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As anyone recently or currently going through the house shopping process this is nothing like 2007. Buyers are competing against other buyers with seemingly unl

by yardie 6y ago

As anyone recently or currently going through the house shopping process this is nothing like 2007. Buyers are competing against other buyers with seemingly unlimited cash offers. Which is nothing like the subprime, stated income loans prior to the financial crash. You have to be in great financial shape to even qualify to buy a home. And then you have to do it timely enough to beat other offers. There is more cash moving around these days and not a lot of places to put it. Conservative banks, investors, and pensions are placing them in the few sure things left on the market, bonds and property. Also, inventory is drying up because construction has been heavily affected by the pandemic. Now that the warehouses have been exhausted it's just starting to ripple through supply chains. While the millions of lives lost were felt immediately the long tail of JIT supply chains means we'll be feeling the effects a hell of a lot longer.

noofen 6y ago
More cash because everyone with half a brain knows this money printing won't hold the market up forever, and they're terrified of runaway inflation. The insane market speculation going on is also a symptom of this. It's reasonable to assume USD is losing 8-10% of its value every year from 2020 onwards, thanks to Fed policies. I know about their bullshit CPI numbers, and anyone who is gullible enough to believe "there is no inflation" deserves what's coming.
- Analemma_ 6y ago
  > It's reasonable to assume USD is losing 8-10% of its value every year from 2020 onwards, thanks to Fed policies Are you willing to bet money on this claim? Because I will happily take the other side of that wager. It is absurd.
  - deleted 6y ago
    [deleted]
  - thaeli 6y ago
    In the long term, everyone with more debt than assets is on the other side of that wager.
  - intergalplan 6y ago
    Houses around here have been going up in price 5-10% year over year around here since, like, 2012 or 2013. Foreclosures aside (now long gone, but widely available for a few years), they never dropped all that far from their '08 peak, really, either. I'm in probably a third- or two-and-a-halfth-tier US city, so this isn't NY or SF or CHI or LA or even Austin or Denver. New housing is going up fast and everywhere, and has been non-stop aside from a very brief period after the '08 bubble. 2020 happened, and the prices went up even faster, and everywhere in the city, not just in certain areas. WTF is going on, if not inflation? (serious question, I'd like to know what other explanation there could be)
    - kart23 6y ago
      don’t think so. look at canada’s housing market, look at NZ. those markets are truly insane compared to the US, and they’re not printing a ton of money or experiencing major inflation. housing has become a good investment simply because the supply isn’t great enough in desirable areas, and people with money recognize it. inflation is up, but not on the scale you claim.
      - intergalplan 6y ago
        Right, but, all other assets seem to be doing exactly the same thing.
      - jdsully 6y ago
        Canada's M1 is up 27%, M2 up 20% over the last 12 months. They aren't printing nearly as much as the US but it's still dramatic vs prior years.
      - wcarss 6y ago
        I dunno about NZ, but Canada printed pretty hard for COVID relief[0,1]. Regarding inflation, anecdotally food etc prices in Toronto seem much higher this year than last, and did last year too, but the CPI data doesn't share my opinion. 0 - https://betterdwelling.com/canadas-money-supply-is-growing-at-the-fastest-rate-in-over-30-years/ https://betterdwelling.com/canadas-money-supply-is-growing-a... 1 - https://economics.bmo.com/en/publications/detail/76f0b0ca-c05e-4e32-9d70-93630654f659/ https://economics.bmo.com/en/publications/detail/76f0b0ca-c0...
  - deleted 6y ago
    [deleted]
  - noofen 6y ago
    I am betting money on this claim, 90% of my net worth is in equities and BTC/ETH.
    - trimbo 6y ago
      It seems like equities do not (long term) perform well relative to currency in inflationary markets because companies' costs also rise. Apple, e.g. would be spending more per unit iPhone and would eat margin or require a price increase, which leads to fewer sales etc. There are exceptions, like energy companies, for example. IIRC Exxon went up in the 1970s while the market as a whole stayed flat and lost value relative to the USD. At the extreme, in the Weimar republic, the stock market did what the US is doing today... until the stocks flatlined relative to the currency[1]. [1] - Haven't read it but sources that claim this point to this book (I just bought it though, it's only $3): https://www.goodreads.com/book/show/8567383-when-money-dies https://www.goodreads.com/book/show/8567383-when-money-dies
      - noofen 6y ago
        Thanks for the link, looking forward to reading it. I agree, I think we will see SPY do just fine for the next few years. Then, it won't be fine.
    - bottled_poe 6y ago
      It’s too much risk. It may work out, but unless you know something the rest don’t, it is just gambling.
      - noofen 6y ago
        I understand how it can look that way. But from my perspective, being long USD is a much more dangerous gamble. I'm young and have a high risk tolerance, we will see.
      - concreteblock 6y ago
        Choosing to allocate most of your net worth in, e.g. cash, is a gamble too.
- jeffreyrogers 6y ago
  If the numbers were really that off in the past wouldn't quality of living be much less than it is for most people in the US? I am skeptical of inflation staying low in the future, and I think they do sometimes make questionable quality adjustments in the inflation data, but if inflation was actually much greater than they've claimed you would see a gradual immiseration of the population.
  - danhak 6y ago
