The Housing Correction is In Full Swing – Gear up For Years of Housing Challenges as Inventory Grows and Low-Rate Years are Over. 4 Charts Showing Housing Correction Just Started.
There are many Americans that are going to painfully realize that the Fed does not necessarily love housing. Their focus is the overall economy and when housing is juiced up by low rates, we realize that creating a housing bubble as a consequence of low rates has repercussions. One of those is that once the low-rate spigot is off, you have a bunch of industries that get slammed because of this, including those in the housing cheerleading section. Another industry is the mortgage sector and banks like Wells Fargo and other brokers have seen traffic completely dry up. New home buying is being impacted and builders are now needing to give incentives and cut prices. Potential buyers with the economy slowing and high rates are unable to squeeze into crap shacks at inflated bubblicious prices. Does this story sound familiar? It should because housing bubbles are simply a reflection of artificial rates and easy money – this can be with absurdly low rates as we saw this time around or subprime debt and lax lending in the Great Recession. Same book, different chapter. Let us look at some data first.
Housing bubble 2.0
The housing correction is here. In many areas home prices are now correcting and price reductions are very common. Take a look at inflation adjusted home prices here:
Home prices are at their highest inflation adjust point in American history. “But the rates!” was the argument for a long-time. Well guess what? Rates are still historically low but all it took was 6 to 7 percent interest rates (still historically low) to implode all of this which suggests people were gambling with low mortgage rates to squeeze in. Great, you bought a $1 million woodshed at 2.5% and are super excited. Hope you enjoy that place and have the income to support that for 30-years because new buyers would buy your place at a 30 to 40 percent discount given rates and their incomes. You know, income that comes from actual jobs and not speculating in imaginary tokens or tech companies with insane valuations for an app that makes you look 30-years younger. The reality is, there is no shortcut – to look good in the meat world you need to workout and put in the effort consistently. I know a few plumbers and electricians that are doing fantastic since no avatar in the metaverse is going to fix your plugged up toilet in your crap shack.
And this is exactly what is happening. So existing homeowners are in a “it is you, not me” situation for the short-term but home builders with new homes have a cold economic driven view of the market. And they know what is happening. Take a look at this:
We are at Great Recession levels of traffic and new home builders are offering incentives and now lowering prices. Many prefer incentives and massive bells and whistles to move inventory but now, they are cutting prices plus offering incentives which is exactly what happened during the last crisis. Builders do not have the luxury to be delusional like some homeowners that are psychologically addicted to tracking their “home gainz” on Zillow and pretending it was real – it is only real when you sell and have the cash in your bank account! Ask the crypto bros in FTX how real those “gainz” were. Easy come, easy go.
Prices are adjusting everywhere
In many areas prices are down year-over-year. Nationwide, we are seeing a clear trend of where we are going and in a few short months, we will once again have a negative year-over-year print (something that was said to never happen in housing but happened in the last Great Recession and in this Recession pending its trademark):
So do a little analysis here. Prices hit a momentum peak in 2006 and started trending down noticeably in 2007. Prices had sizable drops here until 2012 when the market started trending up slowly again. You need to understand that the Fed is focused on smashing inflation! The biggest component of the CPI is housing so guess what they are trying to do? Obviously, they will not say this publicly to offend the cult of “housing only goes up crowd” but they have no choice to do this or risk inflation getting even further out of control. Kiss those low rates goodbye.
Housing shifts down in increments. Take a look at this SoCal flip as an example:
Someone bought this home in Santa Ana for $480,000 in August, not too long ago. So slap on a few cosmetic changes and how much value did you add? They added $219,000 in value just by fixing the lawn and doing some basic maintenance here! What is the median income of a family in Santa Ana?
Household income is roughly $72,000 so this little bit of work added 3 times the annual household income here. Totally makes sense folks! We got a long way to go before any bottom is to be had here.
Did You Enjoy The Post? Subscribe to Dr. Housing Bubble’s Blog to get updated housing commentary, analysis, and information
Subscribe to feed
260 Responses to “The Housing Correction is In Full Swing – Gear up For Years of Housing Challenges as Inventory Grows and Low-Rate Years are Over. 4 Charts Showing Housing Correction Just Started.”
I’m still watching that flip in my neighborhood. Plus now I’m watching another nearby house I found out has a potentially illegal short term rental in their ADU. The authorities have limited new short term rentals, where they can throttle new ones easier than the state regulated ADUs.
The smart cities like Coronado limit rentals to 30 days or longer so they don’t end up nearly ruined like Dana Point where you have a real home with no real neighbors. ADU’s will be the straw that breaks the camel’s back in San Diego as far as enjoyment goes.
The overpriced flip next to me wouldn’t sell so they turned it into a rental. The estate sale behind me sold for a reasonable price. Investors don’t want to sell. Inheritors see that this is the time (though we don’t have a Prop 13 in TX).
Californians still clogging up our roads here in Texas. My wife now wants something bigger on more land. I’m ready for that too. Need to wait and see how low prices go first! Price drops are an advantage when going from less to more and you’re coming in with cash. That’s why the Californians are heading our way. 🙂
Turtle, you always come up with reasons why California is unattractive. Funny how you talk so much about California – particular San Diego – all the time. If you weren’t interested in CA & SD and if it were so shitty why talk about it – constantly?
Armpits like the Bay Area, Chicago, Portland, buffalo NY…..those are places nobody talks about. Because they are in fact armpits and undesirable. But San Diego?
“ADU’s will be the straw that breaks the camel’s back in San Diego as far as enjoyment goes.”
Do you know what ADU’s cost since Covid/inflation? I have a buddy who owns a huge BY that is just vacant. He lives in a great location with no HOA. Perfect for a ADU. There is a reason why he has not put up an ADU. The numbers don’t make sense. Btw., if CA would be so undesirable to live in, how come you expect it to be overcrowded?
I think CA is just right. rents are very high, RE prices are high. If it were lower I would be concerned about it becoming too crowded. I don’t mind CA being so elevated in price. My next rental will again be in AZ. It’s much easier to evict some loser who doesn’t pay rent in AZ compared to the eviction process in commiefornia.
Ugh, I’m cringing about the fact that I actually agree with M on this one. San Diego is hands down the best place you can live in the entire country.
Foobaa, I actually don’t remember a time you ever disagreed with me on something
Bitcoin to the moon.
Buy RE as soon as you can comfortably afford in (location, location, location)
And dollar cost avg into stocks
Don’t let emotions guide your trade
Stay off zerohedge and the nypost
Forget about politics and have sex all the time and while others waste time on voting
Don’t ever try to time the market and don’t listen to the majority
Not much more to know. All you need to get rich and retire wealthy/early.
Oh, and don’t live in crappy places like the Bay Area or Chicago.
The Supply Side of the Market:
Crashes happen when supply or inventory goes up. Inventory goes up when sellers lose their homes to foreclosure or extenuating circumstances prompt them to sell (moving out of state, lucrative job in another area etc). It’s highly unlikely that anyone that currently owns a home will default on their low monthly payments. Also, extenuating circumstances are an exception not the rule so that will have little to no effect on oversupply. Builders haven’t been building enough in the last few years to the point that these empty homes are significantly adding to the supply either.
The Demand Side of the Market:
Demand is absolutely clobbered and ground into a fine dust. Potential homebuyers saw a 50% increase in payments after these last rate increases pricing many out of the home that fit their needs. Lending hasn’t loosened up either which drives demand further down. Don’t get your hopes up though, falling demand is not enough to significantly affect prices. Housing is not a commodity with a shelf life like grain or petroleum and falling demand only causes crashes commodities where its a race against the clock and selling for something is better than nothing, especially when storage costs become a liability. Most homeowners currently occupy homes that rent for higher their mortgages. If sellers can’t the price they want, that’s fine. There’s nothing stopping them from renting it out until more qualified buyers enter the market through wage increases or decreasing rates. Owning a property today is not a liability like it was in 2006.
Final Verdict:
Slightly increasing supply and the lack of demand is sure to have a downward effect on prices but not enough to cause a full blown crash. The average mortgage is about 20% higher than comparable rent in my local market and when prices come down to rent parity, that is a strong buy signal. A increasingly common trend I’m seeing in the market is sellers incentivizing their listing through rate buy-downs. With so much equity, they can afford a $10K fee to buy down the buyers rate by 1%. This helps alleviate the symptoms that come with increasing rates. Don’t hold your breath for anything more a 20% drop under the most ideal conditions. Even then, a 20% drop in price at the current rate is not enough to dip payments below 2021 levels so all of the chicken littles and popcorn munchers in the comments section better not get too excited because it was still a better time to buy a home last year than at any point in this upcoming slump.
You forgot about all the baby boomers dying off and leaving their homes to their adult children. Most adult children want the cash and will sell the house. There will be a tremendous flood of homes on the market. The ones inheriting houses in several years from now will be so shocked at the value of the house that they may rent it instead if one or two kids. If three or more, they will not want to haggle over splitting rent.
Also, USA population is in steep decline. Birth rate is at 1.5! That’s the reason the are allowing the illegal alien invasion in USA. However, that still won’t replace the steady population loss here.
I heard about baby boomers dying off in droves since 5 years now. Maybe even longer. We have historic low inventory. Would be nice to see a few more listings. A healthy balanced market needs more inventory.
Baby boomers passing their homes off to their children is hardly a blip on the real estate radar. Im sure you can come up with a better contrarian argument. Try again but this time make it make sense please.
Actually, we don’t have a lot of data on why crashes happen in real estate, simply because they haven’t happened that often. The last housing bubble is probably the best indicator we have. It was widely thought the crash happened primarily because prices reached unsustainable levels. In other words, irrational exuberance was making people buy a home in the expectation prices would continue going up. Also, the fear, or regret, they may lose out if they didn’t buy. This bubble fever wasn’t helped by subprime lending and the downward spiral when credit markets seized up.
Inventory levels never recovered and continue to be low to this day. Lack of new builds are often cited as an explanation for this, but new homes only ever comprise a small percentage of total inventory. There have been a few attempts to explain why inventory is so low. One explanation is that high home prices and low inventory disincentivizes would-be sellers. If you can’t find a home to buy, you are not going to sell. Another explanation is again behavioral. Home owners believe equity is ‘locked in’. In other words, they believe unrealized gains are tangible and that prices unassailable.
In 2018, when rates started to creep up, inventory increased markedly. This shows that home owners feared price declines and wanted to offload to realize gains. More recently, that hasn’t happened despite much higher rate increases, and this has baffled pundits. It could be the shock of large rate increases created paralysis. However, we are seeing both an increase in inventory (partly due to slower turnover), and price declines. The Bay area has seen 20% declines in median price from its May 2022 peak, according to Redfin. If declines continue at that rate over a 12 month period, it will be considered a crash.
At the moment, we are seeing in an increase in DOMs (days on market), smaller list to sales ratios, indicating a cooling in buyer fever, and I expect foreclosure will ramp up as negative equity impact buyers who got caught up in the Covid bubble. It is downhill from here for residential real estate, as rates will continue to erode buying capacity and sellers capitulate to a self-adjusting market. It is of course impossible to predict to degree of declines with any accuracy, but we know the Fed is implicitly targeting real estate, and won’t stop until inflation is back to target. This won’t happen unless home inflation comes home to roost. In fact, Powell even warned buyers now would not be a good time to buy.
In the previous thread, M said: “Is anyone surprised that those people don’t advance or are opposed to crypto? They would t even know how to buy it store their precious BTC.”
Like a typical troll, M ignores remarks that don’t fit his narrative.
As I’ve said in the past, PayPal sells crypto. Anyone with PayPal can buy crypto with the press of a button. It’s easy.
Buying crypto is not arcane or esoteric, and requires no “financial expertise.”
They sell it at at the freaking Coinstar machine in Walmart. It went mainstream last winter. The biggest and last victims.
Nobody wants crypto any more. It’s over until Uncle Sam goes digital and there won’t be any opportunity for speculation when that happens as it will be died to fiat money. But they probably no longer see a threat from crypto and so that won’t happen for a long time.
Music to me ears “ Nobody wants crypto any more.”
Bottoms occur during apathy not when moon boys still talk about it. Dump it baby so I can buy back at much lower prices!
Coinstar should also dispense Beanie Babies. That would give educated investors the opportunity to diversify.
Beanie babies don’t have intr
More music for M.
Headline: Bitcoin Mining Giant Core Scientific Ended October With $32M in Cash: Core Scientific reiterated it could run out of cash before the end of the year as lawsuits are piling up.
https://www.coindesk.com/business/2022/11/22/bitcoin-mining-giant-core-scientific-ended-october-with-32m-in-cash/
Core Scientific (CORZ), the world’s largest publicly listed miner by computing power, ended October with $32.2 million in cash and 62 BTC ($975,000) and reiterated that it may run out of money before the end of the year.
The company first warned of bankruptcy risk about a month ago, sending its shares plummeting about 80% on Nasdaq. The miner had 1,051 BTC and $29.5 million in cash at the end of September.
Core Scientific is one of several miners struggling to keep afloat as rising energy prices increase costs, and a stubbornly low bitcoin price slashes revenue.
Compute North filed for Chapter 11 bankruptcy in late September, and Iris Energy has received a notice of default on its loans. Argo Blockchain (ARBK) and Greenidge Generation (GREE) have also said they are strapped for cash.
“We anticipate that existing cash resources will be depleted by the end of 2022 or sooner,” Core Scientific said in its third-quarter earnings report, filed with the U.S. Securities and Exchange Commission on Tuesday.
“Depending on our assumptions regarding the timing and ability to achieve more normalized levels of operating revenue, the estimates of amounts of required liquidity vary significantly. Similarly, it is very difficult to predict when or if bitcoin prices will recover or energy costs will abate.” …
Intrinsic value and more importantly, beanie babies don’t show higher highs and higher lows over a ten year time frame. Buying bitcoin at the lows is a sure way to make money. Not financial advice of course but its a smart idea to listen to savvy investors like me.
Beanie Babies have more intrinsic value than does crypto.
If both plummet in value to zero, you can still use a Beanie Baby to mop up a spill. I don’t know what you could do with crypto.
“I don’t understand it”
That goes without saying though, son of landlord.
Nobody expects you to understand technology. You still have a landline. You carry your phone in a faraday bag. You still have cable and you pay close to 1k in hoa’s.
I mean, come on. I don’t think you would even know how to buy or store crypto!
M: “I don’t understand it”
That goes without saying though, son of landlord.
Huh? That’s not an accurate quote. If you’re gonna use quote marks, quote me correctly.
M: You still have cable and you pay close to 1k in hoa’s.
As I often said (and you choose to ignore) every Millennial in my building has cable. We have no choice. It’s included in the HOA fees.
M: Nobody expects you to understand technology.”
I’ve been using computers since the 1980s. Been on the internet since the 1990s. Built my first website, of many, in 2000.
“Technology,” like crypto, ain’t that hard to understand. You’re not special.
M: “I don’t think you would even know how to buy or store crypto!”
You know that’s not true. As I said (and you choose to ignore), anyone can buy crypto on PayPal. It’s easy. You’re not special.
M: “you pay close to 1k in hoa’s.”
As I said in the past (and you choose to ignore), my HOA fees include gas, water, electricity, and wi-fi internet.
I assume you also pay for those things?
Also includes over a dozen security cameras (outside entrances, garage levels, elevators, mail room, lobby etc.) And 24/7 doormen, on site manager, and three full time maintenance workers.
Perchance you also pay for security (cameras, ADT, etc.).
And yes, my HOA fees also include cable TV, pool and sauna room.
Son of landlord,
Wait, You pay more than 1k in hoa?
And, do you have enough funds saved to buy a whole bitcoin yet?
I’ll help you to move the bitcoin to a cold storage when you are ready.
Because I am a nice guy and you need to make sure it’s stored safely.
How much do you pay every month for gas, water, electricity, security cameras, ADT, earthquake insurance, homeowners liability, and wifi internet (all included in my HOA).
What difference if you pay separately (as M does) or as part of an HOA?
Sorry to jump into this extremely amusing debate between SOAL and M.
I’m more like SOAL. If I ever purchase Crypto, I would never store it in some unregulated shady exchange like LTX. I’d be like SOAL and have my wallet triply backed up with a high level of S/W security. Given SOAL’s level of security, I suspect he would do the same.
I regret not buying Crypto from 2013 to 2020 when I could have earned 2X to 10,000X ROI on this bubble. Crypto still has value to all of the criminals and terrorists out there.
IMHO, it is still a good investment when the ROI is at least 2X in 2-3 years.
The Fat Lady hasn’t finished singing yet. Excuse my dated Silent Generation non-PC quote.
Holy cow SOL, so it is true!
Instead of paying 2k per month for hoa for useless cable and a landline you could have saved the money to buy your first whole Bitcoin?!!!!
That’s a shocking revelation! How are you going to recover from this financial misstep?
bitcoin increases in value tremendously. Just a few years ago a Bitcoin was only 3k!!
A landline and cable just cost you money and provide no value. Landlines haven’t been used in decades. Cable is probably equally useless. With streaming apps you get better quality and less ads for a fraction of the price.
A smart investor would have ditched the landline and cut the cord years ago and bought Bitcoin instead. Too bad you didn’t listen SOL.
Instead you still read zerohedge and carry your flip phone in a faraday bag? ????
M lies again.
M: Instead of paying 2k per month for hoa …
You just made that up.
I never said I paid 2k a month. And you know it.
As I said, my “nearly 1k a month” includes gas, electricity, water, earthquake insurance, liability insurance, security cameras, wifi internet and much else.
How much do YOU pay for all that? More than I do?
Troll.
???? no sol, I don’t pay for cable and a landline at all. Not even for a faraday bag.
M: no sol, I don’t pay for cable and a landline at all.
That was NOT my question.
Once again, the troll misquotes me.
I’ll repeat my question:
As I said, my “nearly 1k a month” includes gas, electricity, water, earthquake insurance, liability insurance, security cameras, wifi internet and much else.
