The continued rising costs in the housing market have caused the Federal Reserve to warn of a housing bubble, something not seen since just before the market crash of 2008. Phillips said this means the Federal Reserve sees people overpaying for houses causing a “market exuberance.” The Federal Reserve called the exuberance “unhinged from fundamentals” and “abnormal … for the first time since the boom of the early 2000s.”
Now, the Federal Reserve is warning about a housing bubble.
Housing prices have spiked 25% over the past year, and since 2012, the cost of a new house has doubled, Phillips explained. “Cities with the biggest spikes were Phoenix AZ, Miami FL, and Tampa FL, but overall, it was houses in southeastern states that saw the largest spike in 2021,” said Phillips to “Morning Wire” hosts Georgia Howe and John Bickley. “But again, it’s really everywhere across the country.” Including Texas and California
Looks to me like we are at "Euphoria" sliding toward "Anxiety" - hang on for the ride
Investor · Tampa, FL · Member since 2011 · 2k+ posts · 3k+ votes
4y
Anyone waiting around for a repeat of 2008 is going to be very disappointed. Buyers may be paying too much right now, but these loans were underwritten well. If someone has no money, no skin in a property, is underwater, and has an unsustainable adjustable interest rate mortgage they walk away and go into foreclosure. This time around borrowers had good credit, good jobs, have skin in their properties via down payments, reserve funds, and a locked in low interest rate 30 year loan. If the value of their house drops, so what? They keep paying the mortgage and life goes on.
I keep thinking about supply and demand. There's very little supply and an outrageous amount of demand. Sure, rising interest rates or some unforeseen event could cause prices to drop. But then everyone would just stay put. No foreclosure crisis this time.
Investor · Dallas, TX · Member since 2016 · 887 posts · 1k+ votes
4y
Quote from :
Quote from :
Just a question... are the ones who are most fervently defending this market and insisting that it can't crash the same ones that would be hurt the most if it did? Realtors, lenders, etc.?
If we accept that the market is grossly inflated and that the country is in a very bad place economically/ financially, that could cause a shift in public opinion and start the inevitable downturn. Denying it is likely swaying public opinion and postponing the inevitable.
Great question actually, Greg! Let's talk about "defending the market".
My team closed 95 transactions last year and we would very much prefer for the market to slow down! Here is why:
It is tough for buyers agents to write offers on deals when you compete against 15 offers! You did all the work, but 14 agents did not get paid. Also not fun when I am on the listing side: 15 offers x 25 pages = 375 pages to print, read, mark up and present to the seller. I'd much rather have 2 offers to present!
So no, I have no benefit in pouring gas on the fire. As an active buy and hold investor I would also like to see the market slow down. I pay literally twice for the same house what I have paid 10 years ago. We buy several houses every year.
And no end in sight. Milwaukee has a housing shortage - we have 300,000 Millennials, who have aged into home buying years (the oldest are 39 now, married, kids) - we have a market of about 10,000 SF homes per year. Tell me how that is going to work! And Millennials are not the only buyers!
We do have new construction; 1678 units last year. That is a drop in the bucket. Plus, these new houses are all 500-700k and up compared to our 250k median. Not much help!
My hope is that rising interest rates slow down the market eventually; so far not much. We have about 60 active buyers and not one has thrown in the towel as far as we know. I'll be the first to post when I see things slowing down!
@Marcus Auerbach what you are describing is a good problem to have. That's like investors complaining because managing their huge portfolio is a so much work, and they need to pay accountants, attorneys, etc. Never mind the fact that they amassed a huge portfolio and established generational wealth. Similarly, you are slammed with work because a million people want to buy your listings for "x" over list price, and your sellers are throwing caution to the wind and offering "x" over list price to get a home amongst the rat race. With record home prices I'm sure commissions have been quite nice. And that's great, you are working hard and being rewarded for your hard work.
I remember a time when there were famines/ droughts among realtors & lenders. I certainly don't wish that on anyone. Just remembering a time when the market was not so kind for those in the industry.
