The Correction is Here with Home Values Declining by $2.3 trillion in 2022: Personal Savings Plummets With Record Consumer Debt.
The housing market is entering a massive slowdown and only the naïve and delusional will ignore the red warning signs. First, there is this odd narrative that housing continues to excel and thrive in the current market. “Inventory is low therefore the market is hot” or “7% interest rates can’t stop the equity train baby!” This seems to be the mentality at this point. But the reality is, $2.3 trillion in housing wealth was wiped out in 2022, the most since the Great Recession in 2008. $2.3 trillion is a lot of equity that has gone up in smoke but somehow, the delusional housing brigade continues to beat on the “real estate never goes down” tagline. Keep in mind why real estate prices shot up. First, we had dangerously artificially low interest rates brought on by the Fed during the pandemic. Those rates were never “healthy” and with inflation raging out of control, the Fed has had to slam on the breaks. The idea of the free lunch is strong in a lot of people. Second, people were confined to their homes for two-years and many thought remote work was here to stay. That is absolutely not the case as companies bring people back either full-time, 4-days a week, or 3-days a week. In other words, being stuck at home is over and 2022 cleared out a ton of inflated equity.
The 2022 Destruction of $2.3 trillion in Housing Equity
The last time we’ve seen this much destruction in real estate wealth was in 2008 at the core of the housing crash. So many people were saying that this was not possible because NINJA loans were not here or that lenders were the perfect example of financial prudence. Absolutely not! We had millions of people on pandemic forbearance, coupled with the Fed going Chernobyl on rates, and finally people thinking the home was the new office for life. All of that is reversing and reversing fast. 2022 wiped out that first layer of equity to the tune of $2.3 trillion. If you are selling today, your audience is looking at 7% mortgage rates and a tighter economy. You are now in a stucco sarcophagus like an Egyptian Pharaoh except instead of being buried with gold treasure, you will be buried with your Ikea ottoman and Double-Double from In-N-Out.
As we look forward, it should be obvious that we are in a cycle of a correction. Housing takes a long-time to go up and a long-time to go down. Unlike the stock market that can go mark-to-market in a day, housing takes a long time because you have delusional homeowners that can sit back until the good days come (or until they need to pay the bills and run out of cash).
Next, you have troubling financial behavior by the public:
The spending rate has plummeted and consumer debt is at record levels. Keep in mind that consumer debt rates are off the charts. Cheap money is gone. Some places are offering 90-month car loans which should come with a therapist appointment. You can get 5% nearly risk free with US Treasuries. So why would a Wall Street investment firm buy tons of properties to gain a similar yield? We’ve seen places like Zillow and Opendoor take big hits because they overpaid with their algorithm that was built on higher and higher prices. These only work when buyers are willing to overpay.
Mortgage demand is also now at a 28-year low:
The vast majority of people beyond foreign buyers and Wall Street banks actually need a mortgage to purchase a crap shack. And like any market, you have leading indicators. New Homes are very telling since builders need to get rid of the inventory. And guess what? People are canceling contracts at very high levels:
Home builders have done everything to avoid lowering prices: incentives, upgrades, buy downs, and any other gimmick. But now, they are pulling the trigger on prices which will trickle down to your Taco Tuesday baby boomers that now think their crap shack is worth $1 million just because Zillow or Redfin says so.
The market is correcting with $2.3 trillion being incinerated. So are you buying, investing, or selling in 2023?
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240 Responses to “The Correction is Here with Home Values Declining by $2.3 trillion in 2022: Personal Savings Plummets With Record Consumer Debt.”
Median sales price in Q4 2019 was 327k for a house in the US. Compare that to the 467k in Q4 2022.
And we are honestly talking about a measly 2.3T that got shaved off the total value? What a nothin burger. The value of the US housing market is 45T. And it means very little. Who cares if my house is worth 1M or 1.3m or 1.5M. I don’t. It’s not like I am gonna do a cash out-refi. It’s nice to sit on a lot of equity but so what. Missing those days of 3% mortgages where you could do cash out refi and buy another house. Never did a cash out refi but I’d consider it if rates would be half of what they are right now. 7% mortgage rates sounds so dreadful.
It looks from the article that the 7% mortgage does have an impact on property values regardless of the inventory.
Real estate prices move super low, like an oil tanker, especially when they go down. From past history, they can go down like 3% the first year, 5% the second year, 33% the third year (capitulation stage), again 5 and 3% in the forth and fifth year – you get the picture. These numbers were pulled from a particular market I was following about 12 years ago. It is just an example of how slow a real estate market can drop.
Definitely, the real estate market does not correct at the speed of the stock market or crypto.
The thing about higher rates that people miss is that you can (finally!) make a decent return outside of RE and stocks. Getting 5%+ on money market and CDs is worth the marginal correction to my home equity, IMO. I don’t borrow from from my home, anyways. Savers haven’t had a break in 14 years. Now it’s our time.
“Missing those days of 3% mortgages where you could do cash out refi and buy another house.”
M, your irrational exuberance seems to be getting tamed. Hopefully it will also tame everyone else who have been using their house as a piggy bank to leverage into real estate (which always goes up or you can just become a slumlord millionaire landlord, right?). Prices will finally come down.
I adore high interest rates! At last, I can get reasonable interest on government bonds and even 5 year CDs- nice, defensive investments that are appropriate for someoone in my age bracket.
And you, M, should be grateful that the temptation to do a cash-out refi has been removed.
Why? My mortgage is so low. If we had below 3% rates now I would pull money out and put it to work.
Buy more real estate or Bitcoin. Worked out so far why wouldn’t it continue my dear?
Problem is we have 7%. It sounds so ugly. 7 is a no go. 3 or 2 is bueno when it comes to mortgage rates.
Laura,
What’s your real rate of return after factoring in inflation?
I’m not panicking, Yes housing prices are down, Yes the stock market is down, but I’m playing the long game and holding my assets. The economy is in a strange place, rising interest rates, but record low unemployment. My employer is so desperate for employees that they now have a bounty program, $300 if I recommend a new employee who stays 90 days. Unskilled labor, $16 per hour + benefits.
I have the same philosophy. I had the same philosophy of holding on during the 2008-2012 crash and did very well. I now live rent-free for the rest of my life.
There is some truth to this paraphrased saying for housing: “He who panics first does the best”. Look at the wealth you could have had by selling in early 2022 and 2005. He who doesn’t panic does even better. He who panics in the middle loses their shirt. I don’t think we are in the middle yet, but who knows?
Timing the top and bottom requires a good crystal ball. Mine broke in the 1994 Northridge Quake.
I’m riding this one out again.
“Douglas Adams’ use of “don’t panic” was perhaps the best advice that could be given to humanity.” – Arthur C Clarke
Not exactly rent free. You do pay property taxes, insurance, maintenance, lawn care, sewer, water, don’t you? Probably also a mortgage unless you bought for cash or paid it off. Some people pay HOA stuff. Nothing is rent free.
William,
Yes, it is not free to own anything; house, car, etc, even if it is paid off in full.
IMHO, in the long term, it is cheaper most of the time to own a house or car than to rent one. The person renting me a house or car is in business to make money. They are realizing a profit above the expenses like taxes, sewer, water, electric, insurance. These expenses are typically much lower than the cost of a mortgage/loan. (Though I have seen the TI part of PITI to be higher than the PI in some high property tax states prone to hurricanes.).
For example, when we were selling my mother’s vacant paid-for house in CA, we estimated the monthly costs were about $600/month for taxes, utilities, and insurance. The going rent in that area was $4K-$5K per month. My mother was grateful that she purchased the house 35 years prior and was able to live in comfort her entire retirement at an affordable cost while receiving SS. She couldn’t rent anything for $600/month in that area. She had the foresight to lock in her PI costs with a 30 year loan that would never go up and would go away in 30 years or less. Housing/rent prices went up and they also crashed during that time. She didn’t care.
That is my goal. It is rent-free but nothing owned is expense-free.
Still waiting for the prices to go down so I can afford my first home 🙁
How much do you need them to drop in order to pull the trigger? 10%, 20%, 30%?
Just speaking in general I think we can all agree the S&P 500, The DJIA, and housing prices in every US market are going to fall by 50% in the near future.
Me thinks housing will fall 50%.
I disagree. If housing prices cross the inflation curve which has been dramatically rising, it will be like 2012 again. Houses should track inflation as a place to live. If house prices are back to the inflation rate that means speculation is removed. According to the good Dr’s chart from his last post, this will be another 30% fall in prices (RE is local, so some areas will vary). I will buy a house at this point.
The speculator iBuyers are realizing this and their income and stocks are falling 90+%. They are starting to dump their houses on the market at whatever they can get to relieve their pain. This will cause housing prices to drop faster.
However, from January the January 1% rate drop caused a 30+% loan origination increase, This means buyer demand is very strong. Why not? Inflation is increasing wages and more income = more buying power. This should gobble up the iBuyer dumped homes causing a slower decline in prices. This will be a soft landing. Eventually house prices will settle to the inflation curve (~-30%). This will be about 2019 prices. 4-5 years of flat house asset gains will remove speculation.
If the economy crashes and unemployment increases beyond 7%, housing could crash more than 30%. This is when the Fed will step in to save us all 🙂 and start lowering rates again which will start Housing Bubble 3. I’ll buy then, if I can. At the recession level bottom. High unemployment could cause a 50% drop like last time in 2008-2012. Nobody sees high unemployment yet so that may be 2024 and beyond if it happens. It would be a hard landing.
Bob,
“If the economy crashes and unemployment increases beyond 7%, housing could crash more than 30%.”
The avg joe can’t afford to buy. Life long renter. When the economy crashes it really depends on which sectors are being hit the hardest. The homeowner in the US is doing fantastic financially. Future Mass unemployment-there are no signs for it. If economic data weakens the 10y yield will go lower. Bond market as always will be ahead of the fed. Lower bond yields translate into lower mortgages. Demand increases. People who sit on cash and keep their job will have great buying opportunities. Before you expect lower RE prices you need inventory to increase. We are below 1M active listings. In 2019 you had 1.5M.
“When the economy crashes it really depends on which sectors are being hit the hardest. The homeowner in the US is doing fantastic financially. Future Mass unemployment-there are no signs for it.”
I agree. There is no sign of mass unemployment today. Homeowners are paying their 3% mortgages and making more money with wage inflation due to low unemployment.
However, the Fed is trying to drive up unemployment to fight wage inflation.
They may be incompetent, but don’t fight the Fed.
Based on how they created this massive bubble in the first place, they are more likely to drive the economy into a recession and unemployment will reach 7%. Just like in 2008. We’ve seen it all before. Given their slow reaction time, I doubt they have supercomputers working on a solution. Decisions are being made the old-fashioned way over a 3 martini lunch.
It has been my experience that appraisals are always tailored to who is asking for them. My House is “appraised” by Zillow and Trulia and Redfin at ~$870K, $750K by Realtor.com, and $890K at homes.com. Not exactly unanimity is it? I don’t see any major change in the house payment in constant dollars (adjusted for inflation) for middle income housing in the next couple of years. What I do see is seesawing interest rates making for a wild ride in prices and inflation affecting the value of a dollar.
As for “crapshacks”, you haven’t seen a real crapshack until you have driven out into isolated rural areas where poor people live in hovels constructed out of whatever they can salvage.
Here in Naples FL 2019 my neighbors from England took over a year to sell their home and for a price that was when they bought in 2013. That same house nearly doubled in value by 2022. And we all know that 2021 and 2022 there was a mania in housing. Now some people have put their houses on the market and they are not getting their price so they are taking them off the market. Having lived through the low point of real estate in 1982 to its high point in 1987 which took till 1991 to bottom, and having lived through the mania in housing starting in 2002 till 2008 where it took till 2011 to bottom, taking the punch bowl away of low interest rates should be history repeating itself.
I started buying short term t-bills in Jan and happy that I’m getting over 5% in tax equivalent yield (no state tax). It’s not making me rich, but it’s preserving cash. As mentioned in the article, how much longer is Wall Street going to continue buying properties when they can get the same return without the headache and risk?
I don’t even know why an individual investor would want to buy a property in the foreseeable future unless prices come way down. If you can afford to buy a primary residence then by all means buy one- who cares about the rate or price as long as you got the cash. You need a place to live. If you locked in a good rate then good for you. But don’t be surprised if you are underwater in a couple years.
The Fed is going to have to keep increasing rates. The inflation train is still chugging along. The dollar is starting to climb again (DXY) so I’ll go back to buying currency like I did last year.
Biden announced a fresh round of defense spending which is music to my ears as a DoD contractor. More sanctions against Russia means higher inflation here = higher rates = greater chance of a not-so-soft landing. And it’s not just Ukraine we are talking about here. The war is raging in Yemen. If you want to see a real crap shack, come with me to Djibouti.
What’s the best/easiest way to buy more than $10K in t-bills? Also, can they be easily liquidated?
Regarding your advice on primary residences, I don’t feel it’s that straight forward. Many people (including some I know) bought at the height of the market in circa-2006 and were soon underwater. Had they waited just a couple of years, they could have saved hundreds of thousands of dollars, particularly when considering interest. For most people, that amount of money is significant and translates into adding years of working prior to retirement. I’m a prospective buyer and hate renting, but I also don’t want to be kicking myself knowing I could have bought a nicer/bigger/better house for less money had I just waited a year or two.
That comment:
“ but I also don’t want to be kicking myself knowing I could have bought a nicer/bigger/better house for less money had I just waited a year or two.”
People talked like this during Q1 2020. Boy are they kicking themselves now. They wished they would have bought back then.
I use treasurydirect.gov which is free and easy to use. Personally, I’m buying 13 week treasuries in $10K denominations with automatic investment. If you wait until the maturity date then it’s very liquid- just don’t reinvest and transfer to your bank account.
If you want to sell a bill before maturity it takes a little more work as you have to transfer it to a broker (I use Vanguard that doesn’t charge a commission) to sell it on the market. It’s still relatively liquid but takes a little more work (not as easy as clicking transfer now from a money market).
You can buy I-bonds that are limited to $10K per SSN every year (and an additional $5K with your tax return) but those have to be held 12 months and currently paying 6.89%. And if you sell in less than 5 years you lose 3 months interest.
These are all state tax free so your actual yield is a little higher if you live here in CA.
No one has a crystal ball but, there are headwinds for home appreciation. Lets use your example of buying in the peak in 2006, if that person held their home this long they’d have paid off 17 years on their mortgage, have a house that is worth more today and hopefully locked in a real low rate.
Buy what you can afford and for most people that comes down to a payment. If you are relatively stable, have adequate cash/reserves and don’t plan to move for at least a decade, I think you’re safe in the long run. Your home is where you live. It’s not a stock or a crypto coin. You do as you please and make memories there which is worth a lot in my opinion.
You don’t need to go to Djibouti, try Red Mountain CA on hwy 395.
https://www.ghosttowns.com/states/ca/images/redmountain2.jpg
And yes, people still live there.
“ how much longer is Wall Street going to continue buying properties when they can get the same return without the headache and risk?”
Thing is, even if you explain that to people for the millionth time, they don’t get it.
investors low ball during this market and buy in all cash. Rents are high.
So now you are getting into a good property at a discount with the same high rental rates. Down the road you do a cash out refi.
Personally I can’t buy all cash and have to wait until prices come down to buy my next rental.
“Biden announced a fresh round of defense spending which is music to my ears as a DoD contractor. More sanctions against Russia means higher inflation here = higher rates = greater chance of a not-so-soft landing.”
You are lacking a moral compass
Key overpriced RE markets will see up to a 30% price decline as mortgage rates rachat up.
Yeah sure, just pull any number out of your hat. A number you can’t make up though is active listings. We are under 1M baby. Not even close to 2019 levels. Since a decade active inventory has been trending down.
Covid was supposed to be a skyrocketing inventory event. Then it was the forbearance tsunami that would skyrocket inventory. Now it’s the 7% mortgage rates. In two years it’s 6M of shadow inventory or some other BS. And so the bla bla bla goes on and on.
For context, In case anyone still reads facts. In 2007/2008 active listings were around 4M.
Record low inventory in SD but prices continue to decline. Wonder where prices will go once inventories increase during the spring peak.
https://timesofsandiego.com/business/2023/02/28/case-shiller-index-shows-home-prices-declined-in-san-diego-for-7th-straight-month/
Another 30% fall will be about 2019 levels.
