The imbalance between the supply of new home for sale and current demand is high and rising. 
Building as Fast as They Can
I received an interesting response to my previous post New Home Sales Plunge 17.3 Percent, Largest Decline Since July 2013
“They’re building them as fast as they can. The operable phrase is ‘as they can’. Regulations. 2025 should be lit!“
Yes, they are building as fast as they can and that’s a problem.
378,000 homes are started or completed. This represents a builder commitment that’s very hard to stop no matter what happens to buyer demand.
Supply of Homes
The supply of homes for sale (not yet sold) is in a rarified atmosphere. The chart is a bit bogus because it counts vacant lots.
Matters are much worse for builders as the lead chart shows.
True Supply
- There are 378,000 homes started or finished for sale. This is the most homes for sale since 390,000 in May of 2008.
- There are 113,000 completed homes for sale. That is the most since 118,000 in August of 2009.
- The trend of started plus completed vs current sales is ominous.
Mortgage rates are near 7.0 percent. To keep sales up, builders are doing mortgage rate buydowns and building smaller homes.
Consumers pay for that in one of many ways: Reduced quality, smaller lots, fewer rooms, or less amenities.
Where Are the Buyers?
October 7: Government Employment Rose by an Amazing 785,000 in September
BLS math is often peculiar. This month is a real doozie. Four charts.
November 3: Excluding Government, Year-Over-Year Employment Is Negative 9 Straight Months
I did a deep dive into the latest jobs report this weekend. Here are some interesting numbers.
November 20: Quarterly QCEW Data Provides More Evidence of BLS Jobs Overstatement
Hard evidence from QCEW report suggests more negative revisions coming for BLS nonfarm payroll report.
My prior comparisons and advance calls suggest we see negative revisions in nonfarm payrolls from 2023 Q2 to 2024 Q2 of well over one million. My initial stab is about 1.2 million to the downside.
Builders can pretend to make things affordable, but smart consumers find themselves saying: This is all I get for $500,000?!
The Fed predicts an immaculate soft landing, I don’t.
Quality of new homes being built is sad joke! Few take pride in their work and much is down right garbage being rubber-stamped by cities and counties. No State is immune from it.
its actually recipients illegal aliens at least that’s what the biden team wants. homan will dash their dreams.
” The Fed predicts an immaculate soft landing, I don’t.”
Neither do I. This is the kind of thing depressions are made of. Oh, I know, China’s property bubble was going to go on forever too. Until it didn’t (starting 2021). And our CRE market is already in a depression.
This is what happens when capitalism runs a muck. Big Corportations and small investors take something meant for people to live a good life and turn it into an investment that is no good for anyone. Greed of a few will kill capitalism. Same thing is happening with the family farm. Both housing and farming should have some protection from the investment mentality.
In 2000 we sold our house in Florida at a nice profit (over $100K). We moved to TN and purchased an equivalent house for almost $100K less that has now inflated to over $100K more than we paid for it. Zero money down VA Mortgage with 2.62% interest we’re set for life, we’re in our 70s. We live in a beautiful small town (pop 16000) in East TN close to NC and VA. Our property is not near any flood zone, property taxes are half what they were in FL and insurance is less. Please don’t move here stay in FL and TX, good luck.
Too humid for me.
The sheetrock artists are at it again.
On the local L.A. news the other day it was mentioned that the average price of a house was around $950,000 or so. I’d guess affordability is a tad low here.
Housing demand has not gone away.
Not when renters who are the working class answering phones, are getting hit with $500 month rent increases.
This is a mortgage affordability problem due to hikes in interest rates.
Knocking down inflationary pressures and reducing Government bloat will allow interest charged to be lowered by market forces. The incoming administration is well aware of Housing as a catalyst of growth fueled by latent demand.They will be using it as one of the ways to get growth going again
Far too much Fiat has come into existence and it will need to get some sort of return.
Just because the Fed has hiked rates and put a price on Cash does not make that money immune from market forces.
A leveling off of Housing price increases would allow for a return to some normality in Building Business. Where having an idea of what costs to Build can be projected forward for more then the time it takes to build while under a contract.