Investor · Eastern ID · Member since 2017 · 69 posts · 53 votes
4y
I disagree that the growth is unsustainable. Housing has certainly inflated faster than the national economy overall, but a portion of that inflation is correlative to the overall economy. Suppose somehow the supply was to suddenly match demand, the new floor in real estate prices should be MUCH higher than the floor in 2008-2010 because everything costs more. If we have experiened 15-20% inflation in the overall economy in the last 2 years, that means an $830,000 home should now cost $1,000,000 just to match the inflation of the rest of the economy. If the fundamentals of building and maintaining a house (materials, labor, wages, etc.) are at their new normal and there is no deflation in the market, then we should simply accept that the growth wasn't actually unique to housing. Individuals on average are making more and things are costing more, so there was no net gain. And as far as deflation, the federal government can't let that happen very much for the simple fact that they have put us in a bond liquidity trap and they would default on the dollar.
When I see low skill jobs like fast food have doubled in wage over the last 8 or so years and are now paying $15/hour, then it seems completely normal to me that food should be double, cars should be double, clothing should be double, rent should be double, and home prices should be double. There is no gigantic correction coming of the price is not fundamentally incorrect. The government is deciding to panic raise the interest rates while still promoting inflation in lots of other ways.
If inflation keeps going ahead at even half of what it currently is, then in a matter of just a few years the average family will be buying a million dollar house and will be able to afford it because that is the new normal.
When I see low skill jobs like fast food have doubled in wage over the last 8 or so years and are now paying $15/hour, then it seems completely normal to me that food should be double, cars should be double, clothing should be double, rent should be double, and home prices should be double. There is no gigantic correction coming of the price is not fundamentally incorrect. The government is deciding to panic raise the interest rates while still promoting inflation in lots of other ways.
Wages aren't doubling. My W2 pay certainly hasn't doubled. In CA minimum wages/ professions (which are some of the highest paid in the nation) have increased significantly but not doubled. State minimum wage is $14 per hour, I see McDonalds starting at $17-18 (about a 25% increase above minimum wage). In mid-level professions there certainly hasn't been a doubling of wages. Normal "middle class" people are being choked out by prices of goods and services, e.g., gas, food, rents, services, etc. Most Americans are drowning in debt and living check to check. Homelessness is growing at an alarming rate with rents at an all-time high. This might be hard to see for successful investors, but the biggest segment of our society is not doing well financially.
When I see low skill jobs like fast food have doubled in wage over the last 8 or so years and are now paying $15/hour, then it seems completely normal to me that food should be double, cars should be double, clothing should be double, rent should be double, and home prices should be double. There is no gigantic correction coming of the price is not fundamentally incorrect. The government is deciding to panic raise the interest rates while still promoting inflation in lots of other ways.
Wages aren't doubling. My W2 pay certainly hasn't doubled. In CA minimum wages/ professions (which are some of the highest paid in the nation) have increased significantly but not doubled. State minimum wage is $14 per hour, I see McDonalds starting at $17-18 (about a 25% increase above minimum wage). In mid-level professions there certainly hasn't been a doubling of wages. Normal "middle class" people are being choked out by prices of goods and services, e.g., gas, food, rents, services, etc. Most Americans are drowning in debt and living check to check. Homelessness is growing at an alarming rate with rents at an all-time high. This might be hard to see for successful investors, but the biggest segment of our society is not doing well financially.
Thanks for the response. I agree that there are members of society that aren't doing well, but it has been very close to a 50% increase over the past 8 years. See: https://dqydj.com/household-in... If you factor in the standard income increase which is 35% and then add the extreme amount of government subsidies increases, welfare increases, etc. then we have likely exceeded 50%. There are always individuals in bad financial situations, but the marco data points are what is going to determine the market. If the government backs off of the super high welfare and subsidies, the dramatic inflation should subside. That could slow the housing market but because of past inflation across the economy, that can only go down so much. And on top of that, the housing shortage still exists.
Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes
4y
Quote from :
what makes you so confident that supply won't increase? Is your position that the current inventory levels are going to stay where they are permanently? If not, when do you suppose they'll increase?
The reason home supply isn't going to increase quickly and confidently is because this time around, we don't have as many of the people who build houses, who maintain them, who bring them back. Those numbers were permanently depressed in 2008, and they're not coming back barring an extraordinary cultural shift that we'll see a mile off.
The supply chain problems don't help, as @Account Closed mentions, but they're not the driving force. The driving force is the ever-increasing skills gap. We don't have enough competent people actually building and remodeling homes for the national inventory to recover and rebound smoothly.