The significance of a 30% fall is that house prices will again track inflation. No speculator/Ibuyer will hold an asset with a 4-5 year (2019-2024) 0% yield. Especially noting from SoCalGuy above that risk-free treasuries are paying 5%+. This is what happened in 2012 when house prices crossed the inflation curve before the Fed pumped up the housing market again by continuing to lower interest rates and buying MBS’s. 2012 was the start of Housing Bubble 2 where lower rates and increasing prices attracted speculators. The Fed could do this again if there is a recession causing lower rates and then we will enter Housing Bubble 3. I think the bottom will occur in 2024 when house prices fall to 2019 prices and intersect with the inflation curve just like 2012. It will be a good time to buy a primary home since no speculator will compete for 4-5 years of flat gains.
You are 100% correct Bob.
Joe Blow Homeowner isn’t selling any time soon. They’ve likely refinanced into a low rate with a mortgage payment below rent.
However, Wall St. doesn’t have an emotional attachment to real estate and only seeks yield. The cap rates locally and in metros like Phoenix are essentially on par with what you can get from the government. Moving forward, prices have no where to go but down albeit slowly until the capitulation stage as Flyover mentioned. As you said, no investor is going to hold onto a property with flat gains (at best) for the next few years.
Up until a week ago all you heard was the Fed is going to do a couple more .25 hikes and then take a pause. Wall Street liked that news and the markets settled. But now all bets are off due to inflation numbers, recent announcements of more defense spending (good for me) and more sanctions against Russia. Now they are debating writing off $400B in student loans.
Bottom line is investors will start selling but prices will have to come down. A new set of buyers will enter the market just as the recession starts to kick in forcing the fed to lower rates. Home values will rise, more people refinance and the cycle continues.
The only other variable I see is the AirBnB inventory. AirBnB didn’t really takeoff until 2015 although it started in 2007. Covid really fueled a lot of people to pull out equity and buy 2nd homes / AirBnB rentals. The pent-up demand also went thru the roof as we all know but that has cooled own dramatically. I personally know a few people in my circle and have overheard the grumbles that bookings are down along with the rates they are charging. I see cash flow becoming an issue.
“ Bottom line is investors will start selling but prices will have to come down”
Same guy predicted a RE crash in 2020 when Covid hit. Opposite happened.
He keeps saying investors will sell. But no reason why!
Investors who bought the last few years are way above water and have locked in low rates. Rents have skyrocketed over the past years. So why should investors sell Cashflow positive rentals? If anything they can buy more rentals at a discount right now. They often buy in all cash to get the best deal and then do a cash out refi down the road when rates improve.
Maybe people just interpret headlines incorrectly.
Investor activity plunging doesn’t mean they sell
Record low sales doesn’t mean prices are crashing.
People refuse to accept the fact that we have less than 1M active listings which ks historic low. But don’t worry, I will keep reminding you 🙂
“Same guy predicted a RE crash in 2020 when Covid hit. Opposite happened.”
Most of us saw a pandemic as a disaster. M is a genius and saw it as a great opportunity.
M saw:
1) The Fed lowing interest rates to historic lows blowing up the RE bubble. I still think M is related to Jerome Powell. Or he just got lucky.
2) The US Government sending out massive cash aid with PPP loans flooding the market with so much cash to purchase anything.
3) Work-from-home which forced workers to purchase a larger home somewhere so they could fit work, life, and kids. This is changing if companies are calling employees to the home office.
4) Massive tech stock and bitcoin increases. You received all of this government aid, your tech company stock went through the roof, and can refi your house at record lows pulling out cash, where do you put the cash? A Work-from-home PC (Tech), a nice chair (Wayfair)? Real Estate looked like a good option with anything left. Maybe an investment apartment or AirBnB?
All of that is gone now. People still have cash and are spending it until they run out.
When they run out of cash, they will start looking for more. That 3% CAP rate AirBnB or rental may not look as attractive to hold when safer Treasuries are paying more.
I really don’t know what will happen. It is up to the Fed and US Government. They could lower rates again next week and we are off to the races with Housing Bubble 3 and massive inflation. We could have a foreclosure crisis and the US government will hand out 500K to new home buyers and forgive all home loans.
Or we could have a soft landing and home prices return to the inflation curve just like they did in 2012. I am betting on this. It is the least painful even though it will mean a 30% drop in housing prices back to 2019 values.
My reference is a chart from Wolf Street Reports. Both Wolf and our good Dr are geniuses at predicting the future without a crystal ball.
The chart link shows CPI housing inflation vs House prices.
2012 was when they intersected. I predict this will happen again in 2024.
https://wolfstreet.com/wp-content/uploads/2023/02/US-CPI-2023-02-26-Case-Shiller-Housing-CPI.png
In 2012, speculation fled the housing market. It was the best time to buy.
I predict that in 2024, the curves will intersect again. House prices will drop 30% to 2019 levels and inflation will rise another 10%. Real Estate is local. Phoenix and Las Vegas will plummet 50% again just like we saw in 2008. Please refer to Wolf’s excellent charts in this article:
https://wolfstreet.com/2023/02/28/the-most-splendid-housing-bubbles-in-america-february-update-biggest-price-drops-now-in-phoenix-portland-las-vegas-san-francisco-seattle-denver-san-diego/
Of course, capitalism is no longer in control. The Fed is in control and can change this at any time.
“ Most of us saw a pandemic as a disaster. M is a genius and saw it as a great opportunity.”
I think Bob got a point here. Can’t disagree with that.
M, please let us all know what your Uncle Jerome will do this year.
Your insider information was extremely accurate in 2020 when you flipped from a bear to a bull.
You have said some bearish statements lately. Should we all be worried?
Will do!
Got popcorn, this show is just starting 🙂
It never rains in southern california
https://www.youtube.com/watch?v=Gmq4WIjQxp0
LA, Orange County home sales crash 43% to record low
The sales pace was 48% below the average January dating back to 1988.
https://www.ocregister.com/2023/02/28/la-orange-county-home-sales-crash-43-to-record-low/
No worries, my magic beans will save me 🙁
munch munch munch ……. 😉
Home ‘sales’ down, not home ‘prices’ down. Big difference there buddy.
Got popcorn, lmao can’t make this up- How Bad
It was the worst January for sales in records dating to 1988.
It was the smallest sales total for any month in CoreLogic’s database.
The percentage sales drop ranked No. 2 largest over 35 years.
Sales were 48% below the average January pace since 1988.
Across the six-county Southern California region, sales also fell to an all-time low.
Los Angeles County had 3,097 closings, down 22% in a month and 44% lower in a year. Orange County had 1,291 sales – down 28% in a month and 41% lower in a year.
In Los Angeles County, the $763,000 median was down 1.5% in a month and 3% lower in a year. It’s also 12% off the $865,000 record high set in April 2022.
Orange County’s $950,000 median was up 1.7% in a month and flat in a year. It’s also 10% off the $1,054,000 peak of May 2022.
Nope, nothing to see here, back to my magic beans munch munch munch…
Of course sales are low.
I mean, who in their right mind wants to sell their house right now?
I get letters and requests all the time if I am interested in listing my house. I always say sure, if you pay me 1.5M ABOVE market value I sell.
But I would never ever sell at market value. I have a 30y locked in rate at below 3% and celebrate every day. Got Avocado!
We might not see 2-3% rates for a loooooong time. I will hold on to that loan and keep this avocado party going.
If people think like me and like they’re low locked in rate and their avocados, then why would you expect anything different than this current market: historic low inventory. We are below 1M active listings!!!! If nobody wants to sell why would sales be anything but low?!
Got avocado toast this morning.
M: I get letters and requests all the time if I am interested in listing my house.
Junk mail from realtors. I’ve been getting those letters for decades. Sometimes they even claim to have a “specific buyer” who’s interested in my condo.
M even brags about his junk mail.
M: I always say sure, if you pay me …
Not only brags about it. M actually replies to junk mailings.
Another one of SOL’s lies. Junk mail goes straight into the trash.
Maybe he lies so much because he’s jealous. I remember when he posted day and night that a bought the top and will lose my equity in Q1 2020. Maybe reality has sunk in and he realizes I made out like bandits and his calls were so wrong.
M: I remember when he posted day and night that a bought the top and will lose my equity in Q1 2020.
M lies.
I often posted that I doubted his claims of buying a house, as everyone remembers. So how could I post that he “bought at the top”? He certainly can’t provide a single link.
I’ve been getting “personalized” junk mail from realtors for decades asking if I want to sell. They send those letters to thousands of people at at time, hoping for a listing.
M even brags about his junk mail.
Can you actually give us an example of me bragging? I don’t think I brag at all.
I give free advice. If you would have listened and bought in Q1 2020 you would be sitting pretty. Instead you said the market will crash.
But honestly, if you would listen to me you would:
Not wrap yourself in a faraday bag
You would have a smart phone by now
You would have a nice sfh and bitcoin
You would def NOT pay over 1k in HOA fees AND
I am forgetting something.
Aaaah And you would def not have a landline anymore! Lol
:0 lmao Got Popcorn :))))))))
Inland Empire home sales crash 45%, 3rd-biggest drop on record
California home-price drops bigger than U.S. declines
Southern California home sales fall to all-time low
Home prices dropped in 90% of U.S. markets in 2nd half
Orange County loses 12 million-dollar ZIP codes since May but adds 9 ‘affordable’ communities
man I hope those magic beans work out 😉
Sorry but anyone counting on interest rates coming back down anytime soon do not understand currencies.. The dollar has lost its ability to offshore itself and hide the inflationary result. All the excess borrowing from Congress is immediately inflationary now. Omni”con” absolutely. There are explicit reasons for that but I’ll save that for another time.
Housing did not go up in value because of productivity it did so because more dollars were created via borrowing costs. That excess is going to be wiped out as it never should have existed in the first place. “All” corporate debt will be rolled over and crush earnings. Read Berkshire Hathaways last quarters discussion in regards to that.
You cannot create wealth through offshoring jobs, and pulling demand $$$ forward via cheap money. At some point that chicken is going to come home to roost and as we have kicked the can a couple more years the Federal Reserve got caught with their pants down. You want to crush to a government let rapid inflation takeover.
A service sector society is not a good recipe for long-term, healthy gdp. Mining, manufacturing, and agriculture are. Oh that’s right we off-shored all that in favor of corporatism, and then we papered over it through financial trickery.
I love our country but I’m so disappointed in what’s become of it. Housing is coming down, and it’s the least of our worries.
Actually Biden’s infrastructure bill is great for manufacturing. Foreign car companies are falling over themselves to build manufacturing plants, chip plants, battery plants in the US. They all need their car to qualify for that $7500 tax break or they won’t sell their EVs.
Manufacturing is coming back to the US shores. Apple is building a chip manufacturing plant. VR and AI are the future of tech and building the tech in the US will be the new gold rush.
At this point, I don’t think any economic data makes any sense, so I assume all stats are lies. Since I don’t trust the data, it’s hard to know what to do.
Finally an honest person here
I agree with about the data. Most of it is trash, especially the spin given by the media. Let’s see few examples:
1. Biden dumped on the market 240 million of tones of oil from the emergency strategic reserves to lower the CPI. Energy was the ONLY component from the index which dropped pulling the CPI down. Can he continue to do that indefinitely?!!…That gave the excuse for media to talk about pivot because the inflation is going down – good luck with that! The interest will continue to go up because the inflation is out of control.
2. In January 2023 they dropped again some components of the CPI to make it look better after they already changed the calculation from the Carter years. Calculated like before, without massaging the data, the real inflation for everything that matter is over 20%. Based on that REAL inflation, the nominal GDP translates into a massive negative REAL GDP – DEPRESSION. Sales increased ONLY because of the inflation. Adjusted for REAL numbers, sales decreased. It is a very FAKE picture of the REAL economy.
We have a CENTRAL Planned Economy by the FED and all central planned economies end up like the former Soviet Union – no exception. Most people already feel their standard of living dropping. When mortgages will go to 9% or higher, they will feel it even more. Mortgages are established by the bond market and bond holders already feel the pain.
The FED can do whatever they want, but all choices will be very bad. They are cornered. Doom on us if they raise the rates and worse if they don’t. Meanwhile the bond market will assert itself and the FED will stay put because the alternative is worse. The bond market wants positive rates of return (above inflation rate). At those rates, the economy will crash.
“ Mortgages are established by the bond market”
Yep, and the 10y treasury has a hard time breaking 4.25%. Feds funds rate is at 4.5
When economic data weakens the 10y tends to come down……so mortgage rates will come down if/when that happens.
Stay off zerohedge! That is 100% garbage data 24/7.
Follow real, unbiased people like Logan Motashami, altos research, Steven Thomas or calculated risk. And by all means don’t get sucked into politics. It’s all garbage. You shouldn’t care what politicians say or promise. Don’t even listen to them and walk away.
Politicians are like that gold-scam ring that hangs out near the I5.
They are dressed well and make up stories. At the end they sell you their lie and hope you go for it. Then they drive away and you’ll never see them again.
I know an older man that told me about how he got scammed by them.
It reminds me of politicians and how people constantly fall for it. How many of you have believed them and given them your vote?
History does not repeat itself but it sure does rhyme. Regarding mortgage interest rates, the last time we saw this level of steep increases was in the late 70’s in response to the high inflation of the era. It took 4 years before mortgage interest rates topped out. It was about 13 years before rates dropped back down to their prior level. If this time is even marginally close as far as time frames, we are looking at a long road of much higher rates.
Regarding bidding wars for assets we have a long history of them be it RE or equities or commodities or something else. They almost all play out the same, with an ultimate major decrease in value of whatever the asset is. This time with RE it should be no different. We aren’t even a year from the peak. The decline will play out over years.
The importance of when you enter a market cannot be overstated. The simulations have long since been run and the data is available. Missing a major devaluation period at the outset of your investment will have a substantial positive impact over the long term. It’s not debatable, it’s just math. Buying into a market anywhere near the overbidding peak is not a good financial decision. People have other reasons for buying and do buy at such times, and that’s fine, but it doesn’t make it a good financial decision over the long term.
You are comparing the market today to the 70’s? So you must be a massive housing bull then?
Median home price in 1969 was 25k
Median home price in 1979 was 62k
Massive rent inflation too
Median rent in 1970 – 108 usd
Median rent in 1980 – 243 usd
I like the 70’s. My houses more than double in value while wages go up and my debt stays the same? Plus I can charge double the rent? Bring back the 70’s baby!
I agree with M to a certain extent.
There was no housing bubble in the 1970’s but the inflation rate was up to 15% for several years. House prices rose to track higher inflation. Currently, house prices are so mismatched with the inflation curve that they have to fall.
I remember getting COLA increases during that time. My wages were growing with inflation. This is true now with lower wage jobs but higher paid tech workers who buy more houses are not even getting raises to cover inflation. In fact with stocks plummeting for some tech, there is a 20-30% pay cut for many tech jobs.
I expect a pay decrease this year. Pay decrease, no more Covid handouts, no cash-out refi’s, no exploding bitcoin, no exploding stocks. How will M and I leverage into the next house??? 🙂
This is different than before in the 1970’s-1980’s.
1) Lower higher income wage increases. No more COLA. Unless you are making lower wages. The Upper Middle Class is getting squeezed.
2) No PPP loans or checks in the mail. Never happened in the 1970’s
3) No more house piggy bank refi’s. Never happened in the 1970’s
4) No more bitcoin/tech stock bubble. Never happened in the 1970’s
5) Inflation raising basic necessity costs . This was true in the 1970’s
6) Rampant speculation in the housing market driving house prices well above the inflation curve. This never happened in the 1970’s
House prices have to fall to compensate for these items. Housing prices will drop back to the inflation curve like it was in the 1970’s-1980’s. Down 30% to 2019 levels. Inflation will raise the house price floor just like it did in the 1970’s. There was no housing bubble in the 1970’s and housing rose with inflation just as M pointed out.
Econ is slowin’ down and it will take a 25% drop in Housing Prices to make that Market show any signs of Life. Until then, stay put and milk it while you can hold on to your job, hopefully. Next shoe to drop is Commercial Real Estate. Wait for it…..
Love this blog. Thank you.
“ Econ is slowin’ down and it will take a 25% drop in Housing”
Don’t be surprised to see the bond yield go down for the 10y treasuries if the economy weakens. Lower bond yield means lower mortgage rates. Lower mortgage rates translate into higher affordability.
Your 25% is just made up stuff. Why not say 40 or 30 or 50%?
