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US housing price higher than housing bubble 2008
- GiorgioG 5y agoThis inflation is no joke.
- devops000 5y agoPrices are inflation adjusted
- RealityVoid 5y agoHow do you adjust for inflation? Because my thesis is the current inflation "on paper" is much smaller than the real inflation. Just look at all the people going "Inflation? Naah! T's all good!" - I just see no way this is true with the increasing prices to... well, everything.
- epistasis 5y agoInflation is a squishy concept, but generally people refer to it as a general decrease in purchasing power for a unit of currency, across the entire economy. When a single good, housing, goes up in price, that is not a general shift across many different goods. What sort of "real" inflation are you talking about here that's bigger than on paper? What's your metric?
- frockington1 5y agoPoster is probably insinuating that inflation is higher than reported. I tend to agree with that sentiment but not enough to change this chart meaningfully
- deleted 5y ago[deleted]
- newaccount2021 5y agocue stream of upvoted HN comments shooting down any whiff of inflation
- alexjray 5y agoWhat do the gray columns represent?
- dstaley 5y agoRecessions.
- lapetitejort 5y agoWithout doing any research, I suspect they're recessions. They line up perfectly with the 2008 and covid recessions.
- runako 5y agoI don't have it handy at the moment, but apparently housing is still more affordable than in 2008. The key factor is that mortgage rates now are roughly half of what they were during the bubble, so a given monthly payment will buy more house today. Depending on the local jurisdiction and price, this could mean that houses are 20% more affordable today than in 2008, modulo down payments.
- gruez 5y ago>I don't have it handy at the moment, but apparently housing is still more affordable than in 2008. this? https://awealthofcommonsense.com/2021/03/what-if-housing-prices-arent-as-high-as-they-appear/ https://awealthofcommonsense.com/2021/03/what-if-housing-pri...
- runako 5y agoThat's exactly the one! The last graph ("Inflation-Adjusted Monthly Mortgage Payment") is the key takeaway.
- leelin 5y agoFair enough, but that implies there may come a day when mortgage rates are much higher and then housing for new buyers is not at all affordable. Homeowners that locked in 30-year fixed rates might not be too concerned at first. But eventually, even they may need to move or sell someday. Wages or buying power will need to catch up to avoid some downward price pressure.
- devops000 5y agoI calculated the monthly payment inflation adjusted using 30-year interest rate and it looks lower than 2008. Chart: https://fred.stlouisfed.org/graph/?g=GMT0 https://fred.stlouisfed.org/graph/?g=GMT0 Formula used: https://www.wallstreetmojo.com/mortgage-formula/ https://www.wallstreetmojo.com/mortgage-formula/ Fred formula: a = Median Sales Price of Houses Sold for the United States (MSPUS) b = Consumer Price Index for All Urban Consumers: All Items in U.S. City Average (CPIAUCSL) c = 30-Year Fixed Rate Mortgage Average in the United States (MORTGAGE30US) a/b * (c/100/12) * (1+c/100/12)^(30 * 12) / ( (1+c/100/12)^(30 * 12) - 1) PS: Similar could be said for everything (e.g. stocks). Buying an overvalued asset using debt might be cheaper than before.
- frockington1 5y agoCould be a consequence of near 0 interest rates inflating assets. Thankfully the fed memo is that its transitory and nothing to worry about so the money press in still on
- mjfl 5y agoI can understand the Fed not wanting to overreact. It has so much control over everything sometimes it's better not to swing.
- topspin 5y agoIt's always easy to wallow in apprehension when the status quo is politically convenient. The spectrum of forces, from home owners to bankers and everyone in between, is so vast that the only politically viable course is "see no evil, hear no evil, speak no evil," and it will remain so until the bubble pops. Again.
- mjfl 5y agoI don't really think it's appropriate to accuse the Fed of "wallowing in apprehension". The Federal reserve is an incredibly powerful institution and missteps are extremely consequential.