Contractor · Grand Marais, MN · Member since 2016 · 249 posts · 417 votes
4y
@Jim K. Exactly this. I'm a gc, booked out 2 years. Looking for help. Prepandemic, you could find a laborer for 20 an hour. Now, 30 gets no response. I did an informal poll of a few 20 to 30 year Olds this past week. Small sample, but asked them if there was a number that they would consider bring in the trades...100k a year didn't move them. They are likely currently making 40 to 60...Last fall I offered a kid working fast food 50 percent more than he was making, with a review and bump in 30 days. He didn't show day 1, and called 3 days later saying he really wanted the job.
I far from a permabull, but McDonalds was paying 12, now that is 20, for 0 increase in output. We are paying 4 for gas that was 2. I don't believe houses are "up" as much as the metric we are using to measure them ( dollars) are down. I'm in a small town, where people want to live. Inventory is at 0. Lots of locals calling a top, but no one is selling. Realtors have 20 buyers for every listing, half are paying cash. Existing still is selling at a discount to new. Not saying it isn't possible, but I feel like with all of those factors, flat on the year would equate to a crash.
Anyone waiting around for a repeat of 2008 is going to be very disappointed. Buyers may be paying too much right now, but these loans were underwritten well. If someone has no money, no skin in a property, is underwater, and has an unsustainable adjustable interest rate mortgage they walk away and go into foreclosure. This time around borrowers had good credit, good jobs, have skin in their properties via down payments, reserve funds, and a locked in low interest rate 30 year loan. If the value of their house drops, so what? They keep paying the mortgage and life goes on.
I keep thinking about supply and demand. There's very little supply and an outrageous amount of demand. Sure, rising interest rates or some unforeseen event could cause prices to drop. But then everyone would just stay put. No foreclosure crisis this time.
Correct this is a different animal the notes are based on sound fundamentals not phony make-believe stories like 2008.
They did not build enough S.F.H instead they built apartments, duplexes etc...so we have a supply and demand imbalance.
I don't know why I'm anti-government intervention. In the early aughts, the government forced lenders into loosening their standards which led to the housing crisis. That created the opportunity for people to buy houses for pennies on the dollar.
Now, the government has caused rampant inflation through monetary policy (I'm not even going to get into the local housing shortages that some locales are creating through fees, zoning, etc.). That created the opportunity to purchase properties at historically low interest rates and wait for the inflation to catch up to us as it was so obvious it was coming. Rents are up 30-50% within the past few years and amazingly, since these properties were purchased.
The more government intervention, the more opportunities to benefit from the Law of Unintended Consequences. Short of a French Revolution and my head ending up in a guillotine, this has all been great for me, so why do I continue to be frustrated by government intervention?
what makes you so confident that supply won't increase? Is your position that the current inventory levels are going to stay where they are permanently? If not, when do you suppose they'll increase?
The reason home supply isn't going to increase quickly and confidently is because this time around, we don't have as many of the people who build houses, who maintain them, who bring them back. Those numbers were permanently depressed in 2008, and they're not coming back barring an extraordinary cultural shift that we'll see a mile off.
The supply chain problems don't help, as @Account Closed mentions, but they're not the driving force. The driving force is the ever-increasing skills gap. We don't have enough competent people actually building and remodeling homes for the national inventory to recover and rebound smoothly.
in addition keep in mind pre 08 at least in our market here banks were giving spec loans at 80% ARV which means builders had to bring in ZERO money to get a spec loan and many could get 20 or 30 loans like this.. Today that number is down to 60 to 70 generally and limited amount of spec loans. Not to mention a lot of the GC's post 08 went banko out here in the West and in the south so banks have long memory they wont loan to those same GC's again.
And then HML like a lima one for instance did not enter ground up until about 3 or 4 years ago. so you had a critical shortage of spec capital on top of it and its has not gotten significantly better.. When I started on my current 90 home project my bank would only give me 4 spec loans LOL and that forced me to pre sell them which if your familiar is just very tough for us and for the buyer for a whole myriad of reasons.. much easier to build then put them on the market within 30 days of C of O .. So acute labor shortage supply chain issues ( which are very real and many buyers simply dont understand) and Access to capital. Then the final straw is land use / zoning approvals.. My first subdivision I did in Oregon was 105 lots in the wine country. From the day I went into contract I had an approved subdivision within 120 days so those days you could go into contract in Oct. approved by Feb underground in by July August and be going vertical.