    *immiseration of those who don't hold assets Which is precisely what's been happening. Just take a walk around any major urban center in the U.S. There is misery in the streets. The opioid crisis is another manifestation of the same despair. Historic civil unrest, "eat the rich" / "billionaires shouldn't exist" rhetoric heating up. Etc. etc.
    - emodendroket 6y ago
      But none of those things are very recent.
      - danaris 6y ago
        It's been happening gradually over the course of the last 40-odd years.
  - noofen 6y ago
    > if inflation was actually much greater than they've claimed you would see a gradual immiseration of the population. Have you been watching the news lately? Keep watching. Violence and deaths of despair are skyrocketing and will continue to.
    - bottled_poe 6y ago
      I don’t believe that. Any data sources?
  - wcarss 6y ago
- deleted 6y ago
  [deleted]
- paulpauper 6y ago
  Pundits have been making this argument since 2010 about runaway inflation and about prices being unsustainable. Yet prices keep going up and inflation remains low. Maybe it is best to just ignore those people. There is no evidence either of USD decline either. Foreign currencies, especially currencies of emerging markets, have fallen considerably against the dollar in recent years. If there is runaway inflation, real estate would be a good hedge. Inflation is not really a concern for Americans because all global wealth tends to be measured in US dollars anyway. It's not like Americans become poorer due to inflation, because all their wealth is denominated in dollars.
  - saint_abroad 6y ago
    > It's not like Americans become poorer due to inflation, because all their wealth is denominated in dollars. What of the nearly 40% of Americans that can't cover a surprise $400 expense, due to having no wealth?
    - pirate787 6y ago
      That 40%/$400 thing is fake news. https://www.cato.org/blog/it-true-40-americans-cant-handle-400-emergency-expense-0 https://www.cato.org/blog/it-true-40-americans-cant-handle-4...
      - saint_abroad 6y ago
        Reality is more nuanced than that. https://www.politifact.com/factchecks/2019/jan/29/howard-schultz/checking-howard-schultzs-claim-40-percent-american/ https://www.politifact.com/factchecks/2019/jan/29/howard-sch... The survey actually states, "Four in 10 adults, if faced with an unexpected expense of $400, would either not be able to cover it or would cover it by selling something or borrowing money." https://www.federalreserve.gov/publications/2018-economic-well-being-of-us-households-in-2017-executive-summary.htm https://www.federalreserve.gov/publications/2018-economic-we... Nevertheless, that doesn't strike me as having wealth.
        6y ago
- undefined1 6y ago
  for those downvoting you: Home Values +8% Money Supply +24% Stock Market +23% Oil +80% Corn +69% Steel +145% Wheat +25% Coffee +34% Cotton +35% Copper +50% Lumber +126% Soybeans +71% this is over the past year.
  - gruez 6y ago
    Who should I believe, a government agency conducting a methodical survey of the country's economy, or some guy with a list of numbers that's possibly cherry picked?
    - noofen 6y ago
      Yes, of course, because government agencies have your best interests in mind.
      - gruez 6y ago
        As opposed to random hn commenters who possibly have an agenda?
        noofen 6y ago
        Random HN commenters might have an agenda (what would it be?). Government agencies definitely have an agenda.
        gruez 6y ago
        >Random HN commenters might have an agenda They're also anonymous, so you should assume the worst. This is especially true when the supporting evidence is suspect (ie. a bunch of arbitrary picked numbers). On the other hand the BLS's methodology is documented (https://www.bls.gov/opub/hom/cpi/ https://www.bls.gov/opub/hom/cpi/), so I'm willing to give them a pass even though their incentives might be skewed. >(what would it be?) their beliefs? "agenda" here doesn't have to be something nefarious. an anti-vaxxer's agenda is anti-vaccine, but that doesn't mean they're scheming to get everyone infected.
- randomopining 6y ago
  Your statements are contradictory. If there will be 8-10% inflation then people will park their money in assets like stocks, thus keeping the market up.
- dragonwriter 6y ago
  > It's reasonable to assume USD is losing 8-10% of its value every year from 2020 onwards, thanks to Fed policies. Since dollar prices of final goods and services can be tracked, and don’t show that trend, its not reasonable at all; nominal price levels of goods and services haven’t generally increased by about ~2.5× over the past decade. > I know about their bullshit CPI numbers, CPI is BLS, not the Fed. And its a whole lot less bullshit than what you’re spreading right here. > and anyone who is gullible enough to believe "there is no inflation" deserves what's coming. The idea that inflation might be coming at some indefinite point in the future is, of course, unfalsifiable, and its been a constant refrain from the same segment of society for as long as I've been alive. The claim that there has been massive inflation since 2010, OTOH, is both falsifiable and false.
  - lotsofpulp 6y ago
    >The claim that there has been massive inflation since 2010, OTOH, is both falsifiable and false. Depends where you live and what lifestyle you live. If I took the total amount spent on all the things and services I have purchased over the years and compared them to their price in 2010, I would have spent far less in 2010. Spending on land, healthcare, retirement savings, taxes and education eclipse the total spent for everything else. Is that not inflation (for me, at least)? All I know is that to buy the things I need or want to buy in the future, I need to ensure I am earning more and more because I am betting the price will be higher in the future. At least it's been true during my adult life of ~15 years.
    - chii 6y ago
      > Spending on land, healthcare, retirement savings, taxes and education eclipse the total spent for everything else. buying land as an asset is not spending - it's investing. Healthcare+education - i agree, it has become more expensive overtime. Taxes - you earn more, hence pay more taxes. It's not due to inflation. Retirement savings - ditto with land, it's an investment, not spending. And you choose how much to invest here, and the increase is not due to inflation (but expectation of inflation might affect your decision, but that's not a causal relationship to inflation).
