    It seems to me the housing inventory problem is likely to be transitory since forced selling should eventually add some inventory. This would likely also result in price rediscovery since people buying with financing can’t pay that extra 1, 2, or 3K more each month until either the prices or interest rates drop.

    As to what causes the forced selling, I don’t know. Maybe a tough economy followed by job losses, or perhaps boomers moving into assisted living, etc. Some of this might be organic, the rest might be from an economic shock.

  34. Micheal Engel says:

    Question to mortgage brokers/lawyers among u : is it possible to sell a home and transfer the 3% mortgage to the buyers ?

    • Swamp Creature says:

      Micheal Engel

      The answer is NO! I went through this in the late 70s. I asked the lender if my loan rate was assumable. He lied and said yes. After the loan was closed I found out that the loan was assumable but not at the low rate I had. He left out that fact.

      • HowNow says:

        Loans used to be assumable, at least they were in Calif. But that ended in about 1980. Today, maybe adjustable ones are, definitely fixed rate ones.

    • Apple says:

      It really depends on the individual mortgage as to whether or not it is assurance.

      Loans backed by Fannie Mae and Freddie Mac are generally not assumable

    • Dirty Work says:

      I have a VA mortgage that is assumable, 2.75%, but If I recall correctly it’s only assumable by another VA-eligible buyer.

      • TexasPhil says:

        This is incorrect. A non Veteran can assume it if they qualify with the mortgage servicer. This is the good news.

        The bad news is:
        The problem is the down payment required between the principal balance of the VA loan and the sales price. Buyer must bring cash and/or arrange a second lien.

        The second piece of bad news is for the seller/Veteran. The Veteran/Seller does not restore his eligibility either, which makes it difficulty to use his VA benefits.

        • Dirty Work says:

          That’s good to know. I might have been explained that at some point when buying the house, but it’s been a while.

  35. Swamp Creature says:

    This is a great article and is right on the money. I posted similar thoughts about a week ago, though not as comprehensive as detailed as in this article. It hasn’t been broadcast much in the mainstream media, I think because the crooked RE and lending industry wants the churn to generate income and sales commissions. The state wants the churn to generate tax revenues from the state transfer taxes.

  36. longstreet says:

    Those who paid cash might spit out their purchases if rates rise.
    It is my observation that much of the RE purchased in vacation destinations are locked in and long term held by big and small operators.
    You will rent that which you might have owned as a second home.
    VRBO and the like changed RE dramatically.

  37. Jackson Y says:

    San Francisco housing prices are about to explode higher once again, now that high-flying “tech” stocks have come roaring back. The freshly-minted IPO millionaires and NVIDIA employees aren’t going to care about 7% mortgages.

    • Wolf Richter says:

      People have been praying for this fervently. But it’s not working. The median price in June dropped again, instead of rising, now down 18% year-over-year and 20% from the peak. And sales plunged 32% from June 2022, when sales had already been down 21% from June 2021.

      • HowNow says:

        Your chart: From 2015 – 2022, a 7-yr. stretch, the median SF home price compounded at approx. a 10% annual rate. Historically, according to Shiller, home prices have compounded at a 3% rate. So how crazy was this period of time?
        And, for those who are betting on the come, I do not like the chances of that rate continuing, unless the Fed returns to ZIRP or similar. And, if they do, there will have to be some economic calamity underway.

        • Wolf Richter says:

          “So how crazy was this period of time?”

          It was nuts, and everyone in the RE industry knew it and expected a blowup. I know a bunch of people who work in RE, and they had no illusions. This surprises no one in RE here. SF has always been boom and bust.

        • CA to surpass CA someday ? says:

          Wolf occasionally posts (or did) RE prices for major Canadian (that other CA) cities.
          I believe Toronto and Hamilton, Ontario and perhaps Halifax (?) had very large price runups the last 5 to 10 years.
          Last year they have gone down but dont follow it closely.

      • Michael says:

        Another factor in previous volume I think was speculation (retail level) or FOMO. I have a niece who spent the last five years changing houses like she was changing shoes, always coming out a little ahead. Like daytrading stocks, once they stop going up, volume drops.

    • Steve says:

      Business is leaving because of high taxes and crime. Good tech businesses. Not helpful for R.E.

    • William Leake says:

      Really, what percentage of home buyers are IPO millionaires and NVIDIA employees? Like less than 1 percent?

  38. Tight Purse says:

    Also, obviously, the demand is depressed by the lack of affordability. So the first time buyers will have a payment shock when a starter home costs $1 million and the mortgage rate is 7%, in many of the more prosperous cities around the country.

  39. Kernburn says:

    I think the pressure for wages to rise is going to be much greater than the pressure on housing prices to decline. Hotel employees, actors and writers, and now UPS going on strike, and housing costs are a huge reason. This is truly a conundrum for the Fed. It’s exactly where they don’t want to be. How could they not understand how disruptive and distorted their pandemic response would be?

    • Herpderp says:

      This runs longer than the pandemic response, that only kicked things into hyper drive. Housing prices were rising 25k a year for almost a decade. The pandemic they rose 50k a year x2. We only skipped 4 years ahead in the formation of this bubble.

    • SOL says:

      Wage/price spiral might just be getting underway. If UPS union members get their way, it’s going to set a precedent, and MANY MANY more will follow. My wife is a nurse, and her union was just given a +40% raise over the next (2) year contract.

      • HowNow says:

        Unless productivity increases, these wage and price increases are ONLY going to fuel more inflation. The new engine of increased productivity is AI which will increase productivity at the expense of employment. It’s almost impossible to believe that AI will increase employment as the CEO of IBM now claims.
        This blister is going to pop.

        • Steve says:

          Yep. If they try to keep increasing wages, more businesses will fold up. Equilibrium will find its own way through inflation.

