M: (619) 461-5800. You possibly can’t dump millions of foreclosures simultaneously in January, but I don’t think it can last indefinitely. I won’t be surprised if the markets go on a tear and the real estate market continues to fart gold – but it’s not what logic tells me is going to happen. But of course that would destroy so called “wealth” as home prices would fall in line with wages. “My job is super shaky, but if I buy a house they probably won’t foreclose on me and I can live free for years like people did last time.”. In a given year only about 1/20th of the housing stock changes hands (5%). There is no “market” for rates — the Fed sets rates. One good note is that he is keeping to the old fashioned adage of buying within the range of 3X gross salary. Idaho/Mi-saw the similar happen in the Spokane/Coeur d’Alene area in the ’90’s. Go long satellite internet providers for vans. Go to San Francisco, Wolf says it is wonderful! The often repeated. I think there are straw buyers for some very big players. Crisis situation allows unusual measures for the States. Majority are in the trades. While that might seem like a bargain for someone from Seattle, Portland, LA, etc., here it is indeed a crisis. they loan it. I REALLY want to buy some MFH but cap rates are very low and quality not so good. The statement “print” implies to a lot of people the money is free and does not need to be repaid, and is therefore massively inflationary. There is just so much money out there I don’t know how you get deflation. Front run the UBI payments! Once interest rates go negative, there is no longer an economic system, and the normal rules like supply and demand, interest rates based on risk (sound banking principles), real price discovery, and ROÍ etc. I was speculating with a friend that maybe they are loosing lending standards again on top of the drop in interest rates, but i don’t think that’s the case. The rent covers his mortgage and insurance. A lot of my friends in SFO are moving out to cheaper/better pastures as their companies are allowing now remote work permanently. 5. If at some point the Fed tries to lower long rates by QE and in response the rates actually RISE, this could change the paradigm completely. In most places if you’re making $50k to $70k you’re doing pretty well relative to others. I just think those two trends, at some point, have to collide.”. Of course the county that slowed down faster has nuclear waste stored at almost sea level in a tsunami zone, but the county south of that would be affected as well. Kyle Whissel explains these stats and if it's a good time to buy or sell a home in San Diego … What I mean is, formerly “big” markets in terms of pricing power (like SF, NY etc.) New defense orders will flow if BA cut their Everett assembly line and become more efficient, since the virus depleted the global demand for international and business travel by more than 60% BTW, I paid 2x my income at the time for my duplex and after collecting rent on 1 of the units my net mortgage payment was 12% of annual. Compared to multi-family unit construction, single-family home construction has remained relatively flat since the market crash. http://www.freddiemac.com/research/insight/20181205_major_challenge_to_u.s._housing_supply.page. You could get a much larger place not that far away at a similar price point so I don’t understand. I feel like that’s the way real estate usually is lately, though. What a wild card this one is???!!! And we won’t get a warning that it’s coming. If all those employees were told they could work from home, why did they move from San Diego in the first place? Next Viet Nam. Great show! Maybe not NYC, San Fran, and Seattle, but definitely out here. Foreign entities already own a bunch of US assets, including $7.1 trillion of US Treasuries, plus corporate bonds, MBS, and other paper, plus stocks, plus real estate, including some trophy office buildings. Housing has become a global asset class, with unlimited demand from global investors. The snowbirds have arrived early in Naples, FL and they are bringing their cash to buy homes. I think a lot of people will discover that it will be hard to sell at the prices they expect. Californias economy grew 4.7% in the 12 months ended in February compared to the national rate of 2.8%. Prices in the area are rising, the tenant is stuck in the throat. Between 2006 and 2010, in addition to the housing correction, there was also a minor correction for incomes. The markets make sense. Much of what was done in the name of relief was just can kicking in hope of a quick recovery which is now clearly not reality. The Bezzle. They have finally financialized the relationship, or the cynics may say, they made it official. Sept home sales were up 46% over Sept 2019. It’s also the only available tangible asset there that can protect average Joe from the massive currency debasement that is going on. You query: “…Which makes me wonder: Will the Fed, after the election (it never changes policy shortly before an election), start muttering musings in the same direction concerning its MBS purchases…”. Watch next year, the housing will do opposite.. the collapse is coming. They were the cause then, and are the cause now. Just for a reality check. yes, you