- thorwasdfasdf 6y ago
  I do agree the CPI vastly undercounts inflation but we loose credibility when we through out numbers so far off from reality. 8-10% is realistic for real estate over the last year or two. But, we need to look at longer term trends to establish inflation as a huge problem. Even 4% actual inflation would be very very high, as that would be 2% per year over CPI, which would compound to 80% over the CPI in just 30 years or so. Let's take a look at some actual values: - the big mac index shows inflation at about 4% for the last 20 years. - Cape shiller housing index for US has been showing inflation at about 4% over the last 20 years. This is a real problem that will affect rents as well because the rent to own ratio spread can't continue to increase forever. - housing of course is now 10%+ over the last year. And yes, those quality adjustments made by the boys in the labor department are very questionable: I don't know how they sleep at night.
refurb 6y ago
Cash offer doesn’t necessarily mean the buyer has cash. There are services like https://www.flyhomes.com/ https://www.flyhomes.com/ that will make a man all cash offer then help you refinance it. In addition, if you waive all financing and appraisal contingencies that’s often called a cash offer as you’re obligated to close even if you can’t get financing.
- meragrin_ 6y ago
  > as you’re obligated to close even if you can’t get financing. How is that a good thing from a seller's perspective?
  - ProfessorLayton 6y ago
    "Can't get financing" for an offer doesn't necessarily mean no financing. A bank won't loan 1.1x (or whatever the offer is) for a property appraised for 1x, so an offer without a financing contingency means the buyer has to cough up .1x in cash to make up the difference. It means the deal is more likely to close and not get held up by financing, and the seller might pick it over a slightly higher offer that does have a contingency.
  - Cd00d 6y ago
    Well, they get to keep the down payment. That smoothes out a lot of frustrations due to the delays associated with starting over.
- akomtu 6y ago
  You're only obligated to pay the fee (usually 2% of the purchase price). A buyer won't magically produce a million dollars if he can't get financing.
- whytaka 6y ago
  I'm confused about this point. Why does the seller care about cash offers? Even if the offer requires a mortgage, the seller gets the cash from the lending bank, do they not?
emodendroket 6y ago
I think people who have a home are also largely taking a wait and see approach and not trying to move, which constrains supply further.
- runeks 6y ago
  Who’s buying all the houses, then?
  - emodendroket 6y ago
    Aren't there a significant number of first-time buyers?
  - milkytron 6y ago
    Millennials, apparently. The generation has a huge population that is at the prime home buying age (nowadays). Being stuck at home with parents or in an apartment is not where a lot of people wanted to be during a pandemic. Combine that with low interest rates, and also investors that see property as a relatively safe asset. The wait and see camp is probably most people, but those that aren't comfortable with their home situation and being stuck in it are likely itching to move.
  - jhayward 6y ago
    Private equity.
  - munificent 6y ago
    Renters in smaller apartments craving more space now that they are stuck at home 24/7.
- foobiekr 6y ago
  I don't know. There are many reasons people may not sell or move. Literally the only reason my wife and I are not selling our home in Mountain View is that I have a vesting event in the early spring and I need to be physically present until then. Otherwise we would absolutely be selling now.
randomopining 6y ago
So maybe there will be a ramp up of home-building etc after the suppliers re-adjust? Thus in 2 years you could see a drop in prices?
- putnambr 6y ago
  With all the newly inflated home values, I don't expect planning and zoning committees to be able to approve anything other than single family housing.
jollybean 6y ago
"Buyers are competing against other buyers with seemingly unlimited cash offers. " So this should be the alarm bell that contradicts the argument. In 2008 the Fed took what was then seen as a 'generational' bump in assets on it's balance sheet, namely bad real estate, effectively bailing out banks and home-owners, and arguably exasperating inequality. But the money printing going due to COVID has dwarfed everything, to the point of multi-generational consequence, and what we might argue is a 'New Financial World Order'. The Central Bank realignment due to COVID may be as significant as the start/end of Bretto-Woods etc. because the degree of social intervention is on an unimaginable scale. Aside from the 'raw numbers' it means social intervention and governmental direction of the economy like we have not seen since WW2 but this time without the obvious and easy infrastructural and educational adjustments to make: in the 1950's there were no highways - so they got build, and nobody had College degrees so getting former Officers/NCO's into College was a no-brainer. Interest rates have been going down, and historically lower since the end of Bretton Woods, and they are now in the range of where it's causing considerable strain with massive leveraging, negative central bank overnight rates etc.. The result of this is a 'primary driver' of the Housing Boom, and it's the same thing happening in almost all asset class. Or in other words: we are playing flirting dangerously with real, scary inflation, it's just happening in our homes so we think it's all good. COVID has caused us to 'look the other way' with regards to financial reality, which is understandable, but that can't go on forever. I am not a supporter of Crypto, BTC or any of the like, and I generally loathe the anti-fiat fanaticism etc. because I don't think these arguments are data driven or made in good faith, however, COVID has brought a lot of credibility to the fiat debauching concerns. Housing prices are one element of that.
