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Home Prices Are Now Higher Than the Peak of the 2000s Housing Bubble
- latchkey 5y agoName something that costs less in 2021 than in the 2000s?
- justaman 5y agoTelevisions.
- latchkey 5y agoIf you compare with the relative cost of the advancements, that's not true. A fancy 8k tv today is still very expensive.
- lghh 5y agoThat's not how you compare prices.
- latchkey 5y agoHow do you compare prices?
- Armisael16 5y agoYou compare like-to-like. You compare the same kinds of bread, not cheap white bread to artisanal. You compare a 27" 1080 TV to another 27" 1080p TV, not an 8k TV.
- latchkey 5y agoBut like-to-like isn't just "resolution" and "size". I'd never buy a tv with a comparison like that. My comparison would be as if I took a "low/mid/top end tv" in 2000 and compared it with a "low/mid/top end tv" in 2021. In that case, it is still about the same price, especially adjusted for inflation.
- Armisael16 5y agoIn that case the way you compare things is not the way most people do. Most people care more about what they’re getting then where it falls in the product stack.
- 14 5y agoSolar panels
- latchkey 5y agoThat's a good example! The technology hasn't really improved that much (it has, but not like TVs), but the cost to deploy solar panels has gone down significantly likely due to manufacturing improvements.
- jsight 5y agoHmm, not sure if I agree with that. I think the best panels back in 2000 were ~11% efficient. Today we are closer to ~24%? I mean, it isn't a fast improvement, but production for a given area has more than doubled in 20 years. And 11% was vastly better than just 10 years or so before that.
- gnur 5y agoAnything related to storage or compute? I couldn’t image having a 2tb drive 20 years ago, but having a 2tb ssd in my laptop is kind of amazing
- larrik 5y agocompute? GPUs used to basically top out at $400, now the cheap ones go for more than that.
- jeffbee 5y agoA modern GPU is literally millions of times more powerful.
- eightysixfour 5y agoThe FLOPS/$ aren't even comparable though.
- BbzzbB 5y agoIn MSRP, sure, but cost/performance? Keep in mind there's a second-hand market, my $200 Rx 580 works just fine for 1080p gaming even for recent releases (without maxing settings). That's after accounting for Ethereum over-charging the demand-side.
- lightbendover 5y agoAnd how many orders of magnitude more performant are GPUs today? Houses don’t fundamentally change level of luxury (or whatever other apples to oranges comparison you want to draw) every few years.
- AnIdiotOnTheNet 5y agoOn-die GPUs you get for free with the proc are more powerful than 2000s GPUs. Hell, CPUs are so much faster now you can do the same effects as a 2000s GPU in software.
- leetcrew 5y agowhen? the nvidia 8800 GTX launched in 2006 at $599 MSRP. it wasn't even the top card of that generation. that would be the 8800 ultra which launched eight months later at $829 MSRP. unless I'm mistaken, you would have to go back to the Ti 4600 to find a flagship GPU that launched at/under $400. that was in 2002. ten years after the 8800 GTX, I bought a 1080 ti not long after launch for about $650. that card is more than 2000% faster, for roughly the same inflation-adjusted price.
- deleted 5y ago[deleted]
- pokoleo 5y agoCRT displays and floppy disks
- toomuchtodo 5y agoAirline tickets.
- durnygbur 5y agoNot necassarily in Europe. There was a sweet spot of cheap flying after massive expansion of EU in 2004 and lasting the entire decade. Flying was cheaper than commuting to the airport and "security" measures weren't that absurd yet.
- InitialLastName 5y agoText messages
- lotsofpulp 5y agoMedicines with expired patents that had generics become available.
- someguydave 5y agoCell phone services
- someguydave 5y agoClothing
- tacocataco 5y agoThe federal minimum wage to hire someone is worth less now than in the 00s.
- latchkey 5y agoSigh, so true!
- robotresearcher 5y agoAlmost everything. Important exceptions are housing, health care and education, which have large impacts on COL. But most else is cheaper.
- twalla 5y agoSo basically all the important stuff, but hey, at least you can get a 50 inch flatscreen for 100 bucks on Black Friday.
