14 ms·

‘Housing in ‘07 wasn’t a bubble” is a true statement that almost no one believes

79 points by cwwc 5y ago

andrewmcwatters 5y ago
Yeah, and people still keep moving to the Phoenix metro area. The housing market is now closed for median income families as a result of the constant growth and the housing inventory here being dried up. I want to emphasize that: if you're a median household income, middle class family moving to Phoenix, you can no longer afford homes here. There's zero inventory. ARMLS listings will produce nothing. That's not an exaggeration. After breaking down the cost of a mortgage, insurance, property tax, cost of food based on USDA Cost of Food reports, median car payments, bills and utilities, and additional monthly expenditures, there's no way the math works out. Phoenix is now Los Angeles. Look somewhere else. Phoenicians are.
- cocoa19 5y ago
  Zillow shows ~650 houses (sfh+town home) in Phoenix in the last 30 days. It seems the median list price is 1/5th of bay area prices.
  - grapeskin 5y ago
    Phoenix also doesn’t have many people making 500k at 25, unlike the Bay Area. Prices can be lower but equally unaffordable for locals.
sien 5y ago
Paul Krugman described the effect memorably in 2005. https://www.nytimes.com/2005/08/08/opinion/that-hissing-sound.html https://www.nytimes.com/2005/08/08/opinion/that-hissing-soun... "Then there are the numbers. Many bubble deniers point to average prices for the country as a whole, which look worrisome but not totally crazy. When it comes to housing, however, the United States is really two countries, Flatland and the Zoned Zone. In Flatland, which occupies the middle of the country, it's easy to build houses. When the demand for houses rises, Flatland metropolitan areas, which don't really have traditional downtowns, just sprawl some more. As a result, housing prices are basically determined by the cost of construction. In Flatland, a housing bubble can't even get started. But in the Zoned Zone, which lies along the coasts, a combination of high population density and land-use restrictions -- hence "zoned" -- makes it hard to build new houses. So when people become willing to spend more on houses, say because of a fall in mortgage rates, some houses get built, but the prices of existing houses also go up. And if people think that prices will continue to rise, they become willing to spend even more, driving prices still higher, and so on. In other words, the Zoned Zone is prone to housing bubbles." Just ignore the first sentence in the article and the prognosis on a bubble popping messily.... Erdmann adds to the thesis in a very valuable way by pointing out that people move out Zoned zone to Phoenix and other US metros. Just pity the countries that effectively don't have a Flatland, like Australia, the UK and NZ.
- Andaith 5y ago
  Which is crazy, because you would think that Australia was mostly Flatland! It's the size of the continental US, with a population lower than Texas. Everyone here lives in the capital cities, and last I looked there were almost no tech jobs at all further up the coast between Sydney and Brisbane. I wonder if pandemic working from home is going to change this, some of our devs have already moved up the coast...
  - LinAGKar 5y ago
    Probably because it's mostly desert
    - rozenmd 5y ago
      It is, and yet we still only really live in three cities (150km in length along a 26000km long coastline)
      - dmurray 5y ago
        Three cities (presumably Sydney/Melbourne/Brisbane) is a weird way to describe Australia's population distribution. Perth is basically the same size as Brisbane. "We still only really live in two/four/five cities" all would be more accurate.
    - csee 5y ago
      No. The non-desert land per capita in Australia is more than twice that in the US.
      - sumedh 5y ago
        Its not just desert, it about water as well. If I not mistaken large parts of Australia had drought in the last couple of years.
    - loeg 5y ago
      So is California. And Texas.
refurb 5y ago
This analysis seems to be attacking a strawman "the economic recession caused housing to drop, not the other way around". I mean there were multiple, interconnected factors including lax lending standards, anticipation of ever increasing housing prices, overbuilding in some locations. It's pretty clear none of them were responsible on their own. And the fact that they use Canada as an example of a country "that never saw a housing crash" is kind of funny considering Canada median national housing prices is almost double that of the US now. I would agree that the US is likely not in a bubble now, but Canada sure as hell is.
- monkeywork 5y ago
  Canada's housing market is inflated but not a bubble - the fundamentals of supply and demand are still firmly in place in Canada's largest cities (ie population growth is FAR exceeding infrastructure). Canada's housing market will see a roll back in pricing (lets say at an extreeme 20-30%) however that really is only pushing pricing back 1-2 years max (possibly not even that).
  - refurb 5y ago