- UncleOxidant 6y ago
  > Or in other words: we are playing flirting dangerously with real, scary inflation, it's just happening in our homes so we think it's all good. Home prices have gone up way more than incomes over the last 10 years. Economists don't seem to want to call it inflation until incomes are rising. I'm glad I bought a house for $180K in 2011 that's worth $360K now 10 years later, but I really wonder how folks who are entering the market now are able to deal with the much higher monthly payment. That's going to divert spending away from other parts of the economy for quite a while.
meragrin_ 6y ago
> And then you have to do it timely enough to beat other offers. This is an understatement. My mother's neighbor sold their house within 2 hours of it going on the market and for $20k over the asking price just last week. There are realtors asking around my neighborhood if anyone is getting ready to sell because there are buyers looking to purchase in here. This is even with developments going up like crazy. This is in a northern state away from the big cities. > Also, inventory is drying up because construction has been heavily affected by the pandemic. Not around here.
- yardie 6y ago
  > Not around here. If the builders haven't locked in their supply chain yet you'll see it in the coming months. At the moment there is very little slack in the supply chain.
- robotron 6y ago
  My two-layers out suburb of an attractive city had a coworker sell their starter-esque home purchased a few years ago for $350k sell for $620k-ish in the matter of three days. Meanwhile, I'm languishing hoping to buy my first home before I'm too old. About to permanently give up.
- commandlinefan 6y ago
  > My mother's neighbor sold their house within 2 hours of it going on the market I have to wonder, though - where are the people who are selling their homes moving to? They're stuck in the same insane buying spiral everybody else is.
  - Balgair 6y ago
    Typically, they put in a clause where they rent out the house until they can find other housing. This may go on for 1-2 months.
Balgair 6y ago
I'm currently in the market and I can affirm that it is super-bananas. With Covid rules, you get ~15 minutes to view a property. You basically have to decide to put an offer down as you are walking out the door. My SO and I saw a place we liked and were considering an offer. Before we could even drive home, the place had gone under contract. Our location has homes on sale for ~36 hours, starting Thursday at noon (it seems that's the time most have settled on). You cannot sleep on this decision, there just isn't the time to do so. Sellers will get ~14 offers, all very much over asking. A property listed for ~$450k go for ~$550k now. ~$650k go for ~$800k. Three years ago, that same house was ~$400k. To be competitive, you must waive inspections outright. Health and safety objections used to be a thing, but it's so competitive that you just can't anymore. Inspectors are booked for showings as a result, with ~15 min to check on things. All cash offers are ~1/3 offers, per what my RE friends say. If you are doing a mortgage, the new time to close is ~20 days, not 30. Banks/credit unions are not having a fun time with such a crunch, as buyers are walking away for higher rates due to the time crunch and the very low rates to begin with. Appraisal gaps are ~18% or so. Meaning that the bank will appraise the house for about the listed price still, but buyers must state they will cover the gap in price. That is ~18% more than what the bank will give out. Thus the 20% downpayment becomes the appraisal gap coverage. A lot of people are going to 5% down-payments or less. Open-ended escalation clauses are a thing to. You just put in the contract that you'll automatically bid ~$5k over the next person, no ending, no need to contact. As such, things are getting pretty wild when more than one party has that in their contract. They really cannot build houses fast enough, and those that are come with special taxes that are ~2x the normal ones, forever. This is due to the need for materials that Coivd has affected and the speed needed just to lay the pipes and roads. Again, inspections are waived to stay competitive. Like I said, it is super-bananas. EDIT: This tiktok is only a tiny bit hyperbolic about the current state of things: https://www.tiktok.com/@johnsonfiles/video/6952930617298291973?is_copy_url=1&is_from_webapp=v1 https://www.tiktok.com/@johnsonfiles/video/69529306172982919...
- nicbou 6y ago
  This is truly insane. People choose a house faster than I'd choose a USB cable on Amazon. Thank you for the insight. It's a fascinating comment. I wonder if it's the same in other countries.
vannevar 6y ago
I'd really like to see the breakdown between investors and bona fide homebuyers. The main reasons supply is low is that a) people don't want to move in the middle of a pandemic, and b) construction was slowed. This should mean that the proportion of investors and first-time buyers is higher now than pre-pandemic, and who is more likely to win the resulting bidding war: investors, or the young people trying to buy their first home? I believe that the lions share of the housing spike is being driven by speculation, and eventually, the market will run out of "the greater fool" and you'll be left with mostly real home buyers, and prices will fall back to earth.
JeremyNT 6y ago
Aren't flush institutional investors just gobbling up real estate and inflating the prices for "normal" homeowners? Something will have to give eventually. We're going to get to the point that only hedge funds and millionaires can afford to own houses in mid tier cities and just compete against themselves. This is no way to build a community anybody actually wants to live in.
nevermindiguess 6y ago
Can you help me understand? My friends in New York tell me that house prices are down more than 20% from 1 year ago. Real estate agents are desperate for sales. Most houses in New York have been taken off the market because prices are too low. My place in Manhattan is down 20%. Where is the bubble???
- madengr 6y ago
  The suburbs, away from COVID and riot prone areas.