- caust1c 5y agoNothing to see here folks! Move along. /s
- bidirectional 5y agoQE does not involve printing money. How does swapping bonds for reserves, i.e. monies of different durations, invoke a money press? EDIT: I am also using 'printing money' in the figurative sense, I'm not making some obtuse point about actual notes being printed. I don't think QE is equivalent to figurative money printing, the money is not coming out of thin air.
- 5y ago
- tjs8rj 5y agoWonder what this looks like per capita. Not much population growth between now and then but enough that it’d skew it. Population has grown by 10% over this period
- travisporter 5y agoInflation isn't that higher than in the late 2000s, is this the right graph? https://fred.stlouisfed.org/graph/?g=GMNQ https://fred.stlouisfed.org/graph/?g=GMNQ
- bradleyjg 5y agoBoth parties and every level of government determined that the best path forward was re-inflating the bubble. Is it any surprise that kind of joint effort worked? It’s great news for incumbent owners and at the end of the day that’s a majority of voters almost everywhere.
- kazen44 5y agoIt is also a massive wealth distribution scheme for the rich. starters are not able to afford a home, and instead have to rent from either a corporation which has the means the own property, or for a landlord who does the same. It will cause a lot of issues with wealth disparity, especially for young people in the future.
- warent 5y agoIt always strikes me as odd that I'm in the top 1% of income earners and even still the only hope I really have of ever owning a house is: 1. moving somewhere super rural 2. selling my business 3. sell my soul to Google or Facebook etc for 5-10 yrs The situation is dire for me and basically hopeless for everyone else. Put a huge tax on vacancies and cap the number of residential properties a business is allowed to purchase in a year. EDIT: Apologies for the confusion everyone. I meant top 1% for my age bracket. Nowhere near rich old folk making 500k Probably more like top 10% overall, thanks @geebee
- silisili 5y agoSame boat. Basically, the only way to play is to already own, and use that inflated leverage to buy something else inflated. This is the opposite of what we should be doing, and nonplayers are completely priced out of the market.
- spoonjim 5y agoMy friend just bought a nice house near Indianapolis for less than $100,000. You have not listed all the options.
- digitcatphd 5y agoThis is probably referring to major cities like New York and San Francisco where the top 1% earners (Nationally) are. This is probably because the top 1% of earners in these states are in a bidding war. Nonetheless, I agree there are some compelling arguments that, practically all homes will be driven to prices which are only sustainable by institutions and therefore there will be little American home ownership by citizens.
- lpolovets 5y agoTop 1% income is about $540k/year according to https://www.usatoday.com/story/money/2020/07/01/how-much-you-need-to-make-to-be-in-the-1-in-every-state/112002276 https://www.usatoday.com/story/money/2020/07/01/how-much-you... In my experience, an income of $X lets you get a mortgage for a house worth ~$6X. Where do you live where $3m+ won't get you a house?
- jseliger 5y agoAlso relevant: https://www.worksinprogress.co/issue/the-housing-theory-of-everything/ https://www.worksinprogress.co/issue/the-housing-theory-of-e...
- worker767424 5y agoSure, but interest rates are crazy-low.
- yata69420 5y agoWhen money is cheap, houses are expensive. When money is expensive, houses are cheap.
- worker767424 5y agoBut you don't have money, because money is expensive.
- nomel 5y agoInterest rates are at 3% for a 30 year loan.
- worker767424 5y agoWhat I meant is that when money is expensive, houses are cheap, they're cheap because no one has money, and no one has money because it's expensive.
- loeg 5y agoWhen you don’t build housing, houses are expensive.
- toxik 5y agoOr so we thought, yet here we are with low interest rates and no inflation.
- throwaway1777 5y agoNo inflation? Is this a joke or do you blindly believe the CPI numbers over your every day experience?
- gruez 5y agobut the CPI numbers are showing inflation. It might not match the 30% (or whatever) estimate that's inside your head, but it's definitely there.
- rossdavidh 5y ago"But this time, it's different..."