    A few thoughts: Prior to the 2008 crash, the US' "fundamentals of supply and demand" were still firmly in place as well. It's just that demand was massively juiced by easy money and an expectation that "housing only goes up" (speculation). Clearly not all of Canada is in a bubble (Toronto, but even more, Vancouver, has always been expensive), but when a house in Brampton, Ontario (50 km from downtown Toronto, 45 to 75 minute commute with traffic) goes from $890,000 to $2.2M in 20 months, that's speculation. When in Barrie, Ontario (2hr commute, 120 km away) you'd be hard pressed to find a home for under $1M, that makes zero sense. And when small town BC (<20,000 population) has houses worth $1M but no industry or well paying jobs, that's a bubble. Those numbers are more inflated than the peak 2007 bubble in the US, despite lower incomes in Canada. Houses in Las Vegas were bubblicious when they hit $500-$600k, let alone $2M. I agree that major urban cores like Toronto and Vancouver might only see a 20-30% correction (just like San Francisco and New York in 2008), but other places are in for a world of hurt (similar to Las Vegas (-66%, https://fred.stlouisfed.org/series/LVXRNSA https://fred.stlouisfed.org/series/LVXRNSA) or Miami (-55%, https://fred.stlouisfed.org/graph/?g=8hD https://fred.stlouisfed.org/graph/?g=8hD)). And unlike the US, many mortgages are recourse mortgages - you don't just walk away, you're on the hook for the full mortgage if after selling, the proceeds doesn't cover the debt. Plus Canadians can't lock in interest rates (and monthly payments as well) for 30 years like Americans - so less ability to just "ride it out until prices come back". Canadians have much more risk exposure when home prices drop than Americans.
mjevans 5y ago
That chart of vacancies is an oversimplification. It's too smoothed. For example the vacancies should have a breakdown into per-month bands. Rentals of not-direct 'apartment' style units should be counted in some other category of profiteering. Each https://en.wikipedia.org/wiki/Metropolitan_statistical_area https://en.wikipedia.org/wiki/Metropolitan_statistical_area in the US should have a graph per major downtown, for suburbs within a given rush hour commute distance (1 hour, 2 hour, 3 hour) and then each state for outlying areas (anything outside of another graph).
aeternum 5y ago
It would probably be more accurate to call it a subprime mortgage bubble. Those were the assets that were significantly over-priced. Or one could argue that in '07 they were correctly priced given the questionable assumption that home values would only increase. Home values themselves were high but definitely not in bubble territory. It was the derivatives that amplified those high home values. Specifically mortgages that couldn't be paid unless home values continued to increase. That kind of asset is very bubbly, an asset that only has value under a certain transient conditions, and the rating agencies marked them as relatively safe.
- jmole 5y ago
  no one would have called it a bubble if it didn't pop. the pop came from the supply side, tons of mortgage companies selling now-cheap houses trying to claw back their money from bad loans. they patched the hole though, and now mortgages are larger than ever. great news for the banks and existing homeowners, bad news for anyone else.
  - danaris 5y ago
    But it was guaranteed to pop, because of the fundamental unsoundness of it. Like aeternum said, it was only viable as long as prices kept increasing. Any kind of shock to the system would cause a wave of defaults. And because of the bundling and spreading out of the CDOs based on these unsound mortgages, it essentially infected the entire system, meaning that that wave of defaults wouldn't just affect the real estate lending sector. So, sure, in an imaginary world where house prices could monotonically increase forever, we could choose not to call this a bubble. But it really is just that: imaginary.
nitsuaeekcm 5y ago
Something funny about bubbles. I’ve heard it said that housing prices in 2005 were outrageous, so much that they could only possibly be justified if the population somehow banded together to stop most new housing from being built. Likewise I’ve also heard something about the dotcom bubble- that the valuations of tech firms in 2001 were outrageous. That the multiples given could only ever be sustained if American consumer tech came to dominate the world…
- MiddleEndian 5y ago
  >so much that they could only possibly be justified if the population somehow banded together to stop most new housing from being built. This seems to have actually happened. Consider this simple recent example in Boston: https://www.universalhub.com/2022/board-rejects-apartment-building-near-ashmont-t https://www.universalhub.com/2022/board-rejects-apartment-bu... People protested to stop twenty-eight units from being built next to a train station on a commercial lot. The zoning board had a 3-2 vote, with three in favor of the development against two who opposed it. However, the law is such that a 3-2 vote is not enough to approve it, so the owner was prevented from building more housing. Multiple levels of government prevent housing from being created and this issue clearly cascades throughout the entire country.
  - Ekaros 5y ago
    5 story building next to train station... And I realistically would expect at least 7-9 here. Maybe force them to build underground parking making it more expensive, but still, that is sort of area you should aim to densify in future.