M, you are correct if we assume we have a free market system; but do we??!!!…
There are many macro consideration the FED is looking at which are changing daily. They have the power to alter the market dramatically just by punching few numbers on a key board. Because of that, NOBODY knows the future, not even Powell. He might want to go one way and he can see that the market forces can throw at him a black swan event and he reverses course regardless of the consequences. We are also in a big and dangerous war and the FED works hand in hand with the Pentagon. Therefore the geopolitics also play a role; in that NOBODY knows anything unless they pretend they know, because they listen and believe the MSM propaganda.
It is naive to believe that Powell is concerned ONLY with asset prices. He might be till something else becomes a greater priority. If we would have a free market system, it would be easy to predict. The problem is we have a central planned economy with few individuals having all power to affect the market.
where my parents are east of Seattle, some neighbors sold a 4 bedroom house for $420,000 in 2016. In the past 5-6 years, Amazon and other tech companies moved a lot of jobs to Seattle, although I noticed a lot of similar houses being sold for $1 million in the last couple years are bought by investors and rented out. The absolute peak was March 2022 when a street with nice 3 bedroom ramblers, no sidewalk, houses were being sold for $1 million as teardowns, and several luxury houses retailing $2.5-3 million were built. The street has a lot of contrasts now but I don’t want to feel negative towards the people moving in. Zillow does show a 25-30% decline from March 2022 to present, but the newspaper reports more like a 5% decline over the year. I don’t know how they measure this.
For Posterity:
My New Year’s predictions for 2023.
1) If inflation is not tamed to below 4%, the Fed will stay the course and continue to raise rates another 1.5% in 2023. Mortgages will exceed 8% and finally be above the 30 year historic average mortgage rate (Then people have a right to cry, and they will). I cried in the 1980’s paying an 11% mortgage.
2) Due to higher mortgage rates, and less floating cash, house prices will decrease 20% in 2023. I expect the bottom will be in 2024 and house will fall another 10%. Speculation will be removed from the housing market and iBuyers will declare bankruptcy in droves. Housing will again track inflation. More supply will trickle into the market as the iBuyers, speculators, and flippers unload causing prices to slowly fall. My son (and most of the people waiting on this blog) will finally buy a primary home.
3) If the inept Fed causes more than 7% unemployment and crashes the economy into a recession just like they did in 2008, we will have deflation and the Fed will slowly lower rates based on decisions over their 3 martini lunches just like they did in 2008-2012.
4) The US Government is countering this early with the Inflation Act and Chips Act which will keep unemployment low and wages rising. This effect will happen in late 2023 and 2024. Their goal is to remove US dependency on foreign governments for defense. It does counter the Fed’s goal to lower inflation but may save us all if the Fed crashes the economy.
Those are my 2023 predictions. Please comment.
Again I find myself mostly agreeing with you in your prediction.
The only part I don’t agree on is the Inflation Acceleration Act. Those were money the US Government did not have, but they will be created and they will act as gasoline on the fire for the inflation. That will force the FED to increase the rates even more with a dramatic effect of lowering the standard of living for most people.
You can not get something for nothing. Inflation is taxation – government ends up with the newly printed money and most of the people can buy less than before – same effect as in the direct taxation, but in a round about way. This is the reason it is called “stealth taxation”. Under this taxation, the poor and middle class suffer the most – it is the most REGRESSIVE forms of taxation.
Housing cannot and will not drop 30% absent a severe job-loss recession. Anyone who bought between 2012 and 2022 is locked in under 4% interest and likely has at least some equity built up. Fire sales only happen when people have no options and let the bank take the house back. No options only happen when people are laid off and the govt doesn’t bail them out (as what happened in 2020, resulting in no foreclosure tsunami, as initially predicted). You’re correct about housing re-aligning with inflation moving forward, but thinking current pricing is going to correct more than single digits without additional economic stress is a fantasy.
Spot on Joe
Of course, with 8-10% annual inflation, prices standing still equals a price drop in constant dollars. In order to make waiting for price drops to get big enough to profit from them with saved cash, the drop has to be bigger than the loss of currency value from inflation. Informed people know that US Government inflation statistics understate inflation intentionally.
M is no longer championing crypto I notice. Look back to 2020 / 2021 for a real laugh. All he likes to brag about his home purchase in Q1. What happened to Bitcoin to 100K??
In regards to Bitcoin…..we have seen nothing yet (disbelief stage). This will be a massive, massive bull run in crypto. The likes we have never seen before and it will make 2017 look like a kids birthday party.
Buy and hold crypto. You will be easily able to come up with the DP when you cash out at the right time. Cardano #3 crypto currency by market cap is trading above a $1. That was it previous all time high 1.38. I am betting this will at least hit $3 during this bull run.
March 2021
2022 will be massive for the crypto market! I simply cannot wait
100k Bitcoin baby!
Dec 2021
So let’s see…. BTC plunged to $16k on Dec 22. Now it’s floating around $22 and when then fed hikes rates it will plunge even more, below 2022 lows.
Cardano??? LOoooool. Down 88% from the peak. Currently at 0.34…. Oh and the crypto ETFs??? Down 65-70% since inception.
The housing bubble has popped along with crypto and everything else.
Cardano was one of my biggest money making machines.
I am waiting for my price target on Cardano to buy back in.
Same with ETH and some other s-coins.
I have already bought a good junk of a Bitcoin and are also waiting for another leg lower to buy more.
Yeah Bitcoin 100k did not happen. It got to 67k. Isn’t that funny? Remember when the bitcoin haters said it would never go to 20k. ROFL.
100k bitcoin maybe during the next bubble. 🙂
It will take a while though until uncle Powell turns on the money printer again.
At poster “Whatever”, there will be life changing opportunities AGAIN in crypto. Hold your powder dry and buy back in soon. I’ll provide you with the info once I go in heavy.
Right now, there isn’t too much to report on crypto, you just need some patience and wait for the buying opportunity.
Crypto is the best thing since sliced bread. Thank you
It’s interesting to read M the bot’s drivel. He post more than anyone. Where does he find all that time? Is he working at home or is some realtor who owns and writes for him doing the posting? Just curious.
Maybe M lives in his parents basement and has all the time in the world – since the delusion. Maybe he is telling his mom that he writes resumes.
Before 2020 he imagined working in tech with 6 figure income and now he imagines being a real estate agent.
Keep in mind posting here takes 30sec to 2min per post.
There are people here like Bob who also post on other sites like wolf street.
I only post here on dr housing bubble. Have been here since many years now.
It’s very entertaining.
And yes I work from home. Tech company.
I couldn’t do the work of a realtor. I’d hate to try to sell people something.
I like my friends who are realtor very much though. There are so many realtors out there!
M is correct.
I could spend far more time watching Netflix dramas. This excellent blog has much better drama than anything currently on Netflix. There are exploding bubbles, falling knives, zombie corporations, bears, and bulls daily.
This blog is so entertaining and educational that I’ve mostly given up on Netflix and spend all of my free time here.
Great questions LOL! If I cared enough I could probably find out for you because I know people that live in his neighborhood. But I just don’t care enough.
Hello! What basement is it that you keep talking about? Have you been to SoCal? Houses don’t have basements here. So who is the delusional one here 😉
Two different issues that I have commented on here came up again in today’s OC Register. Lansner’s series on the decline in the Case-Shiller 20 metro area index continues with a discussion of California’s 3 markets vs the other 17 markets. All 20 metro areas showed monthly declines for December 2022 (the latest data). San Francisco was the big CA loser while Portland and Phoenix were the big decliners outside CA (all at least 1.8%). The smallest drop in CA was LA/OC at 0.8%, and NYC was the smallest nationally at 0.2%. Demand may vary from area to area but interest rates aren’t as variable.
The other topic was the insurability of condos. I had posted about the impact of the Surfside condo collapse nationally. Specifically about problems with a Marina Del Rey complex. Today’s column by Lazerson isn’t about beach communities, but is about Laguna Hills in OC. Fannie Mae has pulled out of its condo warranty approve for over 6100 condos in Laguna Woods Village which is on the inland side of the Laguna Hills. They have a $1 billion insurance deficit The problem has been building worse and worse over the past few years. Buyers now need non-warrantable condo financing, which requires >20% down and higher interest rates. Since 2/3 of LWV condo buyers paid cash, there is still a pool of buyers who may want to go for it. One broker was very upfront with Lazerson about the situation (he didn’t have to ask!), but others didn’t volunteer the information or feigned ignorance. Buyer beware!!!
Got Popcorn, this collapse is just getting started, Timmmmmmmmbbbbrrrrrrr 😮
“Look at the 20 ZIPs with the largest declines since May’s peak, noting that pricing at the neighborhood level can be volatile. No. 1 Newport Beach 92663: Off 45% to $1.7 million between May 2022 and January. That’s a reversal from a 30% gain in the pandemic boom, February 2020 to the May 2022 peak. No. 2 Santa Ana 92701: Off 45% to $405,000 since May vs. gains of 102% in the boom. No. 3 La Habra 90631: Off 43% to $709,500 since May vs. gains of 101% in the boom. No. 4 Laguna Woods 92637: Off 37% to $284,000 since May vs. gains of 19% in the boom. No. 5 Corona del Mar 92625: Off 32% to $3.18 million since May vs. gains of 40% in the boom. No. 6 Anaheim 92808: Off 30% to $712,500 since May vs. gains of 52% in the boom. No. 7 Irvine 92614: Off 29% to $813,000 since May vs. gains of 44% in the boom. No. 8 Tustin 92780: Off 26% to $686,250 since May vs. gains of 39% in the boom.”
“No. 9 Fullerton 92832: Off 21% to $620,000 since May vs. gains of 31% in the boom. No. 10 Orange 92867: Off 21% to $890,000 since May vs. gains of 42% in the boom. No. 11 Huntington Beach 92648: Off 20% to $1.15 million since May vs. gains of 35% in the boom. No. 12 Los Alamitos 90720: Off 20% to $1.25 million since May vs. gains of 61% in the boom. No. 13 Yorba Linda 92887: Off 20% to $1.06 million since May vs. gains of 58% in the boom. No. 14 Cypress 90630: Off 19% to $783,000 since May vs. gains of 28% in the boom. No. 15 Santa Ana 92705: Off 18% to $1.24 million since May vs. gains of 68% in the boom. No. 16 Huntington Beach 92649: Off 18% to $885,000 since May vs. gains of 25% in the boom. No. 17 Orange 92865: Off 18% to $770,500 since May vs. gains of 45% in the boom. No. 18 Rancho Santa Margarita 92688: Off 18% to $730,000 since May vs. gains of 32% in the boom. No. 19 Santa Ana 92707: Off 17% to $485,000 since May vs. gains of 14% in the boom. No. 20 Irvine 92603: Off 17% to $1.87 million since May vs. gains of 87% in the boom.”
Magic beans oh magic beans, where have thou gone ? munch munch munch 🙂
Your OC zip list of % RE drop didn’t include my zip code. That fits in with what I’ve seen here. People are paying more than I think they should to move in. I’ll just sit tight with my Prop 13 and watch the fun.
Realist only a few more munches and you are ready to buy. The dream mansion with ocean view awaits you and will soon be in reach. Congratulations!
We should have all waited to buy and eat popcorn instead. Realist will buy the mansion of our dreams at a 90% discount very soon. Just open up a few more popcorn bags and you’ll enter the RE heaven! Well played realist! And please stay firm these next few years during this epic collapse. If you just believe and hold your powder dry you will most certainly buy that dream mansion. Almost there. Almost. Just endure this very last stretch. Congrats again!
Once again people are not getting wealthy over productivity gains. The wealth effect is nothing more than a slush fund from pulling demand forward via easy money. The old days of low interest rates made it easy to borrow 1% when inflation was running at 5%.
Credit cards, vehicles, crypto, housing, stock market, et al are addicted to credit creation. That’s fine as long as the productivity game outweighs the debt. How is our Congress borrowing money to finance our debt a productivity gain?
Powell just doubled down and the dovish theory is (not going to happen).
If you want to see civil unrest writ large let’s keep the inflation spigot going.
Powell knows that the runaway inflationary curve is a monetary phenomenon and the dollar can no longer hide it via swift.
As for M needs to learn how to relate to the middle and lower class folks that are going to pay a heavier price than could ever be imagined. Maybe could stand down off the 1% er pulpit (getting richer), and drink a cup of shut the f*** up.
Pulling demand forward via EZ corporate money or congress sponsored is actually stealing tax revenue that could be going towards a worthy cause. When the free handouts stop we’ll see how long that political capital lasts.
Coming g to America: About a third of China’s major cities are struggling to pay just the interest on debt they owe, according to a survey by Rhodium Group, a New York-based research firm. In one extreme case, in Lanzhou, the capital city of Gansu province, interest payments were the equivalent of 74% of fiscal revenue in 2021. This is rapidly approaching the infamous “Minsky Moment” now that debt has moved beyond “mere” Ponzi financing levels.
You are right that easy credit fuels non-productive investment booms (speculative financing). However, there has been smart money investing during this latest cycle, and our friend M was right in the thick of it. (Buying a new house when he did and all!) New housing is productive, unlike crypto which may some day be of use in a world gone nuts, but is currently in the tank thanks to Ruja Ignatova, Sam Bankman-Fried et al. There will be a crypto shakeout with the weak hands folding, and then we’ll see as WB says “who is swimming naked”!
Once again crypto is a Ponzi scheme. It does not collect interest or make money it just sits there waiting for somebody else to buy your share at a higher price so you can cash in. Crypto has to go to zero because of that very fact. It is a mathematical certainty I don’t care how you spin it, ftx notwithstanding.
Unfortunately the low interest rate environment helps serve corporate interest and not the little guy. The bank that just failed was levered at a ridiculous low (bond) interest rate and when interest rates ratcheted up they got caught, yes naked. Who will pay the price for that fallout? The CEO cashed in 3.5 million in shares the week before. Leverage is going to destroy the very fabric of our society. All those that know the why have seen this coming for 30 years and have been looked down upon as naysayers. It’s not that it’s me saying it’s how to protect our future in a sane and balanced way. Too late for that.
Now let’s get this multi trillion dollar government funding bill passed so we can move on to bigger and better inflammatory needless crap.
Hi bud,
“ As for M needs to learn how to relate to the middle and lower class folks that are going to pay a heavier price than could ever be imagined. ”
How do you measure this “pay a heavier price than could ever be imagined”.
Is consumer spending down significantly?
Do you see empty restaurants?
Do you see empty stores?
All I see is people pay for services and goods left and right. Often with their credit cards.
If you spend money for overpriced stuff and you don’t learn how to be frugal, then don’t blame others for it?
Nobody forced people to go out and eat. You know how much padres tickets are in demand? People who don’t have money (supposedly) could just use someone else’s password and watch it at home for free!
Instead, there is traffic and long lines at the stadium! And you tell me people are hurting? Give me a break.
Got Popcorn, Oh No, Please No No No, not my Magic Beans :(…….
The La Jolla Light in California. “La Jolla-based Silvergate Bank, which grew fast by catering to cryptocurrency traders, said March 8 that it is winding down operations and will liquidate amid mounting losses, customer defections and regulatory pressure. The bank’s parent company, Silvergate Capital, announced after markets closed that it had voluntarily decided to cease operations as the ‘best path forward’ given its deteriorating situation. Bloomberg News reported late the day before that officials of the Federal Deposit Insurance Corp. were at the bank’s headquarters in an effort to salvage the institution, but that apparently was not a viable option.”
Well, good thing I bought a home at the peak 🙂 oh wait, that’s crashing just as fast 🙁
The Lookout in California. “Santa Cruz County’s housing market is slowing as properties stay on the market for longer and fewer homes are being sold countywide. The Santa Cruz County Association of Realtors shows the median price of a single-family home fell an annualized 4.7% in Santa Cruz, from $1.6 million in February 2022 to $1.525 million in February 2023. Median prices fell 7.4% in Watsonville, from $810,000 to $750,000. Jennifer Watson, president-elect of the Santa Cruz County Association of Realtors added that she doesn’t expect those types of low interest rates to return anytime soon: ‘If we do have rates that low, then something bad happened.’”
“Some current sellers aren’t willing to reduce their asking prices enough to compensate for the changing market conditions. Some of our inventory is stuck with the peak pricing. Owners are asking the price that it may have sold before, but the market isn’t what it was last year,’ said Marvin Christie, president of Anderson Christie Real Estate. ‘I hate to say it, but it’s unrealistic sellers.’”
AND THIS IS JUST GETTING STARTED, the downfall of my empire 🙁 munch munch munch ….
Realist is starting to post facts and data with his posts after his 2 years of hysteria.
Maybe we should stop ignoring him. I am starting to read his posts.
Silvergate is the latest Bitcoin disaster. Maybe worse than FTX.
