Tag Archives: Housing

The Most Splendid Housing Bubbles in America: Holy Cow, September Update, by Wolf Richter

Posted on September 29, 2021 | Leave a comment

There’s no inflation, just don’t tell the housing market. From Wolf Richter at wolfstreet.com:

Even the Fed is getting antsy about this raging mania house-price inflation. Housing Bubble 1 is starting to look cute in comparison.

House prices spiked 19.7% from a year ago, the biggest year-over-year increase in the data going back to 1987, according to the National Case-Shiller Home Price Index today. But the national index of this raging mania doesn’t do justice to individual metropolitan areas, where price spikes reached up to 32%.

The Fed is getting seriously antsy about this massive house price inflation, on top to the regular consumer price inflation that has hit 30-year highs. Just today, the president of the Federal Reserve Bank of St. Louis, James Bullard, who’d been fretting months ago about the “threatening housing bubble,” came out with a proposal to reduce the assets on the Fed’s balance sheet right after the taper is completed by mid-2022, which would purposefully allow long-term interest rates, including mortgage rates, to rise significantly.

“Everything can occur much faster than it could have in the previous recovery,” he said.

Markets have started to anticipate the end of QE. Long-term interest rates have started to rise. The 10-year Treasury yield is currently at 1.55%, the highest since mid-June. The average 30-year fixed mortgage rate today was 3.16%.

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No, Blackstone Didn’t “Buy 17,000 Houses” out from under Desperate Homebuyers. And BlackRock Didn’t “Buy a Whole Neighborhood.” But Built-to-Rent is a Huge Change, by Wolf Richter

Posted on June 23, 2021 | Leave a comment

You never know what you’ll find out if you go beyond Internet headlines and actually read the stories. From Wolf Richter at wolfstreet.com:

Internet BS made from twisted headlines is fun to spread. But reality is a lot more interesting.

The social media and comment sections, including the illustrious WOLF STREET comments, are afire again with another headline, based on a headline in the Wall Street Journal that is being twisted, contorted, and spread by people who refused to even read the first paragraph. The meme is that PE firm Blackstone Group bought 17,000 houses for $6 billion, outbidding regular people, and thereby making it impossible for regular people to buy those houses amid a red-hot housing market.

Alas, what gorgeous ridiculous internet BS! Blackstone didn’t go around the US grabbing 17,000 houses, outbidding regular mom-and-pop buyers with its $6 billion war chest. On the contrary.

Blackstone bought an entire company, Home Partners of America, that already owned 17,000 single-family houses. Home Partners buys houses and rents them to tenants with an option to buy at a preset price at any time with 30 days’ notice – the company is “committed to making homeownership a reality for more people,” it says.

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California’s Housing Nightmare Is Only Getting Worse, by Tyler Durden

Posted on November 9, 2019 | 1 comment

California has only its Democrats to blame for its housing woes. From Tyler Durden at zerohedge.com:

When historians look back on contemporary California, one thing they’ll be bound to make note of is that the state’s developers bet on the wrong model.

Endless, suburban sprawl is coming back to haunt California in ways both major and minor. In densely populated communities across the state, traffic is horrible thanks to underdeveloped public transportation (this is especially true in LA). Most residents have accepted that deadly, devastating wildfires are just part of the deal now – bound to recur endlessly until the state’s population shrinks to the point that it no longer intermingles with the state’s vast swaths of woodland.

But it’s not just the apocalyptic images of fiery doom that have some of the state’s residents rethinking their decision to settle in California. The wildfires have had all kinds of ancillary effects: In parts of the state, PG&E is essentially shutting down large portions of the power grid in disruptive distributed blackouts intended to lower the fire risk.

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A Housing Bubble Pops: Update on Australia, by Wolf Richter

Posted on August 1, 2018 | 1 comment

Australia has had one of the longest running housing bubbles around, but it looks like it’s popped. From Wolf Richter at wolfstreet.com:

It is rare that a housing market makes such a beautifully defined U-turn, after a long hard surge.

In Sydney, Australia’s largest housing market and one of the world’s biggest housing bubbles, prices of homes of all types fell 5.4% in July compared to a year ago, and 5.5% from the peak in September. Prices of single-family houses dropped 7.0%, and prices of condos (“units”) fell 1.6%, according to CoreLogic’s Daily Home Value Index:

The most expensive quarter of the market got hit the hardest, with prices down 8.0% in July compared to a year ago. Across the so-called “most affordable quarter of the market” – “least unaffordable” would be more appropriate – prices fell by 1.8%.