Some inventory liquidation is bound to happen, however people in the Building Business have tightened up for some time now and are not going to be in trouble if they acted prudently.
Not on Long island – houses still going 70-80k over asking. Insanity
– There are 378,000 homes started or finished for sale.
> Are we becoming China? Build to build? As in China, this will not end well for the Builders, as many will default on the inventory.
– There are 113,000 completed homes for sale.
> Only Fools rush in. No Buyers, because of No Jobs and massive Inflation. Larger Inventory only means lower prices. Buyers can’t buy, so sellers won’t sell. As pressure mounts from the banks, builders will be forced to give them away, or they may go to auction perhaps.
– The trend of started plus completed vs current sales is ominous.
> Very, and it well get worse, and builders more desperate.
– Mortgage rates are near 7.0 percent. To keep sales up, builders are doing mortgage rate buydowns and building smaller homes.
> They are already starting to try tricks to force sales. What worked in the past, will not work this time around. Banks are not freely lending, and that’s a huge problem for Builders and Buyers alike! Sitting inventory will fall slowly in price, and then all at once, bargain basement prices will take over. This is the point where “Breaking Even” is a massive Win for Builders, so look for many more reductions. By the ones that have to first, and then everybody else will follow, as they start taking the majority of sales away..
– Consumers pay for that in one of many ways: Reduced quality, smaller lots, fewer rooms, or less amenities.
> This sort of situation, is what makes people “Stop & Think”. Many conclude Now is Not the time to be buying, and then the crash ultimately starts. More sellers than buyers emerge, as inventory increases.
– Where Are the Buyers?
> Gone! The buyers that could afford to buy and wished to buy already did. The others are now awaiting what’s going on, inventory, cost, and availability, and of course Politics is causing one to stall on the idea at the moment as well, and that may get a lot worse.
– October 7: Government Employment Rose by an Amazing 785,000 in September
> Yes, it has. It’s also about to FALL BY a whole lot more than that, before long. From all articles I have read, in regards to Government Jobs, they are going away, and fast! Civilian jobs will quickly follow.
– The Fed predicts an immaculate soft landing, I don’t.
> Not a chance in my view! An extremely “Hard Landing” is way more probable IMO. We have unemployment issues, bank lending issues, a recession clearly here, people savings has been crushed if not depleted in it’s entirety. Inflation has not subsided at all, Cost of Everything has gone up, and keeps rising. Savings are depleted, and down payments will be scarce IMHO.
>> Who would place themselves in a position of holding a New Big 30Y Mortgage when they are not sure they will even hav a job next year? Unless you have Extra Money to lose, then you’re not playing, and I know not a soul with extra of anything right now. Anything considered extra, is put away from the multiple emergencies on the way.
They will go to auction, purchased buy large RIETs and rented out at huge profits.
That is certainly an option. With the cost of homeownership so high, homes are like condos now. Find 2 couples to split a split, and things such as that.
The boomers cannot hike to the second and the third floor. Millennials and zoomers cannot afford new homes. There is a systemic change in the RE market. Builders still don’t get. Homeowners aren’t aware of it bc they don’t sell and take losses.. Buying mortgages and cutting prices by 10% wouldn’t help. We might be in recession for over a year, yet SPY made a new all time high last week.The Dow Theory recognized dead cat bounces like this decades ago..
Agent orange.
Recession orange
Depression orange
The great orange Depression
My wife sez he’s looking blonde lately
She’s blonde so who am I to judge…
White out!
The next financial calamity will be called
“THE WHITE OUT”
for the record, we’re “heading” for a French revolution 2.o
Discuss
For every 1% increase in the 30 yr rate, housing should drop 10% in price based on mortgage affordability.
So housing prices should be about 40% below peak levels set in early 2022 when the 30 yr rate was 3%.
However, adjust for household income increasing about 20% from early 2022 to present day, so housing prices should be about 20% to 25% below early 2022 levels.
When most people buy a house, they are buying a monthly payment :-/
Also examine home price to annual income ratio on websites like LongTermTrends . net
During the retail therapy Pandemic, FedEx, UPS, Amazon, and private deliveries were all day long on my lower middle class street.