greatpostman 5y ago
A Wall Street insider high up at a major USA bank once told me that 2008 was a media created phenomenon. There was no mortgage crises, leverage for sure, but nobody went to jail. Why did no one go to jail? Nothing was done wrong. It was a panic sparked by the media.
- turbinerneiter 5y ago
  Without judging whether it's true or not, it makes sense for a wall street insider to blame it on someone else, doesn't it? Everybody wants to be the good guy in the story, even wall street people.
- topkai22 5y ago
  To greatly oversimplify the issues, there was plenty of wrong done it just wasn’t illegal. Don’t confuse good decision making nor morality with legality. There are PLENTY of sources documenting the the faulty assumptions and collective delusion that led to the 2008 mortgage crisis happen. Blaming the media for the panic without acknowledging the very real and very large underlying issues sound like post hoc self justification.
t_mann 5y ago
Interesting view and great data crunching. But I am amazed how one can write a long article purportedly about the causes of the 07/08 crisis without ever mentioning credit quality. By my impression, the prevailing view is that the crisis was caused by poor credit quality of some home buyers (I remember the term NINJA borrowers - no income, no job or assets). This was masked away in complex financial products (CDOs,...) that made it hard for buyers like banks to assess individual borrower quality and instead had them rely on (flawed) valuation models by rating agencies. The high ratings for these products allowed the market for them to balloon from a niche to a gigantic size that made it systemically important. When the first cracks started showing, worries about borrowers' credit quality turned into worries about banks' credit quality, leading to bank-run-like situations in the money markets, and ultimately the failure of banks like Lehman Brothers and others. The article seems to start from a misleading claim, one that misses a crucial part of the picture, and that is much easier to refute than the full story. The data is still super interesting to see.
- headmelted 5y ago
  This is the correct answer. Mortgages work differently in the fastest-rising areas of the US than most anywhere else, in that a borrower can have no equity or negative equity in the home… and just hand back the keys. In the UK this involves a complex and lengthy bankruptcy proceeding. Honestly I think the US way is objectively better, but it massively changes the outcomes of how long someone will stay in a home that’s become a bad investment. The article is also looking at the wrong numbers for rents. How much rents have risen is far less relevant than how many rent starts there are over mortgage starts. The first statistic tells you how much people are having to pay to live, the second tells you if there’s really a shortage of homes or not. Some countries have implemented additional taxes on non-primary homes since the crash, but to my knowledge they’re not particularly punitive. I think this tax really is the solution (e.g. 5% value of the home in landlord tax per year).
- DoingIsLearning 5y ago
  > caused by poor credit quality of some home buyers Small detail but the wording here implies a causation, that it was the home buyers who were the makers of the crisis. Whereas we now have ample evidence that it was the real estate companies and mortgage lenders who when faced with free money, became predatorial of people who had no capacity or understanding of the financials of becoming a home owner. We can always argue that these were adults who have taken their decisions but again many of these people were promised pie in the sky and they believed it.
modeless 5y ago
> And yet not very many people think we’re in the middle of a second housing bubble. Really? It seems pretty obvious to me that we're in the middle of a huge bubble. The problem is the bubble may not pop for decades because propping up the bubble is government policy at every level from federal to state to local. And if they ever stop, tons of people will be totally screwed. Never mind that even more people are getting screwed by the bubble...
- Gunax 5y ago
  I think perhaps you and the author are using bubble to mean different things--namely speculation versus bona-fide demand.
- parkingrift 5y ago
  If it takes several decades for the bubble to pop then it isn’t a bubble.
  - Beltiras 5y ago
    If it's being artificially inflated by policy it's a bubble, even if it takes a very long time for the inflation to pop it.
    - parkingrift 5y ago
      An economic bubble, by definition, is a scenario where asset prices are significantly divorced from underlying fundamentals. It is not possible to have a thirty year bubble. A thirty year "bubble" means the fundamentals were wrong and we were never actually in a bubble.
      - modeless 5y ago
        You don't think it's possible for underlying fundamentals to be defied for 30 years, huh? Depends how you define fundamentals I guess. If your definition of fundamentals is "something that lasts 30 years or more" then you'd be tautologically correct.
cm2187 5y ago