And supply in Sydney is starting to come out of the woodwork: Total number of homes listed for sale in July, at 26,103, was 22% higher than a year earlier, and according to CoreLogic, the most since July 2012.

In the chart below, the number of homes listed for sale in 2018 is denoted with the black line. It’s below only the blue line (2012), but creeping up on it. Note the seasonality, with listings getting pulled during the Christmas holiday period (chart via CoreLogic):

And so goes the rental market, where “conditions eased further in July,” CoreLogic noted in its report: In Sydney rents fell 0.4% year-over-year. While that might not sound like much of an annual decline, it is “the largest decline on record” in CoreLogic’s data going back over a decade.

Melbourne lags a few months behind Sydney but is now catching up. Home prices in Melbourne fell 0.5% in July year-over-year, according to CoreLogic, and are down 3.0% from their peak at the end of November 2017: House prices fell 1.4% from a year ago while condos are still up 2.3%. The index is now back where it had been at the end of June, 2017:

To continue reading: A Housing Bubble Pops: Update on Australia

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Housing Market Headed For “Broadest Slowdown In Years”, by Tyler Durden

Posted on July 29, 2018 | Leave a comment

Housing probably won’t be the spark for the next financial crisis, like it was for the last one. Rarely do consecutive financial crises have the same cause. However, that’s not to say that housing won’t get hurt and that house prices won’t fall. They will. From Tyler Durden at zerohedge.com:

For those who have been focusing on corporate earnings, the stock market and the global economy, a more ominous – if under-reported – flashpoint has emerged in recent days after some scary housing market numbers were published over the past week, or as Robert Shiller told Bloomberg, “This could be the very beginning of a turning point.”

The housing market is showing signs of a downward slide after existing-home sales were down in June, sales hit their slowest pace in eight months, and mortgage rates are on the rise, causing usually restive buyers to stay patiently on the the sidelines.

In reporting on the worrisome data released this week, Bloomberg notes that “the U.S. housing market — particularly in cutthroat areas like Seattle, Silicon Valley and Austin, Texas — appears to be headed for the broadest slowdown in years,” due to a trend of buyers “getting squeezed by rising mortgage rates and by prices climbing about twice as fast as incomes, and there’s only so far they can stretch.”

Meanwhile, according to the latest Attom data, U.S. median home price appreciation decelerated in Q2 of 2018 to its slowest pace in two years. Here are some key indicators that we are indeed witnessing the start of a slowdown, published this week:

  • Existing-home sales dropped in June for a third straight month. Purchases of new homes are at their slowest pace in eight months.
  • Inventory, which plunged for years, has begun to grow again as buyers move to the sidelines, sapping the fuel for surging home values.
  • Prices for existing homes climbed 6.4 percent in May, the smallest year-over-year gain since early 2017, and have gained the least over three months since 2012, according to the Federal Housing Finance Agency.
  • Shares of PulteGroup Inc. fell as much as 4.9 percent Thursday morning after the national homebuilder reported that orders had declined 1 percent from a year earlier, blaming rising mortgage rates.

To continue reading: Housing Market Headed For “Broadest Slowdown In Years”

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Why Are the Homes of the Elite So Ugly? by Bill Bonner

Posted on November 30, 2017 | Leave a comment

Some things just can’t be bought, like class and taste. From Bill Bonner at bonnerandpartners.com:

BALTIMORE – Yesterday, we saw the soul of America.

We drove by a house so imposing… so monstrously ugly… so laughably pretentious that we almost drove off the road staring at it.

On a suburban lot, it was as though it had fallen off the delivery truck and rolled into place, with no thought as to its surroundings.

It was a fake mansion!

Yes, dear reader, it is all fake – our money, our economy, our markets, our government… even our mansions.

Bitcoin Bonanza

On Tuesday, we made another 10% gain on our bitcoin “investment”… at a rate of about $4,000 per hour.

That’s more money in one day than we made during our first 10 years of work – combined.

Our coins, formerly worth nothing, are now worth more and more.

At this rate – a 10% rise versus the dollar each day – if you make a $10,000 investment, before Christmas, you will have $100,000 or more. Or less.

Possibly much less…

We toiled not, neither did we spin. We invented not. We earned not. Not a single morning did we get up at the crack of dawn to earn that money… nor a single night did we stay up late studying to make it happen.