It isThanksgiving and deliveries are but a fraction of what was. Possibly 25%.
Point is, people are B.R.O.K.E.
I follow the plant sales, and they pretty much tell you which way the winds blowing. When things are good, it’s hard to find stem flowers for sale in many varieties for example.
Another example is to watch the Holidays. Right now in my area, the annual Christmas Poinsettias are arriving in the truckloads. The initial rush will show in empty inventory spots at first, and then as the next wave of deliveries arrive, they fill back up. It’s this next wave, and how big, if many spots exist, and more importantly how many there are after that wave has passed. This year I see sales dipping and prices falling earlier than usual. The second deliveries a lot smaller, and less selection before the season has ended to assure they are not left with too much inventory. We shall see…
Things are indeed bad, as the first wave of Poinsettias are already popping up: “Buy One/ Get One Free”
Brace yourself, it’s not even December yet, so this could well be a very ominous sign…
There is no problem. The drop in new home sales is entirely due to the hurricane. In the south, new home sales dropped by 28%. If you exclude the drop in the south, new home sales looked fine.
True, buy a new home (1400 sqft) for $590K @ 7.4%, put as much as you can in the forever increasing stock market, especially DJT stock and become rich. Great advise for our new college grads with a degree in English Lit or any of our young people.
Remember Ghost Cities in China?
How about Ghost Suburbs in America? Keeps GDP ticking along….
I am hearing New Zealand is fast tracking swathes of new housing… in a market that has already tumbled close to 30%… seems counter-intuitive… unless of course desperate times are upon us…
Meanwhile… in HK this …so imagine what how bad China is.
The 62-year-old tycoon sold the units in Hamburg Villa on Eastbourne Road in Kowloon Tong, which were valued at HK$213 million (US$27.3 million), earlier this month, according to an agent from Centaline Property. The flats were sold at discounts between 53 per cent and 63 per cent.
Chen was only able to recover about HK$90 million, an aggregate discount of 58 per cent, according to agents and Land Registry records.
We are like a two year old left alone on a clifftop …crawling towards the edge
Kevin Hassett to lead the NEC?
a very good pick
https://x.com/markets/status/1861492777793548300
#winning
The FED made a mistake keeping rates near zero for nearly 14 years over the last 18 years, since 2008. Ultra-low rates will stimulate borrowing but they were artificial because the FED was buying a boatload of Treasuries and Mortgages to artificially depress interest rates. People are reluctant to sell their homes if they have a 2.8% mortgage rate locked in. So we’ll either have depressed housing sales for years, maybe a decade or more, or the FED will artificially lower rates again with QE to bring buyers and sellers back into the market. I think the latter is going to happen, even though it’s inflationary, as was QE and ZIRP. The FED can be blamed for the poor housing sales we have now. It takes a long time for inflationary money printing to cause actual rising of prices. Low rates for over a decade eventually expressed itself in higher prices for products and labor.
I don’t know. If you look at Mish’s chart, sales were pretty steady for a decade. Then COVID happened. All the city dwellers wanted to work from home in a big spacious house in the burbs. That’s when prices exploded. COVID blew up the economy in ways nobody imagined.
They had no choice… that is one of the reasons they gave us Covid… it was cover for a bailout many time larger than that of the GFC… of course saving the global economy …has poisoned it
“The global economy was facing the worst collapse since the second world war as coronavirus began to strike in March, well before the height of the crisis, according to the latest Brookings-FT tracking index. “The index comes as the IMF prepares to hold virtual spring meetings this week, when it will release forecasts showing the deepest contraction for the global economy since the 1930s great depression. Read More
Prices exploded when the Fed implemented yield curve control & bought more than $2T in MBS which along with tons of treasury purchases pushed the 10YT down to something like .65% which was crazy. And then they did near ZIRP with the FFR for WAY too long.
The whole COVID situation was a massive overreaction. By April of 2020, the CDC knew that the IFR was .5% for the entire population.
If they didn’t keep rates low the economy would have collapsed.