        • Kurt Ellis says:

          i don’t know if higher wages = inflation necessarily. if productivity doesnt go up than that money has to come from somewhere. If workers are able to successfully demand more $$ a loss of that cash is going to hurt profits, which will deflate securities and business investment more than anything. Workers just clawing back some of those profits they’ve failed to get over the past 40 years.

        • El Katz says:


          If a business is to survive, it would have to increase prices. That would fuel inflation on two fronts…. more money in the employees pockets looking for a place to go and higher prices for the goods resulting from increased operating costs.

          Or the employees can “demand” all they want, but if the business folds, they’re out in the street.

          40% increase in nursing salaries = more hospital closings in rural areas. Some of those are barely hanging on the way it is.

        • spencer says:

          re: “Unless productivity increases, these wage and price increases are ONLY going to fuel more inflation.”

          That’s a myth. The administered wage and price increases will cause deflation in other products and services.

        • HowNow says:

          I don’t follow, Spencer. Are you saying that money in circulation is a zero-sum? If some industries have wage and price increases, but productivity flatlines or declines, why would that impact a different industry? It may if the money supply remains constant, but it doesn’t.

      • Flea says:

        This will create rampant inflation not good for retires

    • Cao403 says:

      I agree very much. Higher rents and housing costs is a main negotiating point for unions to get higher wages for their workers. This has eventually led over the years to raising the minimum wage as a very popular legislative option (I remember even 20 years ago it was an almost fringe idea to raise minimum wage, because teenagers at McDonald’s didn’t need a raise). Higher wages and raising the minimum wage are popular election promises and a lot of the economic pressure to do so is high housing costs.

    • Candyman says:

      UPS will not strike. Just my take, I believe there is a tentative agreement.

  40. Blam 35 says:

    I am in the western burbs of.chicago and houses are selling over ask. Surprises me but I guess I’m crazy.

    • Painted Pony says:

      See it in the Northern suburbs too. People have been conditioned to think that is the new normal.

  41. TexasPhil says:

    My take: Tremendous real estate wealth is being created simply due to the refinancing into 15 year mortgages at below 3 percent rates during the pandemic. It is a sure thing. These homes should never go back on the market, and stay in the family, if at all possible. Some homes will eventually be converted into rentals, rather than sold, due to high rental rates, and shorter mortgage terms. Then, passed to kids, etc.

    • Carlos says:

      I assure you, wealth is not “created” by someone sitting on a house. Houses are depreciating assets, but the nuts who rule over our economy have manufactured a highly distorted marketplace where they simply transfer actual wealth from producers who create actual value to players in a real-life Monopoly board game.

      Picking winners and losers by fiat. The current financial regime is gaslighting us into believing this is actual wealth creation.

      If the regime changes and goes in the opposite direction, you are going to change your mind very quickly from houses being a wealth creator to a wealth destroyer.

      • El Katz says:

        The act of sitting on a house, alone, may not be wealth creation. However, housing security does help create wealth because the cost of said housing is greatly reduced if said housing is not burdened by debt.

        Less of a producer’s income goes towards housing, costs remain fairly static over time, and then they can build real wealth via other means (investments, savings, etc.).

        It may not seem evident to one with a short term view of life, but long term thinkers “get it” and act accordingly.

        • VintageVNvet says:

          Right Arm EK!
          Love to see those former mortgage payments going into CDs and T-Bills, eh?

  42. SoCalBeachDude says:

    DM: Moment veteran trucker discovers haulage firm Yellow has STOPPED making contributions to workers’ pension as $1.2BN debt leaves America’s third largest carrier on brink of bankruptcy

    The Yellow Corp worker can be seen angrily shouting after learning his health care benefits and pension payments had ceased. The Central States Board of Trustees at Yellow said they would be suspending health benefits and pension accruals for workers as the company struggles to refinance $1.2 billion debts. The Teamsters union, representing 22,000 truck drivers, are preparing to strike as early as Monday. The video, believed to be from earlier this week, shows furious workers in a depot after hearing that the company has failed to make a $50 million payment for employee benefits. Yellow, the third largest carrier in the country, has seen its stock plunge more than 90 percent since the beginning of 2022, has hit out at the union for impeding a scheme to combine its trucking divisions.

    • Apple says:

      Seems like only yesterday freight rates were at an all time high and there was a driver shortage.

    • William Leake says:

      Seems sort of stupid for union members to try to bankrupt their employer. I guess they don’t mind being out of work.

      • OutsideTheBox says:


        Seems sort of stupid that management incompetence is going to bankrupt their employer. I guess they never created nor followed a viable business plan.

      • NBay says:

        Seems like one of the stupidest posts in the comments, Wm.
        I’ll add another….are/were you a manager?

        • William Leake says:

          Right back at ya. Teamsters bankrupt Yellow. No Yellow jobs for teamsters. I can’t see how you can argue with that, unless you live in union fantasy-land.

        • OutsideTheBox says:

          Management bankrupts Yellow.
          No jobs for any employee. I can’t see how you can argue with that, unless you live in management fantasy-land.

      • Flea says:

        While management gets stock options,ceo @400 times average pay of workers .Slaves =workers are woke and fed up

      • JimL says:

        Not as stupid for blaming union members for the decisions of management.

    • Petunia says:

      Bankrupt companies get to break union contracts and live another day. This is how Wall Street killed the unions in the 70’s and 80’s. The workers striking only makes the process go faster for management. Seen it before.

  43. SoCalBeachDude says:

    It is at least refreshing and encouraging to see the mindlessly stupid churn slowing down about 25% in real estate in the US. It would be nice if folks simply move into whatever abode they intend to live in and and stay there without the constant utter nonsense of moving around like a bunch of restless gypsies with fire ants in their panties.

  44. Finster says:

    But to listen to Wall Street economists, there are only benefits from lower interest rates, no downsides. Except for the possibility of consumer price inflation, which can be managed by raising the target.