- vmception 5y agoI mean banking leverage is lower, accounting on collateralized debt is better, consumer/speculator leverage is limited while lending requirements are still mostly higher… Those aspects are different than 2008. The global market is still exposed to other forms of over-leveraged contagion (aka incestuous ownership), but just saying “US housing prices are higher than an over exuberant peak 13 years ago so therefore its a problem without really considering other supporting or negating factors” is pretty uncritical.
- harambae 5y ago>consumer/speculator leverage is limited What are your thoughts on the direction this graph is headed? https://fred.stlouisfed.org/series/BOGZ1FL663067003Q https://fred.stlouisfed.org/series/BOGZ1FL663067003Q
- twa999 5y agoyou will own nothing and you will be happy. live in a pod, eat the bugs.
- jbay808 5y agoCanada is like this too, except the trend never got interrupted by 2008. By now our bubble is in the stratosphere by comparison.
- nsonha 5y agoSo is Australia
- SilverRed 5y agoI sometimes feel like I'm living on another planet to the rest of Australia being in an inner CBD apartment. Whenever I look at the market I see loads of things for rent at reasonable prices and loads of things for sale within my budget. While the rest of the country is paying over a million dollars for a shack in crackhead land I can see really nice apts in great locations for $400-600k.
- seoulmetro 5y agoYou're comparing land (and a house) to no land and no house. I've often thought of buying an apartment before a house, but it makes very little sense since land is practically not at a premium in Australia.
- foxpurple 5y agoLand not a premium in Australia?? Averaged size blocks with no house or an absolute dump sitting on the block are selling for $1-2M
- seoulmetro 5y agoYes. And if you go <50km in any direction you can get hundreds of acres for the same thing. We're not stressed for space. We're stressed for infrastructure (and population). I expected your response, so I want to say that $2M will buy you a great house on decent land, even in Sydney. Not that it's a nice way to spend that much money. Like the rest of the world. Like an apartment. People don't want to buy a good piece of land outside the city. That doesn't mean we're running out of land.
- SavantIdiot 5y agoHonestly, I'm curious to see how long these gains can hold, both in the stock market and in housing. It is just bananas, and I say this as someone that has had both types of investments since the 1980's. The crashes of 1987, 2000, and 2008 all had very clear causes. I wonder what is going to be the cause of the next crash. Or maybe I suffer from 20/20 hindsight. EDIT #1 : If housing prices crater, I'm buying another one because history shows the market recovers. Same goes for index ETFs. So people like me sitting on a big cash position and paranoid AF will have some kind of balancing effect, no? EDIT #2 : "hindsight" not "hindisight", heh.
- hijinks 5y agoI've been watching Boise as the canary in the coalmine. You are starting to see it cool down as more listings are on the market now then 3-4 months ago. Homes are going for closer to asking if not under and homes are sitting on the market longer. If Boise goes south then I feel a lot of other hot markets since covid will go 2-6 months after.
- VRay 5y agoThat's interesting, what do you think sets Boise apart as a good leading indicator? I was thinking the same thing myself, presumably the economy will crumble from the bottom-up next time. So once my rural hometown is a flaming pile of wreckage, I'll close out all my risky positions
- rootsudo 5y agoBecause, there is not much manufacturing or reason for Boise or that area to really support high real estate prices. That area IMO is akin to wealth leaving core metropolitan cities and investing in areas where are close enough, yet not near a metropolitan area. Or something like that.
- Ccecil 5y agoCoeur d'Alene/Spokane as well. Would like to think it is going to get better but this recent spike has only left things open more for market manipulation in the rental market. Even if things get better in the housing prices there is still a huge housing issue for the people who make less than $100k a year (average rate of pay in Coeur d'alene is $20/hr, minimum wage still $7.25, waiters can be paid ~$3.60/hr plus tips). The tent cities option that Ketchum was exploring recently is a thing we are going to be seeing a lot more often.
- nikkinana 5y agoThat's because all the cockroaches escaping New York and California.
- riazrizvi 5y agoProperty prices will drop when credit is harder to come buy for businesses, as prices are being driven up by investors who have moved into residential housing. It’s a shame we can’t get the votes to financially penalize investment ownership, and instead give preference to home owners living in the homes. You’d think this would be something that employers would rally behind in the Bay Area as it would help them staff up.