New Zealand is now experiencing the impact of high rates… they have been in a recession for two years… they have just slashed rates for the second time in two months…
They are panicking.
Of course NZ has run low on gas … and their energy costs have exploded higher. They cannot import — LNG is hugely expensive so would only make the problem worse
Keep an eye on that country. It is the canary
Its artificially low rates and money printing inflation are what eventually leads to collapse. I dont know exactly if NZ did that like the US, Canada, or Europe, but if they did, thats why theyre hurting and the same pain will come to the rest of the debt bingers.
The poor sales we have now is the result of way too expensive houses due to speculative hoarding fueled by cheap debt caused by the feds money printing to manipulate rates. In other words, the situation now was CAUSED by QE. It would be idiotic to start QE again cause thats the root of the problem. It’s the *prices, not the rates. If the nar or re industry or whoever wants to increase sales, they need to quit all their investment propaganda and support massive fed selling of the mortgage backed securities they bought with money printing, which screwed up the economy and jacked up inflation, bringing shame and pain to our country.
Let the spec houses sit for a while until prices come down. It’s not like the developers had a hard time over the past decade plus. Also lose a few million illegals from the lowest housing market, and things will settle down.
Maybe the private funds will buy them and rent them out, bail out the developers, and keep prices high with rents. All good for everyone except the common folk.
Cue ZIRP to the rescue. It’ll come someday
Builders need to start building reasonable priced “Tiny Homes”. People can’t buy what they can’t afford. The sales price/mortgage is just the start of the costs. Most 1st time home buyers have NO idea the costs/expenses to own a home. They know they’l have to pay taxes and insurance but they don’t budget for these items increasing annually. A lot of young people have given up the hope to buy a house, get married and have children. They realize it’s not financially feasable
They should sell at a lost … they’ll make it up with the economies of scale resulting from greater sales volume
Kinda like selling $100 bills for $75. Infinite demand
I am about to launch a website using that business model … I need 50 trillion dollars of seed capital… let me know if anyone is keen
Hey! I’m in. Those of us with foresight make the big bucks. We just need the foresight to cash out before we get too greedy.
Always sticky prices on the housing downside. Miniature price cuts are a sign demand is declining. Some house listings are showing as pre-foreclosure. The urgency isn’t there until people can’t pay the bills. Either, unemployment increases significantly, or the stock market cracks, or Bidum starts WW3.
https://charleshughsmith.substack.com/ wrote something a few months ago …
All these baby boomers sitting believe they can cash out on their homes… however the problem is at some point you don’t have enough buyers to purchase these overpriced houses particularly when mortgage rates are where they are…
Cuz so many younger people are unable to make ends meet … never mind saving hundreds of thousands of dollars for a deposit on a house…
Seems as if we are entering that very dangerous phase of the imminent collapse.
The snowball is stationary on the steep hill… all it will take is a push and it will come tumbling down the mountain causing a massive avalanche….
This is gonna make 2008 look like a tea party — and it is the result of what the Central Banks did after 2008… to fend off the total collapse of the global economy.
Now they are out of ammo.
Remember the scene from The Big Short where Steve Baum makes that speech at the conference…. basically he was Malthus… there was no way out … he was correct… what he got wrong is how the PTB would move heaven and earth to push the final outcome down the road.
The region is important. There’s a crash going on in Florida because of insurance costs which can reach $10,000 a year for average homes because of hurricane risk. So a lot of sales are depressed there. Probably in Texas, and other Southern coastal states. But there is a shortage of housing and people will have to pay more. It costs a lot to build a house now. Housing sales are down but we do have sales depending on the location. But the truth is more and more people will be living on the street, especially when the spouse of a baby boomer dies and the remaining spouse cannot afford their house or an apartment.
Around here, (Low Country) a lot of people in real estate/construction/home improvement are driving new mega-pickups for towing their center consoles with three or four 350-hp Yamaha outboards hanging off the stern.The smart ones know it isn’t going to last much longer.
I spent my misbegotten youth bill fishing in the stream in a 23 ft well craft with a single 159 hp Merc. Worked just fine at 1/20th the cost.