Instead, it was as though we had walked through a casino and randomly yanked on one of the one-armed bandits. Ka-ching!

Nor did we learn anything… except that it’s a mad, mad, mad, mad, mad world – which we already knew! And if Civilization author Clive Bell is right, this is the best kind of money. We didn’t distract ourselves from “thinking and feeling.” We have no coal dust under our fingernails… and no hands calloused by years of hard work.

 

To continue reading: Why Are the Homes of the Elite So Ugly?

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The Party’s Over For Australia’s $5.6 Trillion Housing Frenzy, by Tyler Durden

Posted on November 25, 2017 | Leave a comment

One of the world’s longest inflating bubbles may be headed in the opposite direction. From Tyler Durden at zerohedge.com:

Early this month, we discussed whether the world’s longest running bull market – 55 years – in Australian house prices had come to an end. This was UBS’s view following the October 2017 monthly report on Australian house prices from CoreLogic suggested that measures to tighten credit standards and dissuade overseas buyers (especially Chinese in Sydney and Melbourne) have finally begun to bite. As CoreLogic’s summary table shows, Sydney prices fell in October, for the second month running, and poised to lead national prices lower.

We followed up that discussion with “Why Australia’s Economy Is A House Of Cards” in which Matt Barrie and Craig Tindale described how Australia’s three decades long economic expansion had mostly been the result of “dumb luck”.

As a whole, the Australian economy has grown through a property bubble inflating on top of a mining bubble, built on top of a commodities bubble, driven by a China bubble.

Now Bloomberg has followed UBS in calling the end of the bull market, while showing some of the frankly scary metrics for Australian housing versus the country’s GDP.

 The party is finally winding down for Australia’s housing market. How severe the hangover is will determine the economy’s fate for years to come. After five years of surging prices, the market value of the nation’s homes has ballooned to A$7.3 trillion ($5.6 trillion) — or more than four times gross domestic product. Not even the U.S. and U.K. markets achieved such heights at their peaks a decade ago before prices spiraled lower and dragged their economies with them.
Australia’s obsession with property is firmly entrenched in the nation’s economy and psyche, fueled by record-low interest rates, generous tax breaks, banks hooked on mortgage lending, and prime-time TV shows where home renovators are lauded like sporting heroes. For many, homes morphed into cash machines to finance loans for boats, cars and investment properties. The upshot: households are now twice as indebted as China’s.

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The Biggest Ponzi in Human History, by Raúl Ilargi Meijer

Posted on November 1, 2017 | Leave a comment

The title is not hyperbole. We are living through the biggest series of interrelated Ponzi schemes in history. From Raúl Ilargi Meijer at theautomaticearth.com:

Here’s the story in a nutshell: Ultra low interest rates mark a shift away from people’s wealth residing in their savings and pension plans, and into to so-called wealth residing in their homes, which are bought with ever growing levels of debt. When interest rates rise, they will lose that so-called wealth.

It is grand theft auto on an unparalleled scale, and it’s a piece of genius, because while people are getting robbed in plain daylight, they actually think they’re winning. But as I wrote back in March of this year, home sales, and bubbles, are the only thing that keeps our economies humming.

We haven’t learned a thing since March, and we haven’t learned a thing for many years. People need a place to live, and they fall for the scheme hook line and sinker. Which in a way is a good thing because the economy would have been dead without that ignorance, but at the same time it’s not because it’s a temporary relief only and the end result will be all the more painful for it.

Whatever Yellen decides as per rates, or Draghi, it doesn’t really matter anymore, this sucker’s going down something awful. This is a global issue. Housing bubbles have been blown not only in the Anglosphere, though they are strong there, many other countries have them as well, Scandinavia, Netherlands, even Germany and France. It’s what ultra low rates do.

First, here’s what I said in March:

Our Economies Run On Housing Bubbles

What we have invented to keep big banks afloat for a while longer is ultra low interest rates, NIRP, ZIRP etc. They create the illusion of not only growth, but also of wealth. They make people think a home they couldn’t have dreamt of buying not long ago now fits in their ‘budget’. That is how we get them to sign up for ever bigger mortgages. And those in turn keep our banks from falling over.

Record low interest rates have become the only way that private banks can create new money, and stay alive (because at higher rates hardly anybody can afford a mortgage). It’s of course not just the banks that are kept alive, it’s the entire economy. Without the ZIRP rates, the mortgages they lure people into, and the housing bubbles this creates, the amount of money circulating in our economies would shrink so much and so fast the whole shebang would fall to bits.