The FDIC has arrived to insure all of the moms and pops who deposited US Dollars there get their money back. The FDIC doesn’t insure the massive Bitcoin losses that customers will see. Bank customers should have stuck with US Dollars earning 0.1% instead of Bitcoin promising much more but delivering -100%.
I have a CD with Silvergate through Vanguard. I actually had no idea they were involved with crypto because they were vetted by Vanguard which is anti-crypto. I just thought they were an online business bank with a sweet rate. It matures next week. No more more Texas money to California.
Note: layoffs planned because of rate increases. Rolling debt will crush the
bottom line.
As an aside anyone who buys crypto is knowingly endorsing a pyramid
scheme and needs to check their values. Oh I’m sorry one really wouldn’t
have any values, and it shows the rampant greed and naivety of so-called
Investing. The same game is being played in the stock market.
Ark fund anyone? What percentage of the stock market are a result of companies being able to roll over debt?
Housing will be a slow burn.
From Challenger:
“Worst since Lehman” is never a good thing.”
“Certainly, employers are paying attention to rate increase plans from the Fed. Many have been planning for a downturn for months, cutting costs elsewhere. If things continue to cool, layoffs are typically the last piece in company cost-cutting strategies,” said Andrew Challenger, Senior Vice President of Challenger, Gray & Christmas, Inc.
“Right now, the overwhelming bulk of cuts are occurring in Technology. Retail and Financial are also cutting right now, as consumer spending matches economic conditions. In February, job cuts occurred in all 30 industries Challenger tracks,” he added.
In fact, Challenger has not recorded announcements in every industry the firm tracks since January 2013, when cuts occurred in all 29 industries.
Tech Layoffs continue to dominate…
In retrospect, Tech layoffs were in the cards for a long time. Tech companies way over hired, and automation including AI was bound to catch up and eliminate jobs. Feed a censorship AI Bot with a limited amount of information (e.g.Orange Man bad) and it will do just as good a job as the overpriced censors Musk laid off. The AI mind cannot discriminate on its own. It is stuck in an air conditioned room with only the information feeds its master gives it.
I know someone with a Comp Sci degree who is old enough to get Social Security but is able to get work because they know machine language and real time programming. (The way big mechanical devices like harvesters, assembly lines and sawmills are controlled by computers in real time.)
@Emancel: “it shows the rampant greed and naivety of so-called
Investing.”
I like how you put it. Gambling to get rich quick on a failed currency. Everything about that is wrong but the early-ins made it seem so proper. So many people got burned when this “investing” went mainstream (crypto machines in Walmart, oh my). HELOC and retirement money going to crypto. Talk about FOMO. *slaps forehead*
@Joe R: “In retrospect, Tech layoffs were in the cards for a long time. Tech companies way over hired. Tech companies way over hired, and automation including AI was bound to catch up and eliminate jobs.”
Over-hired, yes. AI eliminating jobs? A few, the more – and eventually new jobs will be created to the point of having more or less a zero net loss. Dramatic technological tends to work that way. If only we could look just 10 years into the future and take a peak at the new industries and professions. That would be interesting.
I’ve been an AI skeptic but things are getting real. I’ve seen results from my use of AI that has translated into real money entering my bank account. AI going exponential is not just hype like Bitcoin was. AI is finally able to create real value and it’s only getting better. Exponential. Exciting and a bit scary at the same time.
A WHOPPING $2.3T of unrealized equity loss??? What is that like an 8% decline? Homeowners aren’t even selling so what did they lose? And if rates jumped 4% from their lows pushing mortgage payments 50% higher why isn’t that number a 33% decline? I love how Doc casually dismisses persistently low inventory rates as nothing to consider but keeps citing 2008 as if the market we are currently in is experiencing the same symptoms from the same factors. Notice how important points are completely ignored and how the narrative always resorts to drawing weak comparisons to 2008. That’s sounds a bit naive and delusional don’t you think?
1. Markets don’t decline drastically unless the supply exceeds demand. This is the big diffference between the current market and 2008.
2. Supply will not exceed demand unless homeowners default en masse.
3. Homeowners will not default en masse unless their payments are no long serviceable.
4. Payments are considered “unserviceable” unless the current market offers cheaper living options.
5. The market does not and will not offer cheaper living options than what current homeowners already have.
Using pure logic, it should be pretty clear to see that the market will not crash. If you disagree, you’re naive and delusional and we can reopen the conversation again in one year and see where the market stands. By then it would be 24 months since rate hikes so no reason to use the ol’ “the RE market moves slowly” argument.
“2008” ruined a lot of people. YouTuber, zerohedge, crumpy Wolf Richter and other perma bear sites capitalize on the “boom and bust” narrative. Sooo Many fall for it and actually believe there will be a similar downturn in RE. It might take another decade for people to realize this 2008 was a once in a lifetime event. In the meantime I am getting ready to buy my second rental. I am looking in Phoenix again.
One of the radical left relatives of mine…….. he’s the definition of woke. He sold his house and thinks he’s gonna win big by waiting for the epic crash. Of course he’s going to time it perfectly to buy a bigger, better house for much less. These clowns really exist. It’s gonna be fun to watch this show for the next few years. until he pulls the trigger to buy again he’s paying sky high rents and lives on half of the square footage compared to the house he sold. Dumbest decision ever. But keep watching perma bear YouTube videos and dream of that 50% crash. Any day now buddy. Needless to say he’s a big fan of “get-trump”.
Is the SVB the new Lehman? This is mainstream news not Zerohedge; it is a fact that a relatively big bank collapsed.
I predicted for months (since interest started to increase fast) that a black swan event will happen soon due to collapse of the bond market. I was wrong on location but not the imminent event. I thought it was going to be Credit Swiss not a US bank (the 16th largest in US).
What will the ramification be from this even? More regional overleveraged banks go bust? Any of the big banks? Personally I doubt this event will be contained – there are trillions and trillions of dollars owed which try to refinance at higher rate. I think only a major financial catastrophe will decrease the real inflation; changing the way you calculate it and using the oil reserves is not a long term solution.
What is the take of fellow bloggers? Is RE going to be impacted a lot, or just a little?…
And yet again, the fed govt and Fed Reserve step in to backstop any depositors from taking losses. But somehow it’s not a bailout. Moral hazard is sooo last century…
It is my understanding that the asset SVB put money into was longer term US Treasury bills As rates rose, their portfolio dropped in current market value. In order to get money to cover debts, they had to sell at a loss. So much for “safe” treasuries! They are only safe if you are able to hold until maturity. In today’s market, there is a seriously inverted yield curve.Today the highest rates are for 3 & 4 month bills, the lowest for 10 year. (Range = 1 Mo to 30 yr.)
The failed banks should have had a better risk management plan. Don’t put most of their eggs in one safe padded basket and lock it away for 30 years.
The banks paid 0.1% to depositors and put all of that cash in 10/30 year guaranteed US treasuries paying as low as 0.65%. Sounds great right? Something grandma might do to guarantee a fixed income for the long term.
The problem is inflation and rate increases. Poor grandma is now seeing 10% inflation and 30% rent increases while making only 0.65% in the safest investment ever. That’s not very safe.
The poor banks are seeing everyone withdraw cash to put it in 6 month treasuries paying 5%. With all of that bank money tied up for 10/30 years at 0.65%, they need cash now to pay depositors. They are being forced to sell their treasuries before maturity at a huge loss to generate cash. If the Fed would lower rates to 0.65% again, every bank would be fine. However, grandma would be wiped out by inflation. The Fed has a problem.
It looks like I was off on Swiss Bank by few days. If that one goes down (high probability at this point), it will make a 1.5 trillion dollar hole. It will be a nuclear bomb on the financial system. Is the FED starting QE again? Inflation to infinity? What will it be the impact on the hundreds of trillion derivative market?
I think the FED has to drop interest to zero again, and fast, or the the whole financial system goes up in smoke. Everything is interconnected these days – think about the domino effect.
Depending on what the FED will do, we are talking more than 20% unemployment or inflation Venezuela style; …or a full blown WW3. There are no good option at the present time. The insanity started long time ago but went full blown with the Covid response…or was Covid just the cover for launching the present insanity???!!!!…Hard to tell if you don’t have your own intelligence agency funded in trillions of taxpayers money.
Headline: Crypto Scours the Globe for Banks to Replace Collapsed US Lenders
https://finance.yahoo.com/news/crypto-scours-globe-banks-replace-121524618.html
Crypto hedge fund executive Marco Lim spent Monday racing to open bank accounts in Hong Kong after the sudden collapse of three US lenders.
The hedge fund, MaiCapital, is based in the city and had cash at one of the fallen institutions, Signature Bank. MaiCapital needs alternatives and managing partner Lim was pressing lenders to speed up account opening.
“The two biggest crypto friendly banks are gone,” Lim said, referring to Signature and Silvergate Capital Corp., which also had many crypto clients and said Wednesday it would liquidate. “I’ve been through too many crises.” …
This article says everything you need to know about the banks and housing fragility that is so deeply corrupt in our system.
Nothing is ever free.
https://market-ticker.org/akcs-www?post=248301
Emanuel, I read most of the article. What I def agree with is: nobody with 3% mortgages is going to replace that mortgage voluntarily with a 6-7% mortgage unless they have to sell. And there is. Arely any forced selling out there. The waves of foreclosures apparently was a “ah nevermind, just kidding” thing.
The other stuff he says in the article: whenever people compare today to 2008 I kinda lose interest. And, he pretends like the SVB failure was soooo obvious. Well hindsight is 20/20. If it was soooo obvious why didn’t he short the SVB stock? He’d be swimming in money and wouldn’t need to sell books to make a living. Aaaaah, wait what? He is selling a book? There it is again, bad news sells. Now they all come out again and say, I told ya! I predicted it! Now buy my book and be prepared for the next one! That’s why they come out with a new version every year because they have to adjust the timeline. Kinda like the people who predict the end of earth. It is 1990 with 100% certainty. It is 1991 for sure this time. Now it’s 1992. The day is def in 1993……it will be with absolute certainty 2023.
FYI Deninger wrote the book in 2012 and did a presentation to the senate. He made his money from an MSC net and writes security software so pull your head out your ass and get your facts straight. He’s also one of the founding fathers of the Federalists movement. I’m not even going to waste my time posting to you anymore you keep the cheerleading up though. Next time do your homework.
So 2020 was the epic housing crash year, remember? You had a pandemic and people were losing their jobs! The perma bears had it but they were wrong (again).
2022, for sure will be the year of the crash though. This time for real. Interest rates are going up!!! Houses MUST come down. Except no crash (again).
2023 epic crash is happening. It just HAS to. Or does it?
Inventory……it’s even lower than at the beginning of the year. Wait what?!?! Spring season means inventory rises. Sellers are coming in droves.
And what about the glut of investors panicking and selling like their life depends on it? Or is this another marketing gimmick like the waves or foreclosures (forbearance crash bros)?!
In the meantime, it you still care for facts:
As said a million times before:
Without even going back to 2019 inventory levels you don’t even have a balanced market. Inventory is waaaay too low. AND
As soon as economic data weakens, the 10y yield goes lower. The banking crisis news hit and look at the 10y. Went from 4% yo 3.5% in a matter of days. Which translate directly into lower mortgage rates…..
But don’t take my word for it. Check yourself or keep hoping and praying for a RE crash.
Btw., ask yourself, do you know a person in this market who is excited to sell their home with a lock in 30y low rate, just to replace that low mortgage with a 6-7% rate????? I don’t, and I will HODL my low mortgages just like I HODL my precious bitcoins.
It won’t be a crash. Everyone will sit happily in their 3% mortgage home until they die or have to sell. Unemployment could be a reason to sell due to high payments or they have to move for a new job. There will be a low percentage of people dying and moving.
The question is: What can people afford at a much higher interest rate? Prices will slowly fall to match affordability. I predict a fall of 20% this year over the entire year if rates keep increasing. By 2024, house prices with another 10% decrease will intersect with the inflation curve and it will be a good time to buy again like in 2012. Inflation will increase and house prices will fall and eventually intersect.
Nobody must sell a house if they have a job and can afford it. The Fed is actively trying to kill jobs.
Just like in 2008-2012, there will be reverse FOMO. Absolutely nobody has to buy a house even if they can afford it. Fear of Jumping In will prevail. Who wants to catch a falling knife?
Today, it seems FOMO is still in control. Rates drop a little and people dive in. When the house drops another 5%, FOMO slowly fades and FOJI takes over.
The Fed is trying to kill jobs, raise unemployment, and wipe out FOMO to reduce inflation. Don’t fight the Fed.
There won’t be a crash. It will be a slow decline. A decreasing asset doesn’t attract speculators.
Good points Bob as always.
Don’t know if buying a house can be described with fomo. Pretty much all my cousins and millennial relatives don’t own homes. They pay high rent though. If they had invested in stocks and bitcoin and inherited money they would have a downpayment to buy a house.
You have to live somewhere. We all know that in places like California it’s financial suicide to rent longterm. Rents have completely exploded the last few years. My mortgage is lower than a 2b place to rent. And it’s worth over a Mio and has more bedrooms than we need. Insane.
Right now Sacramento is seeing bidding wars. Expected market time for homes below 800k is around 15-20 days. It’s crazy how low inventory is in some places. There is no price reductions in sight if you don’t have the inventory for it!!
Above 1M houses sit >100 days.
Everyone dreams of having a house. It’s the American dream. Nobody dreams of being a live long renter. I guess, you can actually describe it with fomo. I think of fomo when my bitcoins go up and people who criticized my precious coins suddenly want to buy bitcoins too because they have fomo. I guess live long renters fear that they will never be able to own a home. In that case, fomo is GOOD. Because you can’t go wrong buying a house that you plan on holding for the long run. Todays prices will appear dirt cheap in 10 years.
I can speak from experience that buying a house was the best thing for us in terms of happiness. So call a good realtor and enjoy the American dream. Be a happy homeowner and invest excess cash in crypto. Thank me later.
And to all those housing bulls in the metaverse (pun intended), we get another 10,000 layoffs. Bank failures a result of low interest rate Venture Capital that was going nowhere, never profitable. Yep housing will be the last of fall but it will fall. These jobs are not coming back they were all fueled by speculative money. That giveaway can no longer function without an immediate transition to an inflationary outcome. We know where that leads, at least anyone who understands the longer term repercussions of bad monetary policies for many years. By all means lets give the Pentagon 1 trillion dollars so we can police the problems we’ve created through international monetary intervention.
Emancel: Your comments are spot on! Most of the world is tired of American hegemony at every level. The weaponization of the ‘reserve’ dollar and American political duplicity are coming home to roost…..
As soon as rates dip slightly buyers come back to the market.
MarketWatch: “Mortgage demand jumps in past week amid bank closures, as rates took a dip”
It is ironic that the Credit Suisse Bank CEO’s last name is Lehmann, because we now have Lehmann Crisis 2.0
That is pretty funny!
But, credit Suisse will not fail. They will print enough money to keep the bank afloat. It’s similar to BOA, the US would never let that bank fail no matter how mismanaged it is.
Fighting inflation is one thing but when it comes to bank failures the FED and stakeholders will come out of bed on a Sunday to turn the money printer back on.
The market expects rate cuts this year. Lol…. Not sure that will actually happen but the expectations on future rate hikes/cuts changed dramatically in one week.
M,
Like I said before, that is a possibility. However, that will make the dollar like peso – you can say bye to the dollar as an international reserve currency. Can you support an empire and over 180 military bases around the world with a weak currency???!!!
Another possibility is to defend the dollar with high interest and QT and let many banks go bankrupt.
It comes down to what is more important to the FED – preserve the dollar or preserve the banks. We’ll live and see. I’ve got ready for both. I’m just watching.
So much for CS not failing eh? Technically they didn’t though. As you say, they were too big to fail to UBS bought ’em up before anything bad happened. Not exactly a bullish signal.
“ let many banks go bankrupt”
Compare our banking landscape to europe. We have hundreds of banks while in other mature countries banks have consolidated to a handful of major ones. Maybe that’s our future as well which I am not a big fan of.
More Banks more competition, lower fees and better client experience.
During my frugal years I used to switch banks often to scoop up their bonus payouts. Haha, feels so peanuts today. Btw have you guys noticed they don’t give out credit card points for new sign ups like they used? I used to love playing the credit card game and pocket the 50k-120k points for signing up and spending a minimum. I haven’t gotten offers in a while now. Maybe cause I have financially rap** them over the years or has it really changed?!
