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Home Prices Are Now Higher Than the Peak of the 2000s Housing Bubble

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Re: Home Prices Are Now Higher Than the Peak of the 2000s Housing Bubble

#211

Post by logicalmonster »

PragmaticPulp wrote: post #20

They cite the numbers in "real terms", which would mean inflation adjusted: > The average price of American homes, in real terms, is now the highest it's ever been Of course, you really need to be looking at mortgage rates to understand housing affordability: http://www.freddiemac.com/pmms/pmms30.html July 2021 average 30-year mortgage rate: 2.87% (with 0.7 points) 2008 12-month average 30-year mortgage rate: 6.03% (…

> The average price of American homes, in real terms, is now the highest it's ever been

I understand that the price of a stereotypical suburban home is well out of reach for many and this isn't great and should be worked on in a smart way. The middle class has continuously been hammered for many reasons and it would be healthier for America for this to be improved dramatically and better for individual communities for people to have a real stake in the well-being of the area.

Just to throw a few devil's advocate points into the mix, I believe a full and complete economic analysis may show that the price per SQ foot of residential living space per person may actually be about the same or even less than it was in the past. I think some variables that need to be considered are the increasing sizes of homes, the decreasing average family size (many siblings in the past had to share bedrooms, which I believe is far less common today), and inflation, among others.

Re: Home Prices Are Now Higher Than the Peak of the 2000s Housing Bubble

#212

Post by bink »

after_care wrote: post #42
throw123123123 wrote: post #15

Earlier quoted context omitted.

Lax lending is not the core issue of a market crisis like 2008, it is the amount of leverage and debt. You must look at how many people have cash in their banc accounts to cover mortgages if the stock market dives 50% and rates go up 2~4%. Can that generate a cascade of foreclosures?

How will future mortgage rates generate a cascade of foreclosures for people with existing mortgages?

If interest rates go up and that causes housing prices to drop, the same monthly payment can now only purchase a lower-cost house. People might not be able to sell for what they paid. Then if they need to move they must bring cash to the table. Even those that can afford to bring cash might still decide to go the foreclosure route.

In 2008 we even saw people pro-actively defaulting because they didn't want to make payments on something that was worth half of what they paid.

I'm not predicting any of this, but it is a possibility.

Re: Home Prices Are Now Higher Than the Peak of the 2000s Housing Bubble

#213

Post by sputknick »

dsp wrote: post #119
sputknick wrote: post #103

I don't have the source, but I saw recently that if you price houses in gold bars, prices have remained highly consistent over the past 125 years at a price between 225-250 ounces of gold for the average new home in America. It's the dollar that has changed it's value.

Seems not. https://www.longtermtrends.net/real-estate-gold-ratio/

I'm grateful for you pointing this out, because it shows a very different picture to what I saw, I'm going to have to dig that up and see what the discrepancy is.

Re: Home Prices Are Now Higher Than the Peak of the 2000s Housing Bubble

#214

Post by imtringued »

irrational wrote: post #19
skywal_l wrote: post #3

So is this finally the inflation that we were promised for so long? I guess all that money created during covid had to go somewhere. Too bad it's not going into education or healthcare...

No, this is just the Chinese billionaires trying to hide their money before Xi Jinping takes it all. https://techcentral.co.za/xi-targets-chinas-richest/110293/

A trade deficit results in a capital surplus. The exporting countries can use their dollars to buy real estate and financial assets. It's only obvious that this must happen.

Re: Home Prices Are Now Higher Than the Peak of the 2000s Housing Bubble

#215

Post by adventured »

wonnage wrote: post #118
fridif wrote: post #100

Earlier quoted context omitted.

But also salaries have risen and additionally so has the value proposition of owning a home compared to living in an apartment. Why? Because they've stopped building homes for the most part in desirable areas close to big tech companies.

Salaries have not risen outside of certain industries like tech

Salaries have climbed. Particularly for the home buying demographics.

The real (inflation adjusted) median household income hit an all-time high in 2019. At $68,700 it was approximately $12,000 higher than 2012, and roughly 10-11% higher than the peak of the housing bubble. Incomes shot up rapidly from 2014 to 2019. For the people at the median or above, things have continued to be great in terms of income position (Covid didn't roll back those gains), as labor supply remains tight for most median pay and above jobs.

So if mortgage rates have declined considerably (cut in half), and we're just now back to home prices being inflation adjusted where they were during the housing bubble peak, and real median household incomes are also 10% higher, and the US household disposable income to debt service payment ratio is near decades lows, that leaves a lot more room for higher mortgage payments - which fully explains the upward trajectory in housing prices.