win! There were people who should have never been buying a home that were buying with adjustable rate mortgages and some with interest-only mortgages. The rapid inventory change in SF seems to be offset by a rapid shortage in other places. Housing supply is short though, lots of people apparently looking. if you’re smart you’ll bypass the pots and pans and take this feeling out on your wife or someone’s wife, and blow HER mind. But when they stop pumping ever-increasing amounts of financial crack cocaine into the system, their house of cards will implode under the weight of its own debt, fraud, and fictitious valuations. Wolf, when do you think the flood of FHA REOs will start? High prices equal big bank profits, huge property tax bills, nosebleed rents for those who can’t buy, all the goodies government wants. Reducing rents and throwing in big incentives to lease vacant units is not panic. @RightNYer – Touché. - … My only advice (when he asks) is to tell him to not to be in a rush and stampede into a wrong purchase. This surge in supply can happen suddenly, as it has happened in San Francisco. “Seriously, I can’t see any losers here. Larger and larger populations of refugee-like homeless people are demoralising to everyone- not just the homeless. The market does. That’s actually an old idea once known as “credit guidance” which is part of good, old fashioned industrial policy. Car registration $200 to $500 a year. With the entire country recognizing that Covid is at best a 2 yr issue (2020-2022) people are intellectually coming to the realization that their home is going to be the primary source of entertainment for the foreseeable future. Just to jump on Lynn’s comment, Wolf, have you considered publishing “Wolf’s Richter Scale of Housing Market* Insanity”? O: (619) 461-5800. https://www.housingwire.com/articles/in-a-bid-for-stability-fhfa-and-fha-extend-forbearance-policies/. Listings were up 10% year over year for September @ 7,771 new ones. 858-240-9900 ), but shelter is. In addition, there is lots of supply waiting in the wings, including: A portion of the homes whose mortgages are in forbearance and delinquent will have to be sold to cure the delinquent mortgage; homes whose owners moved into their recently-bought new home will end up on the market; and homes owned by investors for vacation rentals will end up on the market if vacation rentals continue to be a drag in those cities. I don’t believe prices will crash until interest rates rise, or the economy totally tanks. You can replicate the appeal of global cities like NY or SF once they regain their footings. It is ashamed what has happened to it, because it is a beautiful state. Combined with AI and automation this is the nightmare when all the tools they have are for fighting inflation. There have been certain indications, such as, changes to the federal interest rate or trade disputes that would lead to a slowing economy. The Fed doesn’t set interest rates. It is the long term trend to lower rates that drives this. Kudos…most people get suckered into looking at household income (about 60k), which almost always means two workers these days. 1. 3. Here’s the problem with buying an overpriced house. What that will be, and when it will be, I have no idea, but I know it’s coming. Enjoy reading WOLF STREET and want to support it? keep the tiara on, though. So explain to me how that translates into higher wages, to pay higher payments, for higher priced assets? are fading, and formerly “boring” markets (like Phoenix suburbia) are moving up. After several years living conservatively in small cheap homes, we want something for the little kids been eyeing larger homes with more room for kids to play. Stimulus Payments. Doublespeak, anyone? Overtime is a known concept, companies have gotten around it by making you a salary employee. -activities, hobbies (almost exclusively outdoors) That’s real life. And this bifurcation is permanent. Some months there isn’t too much food in the fridge. About Europe, but equally applicable to the US: All of surviving big business is aligned with it: those who refused to play the game have disappeared. i listened to dave’s program for several days a few years ago, during a long road trip with my mom. “Capitalism without bankruptcy is like Christianity without hell.”. If you have separate debts, try to pay off the debt with the highest interest first, even if it’s a small one, then work your way down the line to the next highest interest rate. more hospitalizations and incrementally more deaths. The Minneapolis Star Tribune reported on 19 October that in September, buyers signed 6,443 purchase agreements in the Twin Cities metro area. I’m fairly sure the FDIC delinquency rules are still (mostly) on the (relative) up and up…ditto SEC reporting of delinquencies. I’m sure these historic ratios exist for malls and commercial office space, but if wolf published this and promoted it for a while until his readers “get it,” there wouldn’t be much to write about because reading about cheaters and swindlers finding new idiots gets old pretty fast. Before the fires, there was huge demand in the Wine Country (and there may still be). 