  45. SpencerG says:

    I am really not seeing this as “golden handcuffs” or “mortgage jail.” My mother was a Realtor until her stroke in 2012. She used to say, “American houses keep getting bigger as American families keep getting smaller.”

    Which leads to this point now… MOST families don’t have a NEED to upsize their homes. If they had good enough credit to get a 2% to 4% house loan in the past decade… and haven’t moved by now… then they are better off NOT moving and just waiting this inflationary period out. The big money profits will be waiting for them on the other side.

    Obviously things change if there is a death, divorce, or job dislocation that forces a home sale. But if you have been in your home for five to seven years already, then chances are that you like it just fine and are pretty settled in your life. As much as Realtors want to tell you that a home is an “investment”… at the end of the day it is YOUR HOME. If it gets paid off while some bank that stupidly issued 3% paper on it takes a loss for years on end… that is not a bad thing for YOU.

    • Bs ini says:

      Homes are huge for family size as my 4000 sq Ft home for 2 has 3 br and 1 den empty 98 percent of the year . I need a 1 br for 2 about 600 sq Ft they just don’t build those lack of demand

      • Smaller homes says:

        700 ft² to 1400 ft² homes would be quite popular with singles, couples with 0 or 1 kid in my opinion. At 60 to 80% cost of the cost of the 2500 ft² to 3500 ft² variety.
        Homebuilders could profit just not as much.
        Consumer desires are irrelevant in US.
        Businesses and government decide what consumers are supposed to want.

        Somewhat related: Kristina Smallhorn had an interesting video recently criticizing how the MSM sells the narrative that the younger generation wants to rent, not buy. She feels its misleading.

      • 91B20 1stCav (AUS) says:

        …until housing is essentially digitally printed, we’ll be dealing with legacy inventory designed for many, many, earlier, different demographics as well that designed only as best-guess of future ones…

        may we all find a better day.

  46. Micheal Engel says:

    1) SPX & NDX are rising for technical reasons. Investors are excited by the bull trap, ignoring the cracks :
    2) SF median home prices are in a jail break. CMBS domino effect.
    3) “Other” smaller trucking co will feast on the leftovers, because UPS is on strike, Saia and Yellow trucking co are out. Hollywood actors and writers are striking to save our democracy.
    4) Nurses salaries are up 40%, but medicare is cutting down.
    5) The industrial sector is down, while the airlines and VRBO sleaze meter reached its top.
    7) Natgas markdown is over. When it will popup it might leave US north east and Europe freezing in the dark.

    • Shiloh1 says:

      Hi Michael

      Do you know the ages of the underground fuel storage tanks at their terminals?

  47. Imposter says:

    Wife and I moved in early 2021. While I don’t have data, the change is very evident on the surface. Having been searching for a home on Zillow and Reator for a year and a half prior to finding our new to us home. I guess you could say it was in the midst of the government policy pandemic. I can tell you that there were a LOT more activity on the market with very robust offer actvity at that time. We lost 3 attempts to buy due to competitive bids ending in significant sales prices above the asking prices. Still follow along in these RE sites for our former and new area, and the activity and offerings is definitely less, much less.

  48. Ticket to Ride says:

    Bought my house in 2007, 1400 sq ft on 1 acre, at 5.375%, which seemed like bad timing up until recently. Refinanced to a 15-year in 2016 at 2.75%, shaving 6 years off the term and keeping the payment the same. The monthly payments now are less than you can rent a 1 bedroom apartment for in the area.
    When we bought, the realtor said something to the effect of “what a great starter home.” I nodded and thought, I’m dying in this joint, wtf are you talking about. I guess that’s the realtor schtick.
    So it’s not like my mortgage is holding me hostage… I never planned to leave. I’m raising kids here, etc. And it feels like a game of musical chairs, where I sat down right at the right time. I imagine many of my generation feel similarly (late genx/early millenial).
    And the following generations? It’s bad for them. And that means someone will pay for it as political power moves down through the generations. I can see young people not being eager to prop up something like Social Security when they feel that the same group that benefits from it, stuck them with unaffordable housing and declining quality of life.

  49. spencer says:

    The federal government’s housing policies as well as state and local regulations are a fiasco. Builders build for profit. Profit incentives don’t support affordability. Just the opposite.

    Interest rate suppression worked largely on the demand side, not the supply side.

    How Bernanke won the Nobel, when he bankrupt half the home builders, is a mystery.

    The U.S. Golden Age in Capitalism provides the answers, square footage, eligibility, government financing, et. al.

    • SoCalBeachDude says:

      Why would builders of housing build for anything else but profit?

    • NBay says:

      “The U.S. Golden Age in Capitalism provides THE ANSWERS”.

      I hope said answers are in a big stone monument somewhere…..would be a shame to forget such great truths.

      And if you say in Simi Valley I’ll puke.

    • The Real Tony says:

      We see all the consequences of Bernanke’s policies today even worldwide. Japan ended up a basket case and Bernanke followed what Japan did.

    • William Leake says:

      The Nobel Prize quit meaning anything when Kissinger got it. It’s like the Academy Awards, a bunch of people congratulating people who do the same stuff, which is generally crap.

      • Imposter says:

        William Leake, Spot on! They are simply Mutual Admiration Societies.

      • Sams says:

        A detail, Bernanke did not get a Nobel prize. There are no Nobel prize in economics. It is a central bank prize he got.

        • Wolf Richter says:

          “On October 10th, The Royal Swedish Academy of Sciences awarded the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2022 to Ben Bernanke for his groundbreaking research on banks and financial crises. Bernanke shares the prize with Douglas Diamond of the University of Chicago and Philip Dybvig of Washington University in St. Louis.” (Brookings).

          History of the prize, per Wikipedia:

          “In 1968, Sweden’s central bank Sveriges Riksbank celebrated its 300th anniversary by donating a large sum of money to the Nobel Foundation to be used to set up a prize in honour of Alfred Nobel. The following year, the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel was awarded for the first time. The Royal Swedish Academy of Sciences became responsible for selecting laureates…. The board of the Nobel Foundation decided that after this addition, it would allow no further new prizes.”