If they own a home they can take a reverse mortgage.
And buy a bigger boat!
Let’s not forget that the pool of people with the deposit on massively overpriced homes… and the ability to service a relatively high interest mortgage … is LIMITED.
And even many of those who could buy … are holding off… not wanting to get burned buying now when all signals indicate a major correction (or crash) is coming.
You’d have to be mentally ill and delusional to buy now
Any discussion of new housing markets has to include regional factors to make any sense.
Maybe most of the overhang is in Midwestern and Southern suburbs because permitting is easier and the coastal markets are still under supplied.
Put your toes in the oven and your head in the freezer to be comfortable on average…
Of course sales are different depending on the region. If you want to retire in a warm climate, would you buy a house in Florida where the average home insurance rate is $9000 a year, or would you choose Arizona where they have no hurricanes and where home insurance is $1200 a year? In Florida there are lots of people paying more for home insurance than they pay for a mortgage payment. According to Bing AI: The average cost of homeowners insurance in Miami, Florida for a $500,000 house in July 2024 is around $16,393 per year2
Housing ate the world. Folks can’t afford homes (bipartisan, multiple presidency failure).
New homes are a small share of the market in the Northeast, where housing has been going gangbusters the last couple years.
Extreme shortage of houses for sale in CT & MA and elsewhere in the the Northeast with most homes for sale going over asking.
Two reasons:
1) Nobody wants to give up their 3% mortgages so very few homes come on the market.
2) Northeast has gotten a disproportionate share of immigrants, creating more demand for housing.
Immigrants with suitcases of money….Ready to buy into the housing mania…
Would love to know what Mish thinks of Scott Bessent.
Sure, I disagree on tariff policy. But it is difficult to make a case he is unqualified.
He will be confirmed but he may soon have his hands full if Trump goes overboard on tariffs and causes a spike in inflation. The same holds true for the next Fed chair replacement.
He is very sharp and absorbs information like a sponge. I think Trump will listen to him but I do not know what his policies will be but I do know that he is not milquetoast like many other financial appointees we have seen these last years.
Thanks for your opinion.
Every country demand free trade in the US, but they imposed tariff on us and everybody else. The EU does it. Asean countries are doing it. India is worse than China. Only Switzerland and Singapore are better than us. If they want to sell us let them pay rent. The Trade deficit with China reached nadir in 2018. It’s getting better. The Trade deficit with Mexico is on Trump’s crosshair.
If BLS have been cheating on inflation rates the real disposable income is lower. If the economy is booming why the participation is lower than in 2019. That’s why we have shortages. We might be in a recession for more than a year. Fed is likely to cut rate in Dec.
You answered your own question(s) and you were correct on all accounts I might add.
He sounds like the best and brightess who got us in Vietnam. These intellectual masters have a way of screwing things up with great effectiveness.
Canada and Mexico will capitulate to Trumps demands.
They HAVE TO because they have more to lose than the US does. In any relationship (personal, business, countries) the side with the power is the one who needs the other the least. Trump understands that and is going to bully those 2 countries into doing what he wants regarding the border.
Unfortunately, you are correct. Ironically, this may provide Trudeau the opportunity to hang in.
His Soros connections is a negative
He left Soros a good while back and has been a backer of Trump since at least 2016 so he is not a Soros person.
I hear you. As long as he is on board Trumps agenda.
I have trade skills. I renovate homes for a living. If I had to hire someone to do it for me, I would be unable to turn a profit.
HOwever, I work a 8-5 job doing property management and in the evenings I am renovating a home I purchased for 95k a month ago. I plan on doing 20k worth of work to it, refinancing it for the new value of 160k and renting it out. I’ll clear 300 a month in rent on this property.
I will get this home for free but not really when you include all the sweat equity, which will take 3-4 months of evening work.
If you have trade skills, there’s never been a better time to buy a home, as trade skills are in very short supply and those that have them can command very high prices.
I will make way more fixing up junk houses than I do at my day job this year, just because there is such a strong demand for renovated homes.