How much do YOU pay for all that?
You see? I didn’t ask about cable or landlines.
Don’t tell me you don’t pay for water, gas, electricity, wifi internet, homeowners liability insurance, and possibly earthquake insurance and security (RING, ADT, etc.).
So how much DO you pay per month for the above? More than me?
Thanks for the question SOL.
I def don’t pay for
A flip phone
A faraday bag
A landline and
Cable
Maybe 10 years ago I would have paid for that in my twenties.
Minus the faraday bag. Still don’t know why you wrap yourself in a faraday bag. Do people sometimes ask you why are you wearing this?
I also pay much less than 2k for my hoa. Way, way less. I think most people do.
The rent zestimate of $3,413 is 57% of household income ????
People are nuts paying nearly 10X their annual income. The bank allows this?
It’s a recipe for disaster come recession. We were paying 1.5X our income buying right before the last recession and it made things hard for us. I cannot imagine having paid 10%. We’d probably have drained half our retirement at that time.
Hopefully it’s not true Uncle Sam doesn’t care about housing. And hopefully the Fed knows what they’re doing. Juicing the economy + people’s FOMO is a bad combo.
Homeowners have been paying 6-7X their annual income in S. CA since the housing boom in late 1980’s. I was one of them just out of college. I was fortunate to receive raises and drastic refi interest reductions from 10.5% down to 3% since then. Currently, wage inflation is raging helping any working fixed rate mortgage holder.
Based on a quick Google check, the US government owns and backs about 80% of conventional loans. Freddie & Fannie (62%), FHA (10%), VA (10%).
The taxpayer (and political careers) are on the hook for these loans. All of the Fed MBS’s are backed by the taxpayer.
The Fed represents the banks. Compared to 2008, the banks hold very few home loans. Since 2008, banks originated the loans, collected the fees, and sold them to Freddie or Fannie (The taxpayer).
The banks also have other loans, commercial and personal (credit card).
In summary, the Fed doesn’t care about what housing prices do since this time, since the banks hold very few home loans. Taxpayers and politicians care.
However, if the Fed crashes the housing market and cause a deep long recession, the taxpayer will cover the mortgages, but the banks will likely be hurt badly with their other loans.
For this reason, I think housing will drop 20-30% (back to 2020 levels) before the Fed steps in prevent a deep recession to save the banks. The homeowners who purchase since 2020 with 3% mortgages and inflation based wage increases will be underwater but likely not hurting unless they lose their jobs in a recession.
Most home sellers are also buyers. When you sell you have to buy something else right? With a majority of homeowners locked into sub 5% rates, buyer credit scores and incomes being healthier than ever, it’s tough to imagine a scenario of forced selling. For employed homeowners to sit the family down and say “housing market is crashing, we need to sell now and go rent a comparable house for more!!” Is tough to imagine. If rates stay high I think we will be in a mortgage rate lockdown scenario. The real crash is in transaction volume. Check on your realtor/mortgage broker friends, could be tough for a while.
>>Most home sellers are also buyers<<
Exactly, nobody sells to be homeless. Only a crash bro would believe this fairytale. Inventory won’t rise.
Nobody gives up a 3% mortgage to buy back in at 6.5%.
Housing is about the monthly payment not just about the home price. If my beautiful home on SoCal goes down in value and someone wants to buy it I say: if you pay 2million usd over market value I sell. If that buyer says you are silly I reply: maybe you are silly for thinking I would ever sell this treasure! I bought in Q1 2020 and have a below 3% mortgage interest rate. I’ll never sell this house!!
Kj,
“Most home sellers are also buyers.”
I completely agree with this for primary homeowners (except for homeowners trying to time the market and sell high, rent, wait for a crash and then buy low. My 3 co-workers who tried this broke even at best in 2008-2014).
Flippers, second house owners, AirBnB speculators, and corporate rental owners are the real question.
They won’t buy again until the market drops or rents rise. They likely will sell if the market fall picks up momentum. This positive feedback loop might drop the market rapidly as the speculators try to all dump their losing investments. What % of house owners fall into this category?
The question is: What percentage of house owners fall into the speculative category?
By 2011, Phoenix Real Estate prices dropped more than 50%. The snowbird renters disappeared and the speculator lemmings all tried to unload their losing house investments. At the bottom in 2012, another co-worker was trying to sell me the 50% off investment opportunity in Phoenix houses. They learned from 2008 and sold at a huge profit in 2019 as the speculative bubble inflated again.
Note I said house owners instead of homeowners. House owners are often speculators that rely on increased value or higher rents to keep their house investment. If this falls, they will dump the house faster than they dumped their crypto and prices will fall.
M will become humble. Probably not a bear since he will still have his 2020 primary home paying much less on his mortgage than going rental rates. However, he won’t panic or sell since the price will be the same as what he bought it and he has an extremely low mortgage rate.
If RE prices in Phoenix fall 50% (which they won’t). But let’s say they do, why would an investor like me sell? Rents barely every fall significantly. Instead of selling I would try to buy more RE in AZ.
RE is not like stocks. Investors don’t sell their RE, they accumulate more. 2008 was an Outlier. You had NINJA loans back then. Those days are looong gone. Todays RE investors don’t care if the book value falls. As long as renters exist in this country who are paying off our RE investments, we are just fine.
And we won’t run out of renters! Inflation is hurting renters. They won’t be able to save for a downpayment and probably keep renting until they die.
Many people sold their RE investments during 2008-2012.
They were so overextended with unprofitable rentals that they had to. Or they foreclosed. A few who survived during 2008-2012 have posted on this blog onthe nightmare they experienced.
The Good Dr posted many great posts during this time on the foreclosures.
Don’t overextend to the point of having to walk away.
Maybe this time is different with 20% down and ultra-low rates.
Great, you bought a $1 million woodshed at 2.5% and are super excited. Hope you enjoy that place and have the income to support that for 30-years because new buyers would buy your place at a 30 to 40 percent discount given rates and their incomes. You know, income that comes from actual jobs and not speculating in imaginary tokens or tech companies with insane valuations for an app that makes you look 30-years younger. The reality is, there is no shortcut – to look good in the meat world you need to workout and put in the effort consistently. I know a few plumbers and electricians that are doing fantastic since no avatar in the metaverse is going to fix your plugged up toilet in your crap shack.
I’m dying!!! ????????????????????
Working for a 30 years is very overrated.
You want to get to a point where you can put money aside and invest in a multi bagger. Crypto is an excellent vehicle to increase your wealth. Same with stocks and real estate. The next crypto bubble will offer life changing gains.
‘inflation fueled wages’ is really weird concept: Only CEOs have their wages raised in par (or faster) than inflation. Everyone else gets the same salary as in 1990s, +- few percent. While actual inflation rages at 10% *per year* (see shadowstats.com inflation charts).
Add rising property taxes to that and it is very likely that a large number of current home ‘owners’ can’t afford to pay their mortgage and will lose their home.
Add rising interest rates and you get a very large crash when the bubble bursts. Which suits to FED very well, it is a private bank and it cares *only* about bank profits.
At crash banks are the only ones having cash so they’ll ‘aquire’ huge amounts of homes, basically for free, sit on them couple of years and slowly sell them with huge profit. Just like in the previous crash.
If it goes pear shaped, FED will save the banks. no problems. Just like last time: Zero risks, potentially trillions in profits.
‘inflation fueled wages’
Agreed. The only income we have with inflation adjustment is Social Security, and it lags true inflation. I’ve been getting zero or way less than inflation raises for the last three years.
‘rising property taxes’
Prop 13 in CA and a similar measure in OR have prevented major increases there for us. In fact, OR property tax went down this year due to falling prices there. (I checked the two bills… 2021 vs 2022.)
“At crash banks are the only ones having cash so they’ll ‘aquire’ huge amounts of homes, basically for free…”
The little guy can get in on the game if they have been patient. Living below ones means, delaying gratification and all that. Financial counterculture, if you will.
sorry, turtle, but that saved latte mindset is typically making you fall behind, not get ahead
Like the famous story with the Turtle and the Hare, the turtle was behind most of the race but eventually won because the Hare impulsively ran off to buy Bitcoin at its peak while the turtle followed Bogle’s advice.
The race isn’t over yet.
The issue with turtle and a hare tale is that sometime turtle is so slow, the hare gets all the chicks. The turtle can be so patient it might die before it does anything fun.
Tract homes in northern San Diego are now closing about -15% from peak spring ’22 prices. We are in the early stages of the inevitable devaluation of real estate. The bidding war era is over and buyers have less and less $$ to roll from their old home equity into a new home as values are going down everywhere. Interest rates are way up. The job market is slowly flipping from employees with all the leverage to a balanced market, and will eventually completely flip to employers will all the leverage again. This will take a few years.
Inflation is not transitory and is higher than govt. figures allege. It will not abate soon. Purchasing power is way down. Wage inflation is not keeping pace and will eventually stagnate. In fact go ahead and talk to your friends in the mortgage and RE industry about income these days. It’s a huge part of the SoCal economy that is drying up.
There is really rough water ahead. There are too many moving parts to predict a bottom date with much accuracy, other than to say that this will be a multi-year process due to transaction velocity being far slower than for instance the stock market. I estimate 2025-26 bottom with values down about 40% from peak. This is for San Diego and is an average. I have been in the RE/construction/lending related industry since ’91.
I’m bullish for SoCal coastal RE long term and always have been, but I saw many get wrecked in prior eras. Not just in RE but in other asset classes/investments. Arrogant know-it-alls, young inexperienced people with no frame of reference, and people in denial are usually the ones I see taking a beating. I promise you this will repeat itself this cycle and these types of people are going to get caught off guard and lose alot of money and i mean ALOT.
No chance North SD Country drops 40%. Too much doom and gloom here, go to bubbleinfo.com to get an accurate accounting of market conditions here in North County Coastal SD. House inventory is extremely low, people are not giving away these houses, especially with locked in low interest rates.
Jim at bubbleinfo has good data. Fact is the recent closed sales are averaging out at about -15% in the area for comps. I’m calling for another -25% from now over the next 2-3 years. We’ll see. Jim also links to outside data and has a good vid of Palacios calling for essentially reversion almost all the way back down to pre-pandemic values by ’24, with support for the proposition.
San Diego thought it was special in ’07 before the 40% crash, and they think they’re special again. Not so.
I live in north county San Diego and we have very low inventory. There are open houses but sellers just wait it out or take it off the market. Time is on your side if you are a homeowner.
Even if home prices dropped 40%.. they would bounce HARD off that bottom like in 2011-2012… No one that bought a house in 2013-2014 is crying right now. Also those that sold in 2006-2007 and didn’t buy back in in 2011 missed out as well. The pandemic home price increases was artificial… just like the big tech stock gains in late 2020-2021. Just like used car prices will crash.
” I promise you this will repeat itself this cycle and these types of people are going to get caught off guard and lose alot of money and i mean ALOT.”
I know many who took a beating (only on paper) for their primary home from 2008-2014.
They just continued to live their lives in their home in perfect weather while going to the beach every day. Today, they have their houses paid off and at the moment have huge equity in their houses so if they grow tired of perfect weather, they can easily move.
I know a few who panicked and sold or walked away at a loss in 2009. Many are still struggling and trying to get back in to the housing market or have moved out of coastal CA.
I think the key is don’t panic sell and don’t overextend.
munch munch munch…..
Better hope and pray those magic coins come back in style, housing sure aint :0
A report from the Union Tribune in California. “San Diego County’s home price has now dropped five months in a row. The median home price was $775,000 in October, said CoreLogic on Tuesday. It reached an all-time high of $850,000 in May. Jan Ryan, an RE/MAX agent based in Ramona, said she typically has four to six homes in escrow at any given time. Now she has none. Ryan said she is seeing many potential buyers struggling financially with higher interest rates, and many sellers are having a hard time accepting that sales prices are lower now.”
“Here’s how the San Diego County price changed by home type in October: Resale single-family home: Median of $842,000, with 1,392 sales. It is down from a peak of $950,000 in April. Newly built: Median of $840,000, with 203 sales. This figure combines single-family homes, townhouses and condos. Down from the peak of $890,500 in August. Almost all of Southern California saw price drops from September to October. Riverside County had the biggest drop, down 2.7 percent for a median of $545,000.”
The Daily Democrat in California. “Buying a home in Woodland is becoming less attainable for young adults and other prospective owners as mortgage rates rise to their highest level in decades. Ryan Lundquist, who runs a Sacramento appraisal blog, agrees that Woodland is much more affordable than Davis. The median home price in Woodland is around $570,000. That same-sized median-priced house in Davis is around $890,000, according to Realtor.com.”
“Lundquist said the market started to see a drastic change this past spring. ‘Honeymoon market – that ended in April,’ Lundquist said. ‘We are in a different arena right now where prices have been going down. The market is starting to lose steam in a lot of places in the Sacramento region…It was almost like when mortgage rates went below 3%. It was like a steroid for the market. Buyer demand went crazy.’”
Got popcorn 🙂
Why pay for a quickly depreciating asset when the Big Fat Bastard will pay your mortgage for you?
Thank you Big Fat Bastard for paying my mortgage! I am now living rent free in my house and in your head!
I really like the inflation vs home price chart the Good Dr used above.
It shows that today, if housing prices fall 36%, they will intersect with the inflation baseline for houses. The last time this happened was in 2012 at the bottom of the last bubble. That is when home prices were a great bargain and investors and primary home buyers jumped back into the housing market. Housing prices tracked inflation again in 2012. As they should in a non-speculative market.
This time is slightly different. Unlike last time, when inflation was negative in 2008, the inflation line today is rapidly rising 8-10% per year.
Within a year, if inflation rises 10% and housing prices fall 25%, house prices will intersect the inflation line again and the bottom will be reached. I would wait until that point to purchase a house. Housing prices will be back to 2020 levels but wage inflation will give people more buying power.
“wage inflation will give people more buying power”
Where is this wage inflation? Maybe union workers in jobs that have a stranglehold on some critical work and some management or sales jobs. And government-mandated increases for low wage workers who can hardly afford necessities let alone a house. Social Security is going up faster for me than wages (I get both).
Here is an article on federal workers’ wages. Doesn’t look like they have been keeping up with inflation either:
https://www.govexec.com/pay-benefits/2022/03/biden-proposed-raise-federal-workers-2023/363666/
Current inflation is supposedly almost 8%. The drop from Summer’s rate is mostly due to artificially lowered gas prices from the latest Teapot Dome scandal.
JoeR,
As you said, most of the wage inflation is in the lower and middle class. Social Security, government jobs, and all of the career wages being floated higher by the increased minimum wage. I think this is the majority of the US.
I agree that unless you changed jobs for higher pay in the last 2 years, tech wages have not increased. The exception is highly specialized jobs. However, if you were lucky enough to work for a company whose stock increased 10X over 2 years, you had a massive increase in yearly pay. If you are now in a company whose stock plummeted 70%, you saw that “raise” evaporate. Most co-workers who changed jobs in the last 2 years had raises that were paid in RSUs/Stocks. Most of these raises are now less than originally anticipated due to declining company stock values.
I suspect the median wage has increased over the last 2 years but will lag inflation just like what happened in the 1980’s.
Any increase in wages will help soften any declines in the housing market. This is different than 2008 when inflation was negative for a year. It is more like the 1980’s when COLA and inflation based wages were paid. The housing market did decline slightly but increased wages balanced it. Of course, there was not a huge bubble back then so this time is different.
I am employed as a contractor for a unionized company that supports the federal government / DoD. We’ve been in negotiations for a new contract since early last year.
Things slowed down for a minute initially when we pulled out of Afghanistan along with covid. But now with the Ukraine situation, they are making bank and labor is critically short. There was some kind of a rumored offer recently for a 20% retro raise / bonus and 5% a year increase for the next three years which the union shot down real quick.
We know the real inflation numbers and this isn’t going to let up anytime soon. And who knows what the state of the economy will be when the next contract is up. We’re looking for somewhere around a 50% increase in wages/benefits over the next three years. In the meantime, guys are making huge paychecks working unlimited overtime.
Working in the life science industry. Covid was basically a money printing machine for us. Bonuses and additional payouts that were unheard of. Covid money is drying up a bit so things are reverting back to normal business conditions.
House prices are holding up pretty well? Looks like the crash bros are disappointed again and have to hope for a crash next year. 🙂
For the Newbies, I repost why I disbelieve M’s tall tale of buying a house from an alleged inheritance. His timing of events — from bear, to inheritance, to housing purchase, to completion of construction, to move-in — are too quick.
(Unlike M, I quote him accurately, and provide links for verification.)
All the below dates are from 2020.
Jan 31 — Still a bear. Advises against buying.
Feb 11 — Claims to have inherited money.
Feb 19 — Claims to have bought a house. (Fastest probate in history.)
April 16 — Discusses commute time from the new house, which is beautiful, brand new. (Apparently already moved in.)
May 20 — Claims to have a tenant.
June 27 — Now claims he bought the house while it was under construction. House was so incomplete, he saw the materials that went into it. Considering the short time between the inheritance, the purchase, and the move in, this was the fastest probate AND fastest construction in history.
Relevant quotes:
Millennial (Jan 31): “there is an incredible amount of inventory on the market and much, much more to come. Just obvious that sales and prices fall accordingly. … Boomers need to start paying their fair share. They barely pay any property taxes.”
————–
Millennial (Feb 11): “I inherited from a boomer. A lot. Thinking of buying property. ? I have a very nice house in mind.”
—————
Millennial (Feb 19): “Just signed. … Love it here already.”
—————
M: (April 16): “Commute to my tech job isnt bad (25min). … [house] is brand new, no headaches and it looks beautiful as you can imagine.”
—————-
M: (May 20): “My stranger in the house knows she can’t have sleepovers or she will get a spanking. I do like she’s paying nearly a third of my mortgage …”
——————
Millennial (June 27): “… the top line materials were used. We watched it being built which is a cool experience itself.”