  50. Maltus says:

    If you live in overpriced shithole and your mortgage is only 3%, even overpriced it’s still a shithole, and you live there.

  51. Bobber says:

    It’s interesting that the big movements in wealth are now based on the whims of legislators and monetary authorities, as opposed to work and effort.

    I know retirees who made $2M the past decade on home appreciation, for doing nothing. I know of immigrants who came to work hard in the tech area, but were pleasantly surprised to find that hard work wasn’t required. All you had to do was buy a home in a nice area, drink a few smoothies at work, and watch the tech stock prices climb.

    Has government been fair? responsible? loyal to the hard-working?

    Is equal opportunity an aspiration anymore?

    • Ted Byrley says:

      I agree 100% with you. I think we need a severe recession to get people mad enough to update the securities and reporting laws for the current era. For example, IPOs without earnings, private dark security markets, and unaudited securities sold into the US should not be legal. We are in an extreme situation. I hope we will survive this.

    • William Leake says:

      The Fed has turned the U.S. into a centrally planned economy, much like the Soviet Union. People don’t like to admit this.

      • Implicit says:

        History shows the path to be: Capitalism to communism to socialism, where the delineation between the rich and the poor becomes larger and larger.
        It starts with monoplolies/oligarchs and goverment partnerships and inflation. Time and entropy are the variables that see each phase through over and over again.

      • JimL says:

        The U.S. is far from a centrally planned economy. Absurd to even suggest. People don’t admit it because it isn’t true.

        • Wolf Richter says:

          The cost of capital is centrally planned and manipulated by the Fed as a matter of official policy. We’ve got another one coming up today. Short-term cost of capital via policy rates, long-term cost of capital via QE/QT and the short-term policy rates.

          The cost of capital is one of the most important factors in an economy.

  52. spencer says:

    New Privately-Owned Housing Units Started: Single-Family Units (HOUST1F)

    The ratio of new starts to the population growth hasn’t increased since the 50’s.

    • Wolf Richter says:

      Your statement is misinformation because you’re ignoring the boom in multifamily construction (condos and apartments). You linked SFH starts.

      You HAVE to look at the whole picture. Lots of multifamily is now in urban cores for people who don’t want to live in a house (includes us) and out in the boonies (includes us). Lots of people love living close to the action and have big views.


      And here is our view out the bedroom window:

      Either Queen Mary II and Alcatraz …

      Or San Francisco Fog. The marine layer is blowing in from the Golden Gate at sunset and smothers Alcatraz. Sticking out behind it: Angel Island.

      • longstreet says:

        there used to be a nice watering hole named Tattingers (sp?) near the financial district. Still there?

        • Wolf Richter says:

          I’m not familiar with it. I googled it, and only the champagne brand came up. Maybe before my time.

        • longstreet says:

          Got the “T” right
          still a good spot?

        • Wolf Richter says:

          Thanks for reminding me to go. I haven’t been there yet. It’s now on my list.

          A few blocks away is Sam’s Tavern (the down-to-earth bar next to Sam’s Grill), another one of the “oldest” in San Francisco. I go there every now and then with a friend of mine for a good beer and hamburger. Great place for two guys to hang out and talk.

        • longstreet says:

          checked out Sam’s Grill on web
          Looks like a great spot!
          My kinda place…not many left like that.
          When I think of San Fran that imagery leaps to mind.
          And what of Anchor Steam? Maybe a venture capital play for you….

        • Wolf Richter says:

          In my mind, the problem with Anchor Steam was that they didn’t brew an IPA that I liked. Their flagship beer was just OK-ish. That was fine when there weren’t a gazillion great beers around. But now there are. Competition based on quality is huge. There are great craft brewers everywhere. Big Beer buying the brewery didn’t help. Big Beer is a scourge for beer lovers. So in my mind, the brand name is now worthless. But if the employees can get together, buy it, and make it work, great. But they gotta brew an exceptional IPA these days to make headways.

        • Mark says:

          From Sam’s Grill Menu ……. a bargain ?

          Meat & Poultry
          New York steak, 14 oz. dry-aged prime
          Flannery Beef, baked potato and sautéed vegetables 65
          Bone-In Ribeye, 16 oz. baked potato and sautéed vegetables 70
          Grilled half Mary’s chicken, blanched garlic and parsley 28

        • Wolf Richter says:


          Try “Sam’s Tavern” which is attached to “Sam’s Grill.” That’s the bar I was talking about going to. Go for the “Tavern hamburger”(dry-aged prime beef) and beer. longstreet might have gotten the names mixed up.

      • Micheal Engel says:

        multi 5+ units : the distance from 2016 high to 2010 low is about 40. Add 40 to 2020 low ==> min 60.
        Can u take pictures of the homeless and the vacant office building.

      • NBay says:

        AND the Balclutha. Friend of a coworker was in merchant marine for many years and spent his spare time learning to build old seaman’s tools…..rope stuff, wood carvings, knives, etc.
        Anyway, he was snapped up by the Park Service when he showed them his collection (which is mostly all in that nautical museum there) and skills.

        A TOTAL SUCCESS STORY. Hired c1992-3

      • Debt-Free-Bubba says:


      • spencer says:

        Multifamily is not an exogenous factor.

      • Different strokes for... says:

        Different strokes for different folks (and life timeframe).

        I have a cousin who lives in SF, has for 40+ years.

        The views don’t do that much for me.
        They DID though… long ago.

        Lived in Redwood City (CA) one year in the 80s.
        Liked the winter and smell of Eucalyptus (?) trees when it rained. Appreciated that more than the couple of visits to the city by the (SF) bay.
        Liked hiking in the Rockies long ago, hiked a few times in Olympic National forest (west of Seattle).
        I live in the NW now but was quite content with boring Texas… except for the heat.
        Currently have a view of a little 5200 ft mountain/hill which is ho hum. Five major ski resorts within an hour or two drive… only bothered with one.
        Occasionally we get a very low ceiling (clouds) and I still get a kick seeing them mix in with the hills here. But I could get that in Pennsylvania or Tennessee.