New homes are too high for most people here, but renovated homes are cheaper and that’s where the real action is for investors now.
Nice comment and nice skills you have
Best wishes
That 115k in a HYSA would net you 383 a month at 4%. Is there an angle to this I’m missing?
The angle is usually leverage.
As in he didn’t have 115K. He bought for 95 but only put down 18K (20%) + 20K in reno costs (38K total) and financed the rest. If after paying the mortgage he still nets 300 a month profit then he’s good because his ROI is 3600/38000 = 9%.
But if he bought for cash (115K outlay total) then yeah his deal makes no sense when at 4% you can make more for doing nothing (no sweat equity needed either).
If the property drops in value… the leverage will bite him in the arse
If he bought bonds for 115k, he could take out a 115k loan collaterized by his bond portfolio, then buy another 115k worth of bonds, and so on 10x.
That would net him a 40% return.
If he started with 10B, his Ponzi scheme would earn him a bailout if things went wrong.
$300×12 = $3,600/Y. [$95k + $20k labor]/$3,600 = 32 years.
Technically more than 32 years since he has to pay taxes on that 300 a month (unless these are cash tenants).
As always, when prices decline enough buyers come out of the woodworks. There are lots of liquid people who step in when they see a good deal.
Enough to offset the baby boomers who want to sell…???
Yes of course if the price is right.
“Yes, they are building as fast as they can and that’s a problem.”
A home is massively more valuable than an empty lot.
That delta is massively higher, than the raw cost of erecting some walls and a roof on such a lot.
Ergo: Erecting homes on lots currently create massive net value.
There is NEVER ANY “Problem” with creating value. Never. Ever. Can not be.
Until prices for homes dip below the raw cost of erecting walls and roofs, there can not ever be a problem with building them, more and faster.
What IS a massive, ongoing and enduring problem, is that there are far, far, far too few homes built. Not unlikely to the tune of 378 million too few, nationwide, before free-market supply and demand be close to balance out. Certainly a lot closer to that, than to a measly 378,000.
Heck, there’s plenty, free-market viable, demand for more than 378,000 homes within San Francisco CITY limits alone. And that’s despite “everyone” here now “wanting to leave” on account of the current “lawlessness.”
There are definitely not 378 million too few homes.
There are 340 million people in America. Are you really saying we still need more homes built still than there are people living here?
I believe you added at least 2 zeroes accidentally to your comment?
Stuki may not be that far off. The median age of homes, like the aging population, is approaching replacement time frame. Housing is also in a “demographic” death spiral that needs to be addressed at some point.
https://todayshomeowner.com/home-finances/guides/median-home-age-us/
Is there some ‘magic age’ when older homes need to be replaced? The bricks wear out? Wood/steel lose their strength?
Replacement occurs over time with updates/upgrades, mostly with energy systems, and components having short life times (shingle roofs), windows etc. BTW those older communities often come with far greater lifestyle benefits than developer-subdivisions.
The KEY factor in national housing growth has always been ‘household formation rate.’ FYI,
“…The 2020 census counted 126.8 million occupied households, representing 9% growth over the 116.7 million households counted in the 2010 census.” THE LOWEST HFR EVER. It increased slightly in 2022.
So, what is happening in housing
The usual story, regional migration patterns West to south E, North to South etc. What is trending. One thing is certain–inner city living is finished for the foreseeable future–too much violence and liberal local govt. Also retirement destinations should start to lose their attraction. Trump’s govt destruction–if it happens–should lower prices for 100 miles around DC
Yes, it’s usually around 40 to 50 years. Just look at the condo collapse in Florida as a key lesson. While homes can be repaired, they can’t be repaired in perpetuity. Mold, insects, and other things eventually weaken the structural integrity of most homes and it often costs more to fix than simply start over.
The 3-D printed homes offer 100+ years of longevity but that is yet to be tested. Lastly, most insurance companies are starting to balk at insuring older homes because they pose fire risk or other hazards (e.g. mold) that they won’t offer insurance. No insurance = no mortgage.