Re: Home Prices Are Now Higher Than the Peak of the 2000s Housing Bubble

#216

Post by betwixthewires »

> But, in Kindleberger's theory, investors got over-excited about the economic changes the new technology brought about. They began seeing the sky as the limit. They over-speculated on land near railroad stops, often borrowing from banks and racking up debt in the process. At some point, reality kicked in, and prices began to fall. Once prices fell, investors couldn't pay their debts, and that led to a crisis. It's a general pattern he finds repeated over and over in history.

So, a bubble? Once the "overoptimistic" part kicks in I fail to see how there's any substantiative difference between the two scenarios. All markets grow on fundamentals til they don't, and when they don't you have a bubble.

Sounds like people creating distinction where there isn't any to justify their "this is fundamentals" position. The article is a whole lot of noise about nothing.

We are currently in a housing bubble, 100%. Add on top of that massive monetary inflation. To what degree the prices reflect the housing bubble or the increase in money supply, I don't know. But I do know the best thing that could happen is the bubble pop, because the alternative is much much worse.

Re: Home Prices Are Now Higher Than the Peak of the 2000s Housing Bubble

#217

Post by imtringued »

avidiax wrote: post #135
minikites wrote: post #46

Doing everything we can to ensure house prices/values only go up is going to cause disaster soon enough. It's time we stopped bending over backwards to feed this beast.

It's not clear to me what disaster will happen. It's certainly distortionary and inefficient, but doesn't seem critical. Eventually we could get a voting shift where sufficient power is held by people priced out of owning, which could result in improved housing policy. Those eventual changes will be calculated to not disrupt the market, though.

It's pretty critical. Housing is probably the only basic need that involves a non reproducible asset (land). Sure, farming needs land but the capitalists willingly sell you food.

Re: Home Prices Are Now Higher Than the Peak of the 2000s Housing Bubble

#218

Post by seanmcdirmid »

cudgy wrote: post #171
meterplech wrote: post #105

Earlier quoted context omitted.

100% true. And a good reminder of how much exposure housing prices have to interest rates. To frame the same math another way: If you bought a house for, say, $580k with a $500k mortgage... You paid $80k down payment + $20k closing costs and your monthly would be ~$2,073/month. If interest rates go up to 6%, and the person buying your house also wants to pay the same ~2,073/month, they would only be able to afford a…

I’ll take a cheaper house with higher interest rates (up to a point of course) all things being equal. More equity and interest is deductible.

> More equity and interest is deductible.

It is much harder to deduct interest these days with the higher standard deduction. Interest deductions on a cheaper house might only a few years unless you have something else going on with your custom deductions.

The equity aspect is also questionable. Cheaper markets are cheap for a reason, and while they might hit a growth spurt, it is far from guaranteed. A booming market with high prices might also continue to...boom even more. Anyways, the market is actually efficient, you can't find a loophole that everyone else is missing.

Re: Home Prices Are Now Higher Than the Peak of the 2000s Housing Bubble

#219

Post by imtringued »

dudul wrote: post #70
c7DJTLrn wrote: post #55

It is atrocious that the law allows using shelter as an investment. Only for the initial sale of the property should it be permitted to make profit. After that, properties should only be sold at cost between buyers.

Do you think the same about selling food for profit? or clothing? or medical care?

Those are reproducible. You can make more food. You can't produce land.

Re: Home Prices Are Now Higher Than the Peak of the 2000s Housing Bubble

#220

Post by betwixthewires »

Armisael16 wrote: post #56
AdmiralAsshat wrote: post #34

Awesome. I've been trying to buy a home since 2015 or so and noting that housing prices continue to rise, without fail, regardless of economic or political climate. Economy is doing well? Price increase! Economy is doing terribly because of global pandemic? Price increase! I have been patiently waiting for the next "bubble" to pop, even as my realtor insists that oh no, we're not really in a bubble, this is just the…

Price can't rise literally forever, no, but there really isn't much evidence that we're in a bubble right now. There isn't any reason price need to drop either.

There's plenty of evidence we are in a bubble.

I know this guy, and he's not smart. One of the stupidest people I've ever met actually. Washed his clothes with dish soap stupid. He bought a house 2 years ago with less than 10% down and he's got equity totaling more than 150% of the value of the house when he bought it. Even monetary inflation aside, if an investment can bring windfalls to anyone who can fog up a piece of glass, something isn't right in that market and it isn't sustainable.

There's an anecdotal indicator, but housing prices are rising significantly faster than monetary inflation and population nationwide, that's pretty good evidence for a deviation from fundamentals.

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