This may be the most accurate post Dr. Bubble has ever made. As a person who has been a responsible saver, investor, and homeowner I can only say it’s about time this financial insanity and irresponsibility has had a dose of reality. There are a ton of entitled millennials who are getting a ‘wake up call’ as this develops. Many still believe the FED is going to solve the crisis, and their problems with it! A crisis which the FED created! NOT! It’s got a long way to go. Failing banks are just a symptom of a much larger MMT created issue. Trillions in money printing and asinine zero interest rate policy were never sustainable.
For those who were prudent, and didn’t participate in the mania, there is ‘true’ opportunity ahead, but that may be very far out indeed. Patience is key…..
There seems to be a standoff between sellers and buyers. Buyers are demanding affordability with the current 7% rates and sellers are not budging with their low mortgages and considerable equity.
In California, 89% of current mortgages are below 5% and 99% are below 6% with the current mortgage sitting at about 7%. This means that current homeowners that would like to trade up are unable to because prices haven’t come down enough to make the current 7% rate an easy pill to swallow.
These last 3 years have been unprecedented with how low rates have gotten and how high prices have risen as a result. Drawing a comparison to previous housing crashes, especially 2008, would be foolish so we can only make future predictions based on the current indicators.
1. Wages rising: Wages are due to rise sharply making homes more affordable for buyers. This is good for prices but this is usually the last thing to rise during an inflationary cycle so it will take a while.
2. Inventory: inventory is currently sitting at 3.2 months in SoCal which is still pretty low. It usually takes about 6 months of inventory to force prices down to at a significant rate. More inventory must hit the market for this to have a downward effect on prices.
3. # homes sold: Unit home sales have dropped 35%. Mortgage applications are down 75% YoY which means this is mainly due to buyer unaffordability but seller unwillingness to list their homes also is a factor.
4. Prices: Prices are only down 3% in SoCal despite a 3 – 4% rate increase further supporting the standoff theory.
5. Rates: Speaking of rates, rates are as high as they were in the early 2000’s pricing out a significant amount of buyers. Since the current “price drops” aren’t actually drops at all, this means the average monthly payment has shot up 40% to 50%. Higher payments are easier if prices are lower which means down payments are lower but that is not the case. Not only is the barrier of entry as hard as it was in the years prior, the cost of servicing the mortgage has significantly increased.
There is no indication that prices will rise but there is also no indication that prices will fall either. Sellers will never agree to taking on higher rates to trade up and buyers just can’t afford the current market. Inventory is not rising, mortgage applications are down so the supply and demand are both depressed. For anything significant to happen in this market, rates must come down.
I have an interesting theory about what the market will look like once rates come down. If rates come down, not only will that allow buyers into the market but sellers looking to trade up will also enter the market. There is pent up pressure on both the sellers and buyers to transact but the pressure is far greater on the sellers. If rates come down, listing will shoot up adding more seller competition which may actually further decrease prices despite a decreasing interest rate environment as sellers can finally proceed with their postponed life plans. Buyers will be presented with a double bonus of increased affordability via lower rates and decreasing prices via increased listings. The longer rates stay at their current levels or higher the greater the compounding effect will be but do not expect prices to drop below 2020 levels as wages will also rise increasing buyer competition and rents will have also risen increasing buyer motivation.
“but do not expect prices to drop below 2020 levels ”
That would be quite a drop if we look at how high prices increased from 2020 to 2023, especially in desirable markets!…
I can’t forecast prices one way or another due to uncertainty in what the FED will do. I don’t trust anything they say and they act based on other considerations than the market – not too much market left, just a centralized controlled economy.
“ If rates come down, listing will shoot up adding more seller competition which may actually further decrease prices despite a decreasing interest rate environment as sellers can finally proceed with their postponed life plans. ”
A seller is usually also a buyer. Selling one and buying another one doesn’t increase inventory. Yes, in theory more listings increases competition. But it’s not like more sellers face less buyers since the sellers is also looking to buy the next house.
Forced selling is what got us to 4M active listings back in 2008. Today we have less than 1M of active listings. Forced selling is no longer present today. The other dynamic is Demographics which plays a huge role in this. if you have more older people selling their home to live in a senior living apartment but not enough young people that are ready to purchase their first home you end up with more supply than demand. But thats not a reality either today.
Millennials are the biggest home buying group today. Yet, have you ever met a millennial that says he or she (or they/them) love renting and won’t ever pursue to buy a house? It’s just taking a lot of them longer to save. In other words the demographics are there to sustain future demand. And you can see on how purchase application data improves as soon as rates dip. Lots of potential buyers are out there but can’t pull the trigger with sky high rates.
Please factor in that people with money are leaving CA meaning they will be buying a home in a market outside of CA.
Inventory should start to rise while the number of qualified buyers shrink due to unaffordable interest rates.
The macro situation is to depress home prices.
Are you reading about increased layoffs across the tech and banking sectors? Those are the good paying jobs that then translate into home sales and forced downsizing, people leaving the state.
But none of these layoffs amount to a meaningful number yet. The tech layoffs until now are peanuts. The labor market hasn’t broken (yet).
On regards to rising inventory. We heard it for years. Fact is we have about 1M of active listings. In 2008 you had around 4M.
I’ve also heard about the CA exodus for 5 plus years now. all I see is traffic and lines when going out to eat. Let’s see how much traffic and lines there will be in the stadium. seasons kicking off tomorrow! Go padres!
Got popcorn munch munch munch ….. 🙂
The Orange County Register. “California home prices are now 18% off their all-time high, but sales activity has risen in three consecutive months. Source: My trusty spreadsheet reviewed the California Association of Realtors’ February home sales report for existing, single-family homes. Debate: Is California’s housing market recovering from its bubble bursting? The California median benchmark is 18% off its $900,000 peak of May 2022, just 10 months earlier. Compare that dip with the 10-month drops off in previous peaks: 1991: Prices fell 6% in 10 months, with losses that grew to 20% over 69 months. 2007: Prices fell 30% in 10 months, with losses that grew to 59% in 21 months.”
Magic oh magic beans :(((((((
Powell today said that he will continue the QT; what type of QT is that when he increased the FED balance sheet by 300 billions in one week after he decreased it by 600 billion over 7 months?!!!!….It looks like he chose inflation vs. a banking crisis. The 0.25% increase is not going to do anything to the inflation, especially with how fast he is increasing the balance sheet.
You can’t let a major bank fail (probably not even a small bank). Imagine the fallout and associated bank run. Again, any bank that needs saving will get saved (takeover by another bank or by the FEDs). J pow pow is their Jesus. Ready to save em all. You know this: If market participants lose faith in their Jesus all Hell breaks loose.
Fed Rates are high enough. They can stop now. 0.25 was likely the end of it. Remember there is a lag of when higher rates impact the markets. the damage is here now and credit should get tighter which is a deflationary force.
This might not be a bad outlook after all: the banking crisis helps to fight inflation? No hard landing needed? Or will get things worse and the labor market finally breaks? Interesting times.
“Fed Rates are high enough. They can stop now. ”
No, the fed really cannot stop raising rates. The Fed mandate is to control inflation below 2% and maintain close to full employment (3% unemployment). So it has a mandate to keep raising the interest rates.
Why is inflation so high and going back up? Because of sneaky QE. Bailing out the entire banking sector from small to large banks is what the Treasury/Yellen have stated they have to do. So Powell and Yellen are like good-cop/bad-cop. They work at cross purposes. But the wait of fiscal policy plus the bank bailouts ($2trillion more back door stimulus) will certainly push inflation rates back up above 8% by July.
Interest rates will need to keep chasing inflation because Powell has no balls like Volcker had.
And it is inflation that destroys societies, never interest rates. Interest rates simply freeze credit and cause economic contraction but not collapse.
The troubled banking sector may have a deflationary impact by tightening up credit?
It’s gonna be a long painful wait for homebuyers. Even if people lose their jobs they have tons of options before they avoid paying their mortgage. I personally have a $200k home equity loan to tap… that I technically could use to pay my mortgage for 8 years if I lost my home. Sure I would be losing some equity slowly … but far better than losing my 2.5% mortgage rate. People with homes have so many options to hold onto their homes.
A mortgage payment. It sounded so heavy and dreadful in the past. Ask homeowners today and they celebrate their mortgage payment. We can thank inflation for that.
A below 3% mortgage rate feels like sitting on a goldmine doesn’t it?
It’s incredibly unfair to those that waited and saved money……higher rent is eating up their pay increases and inflation is eating up their savings while houses became even more unaffordable due to higher rates.
Boy I celebrate every day that I pulled the trigger.
Be very careful with HELOCs. In the GFC in 2008, many of my relatives and friends got their HELOCs closed without any notice. These were people with credit scores over 800 who were never late on their payments. The bank has the right at any moment to close the HELOC without any notice, no reason given. They just wanted to decrease their exposure and preserve the bank liquidity while the financial/banking system was frozen.
If things get really bad, they can do that again. Don’t count on HELOC!…
HELOCs are and will be affected as the recession deepens and consumer debt increases. Banks will seek to reduce their exposure to defaults. There were many individuals in 2008 that thought the same and lost. Maybe withdraw some cash now before your HELOC is closed.
https://www.helpwithmybank.gov/help-topics/mortgages-home-equity/home-equity-loans-lines-of-credit/heloc-freeze.html
Name one reason the FED can’t just quickly bring interest rates back to 0% again within a year of a recession? They have tons of ammunition now with rates so high to do rounds of QE after another if we start truly crashing.
I will give you one reason – currency crash. You can’t sustain a military empire with over 180 military bases on a dollar equivalent to pesso.
If the Saudis sell oil on Chinese currency instead of US dollars, the only way the FED can prop the dollar is with high interest rate. I think that is a very powerful reason not to drop the interest and increase it more.
The second reason is with banks collapsing, they started again QE to bail them out. To counter the money printing effect, they will be forced to raise rates even more to stop the collapse of the dollar.
because the globalist deepstate masters have given him his orders to collapse the economy so they can roll out the reset and crush the majority of the population so they can have more control and wealth. It’s ALL (stolen election, covid, vaccine, magic beans, BRICS, US Dollar, housing, small business, j6) part of the PLANDEMIC
Go Woke, Go Broke
The FED doesn’t necessarily want a RE crash but it does want a correction.
The FED has no control over what it wants. This is the reason why inflation lags a year out and they have no control over were that cash flow goes. SWIFT is now being circumvented via direct .exchange. France just made a major LNG purchase from China and did not go through the dollar settlement system. IOW we cannot hide dollars anymore via an expanded money supply that won’t directly relate to an inflationary result. The days of cheating are numbered. All assets will revert back to their means.
A year is a somewhat insignificant time in the eyes of the fed. A lag of one year only indicates a degree caution to not over-correct. Low rates were implemented to prevent economic collapse during the pandemic. Escalating RE values were a result but were not a concern at the time. But are now.
OC Register columnist Lansner has published his CA price decline spreadsheet results for February. Prices are off 18% since May 2022 (all time high). As prices drop, sales are now up; almost 18% higher than this January. It is the highest level in 5 months. He compares the 18% drop to other housing bear market 10 month drops: 1991 = 6% over 10 months which kept going on for several years to an ultimate 20% drop; 2007=30% in 10 months with 59% in 21 months. Seem like we’re in between 1991 and 2007. One difference is the continued high inflation which we didn’t have in 1991 or 2007.
A New York Post article gives statistics on East vs West housing markets:
https://nypost.com/2023/03/27/us-home-prices-sink-in-west-while-east-surges/
Some non-surprises are hot – like Miami and Orlando – but Buffalo??
It seems that woes in the West-heavy computer economy are the source of the problem. As I said in a previous post, the Tech companies are shedding employees they no longer need or want possibly due to inroads of AI.
According to Market Oracle (Nadeem) any housing crashes are the boy who yelled werewolf
scroll down for his US Housing forecast
https://www.marketoracle.co.uk/Article70856.html
The OC Register has two articles by Jeff Collins about Huntington Beach’s fight with the state over its charter city status and state housing laws. They won one lawsuit by a nonprofit advocacy group over elimination of affordable units from a zoning plan where they invoked their charter city status. But they have backed off in other cases brought by the state and have lost in state courts where they challenged a particular state mandate. Last month they filed a suit in Federal court to invalidate SB1333. A land use lawyer interviewed by the columnist says that he doubts that the Federal court will do that. The argument is that the law violates the US constitution, not about the charter city exemption from state laws that have an impact outside the city’s jurisdiction. If there is no US constitutional issue with the state law in the eyes of the Federal court, then they usually give precedence to state appeals court rulings according to the attorney. The ADU / Affordable Housing avalanche to crush one more municipality.
Holy crap, in an older neighborhood in north county, remodeled home went on the market for 1M and ended up in a bidding war selling over 100k over asking. I couldn’t believe it as I know this hood. (Nothing special).
Tell me again the market is “correcting”, “crashing” and “got popcorn”.
Did the ones waiting for lower prices miss the boat again?
My buddy realtor told me that he had multiple offers on his listing and 40ish people come through his open house. Anyone else heard/seeing the same?
I think I am changing my mind (politically). Unfortunately, I couldn’t avoid learning about the indictment of trump. So he is arraigned but no mention of what the actual crime is according to DA Bragg’s press conf?! He just said “with intent to defraud and intent to conceal another crime” ? What?!? so what is the other crime? How can this even happen without him mentioning the actual crime? And who is/are the victims?! Can’t be stormy, she got to munch on trumps mushroom AND got paid twice! For being a talented pornstar and to keep quiet afterwards. When I heard 34 felony counts my first thought was, oh they finally got something against trump. Then I learned all 34 counts are for the same thing? Paying off stormy Daniel’s to keep their sexy time under the pillow but accounting for it incorrectly!? Not much wrong with that Bawahahahahah! this got to be the best campaign ad for Trump. This will result into a major win for him and shows what a bunch of clowns these dems are. Again, he will get coverage day and night and people will scratch their heads about the dems suffering from trump derangement syndrome. Jesus, I prob even go out and vote for him just because of this embarrassing clownshow.
I said it multiple times before, one of my favorite things to do is making fun of the radical left friends and family I have in CA. From Now on, All dems are included.
Sry Bob! But I am sure you are turning to the good side after seeing this clownshow?
Since this is a RE blog: multiple offers, offers over asking, low inventory. Sums up the RE market.
I switched from Dem to Rep in the ’80s due to OC primary elections. I have voted for a few Dems in local non-partisan elections over the years. The demographic group I am in has been all but abandoned by the Dems, anyway. In the 2016 Rep primary I voted for Ted Cruz because he was the last candidate with a mathematical chance of passing Trump. I donate occasionally to local candidates, and I’m more interested in my local council and school board than in national races. All that being said, I am now in the position of having to support Trump in 2024. Joe Biden is in my opinion the third worst President in our history (after Buchanan and A. Johnson). He is destroying the dollar, destroying civil liberties, destroying property values and doing it all at the behest of others who pull his strings. His Dem henchmen in LA just passed a tax to increase property values in Beverly Hills. (Stupid rich Libs vote for these clowns and donate money to them.)
And when they soil their nest they move to areas like where I live and start the cycle again. I hope it doesn’t come to being forced out of OC before I kick off. For tax reasons, I’ll probably have to keep my house and rent it out. Rents around here are approaching $4000/mo for a place like mine (not even close to being a mansion!).
I think that everyone has a Constitutional right to pay off their pornstar hookers with under-the-table money and become President! This is America! That is what Makes America Great! We have finally returned to the Family Values that was promised us all when we elected that President.
Anecdotally, one of my former company CEOs did the same thing. He was only fired in disgrace and divorced. He was not charged with multiple felonies. It may be a hard case to achieve a conviction.
Anecdotally, some houses in some neighborhoods are still going up. The Good Dr and Wolf are posting trends among tens of thousands of home sales showing a large decline in home prices. What to believe? An anecdote or a statistical trend?
Bob,
“ That is what Makes America Great! We have finally returned to the Family Values that was promised us all when we elected that President.”
Who cares about that. I don’t need a president to be a good husband. He needs to get the job done. And you know these 34 felony charges are complete BS but you support it because it’s trump? DA Bragg and what he’s pulling here is an embarrassment. This liberal radical BS made me a trumper. I used to not care about politics until these clowns got my attention.
In terms of wolf and dr h bubble…….wolf has been pushing his housing bubble BS since 2013. I just hope people didn’t listen to this old crumpy dude and bought houses instead. Why do you think wolf never references absolute numbers when it comes to active inventory? He’s like zerohedge, you just leave out some facts and stats here and there and spin everything based on your confirmation bias. Bad news sells.