———-
Sources for the quotes:
http://www.doctorhousingbubble.com/the-cure-to-the-housing-shortage-may-be-retirement-homes-the-coming-tsunami-of-homes-over-the-next-decade-may-come-from-an-unlikely-source/
http://www.doctorhousingbubble.com/why-are-californians-moving-out-in-droves-to-texas-a-trend-that-goes-beyond-one-year-a-two-city-example/
http://www.doctorhousingbubble.com/the-forbearance-tsunami-4-7-million-mortgages-are-now-in-forbearance-with-an-unpaid-principal-of-1-trillion/
http://www.doctorhousingbubble.com/covid-19-and-the-impact-on-housing-socal-home-sales-hit-an-all-time-low-in-may-and-4-76-million-americans-are-now-actively-not-paying-their-mortgage/
Thank you! Do you see anything wrong with my statements?
Son,
I find M to be entertaining. I agree some times and am amused sometimes. I wouldn’t spend 10 seconds let alone a couple of hours going through his old posts. The flipped stand on buying actually made sense with the specter of inflation rising, and crypto is also a big part of his posts which doesn’t figure in your research.
The interesting link of crypto and real estate for me is that both have a history of fraud, but the crypto fraud seems to be more front and center in the media. I think it is because the political crooks are involved and are using their buddy’s scam to promote “regulation” of crypto. Just like with Madoff, there were people going around pointing out the fraud but the chief regulator of securities markets was a buddy of the parents of one of the fraudsters (she). Madoff also had deep connections in the securities industry (“When the tide goes out you can see who’s swimming naked”: Warren Buffett). The public is being hoodwinked about digital currency, and the rulers want to emulate the dictators by instituting Fedcoin so they can track every transaction we make. I’d like to do the reverse. I’d like to bring back the $1000 bill. In the ’30s, you could pay for a car with one bill. Now with the largest bill in circulation (and inflation), you can pay for an oil change.
“The flipped stand on buying actually made sense with the specter of inflation rising, and crypto is also a big part of his posts which doesn’t figure in your research.”
IMHO, since M never mentioned the specter of inflation rising or the Fed lowering interest rates to irrational levels, he is more extremely lucky than he is a genius.
I guess he was also lucky to have a dear relative depart at a timely moment so he could have the cash to dive into crypto and the housing market. A fool and his cash are soon parted. So far, M looks more like a genius than a fool. Time will tell.
The game ain’t over until the fat lady sings.
I take this all back if it turns out that M is J Powell’s son with insider information. With insider information on the Fed lowering rates, I would have invested the same way.
|I don’t see anything wrong with this timeline except M flip-flopped from being a Bear to Bull in record time.
I was a bear in 2019 because I thought homes were overpriced by at least 15-20%. Massive 15-20% inflation over the last 3 years fixed this. I believe house prices today should be at the 2019-2020 levels.
M had the incredible foresight to predict the pandemic and Fed dropping rates to record lows which caused this 15-20% inflation. Or he just got lucky. Or maybe J Powell is his father telling him what would happen. M ran in when all other investors were running scared.
I was an executor for a trust and if the deceased had set up a trust, the funds do not have probate and are available immediately to the heirs.
However, the game isn’t over yet. Not all of us have J Powell giving us insider information.
Wasn’t it established a long time ago that the Millenial guy was not trustworthy because he was talking down real estate and saying don’t buy, but at the same time he had put a deposit down on a new build? LOL that is classic!
Yeah! I actually had enough money for a deposit for years. Just couldn’t get myself to pull the trigger. Once I received an inheritance, I was like, alright, now I am pushed over the edge. Can’t wait forever for a crash. Pull the trigger. That was the best thing ever! I never even think about a crash anymore! And if a crash comes, fabulous! I buy more real estate! Being a homeowner (and landlord) is a dream come true for me.
That’s why I always say, “time in the market beats timing the market”.
In other words buy when you can comfortably afford it!
What has renting for so long done for you Falcon? Your landlord just keeps increasing your rent. I am one of those landlords and in 2023 a rent increase is coming for my tenants.
Thank you inflation! Cha-Ching!
SOL, even though M is a complete fraud with an massive inferiority complex, you’re doing yourself a disservice by constantly entertaining him.
Damn man! Can’t you just let it go? This person “M” is just pushing your buttons/trolling the hell out of you. Regardless of who the liar really is or not, we have no way of knowing for sure, and all this is just a bunch of juvenile drek in the meantime.
“M” keeps putting it out there and you keep taking the bait, making yourself look more absurd with each retort.
You guys need to go get a room, and get out of the light.
Headline: NYC landlords could soon be denied criminal background checks for tenants
https://nypost.com/2022/11/26/nyc-landlords-could-soon-be-denied-criminal-background-checks-for-tenants/
A controversial bill prohibiting Big Apple landlords from performing criminal background checks on prospective tenants – even those convicted of murder and other heinous crimes – is on a fast track to becoming law.
At least 30 of the City Council’s 51 members have agreed to back the “Fair Chance for Housing Act,” which is set to go before the Council’s Committee on Civil Rights for its first public hearing on Dec. 8, records show….
And Mayor Eric Adams appears more than willing to sign it into law should the bill reach his desk.
“No one should be denied housing because they were once engaged with the criminal justice system, plain and simple,” Adams spokesman Charles Lutvack told The Post.
“We will work closely with our partners in the City Council to ensure this bill has maximum intended impact.” …
I have some experience in losses you can accrue by renting to an irresponsible tenant. We were lucky that it was only $5000 worth of damage, and the repairs upgraded the property by maybe 30-40% of the cost, so it has worked out OK for us. I know someone else who rented a house to people they shouldn’t have on the assurance from a friend of theirs that vouched for the tenant in question (who had a bad background) saying that he was OK now. That ended very badly. If you are not a rental management professional (especially if you do not live near your property) you should hire a property management firm to run it for you. Their fee can wind up saving you a lot of money. PS: Real estate sales agents are not necessarily qualified as property managers. We found that out the hard way. You want a company with a long track record in property management, period!
SOL, do you have any suggestions for people who own residential property in woke cities? What are the barriers to converting properties into co-ops or condos? Should you sell at a loss now or take your chances with the future? (Not that this is anything that relates to my situation of owning rural rental property. I’m just curious and you seem to keep up with this kind of thing.)
My late father made his fortune buying rent stabilized NYC apartments at bankruptcy sales, then converting them to co-ops.
It’s a long process, several years. It requires lawyers. Also, he filed a “Non-Eviction Conversion Plan,” which means that tenants can opt not to buy their units and retain their leases. Such plans are much easier to get approved than Eviction Plans.
It also means that each building ended up with two corporations. One managed the co-op units. The other owned the rental units.
Later, whenever a tenant moved out, my father would “warehouse” the unit. Keep it off the rental market, and sell it as a co-op when the market was right.
But I think it’s increasingly risky for a small landlord to buy a building in a woke jurisdiction. Large corporations can take a loss on units (economics of scale), but small landlords can be destroyed by enough bad tenants.
As we increasingly become a nation of renters, I expect “tenant protection” laws to likewise expand, especially in urban areas with high concentration of tenant voters.
That’s why I bought my sfh rental in Arizona.
No woke crap. And if the tenant doesnt pay you get him out in now time.
Nothing like commiefornia.
Life is too short…..it’s not worth getting gray hair over a non-paying tenant.
And, getting the backyard done (artificial turf, concrete, plants, rocks) in AZ is like a 1/4 of the cost compared to CA.
Gonna buy again in the phoenix area when rates come down.
“Nothing like commiefornia.” – says the guy who lives in “commiefornia” and loves it….
Future M responses to expect, in no particular order:
1) “That’s right cousin, I do love it. I love the ability to afford living here because my renter peons pay for it along with my awesome cushy job but even if I get fired, the cashflow from my rental is so good and the inheritance I’m about to receive from another dying relative will be so much that I won’t have to worry about working another single day in my life. I wouldn’t have it any other way. If you want to get rich quick or slowly, it’s super easy: all you have to do is follow my advice. I would start a Youtube channel to monetize it but I’d rather help others here get rich just like me. So please, if at all possible keep renting because it helps me get rich, not you.”
2) “Spot on. You took the words right out of my mouth. Buy low sell high. Don’t time the market, buy the dip. Keep going straight but take the next left turn…or maybe right. When life gives you lemons, make orange juice.”
3) “I love it when I make everyone jealous. Everyone looks at me and becomes jealous. I LOVE IT.”
Commiefornia, what would it be like without our far-left friends? Who would we make fun of at the dinner table?
I don’t think it’s that bad here. As long as you have a great paying job and a nice house. You don’t want to rent long term in a place like commiefornia.
There is no escape for someone as repetitive as M to eventually fall down into a very narrow camp.
Surge, thanks for the question. Never change a running, successful system. Rinse and repeat.
Waiting for lower crypto prices to buy in more. Same with stocks and RE.
In the meantime I enjoy the sunshine during winter in beautiful commiefornia!
Looks like a similar if not the same bill just passed in Alameda county:
https://www.theguardian.com/us-news/2022/dec/21/california-alameda-county-landlords-background-checks
Music to my cousin’s ears! Hopefully this comes to North SD county too sooner than later. And thanks for all the questions you didn’t ask but that he answered anyway.
Stay away from living in alameda county and the Bay Area. It’s the armpit of America in my humble opinion.
To my fellow Millie’s out there.
I am millennial myself and just like you (most likely) I had a very silly view of the real estate market. I used to be a perma bear hoping the market would crash.
I was so silly that I thought it would be a good thing to have higher property taxes because it would bring down RE values.
Let me tell you, the moment I bought my house and paid for property taxes I never let that thought come back to mind ever again. Instead, if you ask me now, I’d say I love my prop 13 taxes!
I used to believe that people treat their house like an investment and it became like the stock market (speculation).
A house payment is the cost of shelter. People don’t sell because they think it’s peak time now and they can time the market. Nobody sells a house to be homeless. So you gonna sell you house to rent? And tell your wife this is a good idea because YOU know you sell high and buy back low in a few years?! Give me a break.
Zerohedge and YouTube had ruined me and I bought into the bubble-crash, rinse and repeat BS.
Luckily, I am much smarter now and enjoy living in our house. This blog helped me. I hope it helps you too.
Do you want to be that guy that eats popcorn for months if not years because that helps him to believe the market is about to crash or do you want to be that homeowner with a fixed monthly cost that doesn’t need to worry about ever-increasing rents? …. Popcorn is not part of a healthy diet.
Would you pay for your house at today’s price? If not, then why are you suggesting others to buy?
You were hoping for a crash during a period when there was no reason for it to: from 2012 to 2020, the economy was doing well, job plentiful, and interest was decent.
Pretty sure his about face had only to do with one thing: the inheritance. He’d probably still be pining for 50% – 70% if not for the gift. Just like Realist, but without all the baseless links.
And people spend money they didn’t work for differently than money they earned. Your boss gives you $100 to buy a prize for some office function. You blow it on a gigantic talking stuffed animal with a silly hat. Now ask yourself if you’d have made that decision if it was your own money.
I absolutely love my house and the area. I sometimes laugh when I think back of my the-market-is-going-to-crash days!
I can’t wait for rates to come down. I want to buy my second rental property!
thankful to be the right side of the fence now!
Do what I did and live frugal for a while and save money for a downpayment!
Buy as soon as you can comfortably afford it! Thank me later!
O O
I def recommend buying to everyone now. That means less competition for me when I buy my next rental in a year or so. It’s selfish but that’s called capitalism, baby!
not sure why you’re seeking the advice of a person who was only able to get into a house because his relatives died and gave him an inheritance.
Welcome to the blog foobar! Always nice to see newbies. What’s your take on the current market? And what’s wrong with inheriting money? Isn’t that part of life? Are you planning on taking your cash stash (i assume your are still renting and currently save for a downpayment by holding it in cash and a CD) to the afterlife?
Come on guys. I hope you realize there is no other value in giving any effort to dissecting M’s post other than sheer entertainment.
The OC Register (Lansner) reported the April to June average weekly wage for California ($1572) and it was the only state to show a drop year to year. Lansner ascribes that to the big jump in leisure and hospitality workers. That is obviously a group that isn’t able to get into the market for a house in most areas of California.
Another article which was an interview with a pro-housing growth non-profit organization’s head said that all areas of the country are experiencing new housing shortages with California having the worst underproduction. The increase in the underproduction has been larger in non-metropolitan America (small cities and rural) that in the metro areas by a factor of 3 to 2. That bodes well for my rural rental properties. The price of gas is the headwind while electric cars would be a tailwind due to lower electricity costs from REA co-ops (but only if the tenant was willing to pay for the charging station).
Headline: Distressed crypto firm BlockFi files for bankruptcy as fallout of FTX spreads: Lender with more than 100,000 creditors was set to be acquired by Sam Bankman-Fried’s firm
https://www.dailymail.co.uk/news/article-11477829/Cryptocurrency-lender-BlockFi-files-bankruptcy.html
Cryptocurrency lender BlockFi has filed for bankruptcy – blaming the ‘shocking events surrounding’ the collapse of FTX.
A filing said the company has more than 100,000 creditors and liabilities of up to $10 billion….
BlockFi’s products included wallets to store cryptocurrencies, a platform to trade them and also crypto-backed loans…
Headline How Big Tech layoffs could impact some of the priciest housing markets
https://www.msn.com/en-us/money/realestate/how-big-tech-layoffs-could-impact-some-of-the-priciest-housing-markets/ar-AA14BEPt
A series of layoffs at America’s major technology companies could put pressure on local housing markets amid a broader nationwide cooling.
These layoffs, brought on in part by a series of interest rate hikes from the Federal Reserve and a decline in revenues, could cause forced sales, damage buyer confidence and lead to smaller down payments — even from buyers who remain employed. …
munch munch munch ….
From crypto to housing, collapse of speculative wealth could refocus investment on real growth
Livin rent free in the small minds, housing down, magic coin down, par for the course for the weak minded.
https://r.search.yahoo.com/_ylt=AwrgzSaEVIZjvTIAyKlXNyoA;_ylu=Y29sbwNncTEEcG9zAzEEdnRpZANMT0NVSTA4OV8xBHNlYwNzcg–/RV=2/RE=1669776644/RO=10/RU=https%3a%2f%2fwww.cbc.ca%2fnews%2fbusiness%2fimaginary-crypto-tech-column-don-pittis-1.6645787/RK=2/RS=oaVWnuu0hlF6_PoHK_rsKQkNUKI-
Got popcorn 🙂
Well, at least CD’s are looking almost kind of good in the face of inflation.
San Diego down almost 8% from peak in May, says Wolf Richter. The YOY shrank to about 10% from, from what, like 30%? Every metro is down. My own metro in TX is down 4% from peak and the YOY is down to 16% from 32%.
San Diego was has had the biggest increase of all since 2000 (back when it was still “America’s Finest City”, maybe). Miami just took over that distinction. San Diego prices are dropping faster than all the other metros.
It’s pretty clear those idiot low rates caused the bubble to bubble up even more. On the converse, that seems to be unwinding pretty steadily. How low will it go? Let’s hope employment stays on track and that we don’t have a bad recession. The free money is still out there working a little magic.
Musk says the Fed must cut rates immediately to avoid a severe recession. This guy has been off lately. I guess when you have a bazillion dollars, inflation doesn’t matter whatsoever. $10 boxes of cereal mean nothing to a person in that position.
The housing correction is in full swing…this will take a few years and the bottom is 30% below us. Nothing will stop the decline over the next few years. Don’t waste your bullets on a dead body. Illegal Rentals and over-occupation with disastrous effects on infrastructure of house will cost a fortune to rebuild. What goes up, must come down.
30% would take prices back to a year or two ago. Practically a nothing burger.
I called it before Goldman Sachs! 🙂
The flip I mentioned on Nov 19 closed and it went for about 10 Grand less than the asking price (which relative to the prices nowadays is chump change). That means the flippers didn’t get their heads handed to them. In fact they probably made at least $50K. Soooo, Orange County is still holding up in this down market.
Headline: Gavin Newsom’s reparations task force considers $569 BILLION recommendation that could see all descendants of slaves in California receive $223,200 for ‘housing discrimination’ – in nation’s biggest ever restitution effort
https://www.dailymail.co.uk/news/article-11491263/California-reparations-committee-recommend-handing-223-200-descendant-slaves.html
A reparations committee in California has suggested that descendants of slaves in the state could be compensated $223,200 each for ‘housing discrimination’.
The nine-member Reparations Task Force was formed by California Governor Gavin Newsom as part of the country’s largest ever effort to address reparations for slavery.
A focus of the California task force has been ‘housing discrimination’ – and it has been estimated that it would cost around $569 billion to compensate the 2.5 million Black Californians, according to the New York Times.
That is more than California’s $512.8 billion expenditure in 2021 – which included funding for schools, hospitals, universities, highways, policing and corrections.
However, discussions are still underway, and panel is continuing to consider how payments should be made – some suggested tuition and housing grants or cash.
The task force has also identified four other causes for reparations: Mass incarceration, unjust property seizures, devaluation of Black businesses and health care.
$223,200 each? So a single mother with five kids would get $1,116,000?
Reparations for “mass incarceration”? You mean, reparations to gangbangers for jailing them?
And why assume that all “2.5 million black Californians” are “descendants of slaves”? Are not some of them post-Civil War African immigrants?
And if this goes through, what’s to stop a mass influx of “descendants of slaves” from moving to California to claim those reparations?
The taxation for funding that enormous amount, will wipe out middle class CA completely. Like with all other taxes in CA, the limousine coastal liberals will be spared. From the poor, which are most, there is nothing to take. That leaves the middle class the main target to fork the cost. Unlike Uncle Sam, CA can not print money, so more taxation it is. That can attract easily 2 more millions of blacks from other states to claim the free stuff. With that, CA is looking to more than a trillion in fresh new taxes on the back of the middle class.
CA does not have this money and unlike the FED, they can not print them; they can just tax them.