- toomuchtodo 5y agohttps://www.yahoo.com/news/blogs/lookout/fed-official-heckled-t-eat-ipad-20110311-122230-439.html https://www.yahoo.com/news/blogs/lookout/fed-official-heckle... (March 2011: Fed official heckled: ‘I can’t eat an iPad’)
- twalla 5y agoThe real answer to inflation is to start constructing homes from iPads and flatscreen televisions.
- hpoe 5y agoIncidentally also the three areas where the government is most directly pouring money into, via FHA/USDA loans, Medicare/Meidcade, and Pell Grants and Loans respectively.
- someguydave 5y agoThose sectors (except construction) are also very well defended by interest groups against foreign workers in the usa. It’s okay to hire an Indian fresh off the boat (with a visa) to code at Facebook (probably after an older or more expensive domestic worker is unhired) without a license but it is unthinkable that say public school teachers face the same competition.
- IkmoIkmo 5y ago
- mferrari 5y agoA barrel of crude peaked above $140 in July 2008 and has been lower ever since.
- ermacaz 5y agocannabis
- durnygbur 5y agoSSD drives, anything producing white light with LED, Lufthansa shares :D
- forkLding 5y agoClothes, this is observed in the stats too: https://www.officialdata.org/Apparel/price-inflation/2000-to-2021?amount=53000 https://www.officialdata.org/Apparel/price-inflation/2000-to... This is just general apparel, of course. Likely prices have dropped due to cheap factories that have higher production capabilities and sweatshops.
- el-salvador 5y agoWeb hosting
- hindsightbias 5y agoLumber will be there in Q4: https://tradingeconomics.com/commodity/lumber https://tradingeconomics.com/commodity/lumber
- dominotw 5y agomusic
- sfblah 5y agoThere are just all kinds of things people don't need to buy anymore bc of smartphones. I think on balance life is cheaper now. The main exceptions are things like housing if you live in a big city.
- entropea 5y agoAlmost everything that isn't a necessity.
- IkmoIkmo 5y agoYour mortgage. https://awealthofcommonsense.com/2021/03/what-if-housing-prices-arent-as-high-as-they-appear/ https://awealthofcommonsense.com/2021/03/what-if-housing-pri...
- GaryTang 5y agoAnything not heavily regulated like housing, education, or healthcare.
- skywal_l 5y agoSo is this finally the inflation that we were promised for so long? I guess all that money created during covid had to go somewhere. Too bad it's not going into education or healthcare...
- toomuchtodo 5y agoIt's not inflation from money printing. Its reduced supply along with higher wages from income earners getting smeared across the country instead of inflating housing costs in traditional HCOL locations. Before, lower income earners in the suburbs and more rural areas didn't have to compete against higher wage earners who were previously stuck in cities. No longer. In the Sunbelt, I see homes getting bought all cash by the wealthy and retirees (with some or all contingencies waived), driving up values beyond what income driven mortgagees will support. When asked how long this can go on for (by people who, naively, believe this to be a repeat of the 2008 housing bubble and are waiting on the sidelines to acquire property either as a home or investment), I respond "Until that wealth is depleted." Go look at current and historical prices of homes (as well as appreciation rate velocity) in Dallas, San Antonio, Houston, Tampa, Orlando, Miami, and major North Carolina metros (as well as parts of Western North Carolina such as from Asheville to the NC-TN border) to see this. Rents are no better [1]. [1] https://www.bloomberg.com/news/articles/2021-08-18/housing-hunt-turns-to-desperation-with-record-rise-in-u-s-rents https://www.bloomberg.com/news/articles/2021-08-18/housing-h... | https://archive.is/VGtt4 https://archive.is/VGtt4 (Bloomberg: Landlords From Florida to California Are Jacking Up Rents at Record Speeds)
- newaccount2021 5y agowhy is HN so invested in attempting to debunk all of the solid, dependable, reliable inflation gauges? if you look at where much of the % increases are, they are happening in undesirable (even ghetto) places in the rustbelt - this isn't due to demand from knowledge workers
- sumtechguy 5y agoI would posit that it is a combination of things. To discard inflation all together would be an interesting take. The other bits of your argument are good however. Also inflation is not necessary for people to act like it will happen. You may see investment firms looking to 'park the cash' into something they can just borrow against. Not enough inventory to cover that would make the problem worse. It is like the oil crunch a few years ago. We had plenty of oil. The problem was not enough oil to cover real usage and speculative usage at the same time so prices went up. So if (when) more inventory happens. Then you will see a decrease in price. As that could spook the investor crowd and cause inventory to grow. Something akin to what 2008 looked like could easily happen. It will not be the same cause but the effect will probably be similar.