It's probably more than one thing. I agree with with the points on supply, plus the fact that cities can only grow so much before transportation becomes impossible, and then there is a huge premium to be near the center (watch the traffic in the streets in old movies or documentary from the 1970s compared to now in cities like Paris or London). But I think another big factor is that we are measuring inflation wrong. I think the various QE had the same effect than any other money printing in history, to drive prices up. But I think the way it was introduced (directly in the financial system, rather than paying people with it), meant that the inflation was localised into financial assets, and to the cost of anyone benefiting from higher financial assets (VC, asset and hedge fund managers, etc). So stock prices skyrocketed, as prime real estate prices, college tuitions, expensive restaurants, etc. But that's not captured by the various CPI indices. Then came covid, with its new, massive rounds of QE. But this time the money printing was distributed to ordinary citizens through various furlough schemes, financed by deficits, pretty much directly financed by the central bank. And oh surprise, about a year later we see inflation jumping up massively. So it may be that these inflation adjusted real estate prices charts aren't adjusted as they should.
deleted 5y ago
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throwawaycities 5y ago
There is no doubt that the entire housing market was exploited to float the US economy and covered up a recession dating from 2000-2001 until the housing market could no longer be sustained resulting in a complete collapse of the financial markets and banking. The housing market didn’t “snap back” rather two unprecedented tax payer stimulus packages totaling just shy of $2T were given to the banks to finance millions of foreclosure cases and allow the entire industry to consolidate. That $2T resulted in the longest bull market in history, as well as the biggest transfer/consolidation of wealth in history. It was unprecedented until the “stimulus packages” during Covid which is probably closer to a total of $7-8T, so far, once the federal reserve leveraging is included. Once again the policy response during this crisis was designed to benefit corporations and the wealthy. One of my favorite things to highlight was that following the Fed receiving taxpayer funds to prop up the stock market Disney had their greatest single day stock gains in history all while every single theme park, hotel and cruise ship were indefinitely shutdown and every single movie production was indefinitely suspended. The very same way people look back and excuse the banks for their culpability for the financial meltdown resulting in “the Great Recession”, and even more bizarrely argue to some extent that taxpayers should thank the banks for allowing the taxpayers to bail them out (ie finance their foreclosure cases and major bank acquisitions)…its clear the people have once again been conned by politicians and are stupid enough that we will be reading future articles about how 2020-20?? wasn’t a stock market bubble and wasn’t inflation and that the people will once again be thanking politicians and the federal reserve for robbing them.
- prox 5y ago
  One my pet peeves is that better ventilation legislation has been blocked and for that 7T you could probably upgrade every ventilation system in existence. According to a NYT article the average vent system is 4 on a scale to ten. In a pandemic you want something like an 8. This would seriously hamper COVID / airborne viruses.
  - logifail 5y ago
    > better ventilation legislation Why worry about ventilation and masking - particularly in schools - when one could spend that time looking at data showing who is actually at risk, and how to protect them. Spoiler: for this pandemic at least, the risk group simply isn't healthy children. Or indeed healthy young adults. Or maybe even anyone healthy under say 45[0] Our 8 year old had a PCR-confirmed Covid infection three weeks ago, as far as we know that's the first case in our immediate family. He's not vaccinated. For him, it represented a four-hour headache. No fever, no sore throat, no cough. He's finally been allowed to go back to school this week. [0] https://www.euromomo.eu/graphs-and-maps https://www.euromomo.eu/graphs-and-maps
Aeolun 5y ago
From the perspective of just wanting to buy a house in the same place my parents bought one, I don’t really care what we call it. The reason I’m able to actually buy one now is because my salary rose faster than the housing prices, but the prices in that location have still risen by about 800% in the past 30 years.
coldtea 5y ago
>And yet not very many people think we’re in the middle of a second housing bubble. Yes. Many people think we're in the middle of a much larger bubble across the whole unsustainable economy.
gw67 5y ago
You need to factor population over the century.
ricardobayes 5y ago
In Europe we have had no housing bubble because mortgage rates are higher by a few %, and no investment mortgages are available for retail 'investors'. You are lucky to even get one on a stable salary. There are zero possibilities for investors to buy up and hoard houses unless they do so in cash.