CA always spare the rich limousine coastal liberals from taxes because they are the donor class to the establishment and they write the tax laws with all the necessary loopholes. CA can not tax the poor, because they don’t have anything to tax.
The only tax donkey left is the middle class which will be taxed out of existence. When others from other states will hear about “free stuff”, they will also come till the taxes need to be raise by over one TRILLION. CA will be the first to experience the Democrat utopia – few overlords and all others EQUALLY poor. “They’ll own nothing and be happy”
John Kobylt of the John & Ken show on KFI said on the air that his Father was a slave. The Wikipedia article on the show includes his Father’s time as a Polish internee in a Nazi labor camp (5 years a slave). Millions of slaves perished in Nazi, Soviet and Chinese forced work camps under extremely brutal conditions.
The historian Joel A. Rogers calculated that 388,000 slaves were transported directly from Africa to North America. He also calculated that slave ship mortality was 12-13%. And his figures for surviving slaves brought to the New World was 10.7 million. In 1860, there were 4.4 million Blacks of whom 3.9 million were slaves. This was 60+% of the total New World slave population at that time. The condition of slaves in the West Indies must have been horrendous. Of course the New World includes Brazil, which Wikipedia estimates brought 5.8 million slaves from Africa, apparently some after our Civil War. Brazil had 1.5 million slaves at the time of abolition plus 4.5 million free Blacks and Mulattoes. Again, very brutal conditions for newcomers, but more manumission of mixed race and multigenerational Brazilian Blacks.
The slave trade from Africa was outlawed in the US in 1807. Some small scale illegal slave trade went on, and of course, Spain and Portugal continued their trade. So meeting the demand for slaves in the newly established cotton plantations was met by producing new slaves in the border slave states (baby farming!) and then shipping them south when they were old enough to do plantation work. This practice ripped apart families which is definitely a form of cruelty.
Compare all this to Russia. The scope of serfdom in Imperial Russia was a massive number of people. From Wikipedia:
By the eighteenth century, the practice of selling serfs without land had become commonplace. Owners had absolute control over their serfs’ lives, and could buy, sell and trade them at will, giving them as much power over serfs as Americans had over chattel slaves, though owners did not always choose to exercise their powers over serfs to the fullest extent.
The official estimate is that 23 million Russians were privately owned, 18.3 million were in state ownership and another 900,000 serfs were under the Tsar’s patronage (udelnye krestiane) before the Great Emancipation of 1861.
One particular source of indignation in Europe was Kolokol published in London, England (1857–65) and Geneva (1865–67). It collected many cases of horrendous physical, emotional and sexual abuse of the serfs by the landowners.
But what about today’s World? endslaverynow.org estimates that there are 21 to 45 million people held as slaves today. In their forced labor section, there is mention of foreign workers held as forced workers, but no mention of Uighur slaves in Chinese camps or North Korea’s generational labor camps. SO, I think their numbers are probably on the low side. I think that the money would be better used to beef up human trafficking law enforcement in California. That is a current issue that would help all Californians (except for the organized criminals, of course!) and is a proper use of California taxpayer’s money.
If some version of this crazy handout happens you will see massive housing price increases. Houses going for 850 will suddenly go for 2.2
There is no other place to put that much money rapidly that is also a status symbol and adds value. Some will buy a RR but there aren’t enough of them to go around – nor that many deeply stupid people. Even drugs can’t sop up that many dollars. All of our squabbling about is this house worth 700 or 850 will be out the door and a memory as everyone fights over 2.2 or 2.5
I am a nurse, LVN, which stands for Licensed Vocational Nurse. I am not a RN which stands for Registered Nurse. LVNs make about half what RNs do. That may not be exactly accurate but RNs are paid much more than LVNs. Now that we have that cleared out of the way so I don’t have to deal with a douchebag telling me, a nurse/LVN how much I’m paid because their friend is a nurse and then quote RN salaries for Kaiser, as clearly they don’t know what they are talking about and unable to differentiate a LVN salary from a RN salary.
That being said, I am a nurse LVN in southern California with over 10 years of experience. I have to work 60 hours a week to net $1500 a week. People in my profession, licensed vocational nurses are priced out of the housing market. What kind of economy are we in when nurses (LVNs) can’t afford to buy a house! I’m 40 years old with 2 young children. Wife is stay at home mom as her going back to work wouldn’t cover daycare. I have been following this blog for about 10 years, read, but never comment. I agree with buying as soon as you can comfortably afford. I am still waiting for that day. Without a price drop that day will never come. The reality of the situation is it’s quite possible I’ll be forced to rent my entire life. And homeownership may be a thing of the past for the next generation to come, which is something people talk about being the end goal of the government or what not. As they are pushing forward with this new world order thing, own nothing and like it etc. Well see how things play out but I can assure you there are many more people in the same shoes as me out there. I don’t see any real change happening until the boomers have all died off and are no longer running the country as they are completely disconnected and in denial of the current situation the majority of people my generation are in. Unlike millennial, I won’t be getting any inheritance money, and have no family or relatives that I can just “move back home” with like they say the majority of millennials do. It’s been a long hard road to even get where I am currently.
The World Economic Forum (WEF) boss – Klaus Schwab – said openly “you’ll own nothing and be happy”. WEF and Klaus Schwab are globalists, like all Democrats any many RINOs. Since you know their goal and the goal to eliminate fossil fuels (they openly said so), you can say bye bye to home ownership or any ownership for that matter. The whole economy is based on fossil fuels and no amount of “green energy” will replace that. “Climate change” is the new trojan horse of the globalists to grab all power.
Increasing the money supply by 40% in 2 years to buy votes is not going to help you ever to buy a house or a car with cash. The result of that is massive inflation, much greater than stated officially. By increasing the money supply (the most regressive forms of taxation), everyone’s standard of living took a 40% cut unless you already owned real estate.
Voting the same globalists in power at every election expecting different results is the very definition of insanity. 90% of CA politicians are hard core globalists.
Nurse, how come you don’t move out of CA? No older family….so what’s holding you back? LVN opportunities everywhere!
I used to date a LPN in the 70s. She said it was short for Lowest Paid Nurse!
An on-line article from Bloomberg had some interesting information about the national real estate market.
First, Blackstone has a $69 Billion (currently I assume) Real Estate Income Trust. Yesterday, the fund announced that it is limiting withdrawals. Too bad if you didn’t cash out last week.
Wells Fargo is the largest home loan origination bank, and it is cutting hundreds more mortgage employees. Good luck finding a job in that field.
Housing prices nationally have dropped for the last 3 month, and the volume of rate lock mortgages has dropped by 61% in the month of October from the previous year. Also pending sales have fallen for 5 months in a row; all according to Black Knight Inc, a data analytics company.
Commercial real estate prices have slumped 13% from a peak this year (Green Street’s October price index), and financing is getting tight leading Brookfield Asset Management (a $725 Billion Canadian alternative investment firm) to warn of a struggle to refinance certain debt.
Starwood Capital backed Reverse Mortgage Funding has filed for Chapter 11 this week. Opendoor Technologies Inc which has been involved in home flipping has laid off 18% of its workforce and wrote off the value of property holdings by $573 million. Redfin has had two rounds of layoffs and shut down its iBuying business and Compass Inc has cut staff in its technology teams. Independent contractor real estate agents should also be feeling the pain nationally…sitting waiting for the phone to ring!
OUCH!
But yet in our low inventory Orange County area, we’re seeing houses still selling. All real estate is local, and the national picture is that interest rates are driving the collapse. High rents and housing shortages may keep Orange County from the same degree of collapse as nationally. But any massive job cuts in strategic SoCal industries will have to hurt. Meanwhile, We’re staying put.
Reality is setting in for millennials to generation Zers. I recently heard Charlie Munger (95 yrs. old. Berkshire-Hathaway) being interview. He was asked about bitcoin investing. He said, “Trading bitcoin was the same as trading turds”.
At the moment Real Estate is also looking pretty bad, but still has intrinsic value. The key is not to overpay. The last 10 million buyers have a problem. This time around I will be surprised if the FED bails out the entire market like they did in 2008. They still have that debt on their books to deal with. Should be fun going forward. The FED has painted this entire economy, and with it the rest of the world, into a corner. Too much QE, aka free money! Look for some major change going forward. I doubt these will be of a positive nature for the average investor or home owner. It’s only prudent to be prepared. CARRY NO DEBT! Be patient. Opportunity is in our future…..
OC Register’s Lansner has a list of LA/OC Zip Codes that were in the top 100 Zip Codes for home prices nationwide. 23 of the top 100 are in LA/OC. The numbers are for 2022 through October 19th. 90210 was #3 nationwide. OC’s highest was 92662 in Newport Beach at #9 ($4.7M). Newport Beach had six of the eight OC zips and Huntington Beach had one. The only listed OC Zip (#73) that is less than 10 miles from where I live is 92861…the little known Villa Park! No state other than CA and NY has more than 3 such zip codes.
Someone mentioned they were a Perma bear and it didn’t pan out so they bought real estate and is sitting pretty. If you read John hussman, his historic valuations of the market will show it’s been over valued for a long time. Everything reverts to its mean. The only reason the stock market has held up is because of low interest rates and this is how all these startups have continued to fund themselves. Has amzn made a dime? How much market cap did they just lose. If it wasn’t for them rolling over cheap debt and intentionally losing money to corner the market they would have never existed. Sorry to say but the game is over because the dollar being King is days gone by. I o w the Global Financial hegemony of the dollar is over. This is one of the reasons for the mass of inflation spike. The truth is in the book by Karl denninger called Leverage from 2012. All these corporations that have to roll over their debt will not make their yoy targets so evaluations cross the board are coming with multi-year lows. Last saying Medicare and Medicaid percentage of GDP is ramping to the point of no return. The new definition of a depression is upon us it’s just nobody sees it. Papering over it is not happening and this is why Powel at all cost has to get ahead of this inflationary nightmare. Look at Germany this last week inflation at 11 plus percent.
I’m typing on this with my cell phone please excuse the typos.
Emancel,
You forgot to put a zerohedge link in your post and the end-of-the-world date.
I’m not a conspiracy theorist but I’m sure you did not read Deninger, who by the way was one of John McCain’s campaign managers. He’s done presentations to the Senate on the yoy budget issues that will continue to cause an inflationary problem because there will be a point where you cannot just keep borrowing money from the future. Or read John Hussman’s latest column as he is one of the most respected Financial analysts today. In fact your statement is from a perspective of somebody who obviously has plenty of money and nothing to worry about. If we’re not getting close to a depression maybe you could explain carvana and Tesla’s stock chart to me and tell me if that’s not an ultra bear chart. You don’t need to read zerohedge or anybody else to figure out what’s going on unless you’re just like pointing fingers and acting like you know everything. Better yet look at the Cathy ARK fund and tell me how progressives can even justify we’re not moving into a serious recession. She was the darling of Wall Street but I guess anybody who invested with her likes losing money. Next time you post to me try to engage in critical thinking instead of your childish banter.
All the hype stocks will see more downside. More than most people expect. That’s a good thing. Cathie wood is a laughing stock. She was on live TV saying that her base case for Tesla is 7k per stock. A multi-trillion market cap?! ROFL. She has no clue what she’s talking about.
A prolonged bear market doesn’t mean the world is falling. If you bought into the hype stocks in the late stage then you deserve to lose money. Smart money needs exit liquidity. Look at me, I buy crypto when all the haters cheer that crypto is dead and nobody else talks about it anymore. (We are not there yet).
What I always say is: bull markets make you money, bear markets make you rich.
The mistake that all perma bears make is: they never buy. They lose out on bottoms because they are so hung up on how much worse things get (the essence of zerohedge). Missing the bottom and always waiting for a bigger crash is the best way to f-ing yourself financially. It’s very entertaining to watch and it makes me feel good to buy in low and seeing my wealth skyrocket (while the perma bears eat popcorn and wait for a crash).
Emancel,
What I see is a return to the mean in all markets.
The stock market is very similar to the Tech Bubble of 2000. Bubble stock companies that have made no money and were purchased on speculation are returning to fair value. The ARK funds are loaded with speculative stocks. The Tech crash did not cause a deep recession in 2000. Though it did take 10-15 years for the Tech survivor stocks to recover. The S&P 500 index also included many Tech stocks and took 6 years to recover to the the 2000 peak. It is interesting to note that at the bottom of the Tech bubble the S&P 500 returned to the value in 1997. 3 years before the peak. I expect the value of the S&P 500 to also drop to 2019 levels just like what happened in 2000. Speculative stocks will fall much further just like they did in 2000.
The 2008 housing bubble was also caused by “free” money being handed out in no-down mortgages to anyone with a pulse. That is similar to now with one difference.
Inflation in 2008 was negative and income was decreasing. Now, inflation is rising and working income is increasing. The inflation based mean house prices are rising due to inflation. Working wages are increasing. The fall in housing prices this time will not be as drastic due these factors compared to 2008. They will likely return to 2019 prices (This contains effectively another 10-20% loss due to inflation).
For this reason, housing prices will follow what happened during the inflation of the 1980’s-1990’s. A 10-20% drop with a subsequent flattening for nearly a decade.
Or, if there is massive unemployment, 2008 will repeat.
munch munch munch …
San Francisco, down 16.1% to $1.3 million. San Diego: Down 6.8% in the summer quarter to $900,000. Sacramento: Down 6.1% to $535,000. Fresno: Down 3.4% to $410,000. Inland Empire: Down 3.1% to $567,000.”
Got popcorn 🙂
Realist you should have bought when I did: in Q1 2020
If you had bought in 2020 you would:
Live a happier and healthier life
Enjoy a fixed mortgage at below 3% instead of ever increasing rents
Enjoy a house (that would probably get you a girlfriend too)
Wouldn’t have to worry about house prices going up or down!
Instead, you cheer about a few % points of declining house prices. Btw, your mortgage today would be a lot more thanks to 6-7% interest rates. Plus, you have to hope for a RE crash and you eat nothing but popcorn. Doesn’t seem like a great way to live your life.
Will you listen next time when I tell you to buy? I have my doubts. Some people only learn the hard way. You can tell a mule where to find water but if she doesn’t drink, what can you do?!
My properties are ALL paid off, unlike debt donkeys I live a life like very few.
Got popcorn 🙂
ROFL! Thanks for the laugh realist! So assuming you have a paid off house. Why in the world would you want that? Take me for instance. My primary house has a 30y fixed at below 3%. You know how good this feels in a 7-8% inflation environment?
Rather than paying off the house you buy a third one.
But again, you can lead the mule to the water but can’t make him drink….
It’s safe to say there is no crash in 2022, lol. Despite the perma bears/crash bros ensuring us the crash is here. Btw., we have heard about this crash since 2020. Remember the foreclosure tsunami due to forbearance? Lol
The good news for our crash bros is that 2023 is around the corner. And if there is no crash in 2023, well then it’s 2024 for sure!!! For real this time!!!
My prediction? Pain.
The perma-bears pain is the joy of smart investors
Headline: Remote work wipes $453b off office real estate
https://www.theregister.com/2022/10/03/remote_work_real_estate_values/
The surge in remote work, and a decline in demand for office space, during the COVID-19 pandemic has apparently wiped an estimated $453 billion off commercial real-estate value. That’s not good news for investors and pension funds relying on the value of these buildings.
The US National Bureau of Economic Research (NBER) – a nonprofit, non-government org – came up with the figure, and is predicting what it calls an “office real estate apocalypse.” While it focused its work on New York City, data from 105 office markets throughout America between 2000 and 2022 was included in a report this fall.
Prior to the coronavirus outbreak, 95 percent of office space was occupied in the US, according to the bureau. By the end of March 2020, occupancy dropped to 10 percent, it said. As of only a couple weeks ago, the NBER said office occupancy is still only at 47 percent. …
Commercial real estate is a popular choice for investors and pension fund managers, but with remote work likely to hang around, and office occupancy lower, those investors may be in trouble. …
M reminds me of Taco Bell Jeff but that was another crash long ago and far away couldn’t happen again…
Correct. A 2008 housing crash is highly unlikely in this market and with these credit profiles. It’s very different than 2005-2007.
OC Register columnist Lansner’s column is about the rate of building permit apps in the US. Nationwide, permits fell 15% in October from the previous year but fell 29% in CA. They were up 4% in TX!. The economics of new housing construction just doesn’t make builders want to build very many new houses here. High building costs, regulatory overreach and high interest rates along with slower population growth make CA way less desirable for builders than TX and FL. Both of those states are behind CA in houses built per new resident, so builders have a shot at making some money.
That’s why this rapid drop occurred in CA in the month of October this year. Higher costs and fewer people who can afford the more expensive new construction. Our population growth of undocumented (want to be) workers and shiftless drug addicts, thieves and mental cases isn’t going to please anyone with a house to sell. Maybe some slumlords will make a profit off the border crossers selling fruit and other items on the street, but they aren’t going to spur new construction. Just as the State punishes oil companies (so we will ultimately get no refineries), they’ll try the same with builders who are a lot more mobile. Lansner bemoans that “California’s housing supply issues will never be cured if developers continue to slam the brakes on homebuilding when the market gets dicey”. With the policies of our government in CA, I’d say that the builders are obligated by self-preservation to always wait until conditions are screaming “Build!!”
I sympathise with the bear case, I was a permabear but reversed course in 2018 and haven’t really looked back. There are very strong incentives for the system to prop up housing. They aren’t always successful, like in 2008, but as you can see ever since then, prices recovered and then just kept climbing. The problem with a lot of folks on this blog is they think they will be able to time the bottom, whether it’s a 10,15, 20 or even 40% drop. The reality is, no one really knows what will happen. But the real problem with housing is that it’s not like stocks or even most other investments. For most of us, a house is where we live. You’re not going to buy any random house like you buy an ETF. The actual physical structure matters to you. The problem that a lot of you guys are going to have is actually finding a house you want to live in, in an area that you want to live, at a price you want to pay. This is no easy feat. I bought a large home in early 2021 and paid a lot of money for it. I’ve looked every day for something else I could have bought that was comparable for a lower price and literally nothing has shown up. My suggestion is to stop with the hand wringing and just be clear on what you want and what you can afford and just hit the bid. That’s basically all you have control over.