Now its 2 years plus for land use approvals another 6 months for infrastructure then because of covid getting your plat recorded which should take a few weeks went to 8 weeks or more and then getting building permits that used to take 21 to 30 days went to 60 to 90 and so on and so forth.. All of these factors go into increased price of finish product and shortage of inventory.. And we do have to admit the all cash or finance investor that has stepped into the SFR realm in a big way started in about 2000 and has never really let up .. some of our cities especially in the mid west deep south over 50% of the sfr's are owned by investors there by locking out the first time home buyers . Once these homes become rentals they are are far less attractive to a young family looking to buy a home we all know what rentals look like after being in service for a number of years compared to a well cared for Owner occ home.
U now have whole subdivision being built for rental purposes and being sold on this site through the marketing companies you see post here along with big investors buying up those homes.. this simply did not happen 20 years ago this is a huge paradigm shift .. rentals back in the days were plex's and apartments Not SFR's. I just put one of my Vegas rentals on the market ( keep in mind A area so this is not a beat up rental ) Looks like 20 offers and well above ask and huge amount of appreciation I just bought it last spring.. Offers so far are all cash.. the reason I bought this in the first place is my wife's relative kept getting beat out to buy a home in Vegas and we had another A class rental there . Great tenants so I went and bought this other home so my tenant could move very nice of them.. And sold it to my wifes relatives so they did not have to compete and they could use their FHA loan they needed.. Its these types of scenarios that are creating buyer burn out and agents right now with buyers have one heck of a tough job no doubt.. For our family being able to create our own inventory has been a true blessing to us.
@Tom O. what makes you so confident that supply won't increase? Is your position that the current inventory levels are going to stay where they are permanently? If not, when do you suppose they'll increase?
It's well within the realm of possibilities that sales will slow due to rates in the 5's and creeping to the 6's. Historically inventory levels increase in the spring/ summer months. A vast majority of home sales are through financing, not cash. Therefore, if financing becomes difficult/ impossible for some, that could have a significant impact on buying power of the purchasers.
Do you think that people having life changing events that force them to sell is all of a sudden going to stop?
I am not so sure about the vast majority are finance not these days.. and certainly not like pre 08 were everyone was finance OPM driven.
I look at the first 4 pre sales on my Oregon development and these are 750 to 850k 2k sq ft new builds 2 are cash and one is half down and not sure on the other one.. And have another offer coming in this weekend thats going to be all cash.. these are of course owner occupy. And in many markets rentals are sold as all cash.. Look at Vegas for instance I just put one of mine on the market there and first offers are all cash and 5% above list which is 100k above what we paid less than a year ago. Banks control inventory as well and they are not flooding the builders with capital I can tell you that.. Big nationals ya but small guys like me its still tough and highly controlled they are not going to let us get over our ski tips like they did in 06 07 and created a huge GLUT of new builds that sat vacant for years and were sold at fire sales in 09 2010 etc.
Real Estate Agent · Member since 2018 · 459 posts · 414 votes
4y
@Greg R.
I think one thing to consider though is that we are not building at the same pace as we were 15-20 years ago at the very least. We are behind in new construction nationally over 5 million homes. This is completely dependent on location, but I think generally we are seeing that we are not building enough. Material supply is low. 85% of our lumber comes from Canada. In 2021 the US almost doubled their tax tariff on Canada, thus increasing our retail costs compounded with the lack of inventory caused directly/indirectly by the pandemic. So there’s no incentive to build, not enough material, and certainly cannot build a home fast enough causing higher carrying costs and more expenses for the ones financially tied to the build. The numbers don’t pencil out. Having too much capital locked into a build for that long with that much risk doesn’t make sense. So not as many people building.
We are relying on existing homes to sell to make up for our supply problems. I think you also bring up a good point though, life factors such as a change in work, unpredictable life events, etc., can cause people to sell. Even if it’s people moving to a different state because they realized a huge amount of equity and decided it was time to move because they could work remotely. But I don’t think that the number of life changed home owners is going to keep up with the demand. Demand will decrease as we continue to see interest rates climb but our issue is we are not building.
And what we are building are not SFR's. On the west coast, we are seeing apartment buildings and duplexes, 4plexes being built. There's going to be a huge shift in homeowners vs renters here and we are planning on it by building rental units.
Just my two cents but I think we need to dig deeper than just supply vs demand and ask how and why our supply/demand look the way they do and what can change them.
Plus nationally we can see influxes in who’s to get hit the hardest. Maybe Nebraska is building a lot faster than California? Maybe Oklahoma will hardly feel the dip in the market compared to New York?