1) Boeing 787 production will move to SC in mid 2021. The usual cost to launder money is about 30% from what I have read. When you have huge sums, it does not seem that easy to do. Seems like more trouble than it’s worth for 10%. There is no tooth fairy. I just walked past one. I saw this back in mid 2000’s in Alexandria, VA. If inflation rises to or slightly above target (say 3%) at some point and there is no credible path to deficit reduction, I think long dated treasuries could sell off. “Pay cash for a USED vehicle.” And a stones throw from my office in Orange CA you get this. Somehow in the toxic stew of American culture, it has become not only ok, but preferable to act and speak and write like this not true. Paulo – I probably posted something like this before. If the Fed just keeps printing to suppress rates, at some point, they’ll cause massive inflation overnight. And I thought the same thing when Iraq started. Can you explain a little further? Attracted the wrong females. It too is seeing this housing insanity, and after having already quietly mothballed its corporate bond-buying program, its repos, and its dollar liquidity swaps, it would be an unsurprising next step. La Mesa, CA 91941. Enormous pent up demand from 4-5 months of extremely low activity As most markets, including real estate (yes, so cal jimbo even real estate !) I’m very thankful it wasn’t the case, but someone who could go up twenty percent of the asking price could’ve knocked me out of there. 5G ain’t about faster video on an iPhone but a blistering improvement in business process and driving costs down even further. Otherwise, San Francisco truly becomes Baghdad by the Bay, with spectacular scenary, nice architecture, cool weather, empty highrises, a dead tax base and nightmarish streets in most of the town. I was in SFO , happy to quit, but now stuck in another hell hole SoCal. And unlike 30 years ago the prices in Queensland are no longer cheap either. After having lived in SF on and off for over 24 years, while also having lived in Europe and Asia, I have come to the opinion that San Francisco is, presently, a “world class” city by virtue of its geographical setting. They paid cash at 36 years old. The Fed prints by purchasing securities which provides liquidity and stimulus to the market. Yes, from what I’ve seen, banks will lend based on total monthly housing cost (principal+interest+tax+insurance+hoa fee) is no more than about 38% of household income, assuming they have no other debt like student loan debt, credit card debt, etc. This is 28% higher than 2019 and the most in nearly two decades. It is true that states like Utah, Nevada, and Arizona have been recipients of the great California exit for both residents and companies. And it’s still not profitable after five years. We’ll adjust, eventually. Interestingly enough, foreign investors do not need to account for money spent on R.E. What will be interesting to see is how many people flee the once darling city and move to regional areas in Victoria or abandon the state all together and move to NSW or Queensland. These stories are everywhere. Almost thinking of Vancouver Island, next to Paulo, as I hear he makes good coffee !!! Going down Hawthorne Blvd which has a higher congregation of businesses same thing. The National Association of Realtors reported yesterday that sales of existing homes – single-family houses, condos, and co-ops – surged in September by 9.4% from August and by 20.9% from a year ago to a seasonally-adjusted annual rate of 6.54 million homes, the highest since 2006 (data via YCharts): Seasonally, home sales normally decline in late summer and fall. If you’re waiting around for “5-7%” rates, you will be waiting a very, very long time indeed …. This 2nd coming wave of the virus is already worse in some places than the initial wave. If buying a home were financially easy, everyone would own one and demand would be almost ZERO. Your perspective is heavily SF, or big city in general. As someone posted here not long ago, freedom of movement is still allowed in our great nation-as a result, you’re up, and it’s your chance to show you can competently manage those great numbers coming to your slice of heaven to seek that better life. Instantly $50,000 in college loans go poof. Surging home prices like these are a terrible toll to pay for buyers, except for those where wealth is such that it doesn’t make any difference. That’s certainly reassuring, but that data itself is not the only reassuring aspect of what’s happening in our markets today. It’s the actions of the Federal Reserve Board that do not make sense. Pay cash for a vehicle. The wealthy are buying up scarce assets. Even in high priced Seattle where rents are down double digits, prices are soaring double digits and despite so many stories of folks taking advantage of WFH and moving inventory is at an all time low (and that’s sayings something considering 2015-2017). They have no concern for either the young, or boomers, they only act in the best interest of their member banks. They examine things from the macro national perspective, so things can absolutely diverge from the narrative at the regional/local levels. (LOL) Also, have been investing in gold and silver gradually since 2015 and dips along the way through last week… as some kind of protection – we hope. Reality check, please. I am thinking more in terms of disasters brought on by prolonged greed and manipulation and the fact that in nature “things” seems to seek to balance out somehow. If you think about it, it is actually a very strange assumption that central banks can keep rates low by printing money. You are very short sighted. You can use no leverage in life, but you will be left in the dust in the early years. 