by yardie 6y ago

noofen 6y ago

More cash because everyone with half a brain knows this money printing won't hold the market up forever, and they're terrified of runaway inflation. The insane market speculation going on is also a symptom of this. It's reasonable to assume USD is losing 8-10% of its value every year from 2020 onwards, thanks to Fed policies. I know about their bullshit CPI numbers, and anyone who is gullible enough to believe "there is no inflation" deserves what's coming.

Analemma_ 6y ago
> It's reasonable to assume USD is losing 8-10% of its value every year from 2020 onwards, thanks to Fed policies Are you willing to bet money on this claim? Because I will happily take the other side of that wager. It is absurd.
- deleted 6y ago
  [deleted]
- thaeli 6y ago
  In the long term, everyone with more debt than assets is on the other side of that wager.
- intergalplan 6y ago
  Houses around here have been going up in price 5-10% year over year around here since, like, 2012 or 2013. Foreclosures aside (now long gone, but widely available for a few years), they never dropped all that far from their '08 peak, really, either. I'm in probably a third- or two-and-a-halfth-tier US city, so this isn't NY or SF or CHI or LA or even Austin or Denver. New housing is going up fast and everywhere, and has been non-stop aside from a very brief period after the '08 bubble. 2020 happened, and the prices went up even faster, and everywhere in the city, not just in certain areas. WTF is going on, if not inflation? (serious question, I'd like to know what other explanation there could be)
  - kart23 6y ago
    don’t think so. look at canada’s housing market, look at NZ. those markets are truly insane compared to the US, and they’re not printing a ton of money or experiencing major inflation. housing has become a good investment simply because the supply isn’t great enough in desirable areas, and people with money recognize it. inflation is up, but not on the scale you claim.
    - intergalplan 6y ago
      Right, but, all other assets seem to be doing exactly the same thing.
    - jdsully 6y ago
      Canada's M1 is up 27%, M2 up 20% over the last 12 months. They aren't printing nearly as much as the US but it's still dramatic vs prior years.
    - wcarss 6y ago
      I dunno about NZ, but Canada printed pretty hard for COVID relief[0,1]. Regarding inflation, anecdotally food etc prices in Toronto seem much higher this year than last, and did last year too, but the CPI data doesn't share my opinion. 0 - https://betterdwelling.com/canadas-money-supply-is-growing-at-the-fastest-rate-in-over-30-years/ https://betterdwelling.com/canadas-money-supply-is-growing-a... 1 - https://economics.bmo.com/en/publications/detail/76f0b0ca-c05e-4e32-9d70-93630654f659/ https://economics.bmo.com/en/publications/detail/76f0b0ca-c0...
- deleted 6y ago
  [deleted]
- noofen 6y ago
  I am betting money on this claim, 90% of my net worth is in equities and BTC/ETH.
  - trimbo 6y ago
    It seems like equities do not (long term) perform well relative to currency in inflationary markets because companies' costs also rise. Apple, e.g. would be spending more per unit iPhone and would eat margin or require a price increase, which leads to fewer sales etc. There are exceptions, like energy companies, for example. IIRC Exxon went up in the 1970s while the market as a whole stayed flat and lost value relative to the USD. At the extreme, in the Weimar republic, the stock market did what the US is doing today... until the stocks flatlined relative to the currency[1]. [1] - Haven't read it but sources that claim this point to this book (I just bought it though, it's only $3): https://www.goodreads.com/book/show/8567383-when-money-dies https://www.goodreads.com/book/show/8567383-when-money-dies
    - noofen 6y ago
      Thanks for the link, looking forward to reading it. I agree, I think we will see SPY do just fine for the next few years. Then, it won't be fine.
  - bottled_poe 6y ago
    It’s too much risk. It may work out, but unless you know something the rest don’t, it is just gambling.
    - noofen 6y ago
      I understand how it can look that way. But from my perspective, being long USD is a much more dangerous gamble. I'm young and have a high risk tolerance, we will see.
    - concreteblock 6y ago
      Choosing to allocate most of your net worth in, e.g. cash, is a gamble too.
jeffreyrogers 6y ago
If the numbers were really that off in the past wouldn't quality of living be much less than it is for most people in the US? I am skeptical of inflation staying low in the future, and I think they do sometimes make questionable quality adjustments in the inflation data, but if inflation was actually much greater than they've claimed you would see a gradual immiseration of the population.
- danhak 6y ago
  *immiseration of those who don't hold assets Which is precisely what's been happening. Just take a walk around any major urban center in the U.S. There is misery in the streets. The opioid crisis is another manifestation of the same despair. Historic civil unrest, "eat the rich" / "billionaires shouldn't exist" rhetoric heating up. Etc. etc.
  - emodendroket 6y ago
    But none of those things are very recent.
    - danaris 6y ago
      It's been happening gradually over the course of the last 40-odd years.
- noofen 6y ago
  > if inflation was actually much greater than they've claimed you would see a gradual immiseration of the population. Have you been watching the news lately? Keep watching. Violence and deaths of despair are skyrocketing and will continue to.
  - bottled_poe 6y ago
    I don’t believe that. Any data sources?
- wcarss 6y ago
deleted 6y ago
[deleted]
paulpauper 6y ago
Pundits have been making this argument since 2010 about runaway inflation and about prices being unsustainable. Yet prices keep going up and inflation remains low. Maybe it is best to just ignore those people. There is no evidence either of USD decline either. Foreign currencies, especially currencies of emerging markets, have fallen considerably against the dollar in recent years. If there is runaway inflation, real estate would be a good hedge. Inflation is not really a concern for Americans because all global wealth tends to be measured in US dollars anyway. It's not like Americans become poorer due to inflation, because all their wealth is denominated in dollars.