You said you were a Perma bear in 2018 and have not looked back. The question we have to ask ourselves is was the last four year run due to money supply being added into the system? If not was it organic growth? Clearly it was cheap money and Congress writing checks like there’s no tomorrow. So then the question comes up why is the Federal Reserve ramping rates and what happens if inflation becomes out of control?
Since the year 2000 we have ramped up spending and the majority of our entire economic output is based on borrowing. That is not a bull or bear case scenario. That is just fact which is based on math. Well let’s look at some major publicly traded companies that are not doing so well. AMZN lost a trillion dollars in market cap.
NFLX, TSLA, Fed ex, META, and the list is massive and the charts look horrible. How about Shopify and all these other internet darlings from the year y2k? All the two five and 10 year bond rollovers from companies that cannot survive based on earnings alone will be laying off workers writ large. It’s already happening. Everybody thinks that this party will resume in another year to however I’m here to tell you I wholeheartedly disagree. The best analysis in regards to purely the mathematical science behind it, demographics, Etc would be from John hussman IMO. The tax base in the United States Treasury is being eroded more and more because of a continued ramp of borrowing. This is inflationary to say the least. Housing inflation has been at a all-time high in the last 4 years
Oh please don’t bring up Hussie. I read him religiously for years. I read every article he put out on his website. Dude, I was all cash in my 401k from 2008 to 2018. Take a look at his return numbers and tell me that being smart means you know how to make money. There is literally no correlation. The fact is, he had no idea, he has no idea, and you and I have no idea. But, historically, US equities and real estate have been exceedingly resilient over the long term. Check our Jeremy Siegel. He thinks equites are significantly undervalued right now and his track record is way better than Hussie.
You said you were a Perma bear in 2018 and have not looked back. The question we have to ask ourselves is was the last four year run due to money supply being added into the system? If not was it organic growth? Clearly it was cheap money and Congress writing checks like there’s no tomorrow. So then the question comes up why is the Federal Reserve ramping rates and what happens if inflation becomes out of control?
Since the year 2000 we have ramped up spending and the majority of our entire economic output is based on borrowing. That is not a bull or bear case scenario. That is just fact which is based on math. Well let’s look at some major publicly traded companies that are not doing so well. AMZN lost a trillion dollars in market cap.
NFLX, TSLA, Fed ex, META, and the list is massive and the charts look horrible. How about Shopify and all these other internet darlings from the year y2k? All the two five and 10 year bond rollovers from companies that cannot survive based on earnings alone will be laying off workers writ large. It’s already happening. Everybody thinks that this party will resume in another year to however I’m here to tell you I wholeheartedly disagree. The best analysis in regards to purely the mathematical science behind it, demographics, Etc would be from John hussman IMO. The tax base in the United States Treasury is being eroded more and more because of a continued ramp of borrowing. This is inflationary to say the least. Housing inflation has been at a all-time high in the last 4 years, look at the money supply and interest rate charts in that time period and tell me that that’s organic growth? I don’t look at it as in terms of a bear case scenario I look at it as a structural balance or imbalance. What is showing up in all of these stock charts is what is so telling. When carvana goes from 350 to $5 look at why that is happening structurally? That’s underlying current is across the board with so many publicly traded companies and people think that it’s not going to trickle down to housing but I’m here to tell you that that is a complete fabrication because housing lags and when it does hit housing everybody will know how much it’s been inflated. The used car market for all intensive purposes next year is going to have a wipeout. There are some articles written by top Auto CEOs who are saying that the structural imbalances because of easy credit are going to devastate the used car business. How many jobs across the board are related to used cars? All those people own houses. Everyone thinks that the used car business is just going to turn around and come back next year like hey yeah this is the new norm. Actually it’s not a norm and it has been fueled by an economy that is used to and addicted to credit that was pulled forward and now that equation is going to fail us. It’s called living within your means. The FED knew this years ago and all the Perma bears were put to sleep. I just been addressed 20 years ago they hit to GDP would have been minor but now it’s going to be major.
California nightmare, no worries, those reparations checks will create a whole new class of neighborhoods munch munch munch
The Los Angeles Times. “Southern California home prices fell in November, marking the fifth time in six months that prices declined. In individual Southern California counties, home price declines from the peak range from a 3.5% drop in San Bernardino County to an 8.6% drop in Orange County. In Los Angeles County, prices are down 7%. In Riverside County, the typical home price fell 0.5% from October to $599,428 last month. Prices are now 4.6% lower than the county’s peak reached in June. In San Bernardino County, the typical home price fell 0.6% from October to $523,830 last month. Prices are now 3.5% lower than the county’s peak reached in June.”
“In San Diego County, the typical home price rose 0.1% from October to $877,278 last month. Prices are now 7% lower than the county’s peak reached in April. In Ventura County, the typical home price rose 1.2% from October to $837,891 last month. Prices are now 3.9% lower than the county’s peak reached in May.”
Got popcorn 🙂
Prices are 3.9% lower than May and this guy’s having a popcorn party?! To celebrate a 3.9% decline?
“Prices are now 3.9% lower than the county’s peak reached in May.”
Got popcorn ????”
That’s one of the reasons I love this blog so much. Too funny seeing the perma bears celebrate a 3.9% decline in house prices.
Poor perma bears…..I know how they feel. I don’t miss my days as a renter waiting for a crash in RE. I enjoy every moment in our beautiful new house.
I have popcorn because this blog and the housing market is the best drama EVER.
Better than anything on Netlflix today. And it is real time so I don’t have to wait for the next season.
Latest episode:
The protagonist Fed has a knife!!!! Will they use it??? Or will they drop it and all of the other characters dive in to catch it?
Just awesome characters and acting with M as the resident Siskel and most of the rest of us playing Ebert.
If you purchased within the last 2yrs, welcome to the UNDERWATER world of 3% raters lmao munch munch munch
Los Angeles Magazine in California. “With the city’s real estate off 20 percent since its peak last spring, sellers are slashing prices. Here are some properties that lost thousands and millions in value. Reached via a winding private drive, this three-bedroom, three-bath, 2,988-square-foot traditional canyon home on five acres dates to the 1930s. Value Since it was listed in June, the property has been reduced in price three times in roughly $1 million increments; the latest reduction was made in September. Price $6,995,000 ? Today $3,499,999.”
“Recently renovated, this 5,691-square-foot, five-bedroom, six-bath mid-century modern adds an eat-in chef’s kitchen and infinity pool with cabana. Value The price was lowered by $1 million after listing last spring, casual evidence that even a Beverly Hills location isn’t immune to current market pressures. Price $7,950,000 ? Today $6,799,000.”
Got popcorn 🙂
Headline: ‘Comply or it’s going to be a serious backlash:’ Activist demanding $800,000 for every black resident issues warning to California’s reparations task force
https://www.dailymail.co.uk/news/article-11544937/Deon-Jenkins-California-senate-candidate-warns-backlash-reparations-debate.html
An activist has warned California’s reparations task force that there will be ‘a serious backlash’ if they do not comply with his demands for more than $800,000 to be handed out black residents,
Deon Jenkins told the first meeting of the Task Force to Study and Develop Reparation Proposals for African Americans that money given to black people in the California should be in-line with the average price of a home in the state, around $800,000.
California must buy a house for every black person in the state — or else.
From Wikipedia:
“According to 2018 US Census Bureau estimates, California’s population was 59.5% White (36.6% Non-Hispanic White), 14.7% Asian, 13.8% Some Other Race, 5.8% Black or African American, 0.8% Native American and Alaskan Native, 0.4% Pacific Islander, and 5.1% from two or more races, with others identifying as Some Other Race (34.4%), Multiracial (5.1%), Black (0.7%), American Indian and Alaskan Native (1.1%), Asian (0.5%), and Hawaiian and Pacific Islander (0.1%). By ethnicity, 39.3% of the total population is Hispanic-Latino (of any race) and 60.7% is Non-Hispanic (of any race).”
We’re approaching Vermont’s 2.1% Black, but we aren’t 2.6% Hispanic like Vermont (Vermont > 90% White). This is the last hurrah for Black politicians in CA, as the Hispanic population increasingly becomes eligible to vote. Big name Black politicians in CA are mostly supported by White Leftists, or else are in areas with large numbers of non-voting Hispanics. That is going to change. Kevin De Leon (who represents the area I grew up in) is currently feeling the wrath of the Leftist promoters of Black reparations. BTW, he did not grow up there; he moved there long after he grew up. He has John Holland’s old district. Holland was the Republican councilman who fought the evictions in Chavez Ravine back in the ’60s. Now there was a raw deal.
I am Caucasian and think that’s rayyycist toward me if only black peeps get 800k.
The activist should be liberal and inclusive. I would buy more bitcoin and actually do something productive for society with that money. Also, the activist should not judge by color. Take me for instance, what if I paint my face? I would still be the same Millie crushing it. Looking darker wouldn’t make me a worst investor would it? So the activist should look at that logic and include white dudes as well. but I do like his idea. That be a nice additional stash of precious BTC in my digital wallet!
Is Scottsdale, AZ in bubble territory too? This seller wants nearly $600,000 more than what he/she paid in July 2022.
https://www.redfin.com/AZ/Scottsdale/7979-E-Princess-Dr-85255/unit-27/home/26921873
Interesting.
It is under contract. Let’s see what what it really sells for.
IMHO, I doubt there was a bidding war. However, they have an accepted offer after only being on the market for 11 days.
I will bookmark your link to find out the dramatic conclusion of this story.
I’ve got my popcorn.
It sold for $1.65M. The list was $1.69M.
Hardly a crash but I’m happy there wasn’t any overbidding. RE is leveling off after a year.
Speaking of Scottsdale…
Headline: ‘Our water tanks will be dry within days’: Arizona city cuts OFF water to neighbors amid drought – as desperate residents demand ‘water now’ and countdown until dwindling supply runs out
https://www.dailymail.co.uk/news/article-11640903/Were-not-going-make-Arizona-city-cuts-neighborhoods-water-supply-amid-drought.html
Residents in the Rio Verde Foothills of Scottsdale, Arizona, are going to extreme and uncomfortable measures to procure water as they count the days until the supply runs out.
The city officially stopped transporting water to the unincorporated neighboring area on the first day of the new year.
Scottsdale has blamed the ongoing drought for its decision to shut off tap water for its neighbors. The city says it can no longer afford to sell water to its neighbors and must concentrate instead on conserving water for its own residences.
That critical decision has left between 500 and 700 homes – roughly 1,000 people, many of whom operate businesses and send their children to school within Scottsdale city limits – without a dependable source of water.
Residents of the area’s many half-million dollar McMansions, stucco homes, and ranches are desperately searching for a solution to the very serious problem.
Homeowners say they are counting down the days until their water supplies run out.
‘It’s dire,’ said Cody Reim, who says his monthly water bill will now skyrocket to about $1,000 a month. ‘We need water now, we can’t wait a week, and we can’t wait a day. This shouldn’t have happened; we shouldn’t be ten days without water.’ …
With crypto in a continuous long-term dip, how does one know when to buy the dip?
That’s simple! Just ask me!
Headline: How bitcoin fell to earth: The whole crypto system is being exposed as a multi-trillion dollar pyramid scheme
https://www.thisismoney.co.uk/money/comment/article-11567049/ALEX-BRUMMER-Cryptocurrency-exposed-multi-trillion-dollar-pyramid-scheme.html
Music to my ear. I want to buy more crypto at lower prices!
Merry Christmas to my fellow investors and homeowners. Merry Christmas to our renters as well!
It’s beautiful weather in CA these days! It makes sense that a decent house costs 1.8M – 5M dollars here. Especially SoCal. If places in SoCal would be cheaper we would see a rush to sell in other states and an exodus from other states toward CA. We can’t have that. It’s crowded enough here. If you can’t afford it here you should move to Chicago.
Hope Santa was good to all of you! Cheers!
Two OC register articles with interesting information:
A summary article on interest rates says that the 30 yr fixed rate has been dropping steadily for six straight weeks, and borrowing costs are down 80 basis point since early November. Even with dropping interest rates Freddie Mac says homeowners are reluctant to list their home. The drops have been slow but steady, e.g the last drop is from 6.31% to 6.27%. This is a trickle but if the trend holds, we will see a slow resurgence in sales.
An article by columnist Lansner on million-dollar homes says that the newly released 2021 data shows that 41% of these homes are in California. But the growth of million dollar homes over a five year period was mostly in the Western states that Californians are moving to with Idaho leading the pack by percentage at up 444%! Utah, Washington, Colorado and Montana round out the top five. The top states for the five year % increase in home values were Idaho, Utah, Arizona , Washington and Nevada; all are recipients of large numbers of Californians with RE gains. Since the data doesn’t include 2022, Mr Lansner is promising to keep up with this trend to see if the slower market crushes the phenomenon.
My take on this is that the fact that this is happening in the West means that it is California expatriate driven. As California RE prices decline due to higher interest rates, the impact on the other Western states will depend on the number of Californians looking to move to less crowded Western states. I think that this is a long-term demographic shift based on the population of people over 50 (especially those of the baby boom generation). The peak of the Baby Boom was 1957. That peak group will turn 66 next year. So the next five years will be a demographically favorable one for people relocating to areas they see as less stressful. As long as the prices in the other Western states don’t exceed California prices, the trend will continue. The big rise in prices in those states is undoubtedly driven by California money outbidding others
I read this blog time to time, almost never write. I think M is a Artificial Intelugence bot , have you consider this folks? No ofence to good doctor I just have the feeling somebody is conduction masive experiment here …
Thanks for the question Dani! M is most definitely not a bot. But you can be a success story just like him if you listen to his most important piece of advice and recommendation: obtain a large inheritance from a dead relative. If you can do that then you will be set for life and can have the keys to this blog!
Totally agree here. I am as human and woke as they come. No bot, I appreciate the compliment though (being compared to a computer program).
Also agree with m-squared. Alternatively, you get an inheritance from a dead non-relative. Works just as well.
Good luck out there! The new year is here and you get another chance to buy your first house!
Come on guys, don’t listen to these imposters. If you just do as I say and “buy the dip” you will be living the American Dream in no time. Just look at me, I own tons of BTC and other crypto and a rental in AZ. I think if you were to lookup the definition of “success story” Webster’s would jist point you to all of my posts here (thanks SOL for compiling all of them btw! And also for renting because its people like you who make me rich quick). The only thing missing here is that I still haven’t been able to get the keys to a Dodge Stratus. Soon enough though – I can’t wait for that day.
A dodge? Nope, during the next crypto bull run – if it will be as lucrative as the last bubble – I’ll prob buy more rentals. I already drive a very nice car but I don’t want to dox myself here.
Btw., our perma bears told us how inventory will skyrocket in 2022. Looks pretty bad for our perma bears. 2022 is over. Another year without the forecasted inventory spike and of course, no crash. 2023 will provide another chance for our crash bros. Good luck! In the meantime, we’ll enjoy another year in our beautiful house.
M is young and enthusiastic.
He was too young to have experienced the heavy losses of the Dotcom crash of 2001 and the housing crash of 2008. After he experiences at least one crash, I think we will see a much more mellow M.
I hope it doesn’t happen again and I hope he doesn’t disappear like Mr Landlord. M makes this blog very entertaining and has some great points. I’ve learned a lot over the last few years.
Happy New Year!
🙂 thank you Bob!
Dani, you are over the heel on this one. M is not AI, but rather the first post you see when you stick out your turtle head out of your faraday bag.
But seriously, the dominance of M-related drama on this thread is indication that nothing is really happening out there.
Surge, that comment made me laugh hard. A classic!
I am so thankful that SOL shared with us that he wraps himself in a faraday bag. That laugh will never get old.
Your second line is also true…..no inventory, no demand. The opposite of what our crash bros forecasted (wished for). Tough days (months) ahead for our perma bears!
Low transaction volume has made for thin data in my part of San Diego but I do try and watch model match sales and comp sales and within the past month there have been some staggering drops from peak spring ’22 prices, i’m talking minus $580K on 2700 sq ft and minus $740K on 4K sq ft., very nice neighborhoods. Of course my house is going down in value too LOL. I expect all the gains I saw from April ’19 to eventually evaporate and then some but it will be basically a wash in a sense as everything in the neighborhoods i am looking to move into is coming down pretty hard.
Before Bubble 1 was inflated nice homes in my area were running at about 4X professional incomes, that rose t about 6X before the bust. Now prices are about 10-12X professional incomes, way too detached. But prices are coming down and probably will do so for the next several years.
This is odd. They’re selling 1/8 of a Malibu home. Not the entire home, just a “co-ownership” of 1/8.
https://www.redfin.com/CA/Malibu/27405-E-Pacific-Coast-Hwy-90265/home/6855321
munch munch munch….
A report from the Union Tribune in California. “San Diego County’s home price has dropped for the sixth month and is close to erasing all yearly price gains. Jeff Grant, owner and agent with Sand & Sea Investments, has a listing in Solana Beach that recently went on sale for $1.9 million and isn’t getting much attention. His seller purchased the home in April, when home prices were peaking, for $2.45 million. For personal reasons, the buyer has to sell now and has put it on the market for a considerable discount. ‘I cannot get an offer,’ Grant said. ‘It is worth all day, $2.3 to $2.4 million, and we lowered the price, but not a single offer has come in.’”
$500k loss in 6 months, he should have invested in magic coins lmao
Got Popcorn 😉
You always hear people saying how awful California is and how everyone is leaving the state. Then winter comes along and you don’t hear this anymore. I always laugh when people tell me that California is an expensive state. It’s not expensive at all, the sun shine tax is well worth it. F your cold winters. I am in the desert right now with my buddies celebrating new years shortly here, weather is perfect.