Real Estate Agent · Member since 2018 · 459 posts · 414 votes
4y
@Eric Bilderback
It’s ironic how they always make sure we are aware of what they did after the fact, after they get to make their moves and line their pockets first. I love this post. Thank you for sharing.
Real Estate Agent · Member since 2018 · 459 posts · 414 votes
4y
@Jay Hinrichs
I was waiting for you to chime in @Jay Hinrichs!
Yes, people are forgetting that lending is going to tighten up and credit is going to drop. Right now you can fog a mirror and get a mortgage (not like prior to 2008), as long as you have a decent job and pay your bills, etc. Everyone that keeps saying that they are waiting for the time to jump have been and will forever say that
Real Estate Agent · Member since 2018 · 459 posts · 414 votes
4y
@Jace Holt
Thank you for your post! Very good point and I’m glad you mentioned it: the dollar has inflated significantly over the last 2 years. We will probably never live the days we had prior to the trillion of dollars printed prior to the pandemic. Cost of living has increased significantly. However, I disagree that employee pay has not increased with inflation. Yes, you can flip burgers now for almost $15-17 an hour, but those on salary at $50k a year have not seen a doubling in income. If anything, maybe they got a 3% annual raise? That’s the middle class decreasing and loosing buying power. The $15-17 an hour burger flipped can’t buy a home. And they’ll get comfortable their and become forever renters. The $50k a year worker now has to find a better job or find more income because the cost of living is higher, he lost buying power to buy their first home, and work won’t give them a raise to match inflation but to kick rocks. So they’ve need to relocate and/or find a better job.
Thank you for your post! Very good point and I’m glad you mentioned it: the dollar has inflated significantly over the last 2 years. We will probably never live the days we had prior to the trillion of dollars printed prior to the pandemic. Cost of living has increased significantly. However, I disagree that employee pay has not increased with inflation. Yes, you can flip burgers now for almost $15-17 an hour, but those on salary at $50k a year have not seen a doubling in income. If anything, maybe they got a 3% annual raise? That’s the middle class decreasing and loosing buying power. The $15-17 an hour burger flipped can’t buy a home. And they’ll get comfortable their and become forever renters. The $50k a year worker now has to find a better job or find more income because the cost of living is higher, he lost buying power to buy their first home, and work won’t give them a raise to match inflation but to kick rocks. So they’ve need to relocate and/or find a better job.
Lawrence,
This is such a strong point in my opinion about the middle class! I joined BP this week to gain access to forums. Myself and my twin brother are seeking to get into the real estate market for this very reason. We are both engineers (with master's degrees) currently making 50-70k in a lower cost of living town, but we recognize this 50k is not going the same distance it once did. We are both now feeling pressure to supplement our incomes and we are choosing the real estate route. However, these times are unprecedented in certain ways so it has shown challenges. Being younger and relying on older mentors in the area things are clearly different then when they entered the game a decade ago. The middle class definitely feels a loss in value in the last 1 or even 2 years, because our money simply doesn't go as far!
When I see low skill jobs like fast food have doubled in wage over the last 8 or so years and are now paying $15/hour, then it seems completely normal to me that food should be double, cars should be double, clothing should be double, rent should be double, and home prices should be double. There is no gigantic correction coming of the price is not fundamentally incorrect. The government is deciding to panic raise the interest rates while still promoting inflation in lots of other ways.
Wages aren't doubling. My W2 pay certainly hasn't doubled. In CA minimum wages/ professions (which are some of the highest paid in the nation) have increased significantly but not doubled. State minimum wage is $14 per hour, I see McDonalds starting at $17-18 (about a 25% increase above minimum wage). In mid-level professions there certainly hasn't been a doubling of wages. Normal "middle class" people are being choked out by prices of goods and services, e.g., gas, food, rents, services, etc. Most Americans are drowning in debt and living check to check. Homelessness is growing at an alarming rate with rents at an all-time high. This might be hard to see for successful investors, but the biggest segment of our society is not doing well financially.
Financial obligations (bank payments + rent) as a percentage of disposable income is at a 40-year low.
The average household wealth of the bottom 50% of households is at a historic high...there is no comparable period whatsoever.
If you back out real estate gains, net worth is over 100% higher than pre-pandemic levels for the bottom 50% of households.
Bank deposit balances of the the bottom 50% are $10,000+ and $3,000 above pre-pandemic levels, and kept increasing in 4Q21 after 3 quarters of increasing inflation and lower fiscal support payments.