- saint_abroad 6y ago
  > It's not like Americans become poorer due to inflation, because all their wealth is denominated in dollars. What of the nearly 40% of Americans that can't cover a surprise $400 expense, due to having no wealth?
  - pirate787 6y ago
    That 40%/$400 thing is fake news. https://www.cato.org/blog/it-true-40-americans-cant-handle-400-emergency-expense-0 https://www.cato.org/blog/it-true-40-americans-cant-handle-4...
    - saint_abroad 6y ago
      Reality is more nuanced than that. https://www.politifact.com/factchecks/2019/jan/29/howard-schultz/checking-howard-schultzs-claim-40-percent-american/ https://www.politifact.com/factchecks/2019/jan/29/howard-sch... The survey actually states, "Four in 10 adults, if faced with an unexpected expense of $400, would either not be able to cover it or would cover it by selling something or borrowing money." https://www.federalreserve.gov/publications/2018-economic-well-being-of-us-households-in-2017-executive-summary.htm https://www.federalreserve.gov/publications/2018-economic-we... Nevertheless, that doesn't strike me as having wealth.
      - 6y ago
undefined1 6y ago
for those downvoting you: Home Values +8% Money Supply +24% Stock Market +23% Oil +80% Corn +69% Steel +145% Wheat +25% Coffee +34% Cotton +35% Copper +50% Lumber +126% Soybeans +71% this is over the past year.
- gruez 6y ago
  Who should I believe, a government agency conducting a methodical survey of the country's economy, or some guy with a list of numbers that's possibly cherry picked?
  - noofen 6y ago
    Yes, of course, because government agencies have your best interests in mind.
    - gruez 6y ago
      As opposed to random hn commenters who possibly have an agenda?
      - noofen 6y ago
        Random HN commenters might have an agenda (what would it be?). Government agencies definitely have an agenda.
        gruez 6y ago
        >Random HN commenters might have an agenda They're also anonymous, so you should assume the worst. This is especially true when the supporting evidence is suspect (ie. a bunch of arbitrary picked numbers). On the other hand the BLS's methodology is documented (https://www.bls.gov/opub/hom/cpi/ https://www.bls.gov/opub/hom/cpi/), so I'm willing to give them a pass even though their incentives might be skewed. >(what would it be?) their beliefs? "agenda" here doesn't have to be something nefarious. an anti-vaxxer's agenda is anti-vaccine, but that doesn't mean they're scheming to get everyone infected.
randomopining 6y ago
Your statements are contradictory. If there will be 8-10% inflation then people will park their money in assets like stocks, thus keeping the market up.
dragonwriter 6y ago
> It's reasonable to assume USD is losing 8-10% of its value every year from 2020 onwards, thanks to Fed policies. Since dollar prices of final goods and services can be tracked, and don’t show that trend, its not reasonable at all; nominal price levels of goods and services haven’t generally increased by about ~2.5× over the past decade. > I know about their bullshit CPI numbers, CPI is BLS, not the Fed. And its a whole lot less bullshit than what you’re spreading right here. > and anyone who is gullible enough to believe "there is no inflation" deserves what's coming. The idea that inflation might be coming at some indefinite point in the future is, of course, unfalsifiable, and its been a constant refrain from the same segment of society for as long as I've been alive. The claim that there has been massive inflation since 2010, OTOH, is both falsifiable and false.
- lotsofpulp 6y ago
  >The claim that there has been massive inflation since 2010, OTOH, is both falsifiable and false. Depends where you live and what lifestyle you live. If I took the total amount spent on all the things and services I have purchased over the years and compared them to their price in 2010, I would have spent far less in 2010. Spending on land, healthcare, retirement savings, taxes and education eclipse the total spent for everything else. Is that not inflation (for me, at least)? All I know is that to buy the things I need or want to buy in the future, I need to ensure I am earning more and more because I am betting the price will be higher in the future. At least it's been true during my adult life of ~15 years.
  - chii 6y ago
    > Spending on land, healthcare, retirement savings, taxes and education eclipse the total spent for everything else. buying land as an asset is not spending - it's investing. Healthcare+education - i agree, it has become more expensive overtime. Taxes - you earn more, hence pay more taxes. It's not due to inflation. Retirement savings - ditto with land, it's an investment, not spending. And you choose how much to invest here, and the increase is not due to inflation (but expectation of inflation might affect your decision, but that's not a causal relationship to inflation).
thorwasdfasdf 6y ago
I do agree the CPI vastly undercounts inflation but we loose credibility when we through out numbers so far off from reality. 8-10% is realistic for real estate over the last year or two. But, we need to look at longer term trends to establish inflation as a huge problem. Even 4% actual inflation would be very very high, as that would be 2% per year over CPI, which would compound to 80% over the CPI in just 30 years or so. Let's take a look at some actual values: - the big mac index shows inflation at about 4% for the last 20 years. - Cape shiller housing index for US has been showing inflation at about 4% over the last 20 years. This is a real problem that will affect rents as well because the rent to own ratio spread can't continue to increase forever. - housing of course is now 10%+ over the last year. And yes, those quality adjustments made by the boys in the labor department are very questionable: I don't know how they sleep at night.