79 points by cwwc 5y ago

Yeah, and people still keep moving to the Phoenix metro area. The housing market is now closed for median income families as a result of the constant growth and the housing inventory here being dried up. I want to emphasize that: if you're a median household income, middle class family moving to Phoenix, you can no longer afford homes here. There's zero inventory. ARMLS listings will produce nothing. That's not an exaggeration. After breaking down the cost of a mortgage, insurance, property tax, cost of food based on USDA Cost of Food reports, median car payments, bills and utilities, and additional monthly expenditures, there's no way the math works out. Phoenix is now Los Angeles. Look somewhere else. Phoenicians are.

cocoa19 5y ago
Zillow shows ~650 houses (sfh+town home) in Phoenix in the last 30 days. It seems the median list price is 1/5th of bay area prices.
- grapeskin 5y ago
  Phoenix also doesn’t have many people making 500k at 25, unlike the Bay Area. Prices can be lower but equally unaffordable for locals.

sien 5y ago

Paul Krugman described the effect memorably in 2005. https://www.nytimes.com/2005/08/08/opinion/that-hissing-sound.html https://www.nytimes.com/2005/08/08/opinion/that-hissing-soun... "Then there are the numbers. Many bubble deniers point to average prices for the country as a whole, which look worrisome but not totally crazy. When it comes to housing, however, the United States is really two countries, Flatland and the Zoned Zone. In Flatland, which occupies the middle of the country, it's easy to build houses. When the demand for houses rises, Flatland metropolitan areas, which don't really have traditional downtowns, just sprawl some more. As a result, housing prices are basically determined by the cost of construction. In Flatland, a housing bubble can't even get started. But in the Zoned Zone, which lies along the coasts, a combination of high population density and land-use restrictions -- hence "zoned" -- makes it hard to build new houses. So when people become willing to spend more on houses, say because of a fall in mortgage rates, some houses get built, but the prices of existing houses also go up. And if people think that prices will continue to rise, they become willing to spend even more, driving prices still higher, and so on. In other words, the Zoned Zone is prone to housing bubbles." Just ignore the first sentence in the article and the prognosis on a bubble popping messily.... Erdmann adds to the thesis in a very valuable way by pointing out that people move out Zoned zone to Phoenix and other US metros. Just pity the countries that effectively don't have a Flatland, like Australia, the UK and NZ.

Andaith 5y ago
Which is crazy, because you would think that Australia was mostly Flatland! It's the size of the continental US, with a population lower than Texas. Everyone here lives in the capital cities, and last I looked there were almost no tech jobs at all further up the coast between Sydney and Brisbane. I wonder if pandemic working from home is going to change this, some of our devs have already moved up the coast...
- LinAGKar 5y ago
  Probably because it's mostly desert
  - rozenmd 5y ago
    It is, and yet we still only really live in three cities (150km in length along a 26000km long coastline)
    - dmurray 5y ago
      Three cities (presumably Sydney/Melbourne/Brisbane) is a weird way to describe Australia's population distribution. Perth is basically the same size as Brisbane. "We still only really live in two/four/five cities" all would be more accurate.
  - csee 5y ago
    No. The non-desert land per capita in Australia is more than twice that in the US.
    - sumedh 5y ago
      Its not just desert, it about water as well. If I not mistaken large parts of Australia had drought in the last couple of years.
  - loeg 5y ago
    So is California. And Texas.

refurb 5y ago

This analysis seems to be attacking a strawman "the economic recession caused housing to drop, not the other way around". I mean there were multiple, interconnected factors including lax lending standards, anticipation of ever increasing housing prices, overbuilding in some locations. It's pretty clear none of them were responsible on their own. And the fact that they use Canada as an example of a country "that never saw a housing crash" is kind of funny considering Canada median national housing prices is almost double that of the US now. I would agree that the US is likely not in a bubble now, but Canada sure as hell is.