3) It’s all about rotation. I would invite Wolf and others to contemplate this phenomenon from a slightly-different perspective…. Whissel Realty Group 473 views. It’s not different this time. Low Inventory Is Driving Quick Sales. Energy It’s insane near me. Housing Market Crash In a game of Jenga, everything seems fine until the last piece is pulled. i have a few quibbles with his program, but for the typical math challenged, never had to learn how to balance a physical checkbook type of american, his program is like a remedial home economics class over the radio, but for “adults.” it is needed, especially for those who listen to the radio. Since we got rid of the mark to market rules, there won’t be any foreclosures or very little. But that doesn’t stop people from overpaying. The irony is printing $10 trillion globally each year, so we can “keep materialism great again”, well that probably will not be very brilliant for anyone who might think climate change is a future existential challenge. Our subduction zone is capable of a 9.4M . Where you live during working years may not be the best place for retirement years. San Francisco rents plunged by stunning 27% in 18 months. 2. You want governments telling people how long they can work and you want this cap to only apply to a specific “class” of people? There’s always a bust after the boom. Loaned, implies that it does, and there will be consequences at some point. Putting a cap on max hours non-executive employees can work and lowering this cap over time as things can automated is the only solution. Wash-rinse-repeat until inflation finally dissolves the value of money and who knows how long that will take. https://www.niche.com/places-to-live/san-rafael-marin-ca/. Good investment. And yeah, as a young man I liked the way the Asian female population was much more open-minded that you could find elsewhere. Logging and construction is booming. please identify any time in the last several decades when there has been deflation. But that’s the thing, Wolf, it *can* last. No longer a question of if but when. COL is about half in Phoenix what it is in San Diego. Definitely a sellers market. Could also be a rotation out of paper money into hard assets. San Diego House Prices Will Rise Slightly. Housing prices have escalated quite a bit in the past 3 years…. are in need of a serious purge/cleansing, maybe this will be the laxative that unblocks things, so to speak. They own lots of beachfront houses and uses them to launder the cash from their crimes. Watch for more. Immediately after that period, employment and incomes have corrected once more and are actually outpacing housing costs. Things radically improved there as people seek new horizons outside San Francisco, Oakland etc, and the former poor residents left the state and country. The declining value of the US dollar will only help the housing market, not to mention the trillions escaping the Fed manipulated US treasury market in search of alpha. We’re almost going on 10 years of savers being punished, labor is losing value, savings doesn’t pay any interest and anyone with a heartbeat willing to take a risk gets the rewards when it works, and no pain when they fail. Just follow the money. Prices rose sharply during the period between 2005 and 2009 (when the market crashed) and then began to stabilize in 2013, leading to a steady increase thereafter. Federal Reserve correction: It appears at this point that the dam has too many holes for the financial industry to put fingers in them all…. Most existing marriages survive on codependency. But people can’t continue to move to Carmel, Boise, Vancouver Island, etc. – A declining Middle Class isn’t a sign of a healthy economy. My ‘skilled techies’ step-nephew and partner bought a new Sprinter last year, converted it, and are living/working out of it between SilVly & Vegas. The owner looks to short-sale or just walk away rather than paying 2000 a month more on a property than what it is worth. But then the market for MBS and CMBS blew up and the Fed stepped in with the big guns. So eventually, it boils down to the question of getting budget deficit under control. New construction everywhere. On a not-seasonally adjusted basis and not annualized, 500,000 homes were sold in September, up 24.7% from September last year, the highest year-over-year increase in the data except for two months during the depth of the Housing Bust – April 2010 and November 2009 – when sales were compared to a year earlier when sales had collapsed. Once people realize they do not have to be in debt and they can pay off their forbearance – they will flood the market with supply at the tune of 7%-10%, “But this craziness in the housing market is not sustainable.”. -fashion spending (no longer a priority). “Inventory” just means what people put on the market. 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