refurb 6y ago

Cash offer doesn’t necessarily mean the buyer has cash. There are services like https://www.flyhomes.com/ https://www.flyhomes.com/ that will make a man all cash offer then help you refinance it. In addition, if you waive all financing and appraisal contingencies that’s often called a cash offer as you’re obligated to close even if you can’t get financing.

meragrin_ 6y ago
> as you’re obligated to close even if you can’t get financing. How is that a good thing from a seller's perspective?
- ProfessorLayton 6y ago
  "Can't get financing" for an offer doesn't necessarily mean no financing. A bank won't loan 1.1x (or whatever the offer is) for a property appraised for 1x, so an offer without a financing contingency means the buyer has to cough up .1x in cash to make up the difference. It means the deal is more likely to close and not get held up by financing, and the seller might pick it over a slightly higher offer that does have a contingency.
- Cd00d 6y ago
  Well, they get to keep the down payment. That smoothes out a lot of frustrations due to the delays associated with starting over.
akomtu 6y ago
You're only obligated to pay the fee (usually 2% of the purchase price). A buyer won't magically produce a million dollars if he can't get financing.
whytaka 6y ago
I'm confused about this point. Why does the seller care about cash offers? Even if the offer requires a mortgage, the seller gets the cash from the lending bank, do they not?

emodendroket 6y ago

I think people who have a home are also largely taking a wait and see approach and not trying to move, which constrains supply further.

runeks 6y ago
Who’s buying all the houses, then?
- emodendroket 6y ago
  Aren't there a significant number of first-time buyers?
- milkytron 6y ago
  Millennials, apparently. The generation has a huge population that is at the prime home buying age (nowadays). Being stuck at home with parents or in an apartment is not where a lot of people wanted to be during a pandemic. Combine that with low interest rates, and also investors that see property as a relatively safe asset. The wait and see camp is probably most people, but those that aren't comfortable with their home situation and being stuck in it are likely itching to move.
- jhayward 6y ago
  Private equity.
- munificent 6y ago
  Renters in smaller apartments craving more space now that they are stuck at home 24/7.
foobiekr 6y ago
I don't know. There are many reasons people may not sell or move. Literally the only reason my wife and I are not selling our home in Mountain View is that I have a vesting event in the early spring and I need to be physically present until then. Otherwise we would absolutely be selling now.

randomopining 6y ago

So maybe there will be a ramp up of home-building etc after the suppliers re-adjust? Thus in 2 years you could see a drop in prices?

putnambr 6y ago
With all the newly inflated home values, I don't expect planning and zoning committees to be able to approve anything other than single family housing.

jollybean 6y ago

"Buyers are competing against other buyers with seemingly unlimited cash offers. " So this should be the alarm bell that contradicts the argument. In 2008 the Fed took what was then seen as a 'generational' bump in assets on it's balance sheet, namely bad real estate, effectively bailing out banks and home-owners, and arguably exasperating inequality. But the money printing going due to COVID has dwarfed everything, to the point of multi-generational consequence, and what we might argue is a 'New Financial World Order'. The Central Bank realignment due to COVID may be as significant as the start/end of Bretto-Woods etc. because the degree of social intervention is on an unimaginable scale. Aside from the 'raw numbers' it means social intervention and governmental direction of the economy like we have not seen since WW2 but this time without the obvious and easy infrastructural and educational adjustments to make: in the 1950's there were no highways - so they got build, and nobody had College degrees so getting former Officers/NCO's into College was a no-brainer. Interest rates have been going down, and historically lower since the end of Bretton Woods, and they are now in the range of where it's causing considerable strain with massive leveraging, negative central bank overnight rates etc.. The result of this is a 'primary driver' of the Housing Boom, and it's the same thing happening in almost all asset class. Or in other words: we are playing flirting dangerously with real, scary inflation, it's just happening in our homes so we think it's all good. COVID has caused us to 'look the other way' with regards to financial reality, which is understandable, but that can't go on forever. I am not a supporter of Crypto, BTC or any of the like, and I generally loathe the anti-fiat fanaticism etc. because I don't think these arguments are data driven or made in good faith, however, COVID has brought a lot of credibility to the fiat debauching concerns. Housing prices are one element of that.