        “Familiarity breeds contempt” … it may not be contempt as pertains to nature but boredom can and has set in … with me anyhow. It is what it is.

        I do like being close to urban areas for different reasons but beautiful nature is for vacations and I haven’t taken one in 24 years.

        Oh yeah, camped out at Mt. Nebo in Central Arkansas in the 80s. Not more than 2 or 3 thousand feet elevation, but woke up and blanket of clouds to be seen below.
        No high rises in the background though.

        They tell me that where I’m living its
        “Near Nature, Near Perfect”.
        “They” of course being chamber of commerce types.
        They got the first part right… the climate is definitely less than perfect here. Oh definitely less than perfect.

      • RickV says:

        We used to frequent a restaurant/bar in the base of the Transamerica Tower for lunch and after work cocktails. Is it still worthwhile?

        • Wolf Richter says:

          The Transamerica Pyramid is being totally remodeled and retrofitted by the new owner, Shvo, which acquired it in 2020 for $650 million. Big construction fence around it now. I have no idea what’s going on inside.

      • Canazei says:

        Agree on your comment further down the thread about Anchor Steam having fallen behind.

        When you have options like Russian River, Fieldwork, Ghost Town, Henhouse, Drakes, Lagunitas, Bear Republic, Hopmonk etc within 50 miles, plus dozens of other quality craft brews in local stores, Anchor Steam seems pretty lame tasting in comparison.

  53. Bobber says:

    The benefit of the low rate 30-year mortgage is highest right NOW, when home prices are high. If prices continue falling, that low rate mortgage will be an anchor tied to a persons leg. Unrealized gains can be fleeting, especially when they arise quickly or by policy mistake.

    Right now, the Fed is attacking home prices with rate increases. Local governments are attacking home prices with huge RE tax increases. Investors, speculators, and builders are trying to capture price gains via active selling. Lots of powerful forces are lining up against those hoping for RE price stability.

    The biggest influence, of course, is the stock market. Who has faith the stock market will maintain is lofty level over the next two years?

  54. Bobber says:

    I’m now seeing tons of listings where the sellers bought the home in 2020 or later. I see only a few scenarios here.

    1) The sellers bought their home under a WFH presumption that is no longer valid.
    2) The sellers bought at inflated prices, are leveraged out, and are now worried about the downward price trend.
    3) The sellers bought with rental revenue in mind, but that is not panning out.

    This selling activity should increase as the declining price trend continues, and perhaps accelerate. Look for supply to increase significantly over the next several months

    • Painted Pony says:

      How much more are they asking than what they paid?

    • Debt-Free-Bubba says:

      Howdy Bobber. How are you finding ownership of the house?

      • Bobber says:

        You can just look at the sales history on Redfin to see the timing of sales and how long a home has been owned.

        • Debt-Free-Bubba says:

          Howdy Bobber. But did the sale go to a different owner? Use to see properties listed and sold but was the same owner or group and sometimes company owned. Just wondering, no big deal………

    • Lisa says:

      And tax assessments that are higher

    • D says:

      Seeing this in my neck of the woods in the east Bay Area CA. People that bought in 2021, 2022 or early 2023 and see the writing on the wall. They are trying to sell for what looks like their closing costs and 10-15% to break even. Houses are still going pending in 30-40 days. Hopefully, these people are move up buyers with enough equity in their current homes to make for a reasonable monthly payment. But the FOMO buyers will be in a world of hurt if they are not in the former situation. 800k-1mil for a half harzardly built tract home is absolutely ludicrous considering this town is built on clay farmland. And the taxes in this country are equally ludicrous.

  55. kramartini says:

    While “mortgage jail” has an symmetrical effect on the housing market as a whole, removing one buyer for every seller removed, the phenomenon should affect the high and low ends of the market differently.

    It is easy to see why a homeowner looking to trade up would be deterred by the prospect of trading a smaller 3% mortgage for a larger 7% mortgage.

    But for a homeowner looking to trade down, this may not be as much of a problem. A homeowner trading down would have a smaller loan for the new house not only because of the smaller purchase price but because of the equity built up in the larger house after years of payments and the effects of price inflation. An extreme example would be empty nesters who bought in 2012 and who could use accumulated equity on the larger family house to fully pay for a smaller retirement home.

    Thus, we may see a shortage of inventory at the low end along with a glut at the high end.

    • David Cilia says:

      I have no family, I worked 10 hr days 12 yrs to pay massive mortgage in sydney, had no life 2 hrs traffic each day, no quality time with my kids or social time.

      One day I woke up in hospital with a guard at my bedside and I promised myself I would never go back to that place again in my life.
      I never married but separated from a 3yr meaningless abusive relationship with my kids Mum. Never worked in 12 yrs. I had nearly paid my house off, hardest part was leaving my kids but at 16 and 1e they could see this life was killing me.
      So after months of not sleeping, I knew I had to just go and one morning I said goodbye to my children , was the hardest thing I ever did……..

      I moved to GC qld, got a new job and a new start, bought & renovated and made over 220k on 1 property alone in 2 yrs on the gold coast.
      I am always researching property and love the tropical climate and north qld , so after some driving and checking out different areas I moved to the whitsundays which had not seen capital growth in 15 yrs.
      I bought a place that in sydney would be worth 1 milluon dollars and needed to be mortgage free as i had no guarantee or work or income in a regiional area and i was right , I am tradesman and found it difficult to obtain similar wages oto what they pay in the cities and it civered my ass theough 7 percent mortgage oeriod and in 1 yr I have near 80k in equity. So I am looking to sell move north and buy a home and renovate again and again until I have enough to buy my dream home out right, block of land near the coral sea, small neat tidy solid house to make a home..