- loxs 5y agoSo we are nowhere near that bubble, as current USD supply is several times larger, compared to then
- lr4444lr 5y agoDon't see the important question being answered: is this price rise accompanied by lax lending standards? Almost every sober analysis of thr 2008 crash involved dysfunction in the mortgage market. Skewed supply and demand does not a bubble make.
- throw123123123 5y agoLax lending is not the core issue of a market crisis like 2008, it is the amount of leverage and debt. You must look at how many people have cash in their banc accounts to cover mortgages if the stock market dives 50% and rates go up 2~4%. Can that generate a cascade of foreclosures?
- throwaway6734 5y agoIsn't this assuming variable rate mortgages?
- after_care 5y agoHow will future mortgage rates generate a cascade of foreclosures for people with existing mortgages?
- dsp 5y agoAdjustable rate mortgages and people who need to move who are now underwater. I couldn’t easily find nationwide stats on ARM issuance, but a quarter of First Republic Bank’s loans are adjustable rate. https://ir.firstrepublic.com/static-files/1a464a0b-9396-4bd4-b93f-3523a8fcf5e4 https://ir.firstrepublic.com/static-files/1a464a0b-9396-4bd4...
- aidenn0 5y agoWho is buying ARMs? The fixed rate is near all-time lows and is lower than 5/1 ARMs
- 5y ago
- PragmaticPulp 5y agoThey cite the numbers in "real terms", which would mean inflation adjusted: > The average price of American homes, in real terms, is now the highest it's ever been Of course, you really need to be looking at mortgage rates to understand housing affordability: http://www.freddiemac.com/pmms/pmms30.html http://www.freddiemac.com/pmms/pmms30.html July 2021 average 30-year mortgage rate: 2.87% (with 0.7 points) 2008 12-month average 30-year mortgage rate: 6.03% (with 0.6 points) To put that in perspective, a $500,000 mortgage (excluding down payment) would require a $2,073 monthly payment today, but a $3,007 monthly payment at 2008's 6% mortgage rates. In other words: Houses are still way cheaper, in actual out-of-pocket terms for average people, than they were in 2008. Today's interest rates are way too low. EDIT: Updated with 2008 numbers, thanks to comment below
- lotsofpulp 5y agoI think the article is referring to 2007/2008 as peak of the 2000s housing bubble. Not 2000’s housing bubble.
- PragmaticPulp 5y agoThanks! Great point, thanks for catching my mistake. I updated my post
- ineedasername 5y agoThey were still about 6.8% in 2007. Compared to a 3% interest rate today, on a $300,000 loan that's about $700/month difference in payment, about 50% increase. Housing prices have not increased by 50%. At these rates, they often still cheaper.
- lotsofpulp 5y agoIs it possible that proportionally more mortgages were lent to riskier borrowers in years past, and as the years have gone on, for a variety of reasons, mortgages in general are now lent to less risky borrowers than before? Also a conflating factor is if borrowers were perceived as riskier in previous years, but for whatever reasons, are now perceived as less risky. Also, this is data is from a Freddie Mac website, so is it only for conforming loans? Could it be that many homes have moved up in price such that their mortgage information would no longer be reflected in this average from Freddie Mac because their mortgages are no longer conforming?
- Panther34543 5y agoThe ongoing eviction moratorium comes up quite a bit in real estate circles as one of the many reasons for current prices. Of course, the very low rates, high construction costs, demand to leave cities, and various other factors also come into play. However, yesterday I was very surprised to learn that the eviction moratorium that is preventing landlords from selling their properties is actually an order from the Centers for Disease Control. When and why did that organization get that sort of power?