It is often quoted that home prices are going up when, in fact, they are going down. This is a statistical sleight of hand. If you use the year-on-year measure and home prices have been declining for several months, but still remain higher than they were a year ago, this is sometimes misleadingly called a gain. Technically, it is. However, it doesn’t tell the whole story. It is better to measure prices from their peak to understand the price direction and momentum.
M,
It is a matter of character. Would you trust your money to an advisor who constantly lies (OK most politicians lie), cheats on his multiple wives, and uses the money you have trusted with him to pay off his hookers?
I felt the same way about Bill Clinton. Clinton was the only President to balance the budget in over 60 years. However, I would never want to work with him or or for him. He abused his power and was a terrible leader.
Bob,
“It is a matter of character. Would you trust your money to an advisor who constantly lies (OK most politicians lie), cheats on his multiple wives, and uses the money you have trusted with him to pay off his hookers?“
I don’t care about people cheating on their spouses. And I don’t need an advisor as I invest money myself.
When you talk about character. The most evil, racist, hypocritical, lying people I’ve met in my life are without exception leftists. I don’t vote for trump because he is my role model. I vote for him because I simply can’t vote for politicians that these radical leftists support. Whatever they attack, I probably support. For whatever they vote, I vote against.
Let me ask you this: have you ever met a radical leftist? It’s truly fascinating, they are the definition of “do as I say not as I do”. They are the definition of a racist and a hypocrite. How can a successful investor, patriot and level-headed guy like me support anything the radical left supports? It’s just not possible. Trump could sh*** someone on 5th avenue and I would still much rather support him than these leftists nutjobs.
@M: “this got to be the best campaign ad for Trump.”
I agree. Their absolute hate for him has made them lose their minds entirely. It’s the same thing as those two sham impeachments.
@Joe R: “And when they soil their nest they move to areas like where I live and start the cycle again.”
If you look at the voting maps over the years it’s easy to see that OC will be Democrat majority sooner than later. SD followed the same path. I literally grew up in a conservative place that is now raging liberal.
—
I reject both parties as of a couple years ago. They have the same dysfunctions and force you into one box or another. The polarization would be hilarious if it wasn’t so damaging. Think about it. Is it plausible that one party has all the right ideas while the other has all the wrong ideas? No, it’s not. Fox and CNN would like you to thinks so but realize they’re just a product marketing to a particular audience. Money.
What if I’m against abortion but also against the death penalty? No candidate for me. What if I’m a fiscal conservative that is for justice reform? No candidate for me. But at least I’m not a freaking sheep any more. I can make some impact on local elections with judges and school board members but this idiotic system has me locked out on the national level.
America is a tale of “two” countries, one good and the other bad – at the same time, in many different ways. Seriously, these boneheads all change once they get there. Even Trump did, having gone from “interest rates need to go up” to “let’s see 0% rates” after becoming President. I won’t vote for the Divider in Chief again but neither can I vote for Old Joe, who is basically useless.
Anyway, have a good day you all. 🙂
Headline: New law could apply rent control to single-family homes
https://smdp.com/2023/04/05/rent-control-board-march-meeting/
A new piece of legislation introduced in Sacramento could significantly expand rent control to single family homes and new construction.
SB 466 was introduced by Sen. Aisha Wahab in February of this year and would alter the Costa-Hawkins Rental Housing Act that stipulates how rent control rules are applied in local jurisdictions. While elements of the bill have momentum, experts said a wholesale revision to the rules will be difficult given entrenched interests. …
The bill’s author, Senator Aisha Wahab has a history of advocating for stronger tenant protections dating back to her time as a councilwoman in Hayward.
“As a renter, former Hayward City Councilmember, and current State Senator, I understand the scope of how the restrictions of a nearly 30-year-old law inhibit local jurisdictions’ ability to meet the demands of their communities amidst an ongoing housing and homelessness crisis,” she said. “With the reforms to Costa Hawkins, as proposed in SB 466, we are simply opening up the toolbox for cities and counties who are doing their best to keep their residents housed and tackle the affordability crisis.” …
Two articles in today’s OC Register on the situation in the current housing market:
Lansner’s article is on the percentage of sold homes that are new compared to a year ago in the greater LA metro area. It has increased from 8.4% a year ago to 11.2% this year. Discounts and large inventory are Lansner’s reasons for this trend. The jump has been biggest in Riverside (+6.6%) and Orange (+4.2%) counties. There has been virtually no change in LA county (maybe not as much building activity?). Sales are heading upward but are still way below last year.
The other article is about the average age of a first time homebuyer in the US. It has reached 36! My wife and I had an average age between us of 29 when we first bought.
According to Zillow, 20% of buyers in their 50s are first time buyers ( 11 % in their 60s and 7% in their seventies)! Some of these older people are renter refugees from the Northeast who buy in Florida. A lot of them are buying condos instead of single family houses (including those that stay put and buy in the Northeast).
I don’t see a housing crash in this data. I see a lot of fear and frustration due to inflation killing hopes of living better.
Interesting data, JoeR.
“According to Zillow, 20% of buyers in their 50s are first time buyers ( 11 % in their 60s and 7% in their seventies)”.
The FHA is now promoting 40 year mortgages. That should help with slowing the decrease in house prices. It is essentially an interest-only loan the first 20 years.
If I was 70, I’d sign up for a 40 year mortgage. Especially if I didn’t have heirs.
I bought my first home in 1973 when I was a 22 year old college student. It was the nicest house in the neighborhood built in 1890 in a PNW college town, easy walk to campus. Five bedrooms, two kitchens I paid $25k with a $200/month mortgage, including taxes and insurance. How times have changed.
If you are against Trump, Hate Trump, voted for obama, clintons, biden, YOU ARE THE PROBLEM in this country.
Alpha Male MAGA Patriots take great pride in taking care of problems, the American way.
Trump4President2024 🙂
A correction is definitely on the cards, at least in those very over-bought markets. However, the penny hasn’t dropped yet with many homeowners as mainstream media, under pressure from advertisers, is putting a brave ‘bullish’ face in things quoting price increases using year-on-year data. And people buy into it, but it can’t last as we get close to a years worth of declines in prices. It might take a while before would-be sellers capitulate in an effort to realize gains. That might lead to more inventory continuing the downward spiral for some while. Nobody knows for sure, but it seems more likely than any sort of recovery, or reversal of Fed tightening. If I were a home owner considering selling, I’d do it right now, and not expect silly money. Take what you can get and be thankful.
I’m not sure that converting real estate into US dollars at this time is a great idea. Real estate has intrinsic value no matter what its price in fiat currency. I don’t see prices dropping in US dollars, but definitely dropping in inflation adjusted dollars. Probably not as much though as the dollar itself will drop. I see rents going up everywhere there is no rent control and living conditions worsening everywhere there is rent control. Rents in my area are through the roof!
Because offshoring dollars is a thing of the past we are left with raising capital before issuing credit, or hyperinflation will result in social unrest writ large. All these banks are really zombie Banks and the Faith and Credit in the almighty dollar is now a transparent fail.
All these Gen X and ziers do not produce anything (much), and we are relying on China, others, to actually produce real things. As boomers retire who will pay these inflated prices for housing? Demographically speaking the housing boom will become the great housing bust. Really what’s happening is right before eyes the United States is becoming a banana republic. There’s no fixing it because nobody has the will and all the fat cats are just going to continue to skim the proceeds. Why does JP Morgan and Goldman Sachs make billions of dollars? What do they really produce? That money should be redistributed to the working class, but it is siphoned off by financial games, corporate, et al.
Our government knew that labor would be a global cheap commodity.. NAFTA was the real turning point in the globalist agenda for bankrupting the little guy. It is happening now faster and the domino’s are falling. Inflation, unfunded medicare, credit card debt, the high cost of living via rent, gas, food, this is the norm for the poor man.
What percentage of the population is living paycheck to paycheck in the United States and globally? What is it worthless college degree cost?
Cheap money it’s just the way of papering over the inability of a country to raise their standard of living through productivity. Financialization started in the 70s and it was intentionally meant to flatline the labor pool globally.
IOW America is no longer the dream for many, and as the tide turns the significance of these longer-term processes will become apparent.
Seriously dude, get off of zerohedge or whatever crazy website is polluting you. Let me guess, you never lived in another country or continent? This is the greatest country in the world. They say the Skandinavien countries are happier than us. Well, if you like paying half of your money in taxes to get “free education” and “free health insurance”, why don’t you move there?
This entire BS of hyperinflation, banana republic or whatever else you are talking about is getting old.
If you need money for a house payment, dollar cost avg into crypto, wait a few years and you have your downpayment.
I just read that Barney Frank (of Dodd/Frank fame) was a director on the board of Signature Bank! No wonder the big boys who stick money in such a bank are getting a bailout. Trump had $5 million in an account there that was closed by the bank in 2021 after Biden became President. So Trump won’t be getting bailout money, but won’t have to worry about possibly losing access to money temporarily. His daughter was apparently a member of the board from 2011 to 2013 due to her Dad’s heavy use of the bank.
“hyperinflation will result in social unrest ”
Emancel, in the same post you talk about house prices collapsing and hyperinflation. You can have one or the other but not both at the same time.
I believe that sooner or later we’ll face hyperinflation (collapse in the purchase power of the dollar). We already lost more than 90% of the value since 1913 when we’ve got the FED. As the dollar (unit of currency) collapses, people will need more of them for the same purchase, regardless if it is a car, a house, fuel or food.
Headline:California power companies roll out fixed-rate bill proposal
https://ktla.com/news/local-news/california-power-companies-roll-out-fixed-rate-bill-proposal/
If you earn more, you pay more.
That’s the basic idea behind sweeping changes proposed by California’s three largest power companies that will impact your electricity bill.
Southern California Edison, Pacific Gas & Electric, and San Diego Gas & Electric submitted a joint proposal to the state’s Public Utilities Commission last week that outlines the new rate structure. It follows last year’s passage of Assembly Bill 205 which requires a fixed rate and generally simpler bills.
Under the proposal:
Households earning less than $28,000 a year would pay a fixed charge of $15 a month on their electric bills in Edison and PG&E territories and $24 a month in SDG&E territory.
Households with annual income from $28,000 – $69,000 would pay $20 a month in Edison territory, $34 a month in SDG&E territory and $30 a month in PG&E territory.
Households earning from $69,000 – $180,000 would pay $51 a month in Edison and PG&E territories and $73 a month in SDG&E territory.
Those with incomes above $180,000 would pay $85 a month in Edison territory, $128 a month in SDG&E territory and $92 a month in PG&E territory. …
So a single high-earner will pay more for electricity than a low-income family with umpteen children with all the electronic toys.
So people with good credit and 20% down payment will have to pay more to subsidize high risk borrowers?
https://nypost.com/2023/04/16/how-the-us-is-subsidizing-high-risk-homebuyers-at-the-cost-of-those-with-good-credit/
I hope this blog will permit a contrarian viewpoint. How do you explain the over half a million $ difference in the purchase price and sales price/asking price of the following two houses in light of the general real estate economy? What do you think are the wholesale and retail costs of each interior remodel?
https://www.redfin.com/AZ/Scottsdale/7979-E-Princess-Dr-85255/unit-4/home/27739504
https://www.redfin.com/AZ/Scottsdale/7979-E-Princess-Dr-85255/unit-27/home/26921873
Dude, you seriously gonna ask this. Views, views, views. The higher priced property has the beautiful golf course in its backyard. The other house has an ugly wall instead. That’s worth at least 250k difference for the right buyer. This is Scottsdale. The nicest and most expensive place in the greater phoenix area. People who buy there (1-1.5M price range) def care about the backyard views.
They will both sell at asking or above.
Current economy?!?!
RE is a function of supply and demand. SoCal is smoking hot right now with expected market times below 45 days. We have historic low inventory. Don’t be fooled when you read march house prices are down yoy. March house prices are a reflection of sales that happened in Dec, Jan and feb.
For the millionth time: during recessionary times 10y bond yields tend to go down which pulls mortgage rates down. Lower rates = higher demand. Supply is already low. When higher demand meats low supply, expect the next leg up in price.
Yes, I agree that a golf course view demands a premium, but what was most surprising is that the buyer of the golf course unit was willing to reward a flipper with an over $500,000 price difference between the purchase and selling price. It’s difficult to imagine there being $500,000 worth of upgrades in that house. Same with the non golf course house. Difficult to believe there is $600,000 worth of upgrades in that house. How much $ do you think each flipper paid in upgrades, assuming they were the general contractor for the project?
The economy must still be relatively strong at the over $1 million housing level in Arizona for buyers to reward flippers with such high profits.
Headline: Biden rule will redistribute high-risk loan costs to homeowners with good credit
https://www.foxnews.com/us/biden-rule-redistribute-high-risk-loan-costs-homeowners-good-credit
A Biden administration rule is set to take effect that will force good-credit home buyers to pay more for their mortgages to subsidize loans to higher-risk borrowers.
Experts believe that borrowers with a credit score of about 680 would pay around $40 more per month on a $400,000 mortgage under rules from the Federal Housing Finance Agency that go into effect May 1, costs that will help subsidize people with lower credit ratings also looking for a mortgage, according to a Washington Times report Tuesday. …
That is the essence of communism – from each according to their abilities, to each according to their needs, or EQUAL share of misery. I lived under that for decades and I understand better than anyone on this blog where this leads.
You always get more of what you reward and less of what you penalize. Biden and the democrats do not understand these basic principles.
I think this is a matter of risk and not a subsidy.
As lemmings with good credit continue to overpay for houses when the Fed has directly said they are trying to lower house prices, there is more risk involved for the GSE’s. The person with good credit who overpays for a $1M house is more likely to walk away when the house drops 30%. People with poor credit are already paying a VERY high fee to buy any house. The fee is 10X what a person with good credit pays. It is insurance. Lemmings with good credit are now higher risk so there fees are going up.
They already did this to me when I purchased my beach and mountain 2nd and 3rd homes during the pandemic even though I had great credit. 🙂 There was a hefty fee added for homes beyond a primary home. That is because I am more likely to walk away from these homes if a recession occurs. It is a much higher risk for the GSE’s.
People with too much FOMO are overpaying for expensive houses that the GSEs are holding and backing the loans. Similar to what happened with second homes,
It is kind of click bait news.
If you look at the new rates:
https://www.mercurynews.com/2023/05/01/mortgage-fees-to-rise-for-buyers-with-high-credit-scores-fall-for-those-with-lower-scores/
People with good and fair credit will pay more.
If your score is great or excellent, 780 or above, you will pay less (.375% instead of the former 0.5%). I’d recommend getting your score to that level before buying a house.
The puzzling thing is lowering the fees for poor credit. Maybe they are just lining up the BlackRock foreclosure fodder again like what happened in 2008. BlackRock made a killing off buying foreclosed houses cheap. I am not a conspiracist.
My opinion is that since the Fed is actively trying to pop the housing bubble, the fees should be higher for everyone buying a house now. It will act as insurance to bail out the taxpayer if foreclosures happen. I still believe that buying a house is a place to live and not a short term investment. If you buy now, just don’t sell for 10-15 years and that 1% fee will be nothing.
As Lincoln said, “How many legs does a sheep have if you call a tail a leg?” Answer is four because calling it that doesn’t make it that. You have no idea about the risk of a pool of borrowers with good credit because you don’t know the individual circumstances. But adding a fee to people with good credit to make up the risk for borrowers with poor credit isn’t going to be because they are a bigger risk because they overextend themselves. It’s a subsidy for people who are clearly the most likely to default. Someone in my family bought a house in 2007 with a big downpayment and good scores which dropped in price during the crash. In 2013, they sold it for a small profit and bought a bigger house which they still own. It was the speculators and the overextended bad credit risks who defaulted.
Joe R, It depends on who is doing the spinning.
If you have a great score of 780 or above. your fees have dropped from 0.5% to 0.375%
If you have a good score of 740, your fees have risen from 0.5% to 0.875%.
If you have a poor score of 640, your fees have dropped from 3% down to 2.25%. This is still over twice the fees of someone with a good score and over 6X the fees of of someone with a great score.
Depends how you want to spin this. Is the homebuyer with good credit subsidizing the great credit score or the poor credit score? In either case, someone with a poor credit score is still paying over 2X the fees than anyone else.
Leftist tool Wolf Richter said this is “misinformation”
Dr. Housing Bubble, I think you would help us all by addressing the mortgage lending rule change that goes into effect May1 which applies a special fee increase for having good credit and for providing a down-payment.