      “The greatest ability of the human mind is to be able to create a reality that matches the dreams in your head”

      So I left Sydney 2019 and started fresh, it’s july 2023 in 3 yrs I have made over 300k out right , no tax because they are my primary residence.

      I knew back then, I was wasting my life away orking meaningless jobs 12 hour days door to door. I took the greatest leap if faith by leaving my old life behind and moving 2 states, 3 towns, I didn’t know a soul and still don’t but I am free from what was destroying my soul..

      It’s been a long 3 yrs but I have enough to make my dreams become reality!
      Woukd be nice to find a partner again oneday but now I am set up for the rest if my life and I did it all alone without help from a bank or a single loan from a single person..

      Take that leap of faith and Follow your dreams. Life’s too short not too, we only get 1 life and the greatest regret is not taking the chances we once had
      Good luck to everyone x

      • Tony says:

        Ok, you are now financially secure. Is now perhaps is the time to try to reconnect with your children? There’s more to life than money.

      • Gilbert says:

        Did you financially support your children after you left?

  56. Bobber says:

    This is a crazy market driven by artificial stimulus all around. Do a search on DPA, down payment assistance, to see how people are buying homes with 100% financing, nothing down, no skin in the game. Heads they win, tails taxpayers lose.

    Some of these DPA programs are providing 100% financing on $1 million homes.

    Don’t let anyone tell you there aren’t a lot of bad mortgage loans out there.

    • SocalJimObjects says:

      The amount of money this country spends on a yearly basis has long surpassed the amount it receives from tax, otherwise debt would be zero.

  57. seb says:

    Greater Nashville June closings

    ’18 – 4036
    ’19 – 4172
    ’20 – 4191
    ’21 – 4649
    ’22 – 4257
    ’23 – 3533

    17% YOY decline
    24% decline from ’21 peak

    RE is all about the transaction, even though most focus on the sales price. millions of dollars NOT flowing into the economy that once previously was.

  58. Micheal Engel says:

    1) After 3 years office occupancy reached a “high” plateau of 50%.
    2) Street level stores are deserted. Globalization destroyed old industries
    leaving behind vacant spaces in old buildings. New modern office buildings
    are slightly better off.
    3) The “glut” might last 20 more years.
    4) US 10Y popup from 0.5% to 4.25%. It might deflate. The 1Y might rise to 6% to dominate the 10Y and mortgage rates.
    5) The RE roach motel might stay comatose until we know what we don’t.
    Inflation might chew up home value. Wall street whales – they aren’t in love with their junk housing properties – might preempt, before it’s too late.

  59. Micheal Engel says:

    6) Home buyers got in the RE “roach motel”, but they cannot get out !

    • SoCalBeachDude says:

      Most are stuck with 50/50 mortgages where 50% of their month payments are interest and 50% are interest on their 3% loans and many consider it all as permanent rent. That certainly is the case with my next door neighbor who ‘paid’ $2.5 million for their house and now pay JPMC $8,000 per month with $4,000 going to interest and $4,000 going to principle on a balance of $2 million outstanding after a $500,000 downpayment.

  60. falseflag says:

    Bidenomics is simple. Thwart the old fools here who are pissed off because things don’t work like they used too….. Sorry Pops, the new wave will always thwart you every chance it gets. I know because this is what I do for a living. That is whatever makes money on the assumptions you make about what will happen. Join the “real world” of the woke to make money.
    I enjoy seeing the twist, turn and spin of those here who put on the display of how the old is giving way to the new. And, we have already won as we are miles ahead of all here…

    • El Katz says:

      “Bidenomics” is giving way to the new? IIRC, he’s 80 years old.

    • SoCalBeachDude says:

      Never forget that the more things change, the most they stay the same and those who do not learn from history are doomed to repeat the mistakes from the past which is where the housing markets are now.

    • Einhal says:

      Start drinking a little early today?

      • 91B20 1stCav (AUS) says:

        …just the sweet wine of hubris, Einhal, every gen does it eventually (…if not sooner…).

        may we all find a better day.

  61. Citizen AllenM says:

    Real estate is going to get much worse, before we get to normal. Perfect houses will set a reasonable price, but ones that need work will need to discount based upon the much higher renovation costs that now exist. So, a $60k discount becomes $100k, and the flippers set that price point. Then, higher interest rates come into play, including flipper carrying costs.

    Now, at least most of the AirBnb properties are going to be living ready, but old boomer houses- most of them are going to be outdated, and needing refresh.

    This housing wave is going to be driven by the boomer widows finally downsizing and moving in with the kids, or assisted living. Just like what I see happening across the street. A 2900 sq ft. house with the price dropping by the month. Complete with needs for windows, kitchen, floors, ac units, garage doors to bring it up to date. 1986 wants it’s white tile counters on oak cabinets back.

    Welcome back to real estate market that will only reward perfect with ok prices.

    And the new owners are going to have swinging mortgages.

    Of course, this is just California’s experience with Proposition 13 reducing housing sales writ large.

    But life happens, and houses have huge operational costs- even empty, and without continuous appreciation, the desire to dump will overwhelm the previous greed.

    Loss avoidance will be king.

    • Bobber says:

      I have no doubt that Boomer transitions will create housing transactions. From first hand experience, I see most of them selling out in their late 70’s to early 80’s, but of course there are exceptions. That means the bulk of Boomer selling is ahead of us and should peak in the next 5 to 10 years.

    • Lisa says:

      I have seen quite a few fixer uppers getting listed after they were gutted or partially gutted but not rehabbed.