Government unemployment insurance benefit payments have trended to near zero.
Nominal wage growth for the lowest income quartile is growing at the same pace as inflation.
2020 had large gains in real wage growth; so, even though real wage growth is severely negative for the past year, the 2-year trend is break even.
If real wage growth is -1%, it would take ~6 years to burn off the excess savings of the average bottom 50% of households. Even at -5%, it would take over a year.
Job openings are at all time highs; so, wage growth should continue, particularly for the bottom 50% of households.
Spending estimates by all income levels, but most significantly lower incomes, are at record levels and inflecting higher still.
Average tax refunds are higher (due to child tax credit).
The data shows that the biggest segment of society is doing better than ever...that's what causes inflation!
Yes, people are forgetting that lending is going to tighten up and credit is going to drop. Right now you can fog a mirror and get a mortgage (not like prior to 2008), as long as you have a decent job and pay your bills, etc. Everyone that keeps saying that they are waiting for the time to jump have been and will forever say that
One of the biggest points most investors who are sitting on the sidelines waiting for a crash to happen , what they miss is if you have a true crash.. Unless your ALL cash investor loans will not be there and or only for the 1% ers ..markets crash debt goes right with it :) will the cashed up investor and or company do well your darn right.. will the investor who thinks their 750 fico but only has 20 to 30% to put down they will have a tough time and will have to wait for things to bounce back..this is why a lot of folks talk about buying when you can not waiting to time a bottom.
When I see low skill jobs like fast food have doubled in wage over the last 8 or so years and are now paying $15/hour, then it seems completely normal to me that food should be double, cars should be double, clothing should be double, rent should be double, and home prices should be double. There is no gigantic correction coming of the price is not fundamentally incorrect. The government is deciding to panic raise the interest rates while still promoting inflation in lots of other ways.
Wages aren't doubling. My W2 pay certainly hasn't doubled. In CA minimum wages/ professions (which are some of the highest paid in the nation) have increased significantly but not doubled. State minimum wage is $14 per hour, I see McDonalds starting at $17-18 (about a 25% increase above minimum wage). In mid-level professions there certainly hasn't been a doubling of wages. Normal "middle class" people are being choked out by prices of goods and services, e.g., gas, food, rents, services, etc. Most Americans are drowning in debt and living check to check. Homelessness is growing at an alarming rate with rents at an all-time high. This might be hard to see for successful investors, but the biggest segment of our society is not doing well financially.
Financial obligations (bank payments + rent) as a percentage of disposable income is at a 40-year low.
The average household wealth of the bottom 50% of households is at a historic high...there is no comparable period whatsoever.
If you back out real estate gains, net worth is over 100% higher than pre-pandemic levels for the bottom 50% of households.
Bank deposit balances of the the bottom 50% are $10,000+ and $3,000 above pre-pandemic levels, and kept increasing in 4Q21 after 3 quarters of increasing inflation and lower fiscal support payments.
Government unemployment insurance benefit payments have trended to near zero.
Nominal wage growth for the lowest income quartile is growing at the same pace as inflation.
2020 had large gains in real wage growth; so, even though real wage growth is severely negative for the past year, the 2-year trend is break even.
If real wage growth is -1%, it would take ~6 years to burn off the excess savings of the average bottom 50% of households. Even at -5%, it would take over a year.
Job openings are at all time highs; so, wage growth should continue, particularly for the bottom 50% of households.
Spending estimates by all income levels, but most significantly lower incomes, are at record levels and inflecting higher still.
Average tax refunds are higher (due to child tax credit).
The data shows that the biggest segment of society is doing better than ever...that's what causes inflation!
Also states are starting to kick people off of unemployment much quicker than the past this will force people to do one of two things.
1. get back into the work force and get a job ( of which there are many)
In *2006* there were almost 10x the number of houses for sale as there are right now, in Metro Detroit.
We are sitting a little over 10k homes for sale today, and in 2006 we were over 100k…
how many of those though would a homeowner buy ?? and how many are vacant and never really going to come back.. I think you have to look at obsolesces in Detroit.. the same can be said with many mid west cities.. INdy has/had 5k vacants philly at one time 30,000 vacants etc etc.
in other areas of the country very rare to have an abandoned vacant home. So that all said I bet your true available homes is much less than 10k at least what owner occs want to buy ?? thats my guess anyway.