UncleOxidant 6y ago
> Or in other words: we are playing flirting dangerously with real, scary inflation, it's just happening in our homes so we think it's all good. Home prices have gone up way more than incomes over the last 10 years. Economists don't seem to want to call it inflation until incomes are rising. I'm glad I bought a house for $180K in 2011 that's worth $360K now 10 years later, but I really wonder how folks who are entering the market now are able to deal with the much higher monthly payment. That's going to divert spending away from other parts of the economy for quite a while.

meragrin_ 6y ago

> And then you have to do it timely enough to beat other offers. This is an understatement. My mother's neighbor sold their house within 2 hours of it going on the market and for $20k over the asking price just last week. There are realtors asking around my neighborhood if anyone is getting ready to sell because there are buyers looking to purchase in here. This is even with developments going up like crazy. This is in a northern state away from the big cities. > Also, inventory is drying up because construction has been heavily affected by the pandemic. Not around here.

yardie 6y ago
> Not around here. If the builders haven't locked in their supply chain yet you'll see it in the coming months. At the moment there is very little slack in the supply chain.
robotron 6y ago
My two-layers out suburb of an attractive city had a coworker sell their starter-esque home purchased a few years ago for $350k sell for $620k-ish in the matter of three days. Meanwhile, I'm languishing hoping to buy my first home before I'm too old. About to permanently give up.
commandlinefan 6y ago
> My mother's neighbor sold their house within 2 hours of it going on the market I have to wonder, though - where are the people who are selling their homes moving to? They're stuck in the same insane buying spiral everybody else is.
- Balgair 6y ago
  Typically, they put in a clause where they rent out the house until they can find other housing. This may go on for 1-2 months.

Balgair 6y ago

I'm currently in the market and I can affirm that it is super-bananas. With Covid rules, you get ~15 minutes to view a property. You basically have to decide to put an offer down as you are walking out the door. My SO and I saw a place we liked and were considering an offer. Before we could even drive home, the place had gone under contract. Our location has homes on sale for ~36 hours, starting Thursday at noon (it seems that's the time most have settled on). You cannot sleep on this decision, there just isn't the time to do so. Sellers will get ~14 offers, all very much over asking. A property listed for ~$450k go for ~$550k now. ~$650k go for ~$800k. Three years ago, that same house was ~$400k. To be competitive, you must waive inspections outright. Health and safety objections used to be a thing, but it's so competitive that you just can't anymore. Inspectors are booked for showings as a result, with ~15 min to check on things. All cash offers are ~1/3 offers, per what my RE friends say. If you are doing a mortgage, the new time to close is ~20 days, not 30. Banks/credit unions are not having a fun time with such a crunch, as buyers are walking away for higher rates due to the time crunch and the very low rates to begin with. Appraisal gaps are ~18% or so. Meaning that the bank will appraise the house for about the listed price still, but buyers must state they will cover the gap in price. That is ~18% more than what the bank will give out. Thus the 20% downpayment becomes the appraisal gap coverage. A lot of people are going to 5% down-payments or less. Open-ended escalation clauses are a thing to. You just put in the contract that you'll automatically bid ~$5k over the next person, no ending, no need to contact. As such, things are getting pretty wild when more than one party has that in their contract. They really cannot build houses fast enough, and those that are come with special taxes that are ~2x the normal ones, forever. This is due to the need for materials that Coivd has affected and the speed needed just to lay the pipes and roads. Again, inspections are waived to stay competitive. Like I said, it is super-bananas. EDIT: This tiktok is only a tiny bit hyperbolic about the current state of things: https://www.tiktok.com/@johnsonfiles/video/6952930617298291973?is_copy_url=1&is_from_webapp=v1 https://www.tiktok.com/@johnsonfiles/video/69529306172982919...

nicbou 6y ago
This is truly insane. People choose a house faster than I'd choose a USB cable on Amazon. Thank you for the insight. It's a fascinating comment. I wonder if it's the same in other countries.

vannevar 6y ago

I'd really like to see the breakdown between investors and bona fide homebuyers. The main reasons supply is low is that a) people don't want to move in the middle of a pandemic, and b) construction was slowed. This should mean that the proportion of investors and first-time buyers is higher now than pre-pandemic, and who is more likely to win the resulting bidding war: investors, or the young people trying to buy their first home? I believe that the lions share of the housing spike is being driven by speculation, and eventually, the market will run out of "the greater fool" and you'll be left with mostly real home buyers, and prices will fall back to earth.

JeremyNT 6y ago

Aren't flush institutional investors just gobbling up real estate and inflating the prices for "normal" homeowners? Something will have to give eventually. We're going to get to the point that only hedge funds and millionaires can afford to own houses in mid tier cities and just compete against themselves. This is no way to build a community anybody actually wants to live in.

nevermindiguess 6y ago

Can you help me understand? My friends in New York tell me that house prices are down more than 20% from 1 year ago. Real estate agents are desperate for sales. Most houses in New York have been taken off the market because prices are too low. My place in Manhattan is down 20%. Where is the bubble???

madengr 6y ago
The suburbs, away from COVID and riot prone areas.