    • Dick says:

      You don’t understand AllenM. By the time this corrects, oak cabinets and white tile counters will be back in vogue. HA! Joking aside, liked your comment… I know a lot of folks who are basically looking to inherit mom and dads house — and either ‘cash out’ or live in it. Some are already moving in —to help them cause they are late 70s or early 80s. To add to my analogy this is the Titanic Turning… what are the stats on little old ladies life expectancy… And don’t forget… Tom Selleck just might be able to sell her a reverse mortgage (Because he was a cowboy and thus trustworthy )s o she can move to The Villiages and catch a few stds as she discovers she’s ‘a cougar’. You are also correct about operational costs. Housing is not an asset. Housing is a durable good. If no one is there to maintain —they go to shyt faster than you think. Rule #1. Never underestimate the ability for a fellow human being to delude themselves.

  62. falseflag says:

    Oh, and by the way Pops’, AI is superior to the old school intelligence by leaps and bounds and there is more to come after and whittle, nibble, and scrap your wealth from you day by day, until you are left with little to no money….. HAHAHAHAHA….lololololol……

    • Hubberts Curve says:

      To me these two posts seem to prove the opposite of your thesis about AI. If these are created by AI then they showcase all of its weakness’s. Refers to a generic or far removed poster named “Pops. Refers to Bidenomics which does not seem to be a topic for discussion on this thread. Makes random assertions that don’t track any of the other discussions nor make much sense. So I am sorry to break it too you, AI still seems far inferior to real intelligence.

      • falseflag says:

        I think you were one of the statistics professors I had in my Phd program. What has been more useful to me is my family farm which was run by my grandfather who outlived my father…. This practical reality learned makes it easy to cut through the statistical bs which creates this air of “confidence” you project….

        It is people like you that makes it easy to predict what you will do in many given situations…..

        • Hubberts Curve says:


          On the family farm where I grew up we liked to engage in plain talk. Not the weird word salad that you or or AI comment bot seem to create.

    • SoCalBeachDude says:

      AI (which originated and is based on spell-checkers) is even more stupid and useless than spell-checkers.

    • William Leake says:

      Falseflag, baby boomers own you guys. But go ahead and keep pretending otherwise.

      • AI, etc says:

        Machine Learning was researched in earnest by 1980. Impressive results even then.
        It has undoubtedly come a long way since then. Its been over 20 years since AI beat the best humans in chess… repeatedly.
        And… machine learning, neural networks is but one domain of AI. A very important area and perhaps its most successful to date, but symbolic AI and other research areas exist. Are all AI researchers equally
        successful…no. But there are some very smart and interesting people involved in its advances.
        But to repeat, machine learning is but a subset of AI.

        I actually miss the intent of most of these supposedly AI related comments here.

  63. Rico says:

    I know houses are a huge part of the economy. So they constantly find ways to juice it up. But…
    We bought our Home and paid it off in 10 years. Over 30 years now and still love it. Senior freeze on tax appreciation and very low expenses. Spend winter south of the border and in the summer, this week rapping up 2 months in a people friendly northern city that is a gem for summer fun. Makes my return to the old home nice.

  64. SoCalJim says:

    I see a very different picture in wealthy SoCal beach cities. Specifically, people who have a home with a sub 4% mortgage are not selling them. They rent them out and pocket a large profit. This is drastically reducing the supply of homes.

    With that monthly profit from the rental, they can afford to buy a home at 7% because that large monthly profit offsets their new 7% mortgage. Their new 7% mortgage is really more like a 4% to 5% mortgage because it is subsidized by the monthly profit from the rental.

    This is driving a shortage of beach close properties … we have buyers but few sellers because homes are being turned into profitable rentals.

    • Wolf Richter says:

      1. This article was about the people that do NOT want to become landlords and RE investors, for a whole lot of reasons. That may be incomprehensible to you. But there are lots of those people, and they have lots of reasons, including people who commented here.

      2. Housing Bust 1 was in part caused by small-time landlords walking away from multiple properties and losing everything.

      3. Those people with a sub 4% mortgage on their current home that buy a new home at 7% at current sky-high prices, and rent out the old home are stuck with a 7% mortgage at current sky-high prices. If they bought the old home in recent years, there is no way they’re better off than staying put. They are likely cash-flow negative on their rental, if they can rent it at all, and they’re taking on some substantial risks.

      4. Investors have pulled back from buying houses for rentals because the combination of high interest rates and high prices and the market constraints on rents make it a rotten deal to buy a rental house.

      5. There are people that try, including some I know, and their home that they moved out of has been on the rental market for months because they cannot get in rent what they need to pay for the mortgage. Excellent business. Now they’re thinking about turning it into a vacation rental, but everyone is doing that, and they’re everywhere, and there is huge competition, and lots of expenses. Good luck!

      • Hubberts Curve says:

        Wolf, You are correct about the reasons for many people not wanting to be landlords. Two years ago my son and one of his friends moved from Portland to LA to work for one of the big video game companies. My son’s friend was originally from SoCal and had a nice ” beach close” Cottage, owned by a family member lined up to live in. But the person living there would not leave even though their lease was up ( Thanks California Tennent Laws) and now two years later the family still can’t get the ” rent paying squatter” to vacate. The family that owns the place is now working on selling it as they are fed up with the land lord gig in SoCal, especially the Beach Towns.

  65. Shiloh1 says:

    If 3% mortgage is a prison, then my free-and-clear house is a Super Max.

    People DON’T day trade their home???

    Let the FIRE go down the toilet.

  66. Bobber says:

    In the short to medium term, who knows where the housing market will go. You can’t count on this Federal Reserve to be fair or moral, or even logical. Once you add money printing to the mix, accountability and consequences are thrown out the window until the social revolt and grand reckoning begin.

    Is there anything the Fed has done the last 20 years that will not boomerang back at us?

    • falseflag says:

      Everyone here thinks of history as the past….
      Not true anymore.
      Most here will not get what is happening.
      Just look at the new car renting outfits popping up all over the country.
      Buy some cars, create a website, starting delivering cars and the cash rolls in…. Yep, just like that….. This is raw Capitalism at its best Yoooohoooo GET SOME….