And I’ve been hearing about “everyone leaving big cities” for 40+ years and I have yet to see it happen. Ironically, the same people say big cities are over run by immigrants. Baffling.
What they mean is people moving away from urban cores rather than into them, and yes, that is happening again. There was a push for inner city urban renewal for a long time but Covid and the riots of 2020, followed by lawlessness, killed that off.
America is a big country. Who would want only one home? Virtually everyone I know who can afford to, has more than one. The reason not more people do, is solely due to the same totalitarian terror-state Indenture-and-Wealth-Transfer-to-Connected-Incompetents programs which also produce homelessness, unhealthy living conditions, kids left without
Again: Homes are no different than socks. Both are just commoditized manufactured products by now. There is NOTHING “special” about some walls and a roof. Most people who can afford to, has more than one pair of socks as well.
And, like MPO45v2 points out, the US housing stock (like the airplane stock, roads, rail…..) is falling apart.
“There is NEVER ANY “Problem” with creating value. Never. Ever. Can not be”
Excuse me for pointing out overleverage causes bankruptcies even if the idea is sound
“..overleverage causes bankruptcies..”
But bankruptcies are not a bad thing. It’s a priori neither good nor bad. It neither creates nor destroys value. Just redistributes it. Which is not bad in any way at all.
OTOH: Few, if any, delusions have caused, and are causing, more economic damage than failure to comprehend exactly that. Endless destructive “programs” aimed at nothing more than “preventing” such a complete non-event as a BK, as well as at “saving the system” from mass BKs blah, blah… As if ownership, hence control, of potentially productive assets being transferred from those proven incapable to someone at least possibly less inept, could ever be anything but a blessing.
And all this, because people are told to uncritically believe BK is somehow a “baaaad” outcome. As well as, no doubt, because BK almost inevitably involves someone currently nominally “wealthy”; and hence likely connected to the current Leviathan; having to relinquish something he has mismanaged, in order to give someone less incompetent a go at it.
Q) Yeah, like when did that ever happen?
A) 2009-10 (The Great Recession) If you manage to stick around long enough, you’re certain so see a little of everything.
Re “ There is NEVER ANY “Problem” with creating value. Never. Ever. Can not be.”
Incorrect – though the spirit of the comment is good, at least 3 such problems:
(1) Tulip bulbs and other bubbles – price and value are not identical. When price > value there is overproduction leading to crashes. When price < value, value creation is needlessly discouraged.
(2) Government: Zoning. Permitting. Building code. Inspections. Taxes. These all interfere with value creation. Sometimes they help prevent other problems (see below) but they add cost.
(3) A more subtle problem is “tragedy of the commons” – often one person’s value creation comes with hidden costs borne by others. Traffic. Pollution. Destruction of scenic beauty / sight lines. Overcrowding. “There goes the neighborhood”. Water shortages. Fire risks.
1) A bubble is not a problem per se. There are noone able to decree that people valuing a tulip at a million, are somehow valuing it “wrong.” The problem only arises, once those who have made money off of silly high valuations, are then able to; once the value drops and threaten to wipe them and all theirs out; have government prevent exactly such a resolution. Leave government completely out, and everything resolves itself just fine.
2) No government “prevent” problems by destroying value. Government is only ever a possible positive, if they add to value created. Say, by monopolizing violence, hence enabling people to resolve conflict in a cheaper way than everyone holing up behind sandbags.
As for “Zoning. Permitting. Building code. Inspections. Taxes.”: Unless they ALL are; 100%; 1)Applied entirely non-arbitrary, across all dimensions; iow, by wholly verifiable deterministic process, with zero room for discretion nor “exceptions”; All they are, are forced wealth transfers (aka theft): From the productive, to the connected.
3) One person’s ANYTHING, including value creation, ALWAYS comes at someone else’s cost. Some costs are acceptably small. Others not. But they don’t differ from person to person, based on some privileged hack’s arbitrary “findings”, opinions nor dictates.
If traffic is a problem, those who finds it the biggest problem will move. Of course, everyone would prefer to rather have the freeway all to themselves. But… no.