That’s right: the survival of our economies today depends one on one on the existence of housing bubbles. No bubble means no money creation means no functioning economy.

To continue reading: The Biggest Ponzi in Human History

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“Full-Fledged Housing Crisis” in Silicon Valley, Insider View, by John McNellis

Posted on August 22, 2017 | 2 comments

One culprit often behind “housing crises” is government restrictions and costs imposed on those who would build more housing. That is certainly the case in Palo Alto, the center of Silicon Valley. From John McNellis at wolfstreet.com:

As long as local officials strangle housing starts, the mirage of affordability will be pushed further toward the distant horizon.

“A full-fledged housing crisis has gripped California” — New York Times.

Yes, our housing crisis is so critical those envious bastards at The Times are proclaiming it on their front page. So critical that a local politician here is more likely to come out against world peace than affordable housing. But she’s about as likely to vote for pro-housing laws as the USA is to unilaterally reduce its nuclear stockpile.

At the 30,000 foot level — it’s pretty in the clouds — a few politicians in Sacramento are trying to pass state-wide bills to force cities to allow more residential development. Not with champagne success.

It’s less pretty in the trenches, particularly if one focuses on Silicon Valley. Ground zero for the housing shortage, the city of Palo Alto is–not coincidentally–the reigning monarch of the Lucky Location club. Thanks to the happenstance of being Stanford University’s picture frame, the town has been the spawning grounds for almost every great tech company ever.

Zillow says $200,400 is the median house price in America today. Zillow multiplies that number by 12.96 to come up with Palo Alto’s median price of $2,598,200. And even that whoa number is misleading. According to the brokerage firm of Alain Pinel, a lot in North Palo Alto–the cool part of town–goes for around $2.5 million all by itself, that is, $2.5 million before you build your dream house on it.

Is this news to anyone in Palo Alto? No. In the town’s most famous resignation letter, Kate Downing quit the Planning Commission a year ago, saying she and her husband, both well-paid professionals, could simply not afford to live there.

“After many years of trying to make it work in Palo Alto, my husband and I cannot see a way to stay in Palo Alto and raise a family here.” Ms. Downing pleaded with the city to make affordable housing its top priority. “If things keep going as they are…a once thriving city will turn into a hollowed out museum.”

To continue reading: “Full-Fledged Housing Crisis” in Silicon Valley, Insider View

 

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How Governments Outlaw Affordable Housing, by Ryan McMaken

Posted on May 7, 2017 | 3 comments

Great article about how governments and existing homeowners make it hard to increase the supply of housing. From Ryan McMaken at mises.org:

It’s no secret that in coastal cities — plus some interior cities like Denver — rents and home prices are up significantly since 2009. In many areas, prices are above what they were at the peak of the last housing bubble. Year-over-year rent growth hits more than 10 percent in some places, while wages, needless to say, are hardly growing so fast.

Lower-income workers and younger workers are the ones hit the hardest. As a result of high housing costs, many so-called millennials are electing to simply live with their parents, and one Los Angeles study concluded that 42 percent of so-called millennials are living with their parents. Numbers were similar among metros in the northeast United States, as well.

Why Housing Costs Are So High

It’s impossible to say that any one reason is responsible for most or all of the relentless rising in home prices and rents in many areas.

Certainly, a major factor behind growth in home prices is asset price inflation fueled by inflationary monetary policy. As the money supply increases, certain assets will see increased demand among those who benefit from money-supply growth. These inflationary policies reward those who already own assets (i.e., current homeowners) at the expense of first-time homebuyers and renters who are locked out of homeownership by home price inflation. Not surprisingly, we’ve seen the homeownership rate fall to 50-year lows in recent years. 

But there is also a much more basic reason for rising housing prices: there’s not enough supply where it’s needed most. 

Much of the time, high housing costs come down to a very simple equation: rising demand coupled with stagnant supply leads to higher prices. In other words, if the population (and household formation) is growing quickly, then the housing supply must also grow quickly — or rents will rise.

Moreover, where the housing gets built is a key factor. We cannot speak of housing supply for an entire metropolitan area. Metro areas are composed of a wide variety of employment centers and neighborhoods. The mix of employers and workers varies from place to place depending on tolerable commute times, local industries, and geography.

To continue reading: How Governments Outlaw Affordable Housing

 

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