Paying a couple mil to live in SoCal is fair. Paying 500k to live in places like Chicago IL or armpits like Portland or buffalo, NY are not fair. It’s overpriced in those places IMO. I mean who actually likes living there. And who likes pushing snow or defrosting windshields? Nobody enjoys that stuff. There is a reason why people are happier in places with better weather.
Happy new years to all my fellow Californias and HNY to the other states as well.
I love shoveling snow. Whenever I returned to NYC to visit my parents for Christmas, I was overjoyed if there was a heavy snow. So invigorating to shovel snow for an hour or two. Great exercise. And hopefully no warmer than 20 degrees.
I love NYC’s pink winter skies. Yes, when it’s heavily overcast at night, the sky glows a pinkish hue from all the city lights reflecting off the clouds.
I visited Northern Idaho a couple of winters ago. It snowed heavily. I was in heaven.
I’m also happy whenever I fly to Seattle and find the skies a dark gray and raining. I hope it stays that way for the duration of my visit.
Some of us love cold weather, gray skies, rain and snow, and short winter days.
In Santa Monica, the weather has been gray and drizzly for most of this past week. Such weather always cheers me up. But unfortunately, the sun will soon return, and the days will grow longer.
I hate California weather.
“I love shoveling snow”
Said no one ever. Except the guy who still owns his landline & cable and wraps himself in a faraday bag. ????
SOL,
I agree. While S. CA residents were trapped inside during torrential flooding rain, I was in a place where I put on my XC skis and was out having fun with my dog.
You can brush off snow. It is not possible to brush off rain. I also prefer shoveling snow than trimming/hacking overgrown CA landscaping.
Every place has it’s strengths and weaknesses. It is easier to dress for cold and be comfortable than to undress for heat enough to be legal (I would not like inland CA, FL or AZ but that’s my Nordic ancestors). It seems like the thousands of people who invaded Mammoth and Tahoe from S. CA last week agree.
S. CA in general has better weather than most places. Which explains the hordes of people and massive traffic jams.
CA also has more tech jobs with better pay than most other places.
There was a saying in Santa Barbara when I was growing up in the 1970’s and 1980’s. Santa Barbara was for the newly wed and nearly dead. The newly wed could still afford it on 2 incomes with no kids. The nearly dead lived in condos and didn’t have to do any outside work or pay high heating/cooling costs. I’m not either yet.
But I followed all your advice and now I’m broke!!
I don’t have any rich relatives who are leaving me a windfall but I’m still playing the lottery. I took my life savings and invested it into crypto because you kept posting rocket ship emojis and said it was going to the moon (to $100K remember??) but Cardano and BTC have lost 81.89% and 65% respectively YTD. TSLA and all my other tech stocks have also nosedived so I can’t sell.
I’ve been shopping at Aldi to save money and invest every month on the dips but the dips just keep on dipping! The only dipping I’ll be doing is my McNuggets into BBQ sauce!
I did manage to lock in a 3% sub interest rate on my rental property in AZ just like you. Problem is my tenant filed for BK and now has an automatic stay and I can’t evict them. I tried explaining that to the bank but they said they will foreclose on me. I should have probably lived there myself but instead I’m paying “sunshine tax” to live in a studio in Downey.
I’m hanging out in the desert too for NYE . Are you on Grinder too? Lets me up in Palm Springs! Jeeeeeeeeeeeeze
Well, some lose when others win. If you don’t buy high how do I get my exit liquidity when I am trying to sell? That’s how the market works. Buying a rental in AZ was smart but you need to do your homework on tenants next time. Get a good rental property manager next time and don’t rent to the first applicant. Cardano, ETH and BTC is also the way to go. Wait a bit longer for my buy signal. If they wouldn’t go down 90% during the bear market how are you expecting a 20-40x return during the next bull cycle? Also, be nice and respectful to your elderly friends and relatives and you may be included in their will. Last piece of advice: stay off zerohedge and do the opposite of what the majority tells you to do. Great future ahead of you. ????
“Well, some lose when others win”
M is always winning, just like Trump.
The famous lottery quote: “You can’t win if you don’t play”
This is mostly true in life.
Just don’t play too hard or play too little. The other cliche is: “Don’t put all of your eggs in one basket.” ie not everything in Real Estate in 2022, and not everything in 30 year Treasuries paying 1.5% in 2020. M did unexpectedly well investing in Real Estate in 2020. I hope it offset his losses in Crypto during this time.
We haven’t seen any predictions or prophesies for the 2023 economy yet.
I’ll look at what I posted last year and comment on this year if I was close.
Well, most of the time, yes.
What happens if you turn the M upside down?! = W
W stands for winning!
Any decent house in my decidedly non-prime Chicago neigborhood will run $500,000 at least. Anything priced lower is usually in relatively poor condition, while a single-family house in trendy downtown and north inner-city neighborhoods is at least $1.5 million and prices run as high as $10 million, with exceptional dwelling priced at $20 million or more.
You cannot compare Chicago, which is still the third largest city in the U.S., with much smaller Portland, or ragged, impoverished Buffalo. Chicago is not only considered to be the country’s architectural crown jewel. but is second only to NYC in amenities and cultural venues as well as a vast variety of entertainment venues, including 250 live theater companies. Additionally, it has excellent 24/7 public transit, and is mostly safe unless you insist upon hanging around in the far west side and south side areas that produce 95% of the violent crime. Oh, and we have 5% of the world’s fresh water supply in our front yard.
But, yeah, we have winter. However, I’ve personally always found it much easier to stay warm when it’s cold, than cool when it’s scorching.
I checked the rainfall totals for the 2022/2023 year and here in Orange County, we have reached ~5 inches of rainfall. With the rainy season starting now, we all may get more than 10 inches of rain this season. (The rainfall season runs from July to June.)
I noticed that the extensive annual rainfall tables that used to be available from the County on the internet have disappeared. I wonder if there is a conspiracy to keep the actual rainfall history here secret. I have strong memories of the 1968/1969 and 1982/1983 years. I opened a spreadsheet from 2014 that I saved and for the site I have data for there was 26.6 inches in ’68/’69 and 28.2 inches in ’82/’83. But there were also dry years like ’71/’72 (7.2″) or ’01/’02 (5.2″). The driest year on the table I have between ’61/’62 and ’13/’14 is 3.8″ (’06/’07) and the wettest year is ’04/’05 (35.9″).
I may have other archived files somewhere that go back further, but I can definitely say that there are about the same number of dry years midrange years and wet years over this date range. Dry years are less than 10 inches of rain, mid years are 10-15″ and wet years are > 15″. For the first 27 years there were 8 dry years, 10 mid years and 9 wet years. For the next 26 years, there were 10 dry years, 8 mid years and 8 wet years. I don’t see any major difference here. So much for “climate change”.
In years with less than 10 inches, SoCal in general will need to import or conserve. In 10-15 inch years we will be OK and >15 inch years will have flood damage (mostly in areas that shouldn’t have been built on in the first place). Saving runoff by pumping it into aquifers would eliminate much of the need for imported water, but that isn’t necessarily being done properly outside of Orange County.
I looked at my weather app on my phone today and it says we received more than an inch of rain in the last 24 hrs, so now we must be over 6 inches for 22/23 season. less than 4 inches to go to pass 10 inches. And rain is predicted for several days this next week.
It is ALWAYS called “Climate Change” in the Winter and “Global Warming” in the Summer. Watch and see.
You can’t sell “Global Warming” when there is -50 outside with the power grid failing.
The rain reminds me of growing up in S. CA in 1982/1983. Severe drought for a decade before. Water rationing. Building moratoriums.
Within 2 rainy seasons, the reservoirs were overflowing and everyone forgot the drought for another decade.
That is just typical CA weather. Is this time different?
“During the dry years, the people forgot about the rich years, and when the wet years returned, they lost all memory of the dry years. It was always that way.”
? John Steinbeck, East of Eden
Today, the current rainfall website for the County has 8 inches for the 22/23 season. So we got about 3 inches in the last week, including an inch and a quarter in the last 2 days. Wednesday night, the radio was broadcasting warnings that people should stay home from work if they could. Thursday morning, I drove to work and my wipers were on intermittent for all but two miles of the drive (<25 miles). Having lived in the coastal Northwest for a time, it seemed laughable to give any kind of warning, except maybe "don't tailgate dummy!"
BTW, I saw very little tailgating on the freeway; SoCal drivers aren't as a group a bunch of morons. It's more scaring people about "Climate Change", which is not supported by the actual data.
The weather gurus are so taken with the global climate catastrophe hypothesis that they can’t even predict the next three months:
“NOAA releases California winter weather predictions
by: Alix Martichoux, Nexstar Media Wire
Posted: Oct 20, 2022 / 07:26 AM PDT
Updated: Oct 20, 2022 / 10:24 AM PDT
The Climate Prediction Center’s official winter forecast has been released, and it’s got some mixed news for California.
The 90-day-outlook was published Thursday morning by the Climate Prediction Center, part of the National Oceanic and Atmospheric Administration’s (NOAA) National Weather Service. It gives people a rough idea of what November, December and January will look like across the country.
The forecast is heavily influenced by the presence of La Niña, which forecasters recently said was 75% likely to stick around through the winter months.
La Niña tends to split the country in half, bringing a dry winter to the southern half and a wetter winter to the northern half.
You can see that dividing line in map released Thursday (below):
https://thehill.com/wp-content/uploads/sites/2/2022/10/Screen-Shot-2022-10-20-at-3.49.23-PM.png?w=900
Southern California is expected to have a drier-than-normal winter, while Northern California is a bit of a mystery. The northern half of the state has equal chances of being above-average and below-average for rain and snow.
A La Niña winter is bad news for California’s drought. About half of the state is already considered to be in “severe drought” or worse, and dry conditions are expected to persist for at least the southern half of the state over the next three months.
When it comes to temperature, all of California is in the same boat. It’s expected to be warmer-than-average everywhere in the state, though Southern California has a slightly higher chance of a hot winter than Northern California does.
If forecasters’ predictions hold true, and La Niña sticks around through January, it’ll be the third La Niña winter in a row – a rare phenomenon we’ve only seen twice since 1950. However, new research suggests recurring La Niña years are growing more common due to climate change.”
This was taken from the LA Channel 5 TV Internet News. They are just repeating what they get from the so-called experts.
But the sharks in the sea seem to know more than the weather prophets. In 2015, a CSULB ichthyologist correctly predicted a wet winter from his shark surveys which showed an increase of warm water sharks off Long Beach. Here is an article about the sighting of a tropical shark earlier this year:
https://ftw.usatoday.com/2022/09/largest-fish-on-planet-wows-boaters-with-rare-california-visit
So for accurate climate predictions skip the fake “weathermen” and consult ichthyologists or charter fishing boat and whale watch captains.
This can’t be good for home prices…
Headline: Laid-Off Silicon Valley Workers Panic Sell Start-Up Shares As Valuations Crash
https://www.zerohedge.com/markets/laid-silicon-valley-workers-panic-sell-start-shares-valuations-crash
Silicon Valley tech companies have benefited from over a decade of low-interest rates and easy money. But since the Federal Reserve turned off the liquidity taps to combat inflation — at least for now — tech firms have been forced into aggressive cost-cutting measures, such as reducing headcount.
This brings us to the workers who were fired this year. Financial Times reported, “employees of embattled tech groups are flooding secondary markets — where stakeholders in a private company sell shares to third parties.” And as they unload shares on the private market, the valuations of these startups are collapsing.
The latest data from Crunchbase shows more than 91,000 workers in the U.S. tech sector have been laid off this year. …
Zerohedge. Lol
The issue is not the source/publication. This is a real issue commented by lots of journalists in many main stream publications. It is real and the ONLY debatable thing is the impact on the market, not the validity of data.
I guess it has to do with how fast those laid off people find employment and what type of employment and for what pay. Too much selling of shares also has an impact on price per share and consequently on RE.
Headline: Trudeau BANS foreign investors from buying property in Canada after Chinese and Indian immigrants snapped up so much it pushed up average cost of home to $800k
https://www.dailymail.co.uk/news/article-11592499/Canada-bans-foreign-investors-buying-property-country-home-prices-surge.html
Time to do my annual forecast.
Housing to decline by 5-10%
A recession in 2023
Further downside in stocks. S&P500 to bottom at 3200-3400. (Best case scenario).
Crypto: Another 50% decline from todays level.
2023 will be a generational buying opportunity.
I’d like to hear the 2023 forecast by poster “realist”. You know, so we get another good laugh.
Oh, and I forecast to keep my high paying tech job 🙂
Magic Coin to the moon, lmao
I wouldn’t call Bitcoin magic. More like: best thing since sliced bread.
And yea, Bitcoin will go to the moon. Just wait a few more years (and dollar cost avg while waiting).
Thank me later!
Since the good Dr hasn’t updated his post since mid-November, I’m going to wait for his next excellent post for 2023 predictions on housing and the economy.
For entertainment, here is my December 30 2022 prediction post with a critique and defense.
From Dr Housing Bubble December 30 2022:
“Happy New Year to All.
Here are my predictions:
1) The Fed(The Central Committee of the Banking Politburo) will raise rates in Q1-Q2
This will cause a steep drop in stocks (10-20%) similar to the last time the Politburo raised rates in 2018. Unlike 2018, the Politburo will hold the rates and allow the stock market to recover during the rest of the year and not increase rates until it is stable. The Politburo will not raise rates but will continue backing off of QE and will stop purchasing mortgage backed securities which will drive mortgage rates to 4-5%. (Hang on to your current 2.5% loan)
2) Inflation will drop to 4-5% as supply chains free up. The “free” Covid money will be spent and rent and mortgage forbearance will be settled in the courts.
3) Housing lags the stock market, but with less equity for down payments, higher mortgage rates, and increased inflation, price growth will be mostly flat or 3-5%. There will not be a crash if the Politburo does not make the same mistakes of 2008.
People will be more likely to sell their homes as they move back to working from an office and the fear of Covid decreases.
Employment demand is still high and wage growth is increasing.
4) Crypto – Anything that goes up 8X in 2 years is bound for tragedy at some point.
Disclaimer:
A massive Ebola outbreak, WW III, an asteroid collision, or a massive quake causing CA to slide into the ocean would likely affect these predictions.”
Here is my critique.
1) The Fed did increase rates in Q1/Q2 and the stock market did plunge 10-20%. I was incorrect that the Fed would hold for awhile on rate increases later in the year. They continued to raise rates all through 2022. They backed off on QE, stopped buying MBS’s, and went into QT. I underestimated their response. Due to this, my prediction on mortgage rates rising to 4-5% should have been 6-7%.
2) Inflation dropped to 6-7% instead of my prediction of 4-5%. This is due to Covid money still sloshing around the economy. I was optimistic that the free Covid money would be spent quickly. There is still too much money in people’s pockets and they are spending driving up demand and inflation. Commodity inflation has leveled off and prices have dropped. Services inflation due to low unemployment and higher wages is still having an affect in prices. People are feeling wealthy on average.
3) From Jan 2022 – Jan 2023 housing prices are flat or slightly up. I was correct. Housing prices rose to peak in April-June and have fallen since back to January 2022 on average in the US. Real Estate is local, so some areas have dropped more.
4) Tragedy continues to strike Crypto. The fat lady isn’t done singing.
When the good Dr updates his January post, I will release 2023 prophecies using my new Magic 8 Ball and Tarot cards since as you all know, my Crystal Ball broke in the 1994 Northridge quake. I won’t be as optimistic for 2023. I hope Dr also has some predictions. I also will eagerly await your predictions.
I’m sorry,
From Dr Housing Bubble December 30 2022
should be:
From Dr Housing Bubble December 30 2021
Home of Genius. Located in Venice. Priced at $1.7 million.
https://www.redfin.com/CA/Venice/1620-Glyndon-Ave-90291/home/6745679
Great location. You buy that, demolish the crap shack and build a brand new beautiful house there. Which will be worth 2.8-3.2M.
The land is what’s valuable here. RE is about three things: location, location, location.
That crap shack would cost maybe 20k in Chicago. But 1.7M in Venice. It makes sense. That’s why someone will buy it and do exactly what I describe: demolish and build. A no-brainer for someone who wants a new house in Venice close to the beach.
You know little to nothing about Chicago, which is distinctly not a “flyover” city. While the home prices here are still within the pale of reason, this is still not a cheap city. That crapshack would be about $100K on Chicago’s south side and perhaps $50,000 in the more decrepit south suburbs. It would go for land value only as it’s frame, not brick. If it were brick, it would go for rather more.
$500,000 container homes are being built in blighted Garfield Park, one of the city’s most dangerous neighborhoods.
I know a lot of about Chicago and instead of flyover country it should be called armpit of the US. Terrible weather and high crime. What else do you need in order to know that living there is miserable? Sure, if you compare it to Belize it’s maybe ok but if you compare it to California, it’s hell.
CA has lots of crazy liberals we can make fun of
CA has high paying tech jobs
CA has very high RE valuations (great for owners like me)
CA has the best weather in the world and very nice beaches
CA has mountains with snow, beaches and a desert where I can ride my desert toys and shoot guns
Chicago has lots of people of color who shoot each other – every hour or so one dies
Chicago has much lower RE valuations (because who wants to move there?!)
Chicago has lots of crime, murderers and thief’s
Chicago has the shittiest weather
Chicago doesn’t have high paying tech jobs
Clear?
M’s right – CA has a lot of crazy liberals that he likes to make fun of. And those crazy liberals vote for liberal politicians who he also makes fun of. Those crazy liberal politicians end up changing a lot of the rules (like making it illegal to do background checks on tenants and changing zoning requirements), but no worries: he still makes fun of those liberal politicians and their rules. Eventually, his neighbors start leaving the state and either rent out to criminals or have criminals squatting next door to him, but it’s all good: he just makes fun them as well. No big deal – he has guns and can buy the top lawyers (liberal ones too) with all that BTC. And despite what he says, he’s still secretly saving for that Dodge Stratus.