If something pollutes, it’s not as if some have any more “right” to do so than others. To the extent it is enough of a problem to intervene in: Divide acceptable levels evenly by population, and let those who want to drive an SUV polluting more than their share, purchase shares from those who bicycle.
“Destruction of scenic beauty / sight lines.” As long as everyone’s destruction is treated the same…. Specifically NOT: Well, it is OK that I could build a 15 foot house blocking sight lines from a previously virgin lot. But not for you to build 15 foot higher than me again…. And even less so, by arbitrary government discretion. But yes, leave Yellowstone et al virgin. And anywhere else: build higher in proportion with how high it is already built (highest of 15 feet or 30% higher than highest building withing 1/4mile,or some such…). Then you’d naturally converge on most building exactly where most people want things built.
As for overcrowding:Those most sensitive to it, will leave. It’s self correcting in the extreme.
And as for “There goes the neighborhood”, it already went when “you” arrived.
Shortages of water are no different from shortages of anything else: Freedom, and free markets, does the very best at alleviating them. Arbitrariness the worst.
Fire: Again, deterministic, verifiably nonbiased rules. Just as when reducing the fire risk of a mattress. Specifcally NOT arbitrary taxfeeders “finding” that you are somehow afire risk, while their buddy next door is somehow not. The fire-riskiness’ness of a set of houses, can be ranked objectively. If systemic riskiness is too high, you knock down the most risky first. Anything else is both arbitrary and inefficient-hence-value-destroying.
IOW: There may well be gains to be had from a bit more centralized enforcement than absolute lock-limit anarchy. Maybe, although I’m not so convinced it will ever work tat way in practice. But: Awarding ANY discretion to arbitrarily deem and find and hold and decide to a bunch of taxfeeders, will NEVER be net positive.
As other two have commented here already, the problem with home purchases isn’t necessarily the large capital cost (purchase price), it’s the operating costs that kill the deal. Exploding insurance costs, maintenance costs, property taxes, HOA fees/dues, and other expenses are now exceeding capital costs.
The latter are driven by growing labor shortages that will only get worse when undocumented “Jose the plumber/electrician/carpenter” are booted from the country. Add to it Trump tariffs that will increase the cost of tools, materials, etc.
People waiting on house prices to decline will be in for a shock when they get the regular operating costs, it’s game over for anyone that didn’t buy their home(s) for $100k 20+ years ago. The new “mortgages” are the operating costs.
“It’s turtles all the way down and inflation all the way up!”
Not sure how this unfreezes. I refinanced my 1900 sf 3/2 at 3%. PITI is $1650/month. You can’t get even a crap shack home rental close to this. Many current owners will be hanging on for a long time before considering a sale, yet sales are what are needed to establish what they’re “really” worth. (Which I believe at 7% is around two thirds of current so-called “Value”. Haircuts 4 all?
But why sell your home when you can just rent it out and use the home equity as an ATM machine? That’s the new mentality that is setting in with the F.I.R.E crowd and I’m certain it’s a factor in the current housing market but no way to quantify it.
Not everyone wants to be a landlord
Exactly. Many, many years ago, when I sold my first home, which was a condo, I was faced with that exact dilemma.
I decided, at the time with. 2 young kids, and a job with long hours, not to do so, for obvious reasons, as it’s not really a realistic option for many. We also had very little cash available, so no financial support behind it.
After having grown up, and seen both sides of the coin (some friends did this), I was glad I didn’t, never entertained the idea again, with several more chances, but mostly because of the inconvenience to my lifestyle of work hard/play hard, and this would have brought that down.
I like my freedom to come and go, and not be responsible for anything or anyone but my Family and Friends. Especially now that I am retired, I am very grateful, I have that exact situation in play!!
This one is sitting on a pile of cash that just keeps growing, and wondering if it’s even worth the trouble to buy a house, given that my pile of cash would pay my rent well into the next century.
They broke housing with 2% rates and Covid “loans” that will not be repaid.
This is the hangover.
I’m waiting on the sidelines with a pile of cash as well. Why would you even think of purchasing a home at these prices and that’s not even considering home owner’s and other insurance and costs that come with a home.