    • ru82 says:

      Housing will go up as long as the Government debt goes up as this devalues your purchasing power. In the future it will take more greenbacks to buy the same home. Of course, there will be some peaks and valleys along the way when liquidity flows or drives up.

      In looking at the CBO 10 year projections, I cannot see how home prices are not higher in 10 years.

      • Z33 says:

        I was thinking about this yesterday. The total US bond market is roughly the same value as the US equity market I think. About $50T each? When the US govt takes on more debt, it makes the bond market larger. So if the bond market is normally roughly the same as the equity market, it should push that up almost in lockstep. Assets in general so that would include homes. The chart of US debt and US total equity value looks almost identical to me last 50 years.

  67. dang says:

    I think you’ve captured the current dynamic of a fundamentally unstable market structure. A perfect model for game theory who’s target function is not so much to predict but too provide an estimated probability table of likely outcomes.

    For instance, from the data you graphically provided, I have a 95 pct chance of being wrong based on my historic life.

    • dang says:

      Earlier today, I visited my walk-too tavern and there was a man proposing a hypothesis about the life cycle of women.

      In his proposed ideation,

      women become widows the day that the man they married, dies, and becomes the plain old slob that he always was. Just a lot slower and not quite the athleticism that formerly, was natural.

      And, no. I was not looking in the mirror.

  68. dang says:

    Which leaves us with the big news of the coming week, the decision of the FOMC to raise interest rates by 0.25 pct and promise to be vigilant against the scourge of an inflation they created.

    All the while, reinflating the financial bubbles with their policies. Ground that is likely to be painfully retraced by the every man.

    A policy agenda that is perhaps the epitome of arrogant, disrespect that wealth engenders about the less well off.

    In our face.

  69. dang says:

    I’m going through the drama of what my friends 99 year old Father In Law (FIL) wants to do with his tight fisted control on his sizable estate when he passes on in the next three or four years. Thankfully for my friend, as nasty as he was, at the end, his mid west sensibility is likely to prevail.

    Born in 1923, he lived through the great depression, was a soldier in the European theater, had a family that loves him, while at the same time blames him for the reason they are so troubled. Like his Kentucky grandma he is likely too live beyond 100 years.

  70. stegelberg says:

    Locked up the joint ownership where I was COB at 1,38 % in October 20, for 10 years( Norwegian Husbanken – cheap government loans).
    Inhabitants were calling at all times, complaining, and wondering how the board could make such a crazy decision and pressuring us to do a 180.

    Haven’t heard from them after, ungrateful bastards.

  71. Bill Ferrer says:

    I don’t think buying a massively overpriced used box is a “Gift from God.” I would rather have bought a used box in the early 1980s with a 14% mortgage rate but a principal so low that I could pay it off in four years. Versus paying a stupid amount for a used box in 2021 with a 2.5% mortgage rate (offset by much higher taxes and insurance) and a principal amount so huge that it will take you 30 years to pay it off, as the value for used boxes falls due to a massive demand headwind (baby boomers exiting the market matched with no population growth and continues supply growth – new boxes). The real estate agents and media have tricked everyone into believing that the people who got tricked into overpaying for boxes at the top of the market are the winners but because their mortgage rates are low.

    • BobE says:

      I bought a used box in 1987 for 200K at 10.5% mortgage. My income before taxes was high at 32K. My parents co-signed to get me in. I benefited over the years with refi’s at lower rates. I held for 7 years (I should have waited for 10 years), sold and made about 10% gains after 7 years, got married and needed a bigger house for kids. Lots of Ramen and free Taco Tuesday(no TM) Happy Hours back in those days.

      It certainly was not rosy in S. CA back then. Especially at the beginning of a 10+% mortgage. There were no zero down loans. They had to be 20% down. There certainly were no 70% gains over a few years (Thanks Fed!)

      If there is a silver lining, buying a house at a high mortgage rate allows some room for to refi during the next GFC II. I saw this with my current forever house which had an 8% mortgage in 1995.

      Just hang on, save, don’t over-extend, and don’t foreclose if possible just in case GFC II does happen. Everyone I know who foreclosed in GFC I are doing far worse than those who could ride it out.

    • Merkwurdiglieb says:

      Ok, well when they invent a time machine for popular use then I guess you can go back to 1983 Bill and buy that box. Of course your pay scale will be much lower ya know.

  72. Franz Beckenbauer says:

    Maybe the top 5% of realtors will survive. The rest – Not. The banks already got rid of their real estate / mortgage people, they saw what was coming. Same thing for “loan servicers” and the rest of the bunch who all wanted to make their cut. Given that this is the biggest sector of “Da economy” it could get ugly.

  73. Dick says:

    Wolf. I was thinking about this last night, because the FOMC is projected to drop another quarter point increase. Going forward it might not just be the 3% mortgages that are a ‘gift from god’ As rates continue to inch upward… how much more of the market gets ‘jailed or frozen’ with each increase? I think everyone and their mothers’s pet chicken who also owned an airbnb rental would have done their darndest to refi near the bottom, so that would have been the refinance cohort. But thinking about it… as rates continue to rise, maybe we’re looking at 7.5 percent or 8 percent in the future depending on inflation… maybe more? then the 4% mortgage starts looking like a gift from god and so on… it would be really interesting to read how much more of the market gets frozen as rates tick higher.

  74. Merkwurdiglieb says:

    Wolf, I can personally attest to the veracity of your conclusion. In April 2021 we locked in a mortgage rate of 2.875%. Our monthly mortgage payment is a bit less than half of what we’d pay to rent a home of similar size. It’s also well less than half of what we’d pay at 7% for another 3 bedroom house around here, if we could even find something in our price range. The house doesn’t really suit our needs but it was all we could afford at the time given how this area was (and still is) booming. Yes, it was a gift from God. So to hell with the real estate industry and those griping realtors. We’ll stay put until conditions improve.

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