monkeywork 5y ago
Canada's housing market is inflated but not a bubble - the fundamentals of supply and demand are still firmly in place in Canada's largest cities (ie population growth is FAR exceeding infrastructure). Canada's housing market will see a roll back in pricing (lets say at an extreeme 20-30%) however that really is only pushing pricing back 1-2 years max (possibly not even that).
- refurb 5y ago
  A few thoughts: Prior to the 2008 crash, the US' "fundamentals of supply and demand" were still firmly in place as well. It's just that demand was massively juiced by easy money and an expectation that "housing only goes up" (speculation). Clearly not all of Canada is in a bubble (Toronto, but even more, Vancouver, has always been expensive), but when a house in Brampton, Ontario (50 km from downtown Toronto, 45 to 75 minute commute with traffic) goes from $890,000 to $2.2M in 20 months, that's speculation. When in Barrie, Ontario (2hr commute, 120 km away) you'd be hard pressed to find a home for under $1M, that makes zero sense. And when small town BC (<20,000 population) has houses worth $1M but no industry or well paying jobs, that's a bubble. Those numbers are more inflated than the peak 2007 bubble in the US, despite lower incomes in Canada. Houses in Las Vegas were bubblicious when they hit $500-$600k, let alone $2M. I agree that major urban cores like Toronto and Vancouver might only see a 20-30% correction (just like San Francisco and New York in 2008), but other places are in for a world of hurt (similar to Las Vegas (-66%, https://fred.stlouisfed.org/series/LVXRNSA https://fred.stlouisfed.org/series/LVXRNSA) or Miami (-55%, https://fred.stlouisfed.org/graph/?g=8hD https://fred.stlouisfed.org/graph/?g=8hD)). And unlike the US, many mortgages are recourse mortgages - you don't just walk away, you're on the hook for the full mortgage if after selling, the proceeds doesn't cover the debt. Plus Canadians can't lock in interest rates (and monthly payments as well) for 30 years like Americans - so less ability to just "ride it out until prices come back". Canadians have much more risk exposure when home prices drop than Americans.

mjevans 5y ago

That chart of vacancies is an oversimplification. It's too smoothed. For example the vacancies should have a breakdown into per-month bands. Rentals of not-direct 'apartment' style units should be counted in some other category of profiteering. Each https://en.wikipedia.org/wiki/Metropolitan_statistical_area https://en.wikipedia.org/wiki/Metropolitan_statistical_area in the US should have a graph per major downtown, for suburbs within a given rush hour commute distance (1 hour, 2 hour, 3 hour) and then each state for outlying areas (anything outside of another graph).

aeternum 5y ago

It would probably be more accurate to call it a subprime mortgage bubble. Those were the assets that were significantly over-priced. Or one could argue that in '07 they were correctly priced given the questionable assumption that home values would only increase. Home values themselves were high but definitely not in bubble territory. It was the derivatives that amplified those high home values. Specifically mortgages that couldn't be paid unless home values continued to increase. That kind of asset is very bubbly, an asset that only has value under a certain transient conditions, and the rating agencies marked them as relatively safe.

jmole 5y ago
no one would have called it a bubble if it didn't pop. the pop came from the supply side, tons of mortgage companies selling now-cheap houses trying to claw back their money from bad loans. they patched the hole though, and now mortgages are larger than ever. great news for the banks and existing homeowners, bad news for anyone else.
- danaris 5y ago
  But it was guaranteed to pop, because of the fundamental unsoundness of it. Like aeternum said, it was only viable as long as prices kept increasing. Any kind of shock to the system would cause a wave of defaults. And because of the bundling and spreading out of the CDOs based on these unsound mortgages, it essentially infected the entire system, meaning that that wave of defaults wouldn't just affect the real estate lending sector. So, sure, in an imaginary world where house prices could monotonically increase forever, we could choose not to call this a bubble. But it really is just that: imaginary.

nitsuaeekcm 5y ago

Something funny about bubbles. I’ve heard it said that housing prices in 2005 were outrageous, so much that they could only possibly be justified if the population somehow banded together to stop most new housing from being built. Likewise I’ve also heard something about the dotcom bubble- that the valuations of tech firms in 2001 were outrageous. That the multiples given could only ever be sustained if American consumer tech came to dominate the world…

MiddleEndian 5y ago
>so much that they could only possibly be justified if the population somehow banded together to stop most new housing from being built. This seems to have actually happened. Consider this simple recent example in Boston: https://www.universalhub.com/2022/board-rejects-apartment-building-near-ashmont-t https://www.universalhub.com/2022/board-rejects-apartment-bu... People protested to stop twenty-eight units from being built next to a train station on a commercial lot. The zoning board had a 3-2 vote, with three in favor of the development against two who opposed it. However, the law is such that a 3-2 vote is not enough to approve it, so the owner was prevented from building more housing. Multiple levels of government prevent housing from being created and this issue clearly cascades throughout the entire country.
- Ekaros 5y ago
  5 story building next to train station... And I realistically would expect at least 7-9 here. Maybe force them to build underground parking making it more expensive, but still, that is sort of area you should aim to densify in future.