- lotsofpulp 5y agohttps://api.politifact.com/article/2021/aug/04/cdcs-new-eviction-moratorium-it-legal/ https://api.politifact.com/article/2021/aug/04/cdcs-new-evic... It is being litigated. > Five justices — the three more liberal justices, plus Chief Justice John Roberts and Associate Justice Brett Kavanaugh — supported keeping the moratorium in place. However, Kavanaugh emphasized in his appended statement that he agreed to continuing the moratorium only because it was about to end. As a matter of law, Kavanaugh wrote, he thought extending the moratorium further was unconstitutional.
- cronix 5y agoThey don't. A case went to the Supreme Court and said Congress needed to make that decision, not an unelected CDC, but that they wouldn't rescind the current existing order...which then expired. Biden basically said as much, and that he was going to do it anyway and extended it after it lapsed. For some reason, the news doesn't really cover that Biden is in direct violation of the Supreme Court with his latest extension and he knew, publicly said so, and did it anyway. > Biden said on Tuesday he had sought out constitutional scholars to determine the CDC’s legal authority and “what could they do that is most likely to pass muster constitutionally.” The “bulk” of the scholarship reviewed by the White House said additional action by the CDC would not pass muster in the courts, Biden said, adding that there were some “key scholars” who said it could. https://www.politico.com/news/2021/08/03/eviction-moratorium-biden-502312 https://www.politico.com/news/2021/08/03/eviction-moratorium... The bulk of constitutional "experts" said it wasn't constitutional. He found one or more that didn't agree with that assessment, so he went with the few against the majority.
- strangattractor 5y agoI keep hearing about a housing shortage. How we are not building fast enough. I personally know several people that own more than one home and AirBnB it when not in use. Also hedge funds are now targeting real estate. I can't help but wonder if this is partially an AirBnB and hedge fund created situation. Of course these are the same people that have access to all this free money. The average Joe still has to pay interest.
- nightski 5y agoInterest rates are historically low. I'd imagine hedge funds are paying interest too. You'd never want to tie up all that capital to avoid a 2% interest rate. Even I, an average Joe, pay the minimum payment on my mortgage and invest the rest. It would be foolish to pay it off early.
- strangattractor 5y agoYes they are maybe %1 - I was able to get %2 at 15 years. And hedge funds get money from investors then leverage that with loans that brings their total cost of capital down even lower. Our previous Secretary of the Treasury (Mnuchin) made his fortune that way after 2008.
- PragmaticPulp 5y ago> I keep hearing about a housing shortage. How we are not building fast enough. New construction is temporarily extremely expensive due to supply chain issues. Prices of everything from lumber to copper are (or were) elevated because COVID shut down factories and supply chains. New construction is still happening, but it's slowed down and expensive for a short while. There's a secondary problem that the new construction is happening in the suburbs and outskirts where there's still land available. Meanwhile, the trend is to move toward city centers and popular areas, where housing prices continue to climb.
- mixmastamyk 5y agoYes, and the lack of enough construction is decades in the making.
- AdmiralAsshat 5y agoAwesome. I've been trying to buy a home since 2015 or so and noting that housing prices continue to rise, without fail, regardless of economic or political climate. Economy is doing well? Price increase! Economy is doing terribly because of global pandemic? Price increase! I have been patiently waiting for the next "bubble" to pop, even as my realtor insists that oh no, we're not really in a bubble, this is just the new norm. Surely this cannot continue forever, right?
- Armisael16 5y agoPrice can't rise literally forever, no, but there really isn't much evidence that we're in a bubble right now. There isn't any reason price need to drop either.
- geebee 5y agothey probably can rise "forever" as long as the rate of increase keeps pace with general wealth and economic growth. now, a bubble can't last forever, but moderate price increases (inflation) are pretty normal.
- betwixthewires 5y agoThere's plenty of evidence we are in a bubble. I know this guy, and he's not smart. One of the stupidest people I've ever met actually. Washed his clothes with dish soap stupid. He bought a house 2 years ago with less than 10% down and he's got equity totaling more than 150% of the value of the house when he bought it. Even monetary inflation aside, if an investment can bring windfalls to anyone who can fog up a piece of glass, something isn't right in that market and it isn't sustainable. There's an anecdotal indicator, but housing prices are rising significantly faster than monetary inflation and population nationwide, that's pretty good evidence for a deviation from fundamentals.