We need to discuss this topic and the future of the capitalist system in the USA under this current regime.
https://www.washingtontimes.com/news/2023/apr/18/joe-biden-hike-payments-good-credit-homebuyers-sub/
Who cares. If you take jumbo loans, this rule is not affecting you (only fannie may loans).
That’s crazy. We need some regulations on how many single family homes people and corporations can own, instead of punishing the already dwindling middle class.
Bill Maher on why the housing market cannot crash and why democrats are a joke.
https://youtu.be/OdJOLMgY4p0
OC Register columnist Lansner has an article on the real interest rate of loans. He says that the march mortgage rate of 6.5% wa 1.5% above current inflation. This is the largest premium for home loans since November 2020( 2 years 3 months ago). Since 1972 (612 months), Freddie Mac says loans have been cheaper than inflation only 55 month, and 22 of those months were in a run that ended this January! During this run, the average discount was 2.5%! The only other similar streak was 20 months ending in July 1975. He gives a list of premiums and discounts by decade:
1970s: 1.6 point premium.
1980s: 7.1 point premium.
1990s: 5.1 point premium
2000s: 3.7 point premium
2010s: 2.3 point premium
Each of the last 5 decades shows a premium, not a discount. The average for the last 52 years (including the most recent years) is a premium of 3.8%. This current decade we have had way more than half the time a discount. This is a reckless disregard for economic common sense on the part of our Federal government. The two decades with high premiums were times of good economies. If the government gives away money, someone always has to pay, and a big hunk of the payment is among those whose major asset is the money they earn which is diluted by inflation.
Interesting data, Joe R.
My interpretation:
Mortgage rates have gone up but are still historically cheap. Mortgage rates at 6.5% only have a premium of 1.5% over the current 5% inflation rate. The historic average is a 3.8% premium over the inflation rate. Mortgage rates should be at 8.8%.
Two things might be happening.
1) The market believes that the Fed will succeed in lowering inflation to 2% or lower.
A 3.8% premium over 2% would lower mortgage rates to 5.8%. At the current 6.5% mortgage rate, the market believes that the Fed will succeed in lowering inflation to 2.7%. to achieve the 3.8% average premium.
2) The Fed cannot announce that 4% inflation is “Good Enough” without causing a sharp increase in mortgage rates (and 10 year Treasuries). 4%+3.8% premium =7.8% mortgage rates. The Fed must continue to actively increase short term rates to prevent this and drive down short term inflation. It is the cause of the inverted yield curve while giving hope to the market that inflation will not be high long term.
It is the path to a soft landing without a recession.
“It is the path to a soft landing without a recession.”
I think that the Fed has much less control of the economy than they think. The soft landing means that the higher interest rates are not causing job losses. But job loss fears are growing in the tech and banking industries. Musk canned most of the twitter staff without much of a problem. AI is threatening some tech and service jobs. High housing costs in LA and the Bay area are causing business relocations to cheaper markets. On the other hand, some businesses are doing very well. Every month this year my employer is telling us about record breaking revenues we are generating. (Our clients outsource work to us.)
Magic beans are dead, now RE ? This is gonna hurt, munch munch munch
LA-Orange County #homebuying is how slow? March was 28th-smallest #homesales total for any month since 1988 and 39% below the average March over those 35 years!
Got popcorn 🙂
@realist,
Low sales volume doesn’t mean anything.
This spring market is freakin hot in San Diego. Like sizzling hot. Got to SD and see the avg time on market. Anyone in SD can confirm that properties prices right are flying off the shelves. If you are looking for quality homes with discounts you are out of luck. Gotta wait and hope. No crash in sight.
Leave him alone M, he’s drowning in so much regret that any number with a negative sign in front of it is swiftly presented as confirmation to his bias. It’s his way of coping with all the wealth building opportunities that he lost out on that were within arms reach for him.
In the last few years, prices have more than doubled then rates have more than doubled but prices dipped a hair and a half while sales activity fell because no one wants to sell but in his head prices are heading towards “free” because no one wants to buy. The guy needs serious help. I used to think he was trolling but his writeups are too elaborate for the average troll to invest that amount of time writing and the content is genuinely delusional. The guy is going thru a mental breakdown, just let him eat his popcorn and when he says something wacky, just nod and agree and for the love of God keep his popcorn bowl full because I don’t wanna know what happens when he runs out.
“The National Association of Realtors says the median price for a Bay Area single family home jumped by 17% last month.”
https://www.nbcbayarea.com/news/local/making-it-in-the-bay/low-inventory-bay-area-home-prices/3213237/
I know prices usually notch up in the spring, and inventory is low, but does this seem like an unusually dramatic spike?
Curious how much of those withdrawals from banks like SVB are entering the housing market.
In a very slow RE market like we have now, when there are few sales, the median prices move up and down a lot from one month to the next. Unless you have very large number of sales, that number is kind of meaningless – it is skewed by few very high price homes.
Thanks for sharing! That is music to my ears. Don’t want to dox myself but I had this personal bet with one of my radical-left relatives about the housing market in the Bay Area. Needless to say I am winning bigly. Don’t want to share the details but I was bullish on RE and this radical-leftists is super bearish on it. Lol. I love my leftist friends and relatives. You gotta have these people in your life to make fun of.
*Source: National Association of Realtors*
The reason is actually simpler than you think:
Bay Area home price for at least the last 5 years have been flat. They actually did not reap any of the benefits that virtually every other market did during the post covid boom. To see a 17% jump in one month after virtually no price movement for a very long period of time is not surprising to say the least. Despite this, the current prices are STILL over 10% lower than March of 2018. This isn’t even close to “uncharted territory” for them.
The SF Bay values have not been flat. They jumped over 40% post-Covid. That is nowhere close to flat. In the 5 yrs prior to Covid, values were up 35%. Not flat.
How dare you fact check me.
https://www.redfin.com/city/17151/CA/San-Francisco/housing-market
No crash in sight. When I bought in Q1 2020 people told me the market will crash. A pandemic, forbearance and 7% interest rates later still no crash. Iam impressed with this resilience of the RE market.
Headline: US home listings plunged 21% in April with new homeowners reluctant to be ‘locked in’ to high mortgage rates
https://www.dailymail.co.uk/news/article-12049351/US-home-listings-plunged-21-April-new-homeowners-reluctant-locked-high-rates.html
March CA real estate data and statistics are in and well…yet another “I told you so” moment by yours truly.
https://www.car.org/en/marketdata/data/countysalesactivity
You’ll notice that Y/Y sales are down across the board in all regions. Many on this blog will claim that this is the “crash” in action. Unfortunately, this is another “nope, try again” moment from the chicken littles. For over ten years, their claims that the sky is falling is once again just another example how much dedication a human being can display towards unconditional willful ignorance. Truly a wonder to behold reading chicken littles peck at their keyboards knowing full well that each and every one of them can only dream of going back to 2019 prices; a time when the pecking was just as vigorous as it is now. What they don’t quite realize (yet) is that very soon they will yearn to go back to as recent as 2021 prices but to no avail, those days are behind us and it is (as it always has been) a New Age.
Back to the boring statistics: the most interesting tidbit in this month report is that the region that has been the butt of this blogs joke for quite some time (SF/Bay Area) saw a 17% jump in prices month over month. Seeing how this region was the hardest hit during the 2020 lockdown as WFH picked up steam, it seems that this area is undergoing it’s version of “2021” since it never really had a “2021” like the rest.
Condo’s are weathering this “storm” better than every other RE category with a 3% drop in prices Y/Y further substantiating the point that I previously stated: rising rates priced buyers out of one price tier and placed them into another but buyers are still buying. Demand did decrease, it was merely shifted from higher to lower price points.
Blue collar counties with a bustling local economy such as Riverside, San Bern, Kings, Fresno, Kern Counties are at the worst down 1.3%; an indicator that the markets that make up the backbone of the RE is a little sore from its workout but is poised to hit personal records very soon after it break.
But the most interesting data set is the Central Coast (Monterrey, SLO, Santa Barbara and Santa Cruz). The two most expensive counties in 2022 were Santa Barbara and Santa Cruz saw the biggest drop in prices while the other two are faring quite well. In 2022 the order from most to least expensive was:
1. Santa Cruz (1.6M)
2. SB (1.3M)
3. Mont (991K)
4. SLO (903K)
Currently:
1. Santa Cruz (1.2M)
2. Mont (900K)
3. SLO (895K)
4. SB (765K)
I would imagine the data is a bit skewed from lack of home sales but the general trend that buyers are less active in former hot markets and shifting their focus to local affordable markets are undeniable and further cementing my hypothesis that the outcome of this market is that buyers are relentless in their pursuits and will continue buying so long as banks approve their loans. Now before you get any wild theories that this will surely result in a surge of supply as recent buyers are buying too high; virtually every outstanding loan in the US is still below 4% with 85% of the total loans at 3% or lower. What this means is that if the average buyer is faced with a catastrophe and loses their jobs (won’t happen, job market is too strong), their mortgages are so low that it will take no more than two TikTok videos to easily cover the deficit and life will go on without the threat of foreclosures.
I hope you all see that the future of the RE market is anything but grim and if not, keeping pecking away at your keyboards and hopefully one day everything will make sense for you. Who wants popcorn?
Damn, so well written and entertaining! Nice job new age! Appreciated!
Dream of going back to 2019 prices? There were a lot of bloggers on here during the good ole days (2012-2016) who still couldn’t get themselves to pull the trigger. Those prices now backed by a 2.X rate are bargains of the highest order. I always warned people that they have no control of the future, but you have ultimate control of the here and now. For people who went out and bought based on present facts were rewarded. For people who waited for the sky to fall…let’s just say they are in a bad position now.
Rents have literally went to the moon. Rates have skyrocketed and housing has barely budged. Anybody sitting on mountains of equity with a 2.X rate isn’t going to sell their home no matter what. As always, those who save and sacrifice and plan for the future will be rewarded.
The problem people have with figuring out real estate and rental values in US $ is partly that the Dollar has been tanking. Are rents higher or is the Dollar lower?
Who wants to be a billionaire?
https://blog.delcampe.net/wp-content/uploads/2017/09/1-billion-retouch.jpg
I used to dream of living in a million dollar house.
Now that my current house is worth a million, it is rather disappointing.
Bay Area values are down 13% from peak Spring ’22 as measured by the most recent data from Feb. ’23. The data lags so we may see a Spring ’23 bounce, or not, but either way we will not know until later this summer.
Bay Area values spiked by 41% from the ‘covid-effect’ between Spring ’20-’22 so the decline has not come close wiping out the gains. However it is not reasonable to expect that 2 years of gains would be vaporized with 1 down year. It remains possible that the post-covid gains could be completely wiped out by the end of ’24. Or not, LOL.
Bay Area:
From peak: -20%
Yoy: -13
February 2023 to March 2023: +17%
Expected market time is 41 days as of now!
Houses are selling quickly during this spring season in the Bay Area. It’s a great time to buy in the Bay Area while prices push back up quickly. But you still buy at a discount.
Feb to March data is all noise. 17% is bogus.
Trend is probably upward though.
Back to the pole you go :0 $$$$ yall
It’s Friday desk clearing time for this blogger. “A luxury real estate brokerage that handled some of Orange County’s biggest and most iconic home sales has shut down. Villa Real Estate closed all three of its offices in Newport Beach and Laguna Beach, leaving 125 agents scrambling to find a new brokerage. Jamie Duran, president of Coldwell Banker Realty Southern California, said her division has been ‘very busy in talks with quite a few brokers.’ ‘Companies call us and want to be acquired,’ Duran said ‘They just want to get out of Dodge with their shirt on.’”
Got popcorn munch munch munch
The 1.5 year popcorn diet is working well for you. The longer you wait and the more popcorn you eat, the better the discount on that dream mansion. Any day now. Keep it up.
I would advise folks here waiting for the crash to adjust expectations, find something you can afford and hit the bid. I was a permabear from 2006 to 2018. Lost out on 80% of stock market gains. I did buy 3 homes during that period due to life circumstances (not brilliant speculation) and managed to keep all of them, including the one I live in now which I purchase during COVID. Prices ain’t coming down materially. That’s just the gods honest truth and everyone here needs to internalize that. Following this blog and reading John Hussy has been a set back to my financials goals to the tune of probably $1-2M. Sometimes you have to admit you’re wrong and bite the bullet. Your home isn’t meant to be a way to make money anyway, it’s an expense, and people should just treat it like that. The secular trends are not in favor of renters. There is less housing being built than is needed for household formation, the type of housing being built is more expensive than ever because of higher construction costs and labor, institutional investors have caught on to housing as a new asset class, so they are going keep buying even when it might not make sense for normal people, and finally, you can take virtually every home with a sub-3% mortgage off the market cuz those folks ain’t selling for 30 years, they are going to rent and cash flow their house. I don’t mean to scare people, but we are at peak rates already and nothing’s really budged here on home prices. The declines you’re seeing aren’t really declines, they are averages that probably show cheaper homes selling because that’s all people can afford. The minute mortgage rates tick back down, and they eventually will, the frenzy we saw during COVID will likely resume.
Nailed it 100%. I was a permabear too and lost out on gains for years just like you. I bought a forever house last Summer finally and I’m SO glad I did. Now I never have to worry about getting kicked out at the whim of a landlord, the dreaded annual rent increase notices, or never getting anything upgraded. So happy.
Congratulation throbert! You will likely never regret buying this home! Well done.
Best time to plant a tree is now. For years, the comments section on this blog was overwhelmingly pessimistic about the housing market and the midst of it, I can understand why people felt that way. When you prioritize recent historical RE prices over completely objective in depth analysis, it’s tough pill to swallow that now is the best time to buy than tomorrow. Despite this, there is one completely objective fact: the people that have doubted the market in the past, including the people that doubt the present market have been dead wrong about everything and I can’t help but wonder if this stems from having too much pride to switch stances.
I was stuck in the same echo chamber too and my greatest years financially began immediately after I turned down the noise and ran my own independent analysis. It’s never too late to prosper, don’t feel bad about what you missed out on. You don’t know how anything would’ve turned out so focus on being happy that you have more clarity in your life.
Yes, prices are falling and quite quickly in many places. CA of course remains ‘house-stupid’ so you’re always going to get someone willing to pay asking. You can see them at open houses, schmoozing up to the listing agent for preferential treatment and giving tire kickers the old stink eye. It’s usually boomers, many who have more money than sense. Whether the stand off continues through the year is hard to say. Remember though in the 2012 trough we had the same problem. My advise to buyers is if you don’t need to buy, or don’t need to live in CA, leave cause you ain’t ever going to find value, even if things correct 30%.
Stand-off? Nobody is selling their home to replace 2.75% mortgage rates with 6.5% voluntarily.
Historic low inventory means as a buyer you don’t have many choices. The good homes are being sold at top dollars. And if the job market finally breaks expect rates to come down (why? 10y treasury yields go down during recessionary times). Lower rates pushes prices up. And if you tell me nobody can afford to buy, tell that to those sellers that get all cash offers for their 1M plus homes. I got several examples of that in my area.
If you can buy now, do it and forget about the noise, YouTube perma bears or zerohedge. No crash coming.
California spring market is continuing to be pretty hot. New homes are selling quickly. The avg time on the market is 40 days ish.
I watched the CNN Trump town hall. Boy was that enjoyable and entertaining. He handled that B so well. Sharp guy our former orange man. He lost weight too and the tan doesn’t look orange anymore! I don’t know much about politics but it looks like a repeat of Biden vs trump. I could not see Biden in a town hall being asked tough questions like that. The radical left would never allow it. It would be inhumane too. Poor Sleepy joe wouldn’t even find the building without someone guiding him closely.
Since this is a RE blog: no crash in sight. Sry perma bears. J
Should have jumped on my train and bought. You are not getting any younger.
No opinions to spew. Just sharing a interesting link.
https://www.rentcafe.com/blog/rental-market/market-snapshots/rental-space-for-1500/
Greatest insight I have ever seen. Manhattan is the most expensive, Witchita Kansas is the least expensive.
Forever grateful for this exclusive info.
IMO, your sarcasm runs shallow, Surge.
Headline: California reparations task force says black people should be given PRIORITY in renting and buying and demands new agency to veto real estate decisions and ‘lessen racial segregation’ – as Newsom says cash reparations ARE still on table
https://www.dailymail.co.uk/news/article-12085005/California-reparations-task-force-says-black-people-given-PRIORITY-renting-buying.html
California’s reparations task force has said that black people should be given priority in the renting and buying market – and demanded that a state agency should have the veto power over real estate decisions to ‘lessen racial segregation.’
