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> It is beyond insanity and even a crash won't bring it back to reality. You don't appreciate the power of "crashes" or multi year "slow bleeds". Ultimately ho

> It is beyond insanity and even a crash won't bring it back to reality. You don't appreciate the power of "crashes" or multi year "slow bleeds". Ultimately housing prices always recovered to their inflation adjusted average, Robert Shiller wrote a lot on this topic. Both from being undervalued and from being overvalued. The only thing that's always unclear is the path. Note that this implies two exists from the situation, or a combination: CPI will go much higher or nominal housing prices will go much lower. 1970s saw the first variant, 1930s and late 2000s saw the second variant. Also, if you want to see true insanity compare Chinese big city apartment prices to salaries and CNY interest rates. That is true insanity. No other country comes even close to what's going on there (maybe 1980s Japan? I suppose it's close). It has a lot to do with chinese people having strong conviction in government's support of the market, kinda like the US equity market is now widely believed to be completely supported by whatever means will necessary. Time will tell how much such self-fulfilling illusions last.

nostrademons 6y ago
The inflation part is pretty key. $M2 has grown from about $7T to $18T, so if anything, housing prices have tracked monetary inflation. It's just that the CPI has severely lagged monetary inflation, possibly because of cheap food prices, cheap oil, cheap microchips, and cheap goods from China. There's a macroeconomic story for that: with roughly 80 million Millenials (in the U.S; ~3B worldwide) reaching homebuying age and competing for a housing stock that's not growing nearly as fast, the ability to buy a house moves up the income ladder, so that sellers can capture money from an increasingly wealthier homebuying population. Meanwhile, those ~3B worldwide Millenials are entering working age, driving the price of labor (and hence of anything built with labor, including food and manufactured goods) down. CPI of goods & non-professional services goes down, price of assets goes up. This demographic trend reverses itself in about 10-15 years as the comparatively tiny Gen-Z reaches homebuying age, but in the meantime there'll be an even bigger pop as late Millenials (1990-1998) reach homebuying age and there are nowhere near enough homes for them all. I'd also expect inflation to start showing up in the CPI as Gen-Z starts to make up the new workforce entrants, boomers start dying off, and hence the labor force shrinks and wages go up.
- CountSessine 6y ago
  This demographic trend reverses itself in about 10-15 years as the comparatively tiny Gen-Z reaches homebuying age, but in the meantime there'll be an even bigger pop as late Millenials (1990-1998) reach homebuying age and there are nowhere near enough homes for them all. It's worth pointing out that in most developed countries (but not the US), there are far fewer millenials than there are boomers. Also, most residential real estate in developed countries is owned by boomers, and the oldest boomers (right now, this year, in 2020) are entering their final years (age 75). I think even within 5 years most mid-tier cities in the developed world that aren't hopelessly supply-constrained will see huge drops in residential home prices.
  - nostrademons 6y ago
    Life expectancy among the homeowning demographic (~top 3 income quintiles) averages about 85: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4866586/ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4866586/ Barring things like a mass COVID die-off (certainly possible), I still think it'll be 10-15 years before we see a large transfer of homes away from boomers.
- deleted 6y ago
  [deleted]

nostrademons 6y ago

The inflation part is pretty key. $M2 has grown from about $7T to $18T, so if anything, housing prices have tracked monetary inflation. It's just that the CPI has severely lagged monetary inflation, possibly because of cheap food prices, cheap oil, cheap microchips, and cheap goods from China. There's a macroeconomic story for that: with roughly 80 million Millenials (in the U.S; ~3B worldwide) reaching homebuying age and competing for a housing stock that's not growing nearly as fast, the ability to buy a house moves up the income ladder, so that sellers can capture money from an increasingly wealthier homebuying population. Meanwhile, those ~3B worldwide Millenials are entering working age, driving the price of labor (and hence of anything built with labor, including food and manufactured goods) down. CPI of goods & non-professional services goes down, price of assets goes up. This demographic trend reverses itself in about 10-15 years as the comparatively tiny Gen-Z reaches homebuying age, but in the meantime there'll be an even bigger pop as late Millenials (1990-1998) reach homebuying age and there are nowhere near enough homes for them all. I'd also expect inflation to start showing up in the CPI as Gen-Z starts to make up the new workforce entrants, boomers start dying off, and hence the labor force shrinks and wages go up.

CountSessine 6y ago
This demographic trend reverses itself in about 10-15 years as the comparatively tiny Gen-Z reaches homebuying age, but in the meantime there'll be an even bigger pop as late Millenials (1990-1998) reach homebuying age and there are nowhere near enough homes for them all. It's worth pointing out that in most developed countries (but not the US), there are far fewer millenials than there are boomers. Also, most residential real estate in developed countries is owned by boomers, and the oldest boomers (right now, this year, in 2020) are entering their final years (age 75). I think even within 5 years most mid-tier cities in the developed world that aren't hopelessly supply-constrained will see huge drops in residential home prices.
- nostrademons 6y ago
  Life expectancy among the homeowning demographic (~top 3 income quintiles) averages about 85: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4866586/ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4866586/ Barring things like a mass COVID die-off (certainly possible), I still think it'll be 10-15 years before we see a large transfer of homes away from boomers.
deleted 6y ago
[deleted]