- lotsofpulp 5y ago> Economy is doing well? Price increase! Economy is doing terribly because of global pandemic? Price increase! The reason for price increasing is always supply curve of the house you might want is not keeping up with demand curve of people with more money who want that house. There are lots of places in the US with house prices that are stagnant or increasing much slowly than elsewhere. But that is because there is lower demand.
- whoisjuan 5y agoIs this inflation adjusted? Because otherwise I don't see the point of that article. Of course home prices are going to be higher 20 years later. Even if the numbers analyzed are inflation adjusted, the article doesn't explain in what proportion are those prices higher than in the 2000s. If a house value was 60% up before the bubble bursted and then house values crashed 60% you have a baseline which is the deflated prices after the burst.
- jmharvey 5y agoYes, this is inflation adjusted. > The average price of American homes, in real terms, is now the highest it's ever been
- minikites 5y agoDoing everything we can to ensure house prices/values only go up is going to cause disaster soon enough. It's time we stopped bending over backwards to feed this beast.
- avidiax 5y agoIt's not clear to me what disaster will happen. It's certainly distortionary and inefficient, but doesn't seem critical. Eventually we could get a voting shift where sufficient power is held by people priced out of owning, which could result in improved housing policy. Those eventual changes will be calculated to not disrupt the market, though.
- imtringued 5y agoIt's pretty critical. Housing is probably the only basic need that involves a non reproducible asset (land). Sure, farming needs land but the capitalists willingly sell you food.
- c7DJTLrn 5y agoIt is atrocious that the law allows using shelter as an investment. Only for the initial sale of the property should it be permitted to make profit. After that, properties should only be sold at cost between buyers.
- amrcnimgrnt 5y agoWhy?
- ausbah 5y agoi am sympathetic to this viewpoint because the incentives for homeowners are mostly orthogonal to that of increasing home ownership for all. why would a homeowner support increasing the supply of housing when it drives down the price of their home?
- amrcnimgrnt 5y agoBecause I have children that I would like for one day to be able to afford a house. I mean, OPs idea was silly beyond belief. Even the socialists dont say: "The only person who can profit from this are the capitalists (necessarily) who first build this. The buyer can't make a profit from the re-sale". I met a builder once that you probably have never heard of. He is a billionaire. He can profit from the sale of homes, but my parent's can't? Never mind that the tripling of the price of my parent's home over the last 22 years was driven by silly economic policies. Otherwise the house would have appreciated maybe 50%.
- dudul 5y agoDo you think the same about selling food for profit? or clothing? or medical care?
- mediaman 5y agoThey don't normally think through the consequences of this type of policy. What happens when you're barred from selling it for more than you paid? The seller will have a price cap but will have hundreds of people who want to buy it. How do they choose? Maybe lavish off-the-book gifts, or maybe they choose based on how the person looks, or perhaps they arrange consulting contracts to make up payment afterward. Would you invest in your house if you knew you couldn't get any return on it? Or would you let it run to shambles? Imagine you were a landlord renting a unit out and a new law prohibited selling it for more than you bought it. How would that impact your decision to maintain it? Would you spend money on updating the interiors, replacing carpets, putting up new siding, if you planned on selling it within a few years? Suppose every landlord did this. What would a typical city block start looking like? And so on.
- mediaman 5y agoThe article is a summary of a new research paper that covers real estate prices over roughly twenty years up to the start of the pandemic. The argument is that booms and busts tend to be caused by a real change in fundamentals that people then become too optimistic about. For example: people knew "super-star cities" (SF, Seattle, etc) were going to attract more capital and jobs than other cities, so in the 2000s they piled into investments in these areas. However, they were so optimistic that they overshot, causing a bubble that ended in 2012. That they overshot, however, does not mean that there were not real fundamental changes that made these cities valuable. So these super-star cities, even though they had a real-estate crash, did really well because the fundamentals kept being in their favor from 2012-2020. Places like Vegas did not do as well because the fundamentals are not as favorable there (fewer high-paying jobs, more space to build). The question now is whether we are seeing a real estate mania in response to the idea of working from home. Prices in the suburbs have shot way up. Are people over-estimating this change? Perhaps, and if they are, it means that the suburbs could face more of a bubble popping than the city. But it may also mean that if WFH becomes a long-term trend, that even if prices collapse more in the suburbs (after having shot up in a frenzy), that we may still see a permanent shift in equilibrium between being in the city and in the suburbs. So, if you believe WFH will be a long term, real fundamental shift, you may want to buy up some suburban places when, and if, a bubble pops in those markets.