If you just follow his advice, you can be like him too.
“Eventually, his neighbors start leaving the state”
Bawahahahah haven’t we heard that before!
They will leave in droves!!
The great exodus!!
Uhaul rates!! Uhaul rates!!
Only illegals and criminals will live in California!!
Sure, wake me up when it happens. For some reason only people who can’t afford to buy in California (or a nice area) come up with this BS.
Not one owner in my hood has moved away and rented it out to illegals or criminals. If that happens to you, it must mean you live in a crappy hood.
Maybe invest better (crypto?) or try to get a high paying job!
That is a Real Home of Genius!
Every photo has a trash can or trash. I supposed for only $1.7M, the RE agent doesn’t have to do much work to clean it up before photos.
Good find. Takes me back to more interesting times on this blog. Hard to believe the “bottom” was 12 years ago already. Oh the deals to be had in hindsight…
Doc, check this out price decreased 125k for about year. It is good for M … I will wait 6 more months.
https://www.redfin.com/CA/Torrance/16510-Wilkie-Ave-90504/home/6541933
It was sold for 887K in March 2022. Now they have dropped to 840K?
That is a bad sign for flippers.
Housing is long term. Speculators need to get out so families can move in and live in it for the long term.
Now it is down to 812K.
Down 8% from the last sale in 2022.
Not a good sign for flippers holding the bags.
Check the Google Street View on this Santa Monica condo. First thing you see is two homeless people eating lunch in the garage:
https://www.redfin.com/CA/Santa-Monica/1527-9th-St-90401/home/6774251
Odd. They pulled that listing after only two days.
OC Register columnist Lansner’s column today is about SoCal housing price volatility. Lansner tracks 1) gap between best and worst years, 2) share of down years, 3) Statistical Standard Deviation and 4) the 44 year average price gain.Those seem to me to be a pretty good way to get an unbiased tracking of volatility. Lansner tracked the major California metro areas.
Inland Empire took # 1 in all four indicators of volatility (no surprise there). The other metro areas in order were Sacramento, Los Angeles, Orange Co., San Diego Co., San Jose and San Francisco. Average annual gain was the least volatile, with a range of 5.8% for the IE to 6.9% for San Jose/San Francisco. In my opinion, all are pretty good in the long term. Lansner compares CA data to National data and concludes that national home price forecasts are mostly useless for CA housing. CA best year gain is mid way between US housing and the stock market (14, 24 and 37%). The worst year for CA prices was off by almost as much as the stock market ( 20 & 22 %); national worst off 6%. Down years was CA 27%, Stocks 18% and US homes 11%. Price swing variance in order was Stocks (13%), CA RE (9.1%) and US RE (4.3%). Average gain per year order = Stocks 10.1% CA RE 6.2% and US RE 4.7%. Lansner sees a correction coming in CA real estate due to rising prices at the same time as interest rate increases, especially in the recently hot Inland Empire. I agree because the IE is more heavily middle class and working class. Rich areas always drop less in a downturn.
“Rich areas always drop less in a downturn.”
I agree. Mostly because rich people don’t speculate on their primary homes. They live there for the longer term and if the housing market tanks, they don’t have to sell since they are rich. They can hang on and wait for better times.
Unlike the middle, where a job loss and an over-leverage on home speculation can cause a disaster.
Don’t speculate or leverage.
Headline: Coinbase layoffs pile up as crypto markets grapple with downward trends and ‘unscrupulous actors’
https://www.fastcompany.com/90833135/coinbase-layoffs-2023-job-losses-crypto-industry
Layoffs continue to abound in the new year. First, it was Big Tech, yesterday it was banking, today it’s the crypto industry. Coinbase CEO Brian Armstrong has announced that the beleaguered crypto exchange will be laying off another 950 workers today—nearly 20% of its workforce. The cuts come after Coinbase previously laid off about 18% of its workforce, or around 900 workers, last June.
In a blog post announcing the latest round of cuts, Armstrong cited a downward-trending crypto market in 2022 combined with downward macroeconomic trends as the reason for the layoffs. But he also alluded to the sprawling FTX scandal in noting that “fallout from unscrupulous actors in the industry” is also impacting the crypto markets, leading to today’s layoffs while warning the industry could see “further contagion” before things get better. …
Not MAGIC COIN :0 say it ain’t so 🙁
I thought those MAGIC BEANS like Housing would go up forever, that’s what the man who sold them to me said ???? maybe I should double down, yah that’s it, I’ll double down and make a killing yes yes yes, make a killing :))))
Got popcorn, munch munch munch
“Housing would go up forever”
It most likely does. Well, let’s call it long term instead of forever. Long term house prices and rents will go up. Maybe not forever but longterm yes. I don’t know what happens in a thousand years. But I am 100% sure house prices in 40-50 years from now will be higher than today. That’s all I care about.
So buy! Short term prices might go down a few % points. No biggie. Housing is shelter. You buy and live in it and if you are smart your buy more and rent it out!
Inflation is your friend if you own assets like real estate.
If you look at any US housing chart going back to the 1800’s, over any 12 year period, home prices have always gone up.
This is why homes should be a long term place to live and not a short term speculative investment.
Home prices in normal markets should track inflation. Investing in an inflation protected market is a smart move in the long term. You won’t get rich but you will have a place to live. The nice thing about the US is that you can be locked in with a 30 year fixed mortgage and your payments are mostly fixed until it is paid off (taxes, maintenance, and insurance will rise with inflation.) I know many retirees who have paid-off houses. Their monthly payments for taxes, insurance, and maintenance are less than $500. If they rented, the rent would be over $3K.
This is an amazingly good long term investment. They have increased equity and a return of $2500/month. This is particularly helpful when you retire and are on a fixed income.
Rents will also always rise over a 12 year period. In the long run, you will end up with higher rents and no equity. Increasingly higher rents will be very noticeable when you retire and are living on a fixed income. Be the ant and not the grasshopper.
I am not a Real Estate agent. Buying a house and holding for at least 12 years is a no-brainer. Buying a house at a low will give you even more equity. I am advising my 20-something year old kids to wait until mortgage rates and housing prices equalize more.
They have time to wait. If they buy at a lower price, they will only be up more in 12 or 30 years (before they retire). I believe home prices will fall 10-20% more and mortgage rates will either rise or fall depending on the Fed. This is after a ridiculous 30-40% increase in home prices during the last 3 years.
Headline: Crypto giant Genesis is ‘days away’ from bankruptcy after suffering steep losses in wake of FTX collapse: Firm owes creditors $3 BILLION – including $900M to Winklevoss twins
https://www.dailymail.co.uk/news/article-11652049/Crypto-exchange-Genesis-prepares-file-bankruptcy-end-week.html
Popular cryptocurrency broker Genesis is expected to file for bankruptcy within days, insiders have revealed.
It would make the firm the latest crypto casualty following the spectacular downfall of Sam Bankman-Fried’s FTX, where the company held some of its funds.
According to people familiar with the matter, Genesis is currently in the final stage of its Chapter 11 paperwork as it works toward a deal with creditors.
The company, which is owned by venture capital firm Digital Currency Group, had been considering filing for bankruptcy for some time, as it reportedly owes creditors more than $3billion.
Among those owed money is Gemini, owned by Cameron and Tyler Winklevoss, which reportedly saw more than $900million of its customers’ funds evaporate from the exchange after Bankman-Fried’s own Chapter 11 filing in November. …
Bloody Sunday – Magic Coin RIP
https://www.cnbc.com/cryptocurrency/
It’s almost not fair: in the US we have 30y fixed mortgage rates. Mine is below 3%. My equity skyrocketed thanks to Covid and now my salary keeps going up due to inflation but my debt stays low.
Buying in Q1 2020 was the best f.ing thing. *Big smile*
Going, going …
Headline: Crypto lending teeters on brink of extinction after Genesis collapse
https://www.seattletimes.com/business/crypto-lending-teeters-on-brink-of-extinction-after-genesis-collapse/
The bankruptcy of crypto’s marquee lender, Genesis Global Capital, may be one more blow than the industry can withstand, at least in its current form.
The list of bull-market stars laid low now includes nearly every major player to have captured the public’s attention by offering market-beating returns for the simple act of depositing tokens. Genesis joins BlockFi, Celsius Network and Voyager Digital among firms whose collapse have left countless clients angry and unlikely to risk more money on their daredevil exploits.
Acting as de facto banks, these firms took in assets which they then lent out freely across the market, often to hedge funds who used the extra cash to leverage their bets on iffy tokens. Genesis dished out $130.6 billion of loans in 2021 alone, part of a complex web of interconnected risky trades and toxic loans that helped turbocharge the market, only to spark a cascade of collapses when crypto prices started plummeting last year.
Everyday investors around the world have also been left nursing billions of dollars in cumulative losses, and now regulators are forcing lenders to either meet the more stringent standards required in traditional financial markets or face massive repercussions. Either way, the heyday is over. …
Sharing a great secret today:
Republicans always try to tell you how bad these liberals are and how they will make your life miserable.
Surprise, surprise, liberals tell you the same thing!
Politicians are clowns. Don’t follow them, don’t take voting seriously, don’t watch the news. If you learn that in life, you already improved a lot! I haven’t voted in a decade. Guess what, I am fine! I am wealthy and happy.
The president is not responsible for inflation or stocks going down. The president is just a puppet. It doesn’t matter one bit who the president is. Politicians will never ever improve your life. Stop blaming them for your failures. Save money, invest well and you can buy a house too!
Thank me later!
Gotta say liberals are funnier than republicans. The crap they tell you is hilarious. I live in CA and have lots of ultra liberal relatives. Listening to them is almost as funny as watching curb your enthusiasm.
M,
the usage of word “puppet” gave away your shallowness. Do not try to open the truth to anyone; smart people do not do this on internet. It is not but to have light discussions.
Puppet is the right word for any president. A president doesn’t have the power many believe he or she has. The word puppet helps the avg joe to understand not to blame Joe Biden for inflation or to blame trump for your deportation.
If we were living in Russia you can blame the president for things but not in the western world like the US.
If you understand not to blame your American president for your own failures then you are already ahead of the majority of Americans.
Interesting news in today’s OC Register about mortgage rates and applications. Mr Lansner has a column showing a comparison of mortgage annual interest rates to inflation rates. The December Freddie Mac 30 yr rate was still 0.1 % below the annual CPI. That means that interest rates have been below inflation for 21 months, which breaks the record of 20 months set in 1975.
Since 1971 (the year of Nixon’s uncoupling the dollar from gold; the era of 100% fiat currency), mortgage rates have averaged 73.8% and inflation has averaged 4.0%, a 3.8% gap between mortgage rate and CPI. A 3.8% rate gap for a long term loan sounds like a fair rate to me. Walter Bagehot, a 19th Century banker, famously observed that “John Bull can stand many things, but he cannot stand interest rates of 2 per cent”.
An article from a CNN writer reports that mortgage rates are now falling again. An article from Mr Lazerson sees a false positive in a spike in mortgage applications. Still high rates are still a problem for potential homebuyers. Mr Lazerson has seen many pre-approved first-time buyers are waiting for the dust to settle. Inland Empire sales dropped 45% in November and LA/OC sales dropped 44% according to CoreLogic. The trend continued in December. Lazerson sees the application trend to be due to a bait and switch tactic by unscrupulous brokers. He warns new prospective buyers to shop around and that the highest estimate of your purchasing power is probably bogus.
“mortgage rates have averaged 73.8% and inflation has averaged 4.0%, a 3.8% gap between mortgage rate and CPI”
Obvious (?) typo. 7.8 -3.8=4.0. I hit the 3 key on the keyboard right side number pad instead of the period below it.
Oh boy, oh boy….
The bears are probably in pain reading the new inventory data out there.
Remember, inventory continues to go lower and is not skyrocketing: a home seller is traditionally a buyer. Most people don’t sell to be homeless or to speculate. If you speculate you mind find yourself being stuck as a renter for a long time.
Maybe the bears should just keep reading Zerohedge and tell themselves a massive crash is coming instead of reading data/facts.
Question:
What does the radical left and perma housing bears have in common?
Answer: you just can’t stop making fun of them!
For the sake of keeping the facts straight, I’m gonna have to challenge that claim that inventory is lower than pre-rate hike. Inventory is actually about 3x higher. However, this doesn’t mean much because instead of 1 month of inventory, we are at 3 months of inventory which is much lower (about half) than the necessary amount of inventory that has historically had significant downward pressure on the market. Y/Y sales are down more than 50% so all in all this indicates the most obvious phenomenon in housing there is: sellers aren’t listing their properties to hang on to their low rates and buyers aren’t as active in the market since they have been priced out. Sellers can’t sell and buyers can’t buy so itsa test of endurance for both sides and unfortunately, the sellers seem to have the upper hand in this one. Interest rates are down 1% from their October high and thats enough to stimulate over 7% price increases M/M in some CA markets. Sellers can also wait until buyers wages increases, buyers have no choice but to wait. I feel very bad for people who didn’t heed my advice and bought when they could, now they are paying the price and unfortunately, I still believe buying is a wise thing to do (although much wiser about a year ago) but given the choice even with the current market, it’s still wiser to buy than wait. If you think I sound outrageous now, then do me a favor and set a reminder on your phone to come back and re-read this in one year and then see how outrageous I am then.
Headline: These 4 cities will suffer a 2008 crash in home values: Goldman Sachs
https://nypost.com/2023/01/24/goldman-sachs-sees-a-crash-for-home-values-in-these-4-cities/
As interest rates continue to skyrocket, home prices across the country have continued to plummet — and Goldman Sachs says the declines will only worsen and extend through 2023.
In a note to clients earlier this month, Goldman Sachs forecasted that four American cities in particular should gear up for a seismic decline compared to that of the 2008 housing crash.
San Jose, California; Austin, Texas; Phoenix, Arizona; and San Diego, California will likely see boom and bust declines of more than 25%. …
Bawahahahahah, he is citing “NY Post”
Almost like zerohedge!
And the NY Post is citing Goldman Sachs.
NY post citing anything is like zerohedge citing anything. Means nothing. It’s like if SOL is citing something.
Timberrrrrrrrrrrr, so glad I put ALL my monies into Magic Coins :0
KTVU in California. “The median home price in San Francisco fell by 5.1% in December compared to the year before, making it the steepest decline among 53 US cities, according to a real-estate report. That real-estate decline put the median San Francisco home price at $985,929 last month, compared to $1,038,444 a year ago, the RE/MAX study said. Los Angeles saw the second-biggest decline line median home prices last month. LA’s median price slipped 4.7% to $810,000 from $850,000, the study said.”
“The stats from RE/MAX are consistent with a downward trend in Bay Area home prices that was spotted earlier in 2022. San Francisco and Los Angeles were previously identified by Redfin as the two cities that had the biggest exodus of homeowners.”
Got popcorn 🙂 munch munch munch
“The median home price in San Francisco fell by 5.1% in December compared to the year before”
Bawahahahahahah what a massive massive crash!!!!!
This 972 square foot home in Los Gatos (Silicon Valley) just sold for $2,205,000.
$605,000 above list price.
https://www.redfin.com/CA/Los-Gatos/16346-W-La-Chiquita-Ave-95032/home/914699
I’m seeing quite a few homes still selling for 100k – 300k over asking in San Francisco and especially Oakland. Is this really a downturn?
Downturn? It’s an epic crash!!!! Don’t you know that poster “realist” has been eating popcorn straight for the past 9 month? He only does this when we crash hard!! So ignore the facts and reality. Just think “got popcorn” and munch away!
The Bay Area market is the worst performing market at the moment so its common to see sellers offering listings for far below the current market and initiate a bidding war. I’ve said this once and Ill say it again, if yiu have a coupon for 50% off a Tshirt and you notice that the store marked up the prices to double then you’re essentially buying the same Tshirt for the same price. You didn’t get “a deal” you got a Tshirt for the market price. The opposite is true, if a house starts high and sells for lower it isn’t a sign of a bad market. Same as a house that starts low and sells for over asking, it isnt a sign of a hot market. The hardest hit markets tend to go with starting low and selling higher and the markets that hover the statewide average tend to see slight price reductions to market price.
OC Register columnist Lansner has two articles, one on falling prices in the Case Shiller 20 US markets, and one on where people fleeing California will get the best economic deal.
Nationally, the Bay Area was #1, off 14% from the high last May. San Diego and LA/OC were off 10% (#3) and 7% (#6) respectively. Those are the only CA metro areas in the index. Lansner is not making any firm predictions based on recent price and interest rate drops just yet. Western markets saw bigger declines than eastern markets according to the data.
Lansner’s dive into cost of living vs income opportunity comparisons of California the other states showed that of the five popular Cal-exit states, Texas, Idaho, Arizona ad Nevada (in order of index position) all scored better on the cost/income index, with only Florida being lower than CA. He says that FL is more likely to have retirees moving there, so the job income score which brings down FL may not be a factor. The biggest winner in his index was Colorado. Other Western states that scored higher than TX were Utah and Wyoming. The biggest loser vs CA was Hawaii (you need a ton of money already to think about making that move). The other 11 states with a poorer score than CA were 6 Southern states, 3 Northeastern states and two Western states.
The California Real Estate report for the month of December is officially out and the results are not the least bit surprising (to me at least).
Home prices in SoCal are down a WHOPPING 0.9%. At this rate, it’ll take about 50 years to get back down to pre-pandemic levels. That’s a lot of popcorn to munch on in the meantime!
Sales are down 50% and foreclosures SKYROCKETED by 116%! Surely this means a crash right? Have a seat, put the popcorn bucket down for a second and try not choke on the kernals. Sales down 50% because mortgages are up 50%, less demand more supply. Supply is up to 3 months but far below the 6 months needed to see some real price action. Foreclosures more than doubled but twice somethkng that was near zero is still near zero. As it stands, 1 in 3900 CA homes are in foreclosure which means absolutely nothing.