- acomjean 5y agohousing is now an "investment" for everyone with extra cash and not just the owner occupiers. I live in a condo and honestly the majority of the units that have sold in my smallish 35 unit building are to people overseas, who then contract out a manager and rent the unit out. Non owner occupied units don't get tax abatement but that doesn't seem to matter. I couldn't afford to live in my building if I hadn't bought around 20 years ago. Its kinda astonishing that the past 10 years have been that.
- duxup 5y agoWhat seems like a really strong streak of pessimism + huge increases in housing prices always makes me a little confused. People want to tie themselves to huge loans while not feeling great about he future? Maybe my perception is off on the pessimism?
- gtmitchell 5y agoI think at least part of it is desperation. Home ownership has been one of the very few reliable ways for the middle class to build wealth, and with housing prices skyrocketing and the future looking even worse, I suspect many people are trying to get whatever they can before any chance they have of owning is gone forever.
- SubiculumCode 5y agoThe question is whether this is a bubble or not. I was hoping for some insightful commentary on this. Are there any warning signs? I mean last time there was a rise in risky lending, rising defaults, etc.
- throwthere 5y agoBy that graph 2021 home prices are at 150% the trough in 2012. So that's like 4-5%/year compounded. Doesn't seem astronomical considering the trough was probably below intrinsic value. If you go back to 2000 you get the same price level and 2%/year compounded return.
- Newbie2021 5y ago1. Forbid foreign investment in properties 2. Remove tax on first home, increase exponentially taxes on second, third, homes to reduce incentives for people to hoard houses.
- ancode 5y agoReally looking forward to this bubble bursting.
- beeboop 5y agoI'm sure all the speculative "real estate investors" will get bailouts if it does. God forbid people accept the risk part of the equation in investing
- sxates 5y agoQuick anecdote. I bought my first house in Garland TX for $119,000 in 2003. 3 beds, 2.5 baths, a 'not bad' neighborhood. My wife was a teacher and we could afford it just on her income. Looked up that house recently and it was for sale, now at $250,000 18 years later. Someone had updated it with typical flipper grade stuff, but ok it's double what it was even 5-10 years ago. So then I go do the math on monthly payments for it. The interest rate back in 2003 was like 7-8%, and now we're down to 3%. Turns out the monthly payments I made 18 years ago and today are about the same. We bought our second house in 2007, and similarly the price it fetches now is much higher, but the payments would be similar. If you look at housing affordability like rent affordability; that is, what monthly payment can you afford, it seems like house prices are increasing to match interest rates decreasing. That house in Garland TX, inflation adjusted, is now MORE affordable than it was 18 years ago, even though it's purchase price has doubled. EDIT to add - I now live in the Bay Area and this pattern doesn't hold up here. But most nation-wide patterns don't really hold up here. The house we bought in Oakland in 2016 has doubled, but we were already at like 4.25% back then, so the lower interest rate doesn't offset the whole increase.
- xrd 5y agoIf you are anxiously hoping this might be the end of the petrodollar era, having hard assets like houses seems smart and rational. I'm not naive enough to think this will go down without bloodshed, however
- del_operator 5y agoWe bought in December at a price that felt too high, but now with all the sales on the block there’s enough comps this month to suggest we could re-appraise with 20% or 22% of more of debt-to-equity. Having said that I also know more friends/family trying to have kids and move into a home. I also see friends with parent’s in retirement living alone in large homes too afraid to downsize in this market. I went remote in 2018 living in a Brooklyn studio. My wife and I utilized remote work to move to a smaller city in late 2019, living off a substantially smaller portion of wages, seriously snowballing debt payments and increasing savings. Had we just bought in Jan 2020 we would have saved a bunch. The market was wild then too and already not cooling down here through that winter as it usually would. Little did we know 2020 would bring a pandemic into the mix.
- xtiansimon 5y agoHmmm. 2008 can’t happen again. No way. Safe as houses.