greatpostman 5y ago

A Wall Street insider high up at a major USA bank once told me that 2008 was a media created phenomenon. There was no mortgage crises, leverage for sure, but nobody went to jail. Why did no one go to jail? Nothing was done wrong. It was a panic sparked by the media.

turbinerneiter 5y ago
Without judging whether it's true or not, it makes sense for a wall street insider to blame it on someone else, doesn't it? Everybody wants to be the good guy in the story, even wall street people.
topkai22 5y ago
To greatly oversimplify the issues, there was plenty of wrong done it just wasn’t illegal. Don’t confuse good decision making nor morality with legality. There are PLENTY of sources documenting the the faulty assumptions and collective delusion that led to the 2008 mortgage crisis happen. Blaming the media for the panic without acknowledging the very real and very large underlying issues sound like post hoc self justification.

t_mann 5y ago

Interesting view and great data crunching. But I am amazed how one can write a long article purportedly about the causes of the 07/08 crisis without ever mentioning credit quality. By my impression, the prevailing view is that the crisis was caused by poor credit quality of some home buyers (I remember the term NINJA borrowers - no income, no job or assets). This was masked away in complex financial products (CDOs,...) that made it hard for buyers like banks to assess individual borrower quality and instead had them rely on (flawed) valuation models by rating agencies. The high ratings for these products allowed the market for them to balloon from a niche to a gigantic size that made it systemically important. When the first cracks started showing, worries about borrowers' credit quality turned into worries about banks' credit quality, leading to bank-run-like situations in the money markets, and ultimately the failure of banks like Lehman Brothers and others. The article seems to start from a misleading claim, one that misses a crucial part of the picture, and that is much easier to refute than the full story. The data is still super interesting to see.

headmelted 5y ago
This is the correct answer. Mortgages work differently in the fastest-rising areas of the US than most anywhere else, in that a borrower can have no equity or negative equity in the home… and just hand back the keys. In the UK this involves a complex and lengthy bankruptcy proceeding. Honestly I think the US way is objectively better, but it massively changes the outcomes of how long someone will stay in a home that’s become a bad investment. The article is also looking at the wrong numbers for rents. How much rents have risen is far less relevant than how many rent starts there are over mortgage starts. The first statistic tells you how much people are having to pay to live, the second tells you if there’s really a shortage of homes or not. Some countries have implemented additional taxes on non-primary homes since the crash, but to my knowledge they’re not particularly punitive. I think this tax really is the solution (e.g. 5% value of the home in landlord tax per year).
DoingIsLearning 5y ago
> caused by poor credit quality of some home buyers Small detail but the wording here implies a causation, that it was the home buyers who were the makers of the crisis. Whereas we now have ample evidence that it was the real estate companies and mortgage lenders who when faced with free money, became predatorial of people who had no capacity or understanding of the financials of becoming a home owner. We can always argue that these were adults who have taken their decisions but again many of these people were promised pie in the sky and they believed it.

modeless 5y ago

> And yet not very many people think we’re in the middle of a second housing bubble. Really? It seems pretty obvious to me that we're in the middle of a huge bubble. The problem is the bubble may not pop for decades because propping up the bubble is government policy at every level from federal to state to local. And if they ever stop, tons of people will be totally screwed. Never mind that even more people are getting screwed by the bubble...

Gunax 5y ago
I think perhaps you and the author are using bubble to mean different things--namely speculation versus bona-fide demand.
parkingrift 5y ago
If it takes several decades for the bubble to pop then it isn’t a bubble.
- Beltiras 5y ago
  If it's being artificially inflated by policy it's a bubble, even if it takes a very long time for the inflation to pop it.
  - parkingrift 5y ago
    An economic bubble, by definition, is a scenario where asset prices are significantly divorced from underlying fundamentals. It is not possible to have a thirty year bubble. A thirty year "bubble" means the fundamentals were wrong and we were never actually in a bubble.
    - modeless 5y ago
      You don't think it's possible for underlying fundamentals to be defied for 30 years, huh? Depends how you define fundamentals I guess. If your definition of fundamentals is "something that lasts 30 years or more" then you'd be tautologically correct.