Raliegh, NC · Member since 2018 · 50 posts · 19 votes
4y
For starters, I disregard every brokers opinion about everything. If they were so smart they wouldn't be wasting their time chasing buyers and sellers. Right now they're bragging about selling people's homes and they're not even *selling* them. Techonology has thankfully made brokers obsolete. I can't wait until they finally crack down on their illegal trade practices.
As far as a bubble.... inflation, interest rates, shortage, people getting loans who shouldn't be " airbnb" "investors", and a shortage and the fact that no one is working.... yes, it's here. Oh how quickly we forget the 2008!
Thank you for your post! Very good point and I’m glad you mentioned it: the dollar has inflated significantly over the last 2 years. We will probably never live the days we had prior to the trillion of dollars printed prior to the pandemic. Cost of living has increased significantly. However, I disagree that employee pay has not increased with inflation. Yes, you can flip burgers now for almost $15-17 an hour, but those on salary at $50k a year have not seen a doubling in income. If anything, maybe they got a 3% annual raise? That’s the middle class decreasing and loosing buying power. The $15-17 an hour burger flipped can’t buy a home. And they’ll get comfortable their and become forever renters. The $50k a year worker now has to find a better job or find more income because the cost of living is higher, he lost buying power to buy their first home, and work won’t give them a raise to match inflation but to kick rocks. So they’ve need to relocate and/or find a better job.
This is exactly my point. What does it matter if a minimum wage job has a significant pay increase? What impact will that have on the housing market? People working at McDonalds are not the ones out there buying houses & driving the inflated prices.
As you said, most people making between 50-80k have seen stagnant wages with only moderate increases. A 3% raise isn't even keeping up with inflation.
Let's not selectively pick the economical markers that best suite our perspective. Anyone arguing that people are better off now than before the pandemic are either delusional, lying, or just in denial.
As of now the average American household has between 6-7k in credit card debt. Median household income (nationally) is 67k. That means that on average, every family has the equivalent of 10% worth of their gross household income in high interest credit card debt.
Only 44% of Americans have enough funds to cover an unexpected emergency expense.
The average American household only has $5,300 available though their checking and savings accounts (combine).
Millennials average almost $40k in high interest student loan debt.
Home prices have been growing at about 20% over the last two years - and that's very moderate. Most of us are well aware of markets that have increased WAY more than that.
Depending on the area, rents have spiked as much 15-20% over the last two years... and again that's conservative. Some areas have increased much more than that.
Gas is up 60% since 2020. And please don't blame this on Ukraine, gas had been rising well before the war.
Food costs are up about 14%, again that's pretty conservative.
Average cost for used cars is up 40%.
This all points to the obvious... which is that it costs way more to live now than it did a couple of years ago. Aside from successful investors, the top "x" percent of wage earners, and the knowledgeable homeowners who leveraged their equity, it's almost universal that the remainder of society (the majority) is doing much worse now than before.
Real Estate Agent · Lowell, MA · Member since 2019 · 1k+ posts · 1k+ votes
4y
Thanks for sharing @Account Closed. We are still buying cashflowing multi-family ourselves and if you’re following the BIG REITs they’re all scrambling to put more inventory on the books as quickly as possible. At the end of the day I think there is just too much money in our economy and if we believe inflation is between 7-11% then where are people going to put their money in an effort to outpace inflation? I think we’ll see a pull back on the SF and luxury condo market as rates increase but we’re betting big on MF rentals. I don’t know what’s going to happen in 3 weeks, 3 months, or 3 years but I firmly believe real estate worth more over the next 10 years than it is right now.
Specialist · Toronto, Ontario · Member since 2012 · 2k+ posts · 891 votes
4y
@Mike Hern
I wouldn't trust the media..
They are trying to do this in Canada too from multiple sources.. some are coming from big banks and have making these claim for years and market keep rising..
We are expected to have a huge interest rate hike but I just don't see any impact for months
Rental Property Investor · NY · Member since 2017 · 132 posts · 90 votes
4y
I’m no analyst but definitely do not think any housing crash will come. Banks are not lending at 120% ltv. People are not overpaying for houses. There buying houses that they can afford do to low interest rates. As rates raise select people will have to buy at lower price points. Yes there will be influx of “Covid” default that was coming anyways. The feds interest rate projects out there rate back to pre Covid which is 2019. Plenty of us were still buying houses in 2019