- boilerupnc 5y agoAnother trend to keep an eye on is “build-to-rent” [0]. Wall Street is hunting for returns. Real estate rental returns at scale are a viable target in an environment of near zero rates, especially at the lower-mid suburban price points. [0] https://archive.is/byi4V https://archive.is/byi4V
- DisjointedHunt 5y agoLots of people miss the fact that the Fed has intervened in unprecedented ways in the past year, that we may not understand fully for decades.
- acchow 5y agoSince 2008 really. I guess you could say quantitative easing was not unprecedented in human history, but it was unprecedented in the USA.
- imtringued 5y agoWhen banks grant credit, they create a bond on the asset side and credit (bank money) on their liability side. The debt is your liability, the credit is your asset. You can spend that credit on anything you want, it can even be used to repay a different debt than the one you agreed to. Banks took a contract (debt = promise to sell goods and services) and essentially turned it liquid. Each bank dollar is basically a micro bond with no terms written on it. QE basically buys the bond off the bank and gives the bank central bank reserves. It increases liquidity and that is about it. The bank doesn't own the bond it sold, it owns a claim to a small portion of the bonds the central bank has on its balance sheet. It doesn't have to buy the same bond back. (the same way you can use your borrowed money to repay a different debt). It helps banks get bad debt off their balance sheet but in no way does it encourage people to borrow more money.
- atwebb 5y agoI don't think it is missed, at least personally, my thoughts are: "When will it stop?". If the argument is interest rates / incentives, then there really doesn't seem to be much turning back unless there are serious wage increases. The response seems to be "It won't stop."...just like housing always goes up in price (except when it doesn't).
- sputknick 5y agoI don't have the source, but I saw recently that if you price houses in gold bars, prices have remained highly consistent over the past 125 years at a price between 225-250 ounces of gold for the average new home in America. It's the dollar that has changed it's value.
- lxe 5y agoUS population also added 50 million people. I'm willing to bet it also affects real estate prices to a considerable degree.
- DanTheManPR 5y agoTo expand on that: the home building rate kept pace with population growth up until the housing crash, and then collapsed. I'm not sure how much of a lag time there is between population growth and the demand for more housing, but eventually all the kids born in the last 20 years will need to live somewhere. https://www.statista.com/statistics/1041889/construction-year-homes-usa/ https://www.statista.com/statistics/1041889/construction-yea...
- deleted 5y ago[deleted]
- throwawaymanbot 5y agoDeliberate market manipulation from the hedge funds. Who let’s face it, have no business being in the home ownership business. As long as they get their investment returns to hell with society right?
- badrchoubai 5y agoStupid question: Do increases in things like Home prices, wages, etc. correlate to inflation?
- InitialLastName 5y agoStupid answer: Sometimes! Inflation is really an indirect measurement of the rate of change in a currency's value. It usually is approximated by sampling the price of a "basket of goods", including labor, real estate, and other commodities. If the prices of those goods are going up, overall, we have inflation. Sometimes, though, the prices of some things are going up and the prices of other things are going down. In that case, it can be hard to discern between "the value of this good is increasing" and "the value of the money spent on this thing is decreasing". In the current situation, we have both inflation (by some measures at a ~5% annual rate) and shenanigans in the real estate market (to some extent related to very low interest rates for mortgages) that are causing prices to rocket.
- hourislate 5y agoReminder that US housing prices are cheap and affordable compared to Canadian prices considering most people will never own a home again in Toronto and possible all of Ontario. Average house price in Toronto is 1 million + and it is not out of the norm to see 20%+ price increases every year. I was watching a co-op 2 bedroom condo that was selling for 300k in March/2019. They relisted it for 739k this week. There is also the fact that mortgages in Canada are only for 5 years and the interest can't be written off against your income. Amazing that at the current trend a house in Toronto will be several million dollars in just the next decade while the average salary is typically 60k CAD a year.