cm2187 5y ago

It's probably more than one thing. I agree with with the points on supply, plus the fact that cities can only grow so much before transportation becomes impossible, and then there is a huge premium to be near the center (watch the traffic in the streets in old movies or documentary from the 1970s compared to now in cities like Paris or London). But I think another big factor is that we are measuring inflation wrong. I think the various QE had the same effect than any other money printing in history, to drive prices up. But I think the way it was introduced (directly in the financial system, rather than paying people with it), meant that the inflation was localised into financial assets, and to the cost of anyone benefiting from higher financial assets (VC, asset and hedge fund managers, etc). So stock prices skyrocketed, as prime real estate prices, college tuitions, expensive restaurants, etc. But that's not captured by the various CPI indices. Then came covid, with its new, massive rounds of QE. But this time the money printing was distributed to ordinary citizens through various furlough schemes, financed by deficits, pretty much directly financed by the central bank. And oh surprise, about a year later we see inflation jumping up massively. So it may be that these inflation adjusted real estate prices charts aren't adjusted as they should.

deleted 5y ago

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throwawaycities 5y ago

There is no doubt that the entire housing market was exploited to float the US economy and covered up a recession dating from 2000-2001 until the housing market could no longer be sustained resulting in a complete collapse of the financial markets and banking. The housing market didn’t “snap back” rather two unprecedented tax payer stimulus packages totaling just shy of $2T were given to the banks to finance millions of foreclosure cases and allow the entire industry to consolidate. That $2T resulted in the longest bull market in history, as well as the biggest transfer/consolidation of wealth in history. It was unprecedented until the “stimulus packages” during Covid which is probably closer to a total of $7-8T, so far, once the federal reserve leveraging is included. Once again the policy response during this crisis was designed to benefit corporations and the wealthy. One of my favorite things to highlight was that following the Fed receiving taxpayer funds to prop up the stock market Disney had their greatest single day stock gains in history all while every single theme park, hotel and cruise ship were indefinitely shutdown and every single movie production was indefinitely suspended. The very same way people look back and excuse the banks for their culpability for the financial meltdown resulting in “the Great Recession”, and even more bizarrely argue to some extent that taxpayers should thank the banks for allowing the taxpayers to bail them out (ie finance their foreclosure cases and major bank acquisitions)…its clear the people have once again been conned by politicians and are stupid enough that we will be reading future articles about how 2020-20?? wasn’t a stock market bubble and wasn’t inflation and that the people will once again be thanking politicians and the federal reserve for robbing them.

prox 5y ago
One my pet peeves is that better ventilation legislation has been blocked and for that 7T you could probably upgrade every ventilation system in existence. According to a NYT article the average vent system is 4 on a scale to ten. In a pandemic you want something like an 8. This would seriously hamper COVID / airborne viruses.
- logifail 5y ago
  > better ventilation legislation Why worry about ventilation and masking - particularly in schools - when one could spend that time looking at data showing who is actually at risk, and how to protect them. Spoiler: for this pandemic at least, the risk group simply isn't healthy children. Or indeed healthy young adults. Or maybe even anyone healthy under say 45[0] Our 8 year old had a PCR-confirmed Covid infection three weeks ago, as far as we know that's the first case in our immediate family. He's not vaccinated. For him, it represented a four-hour headache. No fever, no sore throat, no cough. He's finally been allowed to go back to school this week. [0] https://www.euromomo.eu/graphs-and-maps https://www.euromomo.eu/graphs-and-maps

Aeolun 5y ago

From the perspective of just wanting to buy a house in the same place my parents bought one, I don’t really care what we call it. The reason I’m able to actually buy one now is because my salary rose faster than the housing prices, but the prices in that location have still risen by about 800% in the past 30 years.

coldtea 5y ago

>And yet not very many people think we’re in the middle of a second housing bubble. Yes. Many people think we're in the middle of a much larger bubble across the whole unsustainable economy.

gw67 5y ago

You need to factor population over the century.

ricardobayes 5y ago

In Europe we have had no housing bubble because mortgage rates are higher by a few %, and no investment mortgages are available for retail 'investors'. You are lucky to even get one on a stable salary. There are zero possibilities for investors to buy up and hoard houses unless they do so in cash.