The task force was created to study the economic effects of slavery and discrimination in the state back in September 2020, making California the first state to embark on studying the possibility of reparations for black Americans — even though slavery was banned in California even before it joined the union. …
One such suggestion would give the control of local land use decisions to a state agency – that would approve plans based on whether they maintain or decrease segregation.
Their finalized recommendation read: ‘Residential zoning ordinances have been used for decades in California to prevent African Americans from moving into neighborhoods, thereby maintaining residential segregation.
‘To address local zoning laws that reinforce and recreate this systemic housing segregation, the Task Force recommends that the Legislature require identified cities and counties to submit all residential land use ordinances for review and approval by a state agency, with the agency rejecting (or requiring modification of) the ordinance if the agency finds that the proposed ordinance will maintain or exacerbate levels of residential racial segregation.’
If that recommendation doesn’t satisfy the issue, the task force said that instead they could: ‘Create an administrative appeal board to review challenges to developmental permitting decisions or zoning laws and reversing the denial of a development permit if the underlying zoning requirement is deemed to maintain or reinforce residential racial segregation.’
As well as this, the task force said that black residents who have been targets of ‘racially restrictive covenants’ that displaced them from living in gentrified neighborhoods ought to be given the ‘right to return.’
Areas like Huntington Beach may be locations where black Californians have priority in the housing market if the recommendations of the task force are brought forward.
They wrote: ‘The Task Force recommends the Legislature enact measures to support a right to return for those displaced by agency action, restrictive covenants, and racial terror that drove African Americans from their homes.
‘The right to return should give the victims of these purges and their descendants preference in renting or owning property in the area of redevelopment.’
Not only should they be allowed the ‘right to return’ to these neighborhoods they were allegedly segregated and restricted from living in, but black Californians should be given ‘preference’ because of their previous exclusion. …
UK tabloid writing about a California board without any binding power…and this is copied on this blog for what?
While they might not have direct “binding” power, I wouldn’t say they have no power.
These boards are not convened for no reason. They raise expectations among voters, activists, and rioters. And thus they influence future decisions by those who do have “binding power.”
This board might not get everything it demands. Not today, at least. But it will get something. And they’ll be back for more.
(And the source — a “British tabloid” — is irrelevant if the facts reported are real.)
All meetings were recorded and posted on YT if you care to see your CA tax $ hard at work.
https://oag.ca.gov/ab3121/meetings
https://www.youtube.com/watch?v=5LkG25HZ4QU
https://www.cnbc.com/2023/05/15/consumer-debt-passes-17-trillion-for-the-first-time-despite-slide-in-mortgage-demand.html
Total consumer debt hit a fresh new high in the first quarter of 2023, at just over $17 trillion.
New mortgage originations, including refinancings, totaled just $323.5 billion, the lowest level since the second quarter of 2014.
Fed data shows that about 14 million mortgages were refinanced during the pandemic period starting in March 2020. Some 64% were considered “rate refinances,” or homeowners looking to take advantage of lower borrowing costs. Average savings totaled about $220 per month for those borrowers, according to the New York Fed.
“As a result of significant equity drawdowns, mortgage borrowers reduced their annual payments by tens of billions of dollars, providing additional funding for spending or paydowns in other debt categories,” Haughwout said.
_______________________________________________________________________
Consumer debt at an ATH. Consumer savings rate at an ATL. It appears most that refi’d into a lower monthly payment chose to spend the savings.
At the beginning of the year, I noticed the real estate market in La Canada, Glendale, Pasadena and La Crescenta had an approximate 10% drop in values. But currently there is a lack of listing inventory in desirable communities.
Definitely not seeing a big bubble popping yet.
I wouldn’t hold my breath.
Get on with your lives.
Leaving a HCOL area sooner than later is the ticket.
https://www.howmoneywalks.com/irs-tax-migration/
IRS Tax Migration
For many years now the IRS has been tracking the migration of Americans and their income across state and county lines. Every year they produce a detailed report on the tax migration of Americans, showing the amount of people and income that moved.
Headline: Mortgage rates surge to 6.57% – the highest level since mid-March – adding to the burden of homebuyers amid scarce inventory
https://www.dailymail.co.uk/news/article-12125831/Mortgage-rates-surge-6-57-highest-level-mid-March.html
Headline: Insurance giant State Farm to stop insuring new homes in California, citing catastrophic wildfires and rapidly rising inflation costs that have put polices at a premium
https://www.dailymail.co.uk/news/article-12130537/Insurance-giant-State-Farm-stop-insuring-homes-California-citing-catastrophic-wildfires.html
America’s biggest home insurance company has announced it will no longer insure houses in California, saying that the risk from wildfires was too great and the cost of rebuilding too high.
State Farm, the nation’s biggest car and home insurer by premium volume, said existing customers would not be affected.
But from Saturday, no new home insurance policies will be issued. The company will continue offering auto insurance.
State Farm said it ‘made this decision due to historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market.’ …
I suspect this is the start of an engineered effort to drive out enough private insurers so CA can implement state-funded insurance to gain more control of residents and their money.
Nothing says strong housing markets in CA like State Farm Home Insurance pulling out of the CA marketplace!
Expect UUUGE rise in home prices as everyone loves failing to find home insurance.
Headline Tax on short-term rentals like Airbnb could fund California affordable housing
https://smdp.com/2023/06/01/tax-on-short-term-rentals-like-airbnb-could-fund-california-affordable-housing/
California lawmakers are considering a measure this session that would tax short-term rentals to fund affordable housing projects, a proposal that has revived dormant tensions at the state Capitol over the rise of companies like Airbnb and Vrbo and their responsibility for the state’s constrained housing supply.
Senate Bill 584 by state Sen. Monique Limón, a Santa Barbara Democrat, would impose a 15% tax on short-term rentals — the homes and rooms that owners rent out like hotels for 30 days or less at a time — starting in 2025. This statewide surcharge, an addition to the local transient occupancy taxes that most communities already require, could generate an estimated $150 million annually to build or rehabilitate low- and middle-income housing.
“One of the things that I get asked very often by my local cities and counties is: ‘Where is the money to build the housing?’” Limón told CalMatters. “I see this bill really saying everyone has a role to play.”
The Senate could vote on the measure as soon as today; it must pass by the end of the week to continue on this year….
This article from the good Dr housingbubble is from February. We are now in June and would like to see a new article about this epic housing crash.
Thanks!
OC Register columnist Lansner looked at home price trend statistics from Case-Shiller (through March), California Association of Realtors (through April) and the Federal Housing Finance Agency (first quarter). FHFA data did not show any rebound in housing prices based on sales and appraisal data. The other two showed some increase. The Case-Shiller tracks gains from individual home sales, and the Realtors track median sales price. The increases in the first two indices both showed the largest gains in the Bay Area. The conclusion seems to be that the slide is over but the recovery has not yet begun.
High income individuals are taking their AGI to other states to escape CA taxes. It was also mentioned that 1% of CA residents pay 50% of tax revenue. That 1% has the means easily establish residency in a low tax state and still live in CA.
Economist Explains Why California Exodus Matters
https://www.youtube.com/watch?v=8HGVxdMmFJk
Columnist Lansner from the OC register had two articles of interest to this blog. The first one used relocation data from the IRS to look at movement into California of new taxpayers (compared to other states). In 2021, the percentage of taxpayers who were new to California was the smallest of any state in the US (1.3%). Nationally, 2.7% of taxpayers made an interstate move. Over 5 years from 2016 to 2021, the number of moves to California fell by 11%. Only North Dakota and Louisiana had larger percent drops. Also inbound people coming to California were more likely than most other states to be single.
The other article was on mortgage stress. 2021 statistics were again used. The survey used 30% of income going to the mortgage as the starting point for mortgage stress in 170 large US cities. LA City had the highest stress in SoCal at 49% of mortgage payers. LA was #3 nationally behind Hialeah and ahead of New York. Irvine was the lowest city for stress in SoCal at 33% but this was above the national average of 27%! The California average was 37%. Irvine has much higher income than LA but not much more costly housing on the average. Palmdale and Long Beach were just behind LA at 44% stressed.
I know I’m dating myself, but 7% is actually the historical average mortgage rate in Duh USA… but after a DECADE AND A HALF or more of artificially free money, even Wall St. hosers need to re-calibrate, let alone The Proverbial Little Guy. Besides, Housing/RE should be the most stable of major markets, so anything that keeps Hedge Funds/REITs from whipsawing it (since 2001) is probably a good thing.
Boy am I glad I bought houses in 2020 and 2022. For the past decade people have been feeding us with this housing bubble BS and an upcoming crash. Sadly, potential buyers still fall for it. I used to believe this BS for years too. Again, so glad I got out of it and bought. Best decision ever. And I plan on buying….already have saved up enough for a DP on another rental in AZ.
Inventory has declined over the years and the bears are now in desperation mode. They had everything they asked for:
A pandemic and stock market crash
An economic shut down
People losing their jobs
Rising interest rates
And where are we now? RE prices are sky high and inventory is historic low.
This feels like a dream. I can’t believe how smart that was to purchase right before Covid. I should go back and archive the blog comments. 90% were predicting a depression, 1920’s style or at least a massive crash in housing.
That taught me a valuable life lesson: do the opposite of what the majority thinks or predict. Right now the majority thinks this is the worst time to buy a house. That’s why I am planning to buy as soon as one of my low ball offers get a bite.
Doc hasn’t posted in 4 months…hope everything is okay with you Doc!
“That’s why I am planning to buy as soon as one of my low ball offers get a bite.”
That should make “the bears are now in desperation mode” very happy to all buy with low ball offers (lower than yours).
“It ain’t over till the fat lady sings” – Not very PC but I’m old. Housing moves slowly. It took from 2007-2012 to reach the bottom last time. We are only a year into it. Have patience, grasshopper.
Yeah, but this is nothing like 2007 for obvious reasons. Can’t compare it.
Here is link to an article about mortgage rates and the economy by financial writer Jared Dillian:
https://www.mauldineconomics.com/the-10th-man/trapped-by-your-mortgage
I’m seeing something like what he describes in my neighborhood. I especially like his mentioning of first order (linear) and second order (quadratic) fits to data; first order fits go straight up or straight down and second order fits are parabolas.
Headline: Controversial ordinance gives San Diego renters new rights
https://www.10news.com/controversial-ordinance-gives-san-diego-renters-new-rights
A controversial new ordinance came into force on Saturday in San Diego requiring landlords to compensate renters when their lease is terminated through no fault of their own.
“This is a good step in the right direction,” said Rafael Bautista, director of the San Diego Tenants Union.
The ordinance, which was brought forward by San Diego Mayor Todd Gloria and Council President Sean Elo-Rivera gives tenants new protections that start on the first day of their lease.
It forces landlords to compensate tenants with two-three months of rent when they serve a renter with a no-fault eviction.
The ordinance was opposed by many landlords and the California Apartment Association.
“Our members have a lot of concerns about the ordinance. This ordinance could add thousands of dollars in operating expenses for housing providers,” said Melanie Woods, vice president of local public affairs for the association.
Woods said California already has strong statewide protections in place for renters and said the ordinance will increase red tape and make it harder to operate rentals in San Diego….
Of course we are to believe you are the only one who’s home value has gone up LMAO, those magic beans must have been traded for magic mushrooms :)))))
The Orange County Register. “The median sales price for an existing California single-family house was $836,110 in May. That’s down 6.4% from a revised all-time high of $893,200 in May 2022. Prices fell in 42 of the 53 counties tracked. Ponder the state’s 10 most populous counties, ranking but their year-long price dips …Alameda: $1.26 million median for May – off 17% in a year even after a 15% three-month rally. Sales down 27% in the year. Contra Costa: $888,000 – off 11% (17% rebound) with sales down 28%. Santa Clara: $1,788,000 – off 7% (19% rebound) with sales down 15%. Sacramento: $535,000 – off 7% (7% rebound) with sales down 20%. Los Angeles: $744,770 – off 7% (2.5% rebound) with sales down 21%. San Bernardino: $455,000 – off 7% (after a 2.5% drop past three months) with sales down 23%.”
$mart Lion investors have been sitting on the sidelines, feeding time is coming.
Got popcorn :))))))))
Sold all cash inland empire SFR to asian buyer over list price closed April 26, 2023. Over 70 walk thru parties on the open house first week that amazed the listing agent. Paid all cash for replacement house in Hawaii.
That makes sense. Inventory year over year is now negative. Imbalance in the market causes prices to go higher.
Congratulations! Any house will sell at a given time if it is the right price, right condition, and right location. Given that you had 70 people look at the house, it means the demand to buy is still high even at higher rates.
However, it doesn’t mean that you couldn’t have sold it for 10% more a year ago, or that you might have sold it for 10% less a year from now.
You sold it for over what you wanted and the RE agent didn’t have to work that hard to sell it. Everyone got what they wanted. You didn’t have to worry about the $1K+/month costs (insurance, taxes, landscape watering and maintenance, electric, gas) to support a vacant house for months if your asking price was too high.
It is true that people are less likely to sell if they have a pandemic mortgage rate of 3%, but if you want to move for whatever reason and if you purchased your house over 5 years ago, you have a HUGE amount of equity that you can cash in. I think there are many homeowners in that situation. If you purchased your house 5 years ago for 200K and can sell it for 400K today, it is tempting to cash out that 200K(minus commissions) in gains even if you could have sold it for 430K a year ago. You can take that 200K and pay cash for a smaller house in Hawaii.
I laugh when the Finance news programs claim that people are TRAPPED with their 3% mortgage.
The majority of homeowners today purchased before this bubble blew up home prices 40% over the last 3 years. 80+% of homeowners refi’d into a sub-4% mortgage.
Even if current home prices have dropped 10% after a 40% gain in the last 3 years, most people who purchased before 3 years ago are still extremely wealthy with home equity today. If my house that I purchased 10 years ago and refi’d at 3% has now 500K-1M in equity, I don’t consider that trapped. Just stop whining and sell your house and become a real millionaire (before the bubble bursts 🙂 ).
I don’t even feel sorry for the minority that purchased less than 3 years ago. They’ll just have to treat their forever home with a mortgage rate lower than anything seen in history as a place to live for the next 10-15 years and they’ll be fine.
Bob,
“ I don’t even feel sorry for the minority that purchased less than 3 years ago.”
Same here. I don’t feel sry for myself for buying two houses in the last 3years.
Primary was in Q1 2020 and two years later my first investment property.
I rather feel like a genius for buying in 2020 when everyone plus their mom told me the market will crash! Those people won’t show their face anymore.
Buy when you can comfortably afford it not when the mainstream tells you it’s a good time to buy.
Headline: Inside the negative equity timebomb: US homeowners lost $108.4 BILLION in equity this year – leaving more than 200,000 at risk of going ‘underwater’ if property prices fall another 5%
https://www.dailymail.co.uk/news/article-12275733/US-homeowners-lost-108-4-BILLION-home-equity-year.html
Homeowners are sitting on a negative equity timebomb after losing $108.4 billion on their property values this year, experts say.
The average borrower saw their home equity plummet by $5,400 in the first quarter of 2023 compared to last year – with households in Washington, California and Utah worst affected. …
Bawahahahaha
The total value of us real estate as north of 40 trillion dollars. 108 billion is not even a rounding error. You guys are funny.
Couple of links:
BlackRock and others essentially put a floor under SF homes for the last few years:
https://www.jchs.harvard.edu/blog/8-facts-about-investor-activity-single-family-rental-market
“Just a year earlier, in the first quarter of 2022, American Homes 4 Rent bought 1,131 homes and only sold off 171 homes. Back then, the Pandemic Housing Boom was still seeing a flood of institutional homebuying. Low interest rates, easy access to capital, soaring rents, and skyrocketing home values were just too good of a deal for mega investors to pass on.
American Homes 4 Rent—which owns 58,639 homes—is no longer on a buying spree
In the first quarter of 2023, American Homes 4 Rent sold more homes than it bought
”
https://fortune.com/2023/05/16/housing-market-institutional-selling-american-homes-4-rent-invitation-homes/
https://www.urban.org/sites/default/files/2023-04/A%20Profile%20of%20Institutional%20Investor%E2%80%93Owned%20Single-Family%20Rental%20Properties_0.pdf
Institutions to own 40% of SFRs by 2030
Published Aug. 17, 2022
https://www.multifamilydive.com/news/institutions-to-own-40-of-sfrs-by-2030/629907/
———–
Looks like the SFR floor is going to bust at these rates.
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