Market is atill low in supply, foreclosures en masse are no where in sight, equity is near high, the average mortgage serviceability is near low and this all means that the market has pleeeeeennnnntttttyyyyy of time to sit exactly where it’s at and wait for one of two things to happen: either rates fall or wages rise. Rates will eventually fall and wages will eventually rise so the market will eventually follow but as it stands what you see is what you get. You definitely won’t have to worry about taking a huge hit in equity with rapid declines so if you can afford it and its something you see yourself living in for a few years, then don’t bother reading butter-breathed comments. Just accept the reality and move on with your life.
Excellent post “new age”!
Wow! How wrong were/are the housing crash bros? Wrong again and again and again!
Active listings are near historic lows!
Days on market in San Diego are at 39 days!! Holy shit. They even report on bidding wars again. Bidding wars?!!?!!! With 6.5% mortgage rates?!?! Who would have thought?!! I guess those people that stay off zerohedge and read real data instead?!
Facts: housing isn’t speculative as stocks. Don’t take my word for it. Just ask yourself, how many people do you know that sell their house to be homeless or rent again because they think they can time the market? I actually know two families who did that and both got burned. But hey, be my guest, sell your house and buy it back at a 40% discount. In 30 years we will compare how we did. I predict you will be a lifelong renter while I sit on 10+ houses and multi millions. Good luck to our crash bros. I will never get tired of making fun of you!
You should expand your circle. There are plenty of people who actually play the timing game and actually sell their home (not to be homeless but rent). And plenty of people did this in 2007-8 timeframe. Even people with families. It is typically a flawed calculation though.
“There are plenty of people who actually play the timing game”
ROFL. I can only imagine in your circle of friends they try to outsmart the market and end up losing their shirt. That’s why they still rent and people like me own.
Selling your house to rent and thinking you can time the market is the single dumbest thing one can do in life. You can bet people who try that end up worst off. for every winner in the real estate game you’ll find a couple of losers.
Yep, imagining things is your forte.
I’ve been a Crash Bro/Housing Bear most of my life.
The only years that I was a housing bull was from 2010-2014. I purchased a house then. The housing price curve intersected with the inflation curve around this period. In my opinion, any time houses track inflation, speculation has been mostly removed. Looking at the Good Dr’s charts, we aren’t there yet. The inflation curve has to rise more or houses have to come down more for me to be interested in buying again. Home prices should track inflation when used as a home and not a speculative investment. The only exception is for a primary home that you are financially prepared and want to live in for at least 12-15 years.
I also purchased houses during other years when I was a housing bear. I planned on living in those houses for at least 12-15 years and had safe backup cash so I could ride out any downturns (Like 2008-2012). I was slightly underwater with my primary home in 2012 but it didn’t matter. I could ride it out. I’ve lived in this home for over 15 years so I don’t care. I didn’t panic like the tens of thousands of houseowners that foreclosed during this time and the Good Dr had many great articles. Also read Nomadland.
You can be a Bear and still buy if you are financially prepared to wait out and live through any downturn in your Dream Home.
M has never seen a downturn. I hope he is prepared.
ie Phoenix fell over 50% during 2008-2012. That was a true stress test to see if houseowners were swimming naked. Many were.
Ya, but tis ain’t 08, bra.
Phoenix can’t fall cuz I am invested in it.
Kidding aside, you won’t see more than a 20% reduction in price in Phoenix.
Time to buy soon (again). Desert money making me rich in the long run.
Remember kids, crack is wack- Nothing to see here
Yahoo Finance. “Some of the most popular pandemic boomtowns such as Phoenix and Seattle, plus perennially popular West Coast cities like San Jose and San Francisco, posted home price declines of more than 10% from their 2022 peaks, according to Black Knight Inc. That outpaced the average national decline of 5.3%, off their June 2022 peaks. San Francisco took the lead, with home prices there down 13% in December 2022 from their peak, Black Knight data showed. This was followed by San Jose ( down 12.7%), Seattle (down 11.3%), and Phoenix ( down 10.5%).”
Times of San Diego in California. “Sales of existing single-family homes in San Diego County fell nearly 20% in January as the 2023 real estate market got off to a slow start. The median sales price was $849,000 in January for single-family homes, down 3.5% from $880,000 a year ago. There were 886 homes sold in January, down 19.2% from 1,027 sales in December, and off 36.9% from the 1,404 sales a year ago in January, according to the association’s monthly data report.”
It’s just getting start, Got Popcorn 🙂
Economics writer John Mauldin has an article about assumptions made by government experts. Basically, nobody can foretell the future of the economy. But that doesn’t stop people from trying. Like the Congressional Budget Office.
“In reality, the CBO data …. involves numerous, giant assumptions. For example, all its projections assume current law will remain in effect for the next decade, with no changes at all. There really is no other way for them to do it. It would be irrational, if not just silly, to try and predict what Congress will do in five years as part of their 10-year model.
Odds Congress won’t change anything in the next decade are approximately 0%. That makes CBO projections automatically wrong the second they are published. Policies will change. Maybe the changes will help, maybe they’ll hurt, but some will certainly happen.”
Here is the CBO prediction for Q4 2022:
ECONOMIC PROJECTIONS FOR CY 2022
(As of May 25, 2022 )
REAL GDP GROWTH (Q4/Q4)
3.1%
INFLATION (PCE Price Index, Q4/Q4)
4.0%
UNEMPLOYMENT RATE (Q4)
3.7%
INTEREST RATE (3-Month Treasury Bills, Q4)
1.4%
How did they do?
Real GDP growth from Q4 2021 to Q4 2022 was 1%, not 3.1%.
PCE inflation was 5%, not 4%.
The unemployment rate (Q4 average) was 3.6%, not 3.7%.
The 3-month Treasury yield in Q4 averaged 4%, not 1.4%.
One almost spot on, one close and two off by a lot. It would be interesting for someone to tabulate predictions on this blog from this current discussion and in 6 months after it closes see who’s better than the CBO!
I am millennial and bought during Q1 2020 (Covid had just hit big time). I find myself in Q1 2023with a big smile on my face. I could not be happier having bought a new construction. I received lots of jealousy from my radical left friends and family. Jealousy has to be earned. Nobody is jealous of you if you are a life long renter hoping for a severe crash. I am so grateful for how Covid played into my equity hands and that I am alive and well, enjoying homeownership. If you are ready to buy, pull the trigger. Otherwise you might find yourself in a situation of lower rates and higher demand in the midterm future. Right now, at least you don’t have to compete with too many buyers. I can tell you from experience that the majority is usually wrong. Remember when they all told me I bought the top and the market will crash hard? 90% of posters here told me that for weeks and months. Where are they now? Big fat LOL
Wasn’t planning on this but there are some really interesting price points for potential rentals in ***. I might be closer to buying a second rental than I thought !!!! Only home made avocado toast for a while. Need to conserve cash for the next investment.
Not yet, M. Patience is learned with experience. Wait until the Fed stops raising rates and then pounce. They are going slow enough now for houses to eventually settle to a bottom. Better yet, buy when housing prices start to turn up again.
Pent up demand is still strong. Rates dropped 1% in January and house prices and mortgage originations immediately climbed again. Wait for the lemming demand to lessen. There are still a few wanting to jump off the cliff.
Otherwise, I’ll throw you a knife that you can catch to cut your avocado.
Don’t be a knife catching lemming.
Thank you Bob!! I will be careful and won’t rush. I am craving for a second sfh-rental like a drag queen for a new wig but I need to be patient and smart.
You should thank god everyday for your inheritance, or you’d still be living in your crummy apartment and sneaking into the pool at the nearby apartment.
I guess it’s better to be lucky than to be smart. You’re proof of that.
You are so damn right Richard! I thank god and the universe every day for making the decision to buy in Q1 2020 while 90% of people told me not to! Smartest decision and smartest investment (besides investing in crypto and stocks).
I am smiling every day. Just looked at condos in north county San Diego today while I was out shopping. 1900 sqft for nearly 800k and that’s without options. Jesus, and that was in a so-so area. In Carlsbad that condo would go for over a mil.
Plus close to 7% rates?! Holy smokes.
So thankful I bought in 2020 🙂
“I guess it’s better to be lucky than to be smart”
Lol… M is smart because he was born into inheritance. To be like him you guys just need to pick to be born into the family of a wealthy relative and you’ll be a success story, just like him. Rememebr: “jealousy is earned” he always says (and he has definitely worked overtime to make you guys jealous but despite the hard work, he’s very proud of this milestone accomplishment and the fruits of this super-important labor… After all, nothing’s better than being a pompous jerk! Even if you are a bot!), so pick who you will be born to wisely folks!
If that’s your excuse that you didn’t buy……because you didn’t get an inheritance….than my response would be How Pathetic! Lol.
Houses were affordable for years prior to Covid. You f’ed up by not buying and hoping for a crash! I turned the corner and realized the cash I was sitting on needed to be invested in RE besides my stock and crypto investments.
Can you believe these crash bros? Always have to blame someone else.
Moommmy! I don’t have a house! It’s the millennials fault! It’s the republicans fault! It’s the radical leftists fault!! It’s the FED!! It’s the white mans fault!!
Those are the same guys that screamed at me “you bought the top and will lose your equity!”
You know a loser when you see one. Just listen to them! Meanwhile I work on getting my second rental! Remember crash bros, jealousy has to be earned!
Nobody will ever be jealous of you blaming someone else! And one more piece of advice. be respectful and kind to your elderly relatives! They might include you in their will. Someone’s gonna get it as they won’t take it with them! Lol 🙂
Plenty of people blow their inheritance. Think of the classic case of Barbara Hutton! Some people come from families that stick together and help each other. My family pooled their resources and built three houses from the money my parents got from selling a house and built three houses with a lot of sweat equity (especially from the young members like myself). So when I finally inherited the house that I didn’t get my name on the deed, it was many years later, and I had many years of good times with my widowed Mother. I worked hard and bought a house in OC with my Wife, so now we have rentals and a house we live in. Family values and family heritage should be celebrated. You don’t know what M might have done for his family that made them want to leave him his inheritance.
My attorney friend in San Diego has been slammed with requests from property owner clients to file eviction actions. It started last Fall and has not stopped. Just within the past few weeks I have noticed a huge increase in the number of rentals available. It looks like this might be the start of a trend of more supply.
Headline: San Francisco Bay Area Housing Market Crashes, Prices Plunge 35% from Crazy Peak: Where’s Demand Supposed to Come From?
https://wolfstreet.com/2023/02/17/san-francisco-bay-area-housing-market-crashes-prices-plunge-35-from-crazy-peak-where-is-demand-supposed-to-come-from/
Better question would be: where is the supply supposed to come from? As wolf stated, homeowners are well off. Lots of equity plus locked in low rates. Who in their right mind sells their house right now to buy back in at near 7% rates?! Homeowners enjoy being locked in at 3% while inflation is 6%.
And the anecdotal “we lost a ton of jobs” is a nothing burger. Wolf should take a look at the unemployment rate. Near historic lows. Pretty much anyone who wants to work can find a job.
It’s almost unfair: homeowners have locked in low debt and see increases in their salaries due to inflation while renters are priced out and face increasing rents.
Maybe they should have bought a few years ago when it was much, much cheaper to buy.
And, another sign of caution: when people reference the housing bust from 2007/2008 and compare that to 2023 you basically know how ignorant they are.
The market couldn’t be more different today. Homeowners are basically in the best shape you can think of. No NINJA loans, qualified buyers, low locked in rate and a strong job market. Plus lots of equity in the home. Hell, if my wife and I lose our jobs we would just rent out the place at a nice profit.
“Wolf should take a look at the unemployment rate. ”
Wrong blog. Who are you on Wolf Street?
Yes, this time is different than 2008.
Housing Bubble 2 is twice as large.
Inflation is raising the floor. When housing prices track inflation again, it is time to buy.
Housing prices have to fall 30% more with inflation rising 10% according to the good Dr’s excellent chart above.
2008 didn’t have the benefit of rapidly rising inflation to cushion the fall. 2008 had deflation which worsened the fall so we saw 50% drops in some areas like Las Vegas and Phoenix.
“It is different this time!”….Did I hear this before?!!!….History doesn’t repeat itself, but it surely rhymes. Nothing new under the sun!…
Major companies are starting to call their employees back to the office 3 days a week.
Wouldn’t it be a bummer if you thought Work From Home would last forever and you sold your San Francisco condo close to work, and rolled all of the money into a nice home in Phoenix, Las Vegas, Boise, or Austin?
Maybe if you hurry, you can sell your nice home before it completely crashes and buy back your old condo before it goes back up in price?
Work from Home distorted so many prices when you could work from anywhere.
I guess if you sold your San Francisco condo and paid cash for a nice new home, you may not need to go back to work. These San Francisco companies will have to hire local which will bring the prices (and salaries) back up.
It reminds me a of a huge bathtub sloshing with water. The churn on buying/selling houses will be interesting. People fled the cities during Covid, and now will have to move back to the cities to remain employed.
Okay let’s have some fun with the crash bros.
Breaking News, the RE world is ending:
https://www.redfin.com/news/investor-home-purchases-q4-2022/
Investor demand is collapsing!!!! Popcorn!! Popcorn!!! Housing crash!!!
Questions for the crash bros:
Where is the supply?
Where is the skyrocketing inventory?
We agree on this, right: no crash if inventory is historic low?!
Okay, 2005 you had 2.5M active listings. The bubble popped and a few years later you had 4M active listings.
Fast forward to 2019/2020. You had 1.5M.
Today…..today….drum roll….970k
Got Avocado. Munch, munch, munch
The value of the US housing market shrunk by the most since the 2008 as the pandemic boom fizzled out.
https://www.bloomberg.com/news/articles/2023-02-22/us-housing-market-posts-2-3-trillion-drop-biggest-since-2008?leadSource=uverify%20wall
Such a silly comparison. 2005-2008…..not only was inventory increasing significantly as I mentioned above but you had NINJA loans. Everyone who can fog a mirror was given a loans. and not 30y fixed loans but ARM’s.
Crazy to think that people still compare this market today to 2008. You basically have the strongest homeowners today from an equity, credit score and low-fixed mortgage perspective.
Btw even if you had bought in 2005 during the peak you would be ahead today. Inflation is your friend if you own assets. Don’t take my word for it. Rent for the next 10years and see yourself.
Looking through some of the comments above it’s pretty clear some are either Realtors, or home owners about to go under, or misinformed. It really doesn’t matter what anyone thinks will happen, since it won’t change anything. And anyone who thinks he/she knows what will happen clearly—ipso facto—doesn’t. The only intelligent way to look at this is using what we do know, and then stepping back and deducing what might happen based on logic and past experience.
At the most fundamental level rising rates lead to falling prices. They have an inverse relationship. While that relationship is not always clear cut (for various reasons), it still provides the linchpin around which all suppositions must ultimately revolve.
@really
All about rates huh? What about supply?
So, if rates go up to 15% but inventory stays historic low, we still get a crash?
Cool, so if I want to buy another rental but barely anything is for sale, what happens if 50 other investors want to buy the one house for sale that I am bidding on? We just all walk away and let you buy it for a 50% discount?
Sure, cuz that’s how a market works. Not.
Last month, Newsom announced that California faces a projected budget deficit of $22.5 billion for the coming fiscal year. The figure represented a striking downturn from last year, when the state enjoyed a surplus of about $100 billion due to federal COVID relief and surging capital gains.
I wonder what is the effect of this taxpayer exodus (over 500,000 in the last 2 years) on the RE prices is going to be going forward. What about if more taxpayers leave? Will the illegals keeping the population the same going to make up the shortfall??!!!
“Newsom announced that California faces a projected budget deficit of $22.5 billion for the coming fiscal year. ”
I can see a number of reasons for a budget deficit.
1) No more Federal Pandemic money
2) Inflation has caused government service costs to increase 8-10%. Prop 13 limits property tax increases to 2% max.
3) All of Tech is predicting a declining year. No more tax gravy train from Silicon Valley.
4) As you said, some are leaving CA. Many are also being called home to CA to work from the office if they want to keep their high paying job.
5) This year is the peak retirement age for the median Boomers. Are they collecting their 100K+ pension and staying or are they leaving? Are they being replaced? At what cost during the lowest unemployment in over 50 years?
There are probably more dynamics. Some younger engineers I work with have recently moved to S. CA for the beach life and the higher pay. Some older engineers retired and fled with their much higher retirement income for other states.
So, let’s see. Inventory over time decreasing.
And wait for it: Population increasing.
When rates come down, there’ll be a rush to buy.
Increase in demand. And what do you think that’ll
do to prices ?
However, rates might not be coming down for awhile.
Golden handcuffs: owners celebrate low locked in rates. Who in their right mind sells their home right now and buy back in with 7% rates?
There are a number of people who believe we won’t see 4% rates for a looooooong time.
My rate is below 3% for crying out loud.
Owners not motivated to sell: inventory stays low. Add to it that we have a strong labor market AND a ton of jobs available with a hybrid or fully remote model. So no forced selling.
Ask owners like me if they have any interest in selling and buying back high with skyhigh rates. All you gonna get is a loud laugh! Nobody is giving up low locked in rates voluntarily.
God I am so happy I am not a renter hoping for a crash. Thank god those days are over.
As Charlton famously said: “You can pry my 2.5% refi’d mortgage and ultra-low Prop 13 property taxes from my cold dead fingers” Why should I pay so much more to sell my house and move to a higher cost house.
Population increasing? Maybe, but are these newly minted Americans all renters, home buyers or life-long dependents on the government/parents?
We need a new message here. Lots going on. Read the piece on Yahoo.
The population of would be homeowners is growing; however, many are
sidelined by higher homeownership costs and rent in the meantime. But
there is that cohort waiting to buy. Once rates stabilize and drop they’ll be
out there buying in a low inventory market. If there’s still an abundance of
high paying jobs. And that doesn’t seem to be changing much at the moment.
Hopefully, we don’t go into a prolonged period of stagflation. No one wants that.
Leave a Reply