Every month I am amused by the comments from NAR chief economist Lawrence Yun regarding housing fundamentals, especially job growth.

Forget about strong jobs. Toss Yun's views in the ashcan.

Compared to wage growth, homes are nearly as unaffordable now as they were at the peak of the housing bubble.

That's without factoring in student debt and attitude changes regarding debt, assets, and mobility.

January 1987 to January 2000

Image placeholder title

In the 13-year period between 1987 and 2000, home prices, rent and wages all rose together. Homes were home, not speculative playthings, not a retirement vehicle.

That changed in 2000.

January 2000 to July 2006

Image placeholder title

In the 6.5 year period between January 2000 and July 2006, home prices soared 85% vs 22% for both rent and hourly earnings.

People thought homes would never stop rising. Supposedly there was a massive shortage of homes. People line up for block for the right to buy a Florida condo. In a few short weeks, after the pool of greater fools ran out, the housing crash began.

The housing crash lasted longer than the stock market bust and finally ended in late 2011. January 2012 was the last time rent, home prices, and wages were roughly in sync.

January 2012 to April 2019

Image placeholder title

RECOMMENDED ARTICLES

Home prices are not quite as bad as they were in July of 2006, but pressure on would-be buyers is extreme.

Wages are up 19%, rent is up 23%, and housing prices are up 55%. Those are national averages. Some markets are better and some much worse.

Millennials are under sever pressure because the price of rent has outstripped wage growth. Waiting to buy has generally made matters worse.

Those who could not afford to buy a home in 2013 are much further behind today.

Worst Time to Buy Since 2012

Now is the worst time to buy since 2012. Markets vary of course, and so do strategies. Those who own a house, especially a big one in a hot area have a good chance to downsize.

But the new kid on the wanna-be block would be wise to think twice.

Deflationary Bust Coming

I am convinced another deflationary asset bubble burst is at hand.

For discussion, please see Deflation Coming: CPI Supposedly Headed Nowhere, But Let's Dive Inside.

The bust could easily last six to eight years this time, not two. Indeed, that is my expectation.

The bubble represents asset inflation. Asset deflation will likely be accompanied with a small amount of price deflation as well.

No Crash?!

Unlike others, I am not calling for a crash. The liquidity conditions are way different. And the primary bubble this time is not housing, but junk bonds and equities coupled with very deflationary demographics.

I expect something more along the lines of -15%, +3%, -10%, +5%, -8%, -8%, +5%, -18%. The result of that is about -46% with nothing worse than -15 to -20% or so.

When I called for a deflationary bust in 2005 I was widely thought of as a fool. I was, for two years.

Maybe I am again, for even longer.

Mike "Mish" Shedlock

Housing Bubble and Everything Bubble in One Simple Picture

To understand the magnitude of the housing bubbles simply compare the index of wages to the index of prices.

Dissecting the Fed-Sponsored Housing Bubble; HPI-CPI Revisited; Real Housing Prices

In the wake of rising housing prices a reader asked if I would revisit my March 2102 article How Far Have Home Prices “Really” Fallen.

Beyond Bubble: $9 Million Vancouver Teardown; Ordinary Houses Sell for $Millions Over Asking Price

There are bubbles, then there are really bubbles. I am at a loss for words how obscenely overpriced the Vancouver housing market has become. Sellers list “low” prices hoping to start a bidding war, and the strategy works.

Calculated Risk vs Mish: Demographics Good for Housing?

Are demographic trends good for housing? Here are two views.

Australia's Housing Bubble Finally Popped?

Australia's mining towns are getting crushed. Not even Sydney is immune.

Real Wages Decline in December, Barely Up From Year Ago

Real wages for production workers fell 0.2% in Dec. Real wages for all employees fell 0.1%. Both barely up from yr ago.

Diving Into the IMF’s Global Housing Update: Bubbles and Busts

The IMF’s Global House Price Index, an average of real house prices across 57 monitored countries, continues to climb.

Wage Growth for Men About 1/4% Per Year Since 2000, Women About 1/2% Per Year

Women are slowly catching up to men in median wages but growth has been pathetic across the board.

Housing Bubble in Norway

Here is a quick post under the theme “Housing Bubbles Around The World”. This one is from Norway, courtesy of reader Espen Johansen.