- sbahr001 5y agoThis is really scary as a whole. Even though you have less interest rate you could be overpaying for you house by 100k+ in the current market. When interest rates do rise in the future(if it doesn't we will have larger problems) more people will be underwater with their homes, some may choose not to pay as they may never be able to be positive on their homes. Take into account that salaries are not rising at an equal level. This may be correcting itself: "minimum wage" jobs are paying near/over double to get employees. If this wage increase is temporary homes would be way overpriced. If it is not temporary "white collar"/"blue collar" jobs have to increase their salaries to be competitive; which would allow property values to stay or rise over time. Increase new home supply. Given that the demand is extremely high and home supply is limited there will likely be an increase in new home supply. On average it will take a few years before new homeowners develop some equity in their homes. During those years are where new homes have a really good market. This would lower the value of homes faster. Especially in states that had the most migration during the pandemic. Something that negate everything and allow house prices to sore is the upcoming wealth transfer from the boomer + gen x wealth transfer to millennials. This will hurt a lot of minority communities as they didn't have the time to develop as much wealth(segregation being a big hindrance for black communities, and a large of first generation unskilled immigrants who's kids are now starting to improve the situation). Ultimately, this may lead to a larger wealth gap which can destroy a lot of things and how civilizations fall. Let me leave it with this: Millennials and Gen-Z are going to be living in very interesting times.
- jscheel 5y agoWe were about to put an offer down on a home in a rural-ish area of north Nashville when we got additional information that showed it was ~120k overvalued. It still ended up with multiple offers in less that 24 hours.
- atwebb 5y agoNow I'm just curious which area is considered ruralish (assuming it is outside Williamson). There's a ton of buildable land left in Middle TN since there aren't too many natural boundaries, I've always found that interesting when looking at the possible density. I know it is a bit seasonal and all and anecdotal but prices are stabilizing in several TN areas where it was growing XX%, we'll see I guess.
- CryptoPunk 5y agoThis is adjusted for CPI inflation, but asset prices have inflated far more than consumer good prices. The 12.5 fold [1] expansion of the money supply since 2008 has, according to some analysts, flowed to assets. [1] https://fred.stlouisfed.org/series/M1SL https://fred.stlouisfed.org/series/M1SL
- penneyd 5y agoThe massive millennial generation are hitting the prime age for buying a home, thirty five, and they are a bigger cohort than the boomers so upward price pressure on homes isn't going to abate anytime soon.
- betwixthewires 5y ago> But, in Kindleberger's theory, investors got over-excited about the economic changes the new technology brought about. They began seeing the sky as the limit. They over-speculated on land near railroad stops, often borrowing from banks and racking up debt in the process. At some point, reality kicked in, and prices began to fall. Once prices fell, investors couldn't pay their debts, and that led to a crisis. It's a general pattern he finds repeated over and over in history. So, a bubble? Once the "overoptimistic" part kicks in I fail to see how there's any substantiative difference between the two scenarios. All markets grow on fundamentals til they don't, and when they don't you have a bubble. Sounds like people creating distinction where there isn't any to justify their "this is fundamentals" position. The article is a whole lot of noise about nothing. We are currently in a housing bubble, 100%. Add on top of that massive monetary inflation. To what degree the prices reflect the housing bubble or the increase in money supply, I don't know. But I do know the best thing that could happen is the bubble pop, because the alternative is much much worse.
- alkonaut 5y agoA huge chunk of all the offices in the developed world moved into people’s homes and a not-insignificant fraction of those offices will remain in people’s homes indefinitely. This isn’t just going to work by having the office in bed. People actually need more home space per person. Unlike many past peaks this time it actually feels like there is a fundamental change that supports the increasing prices.
- SomewhatLikely 5y agoThe analysis of value by this researcher seems to be entirely dependent on future price. But houses have value even if the price goes down: a place to live, space to own more things, for kids to play, stability where no one can kick you out etc. Someone buying a house during a "bubble" can be deciding that they value these intangibles more than future profit of selling the house later.
- huevosabio 5y agoI think a better index is the price-to-rent ratio [0]. In that sense we are in ~2003 levels of housing bubble. [0] https://fred.stlouisfed.org/graph/?g=l0bW https://fred.stlouisfed.org/graph/?g=l0bW
- cafard 5y agoIs the price of silver higher than it was when the Hunt brothers tried to corner it forty-odd years ago?