‘Housing in ‘07 wasn’t a bubble” is a true statement that almost no one believes
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‘Housing in ‘07 wasn’t a bubble” is a true statement that almost no one believes
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Re: ‘Housing in ‘07 wasn’t a bubble” is a true statement that almost no one believes
#2Yeah, and people still keep moving to the Phoenix metro area. The housing market is now closed for median income families as a result of the constant growth and the housing inventory here being dried up.
I want to emphasize that: if you're a median household income, middle class family moving to Phoenix, you can no longer afford homes here. There's zero inventory. ARMLS listings will produce nothing.
That's not an exaggeration. After breaking down the cost of a mortgage, insurance, property tax, cost of food based on USDA Cost of Food reports, median car payments, bills and utilities, and additional monthly expenditures, there's no way the math works out.
Phoenix is now Los Angeles. Look somewhere else. Phoenicians are.
Re: ‘Housing in ‘07 wasn’t a bubble” is a true statement that almost no one believes
#3Paul Krugman described the effect memorably in 2005.
https://www.nytimes.com/2005/08/08/opinion/that-hissing-soun...
"Then there are the numbers. Many bubble deniers point to average prices for the country as a whole, which look worrisome but not totally crazy. When it comes to housing, however, the United States is really two countries, Flatland and the Zoned Zone.
In Flatland, which occupies the middle of the country, it's easy to build houses. When the demand for houses rises, Flatland metropolitan areas, which don't really have traditional downtowns, just sprawl some more. As a result, housing prices are basically determined by the cost of construction. In Flatland, a housing bubble can't even get started.
But in the Zoned Zone, which lies along the coasts, a combination of high population density and land-use restrictions -- hence "zoned" -- makes it hard to build new houses. So when people become willing to spend more on houses, say because of a fall in mortgage rates, some houses get built, but the prices of existing houses also go up. And if people think that prices will continue to rise, they become willing to spend even more, driving prices still higher, and so on. In other words, the Zoned Zone is prone to housing bubbles."
Just ignore the first sentence in the article and the prognosis on a bubble popping messily....
Erdmann adds to the thesis in a very valuable way by pointing out that people move out Zoned zone to Phoenix and other US metros.
Just pity the countries that effectively don't have a Flatland, like Australia, the UK and NZ.
Re: ‘Housing in ‘07 wasn’t a bubble” is a true statement that almost no one believes
#4This analysis seems to be attacking a strawman "the economic recession caused housing to drop, not the other way around". I mean there were multiple, interconnected factors including lax lending standards, anticipation of ever increasing housing prices, overbuilding in some locations. It's pretty clear none of them were responsible on their own.
And the fact that they use Canada as an example of a country "that never saw a housing crash" is kind of funny considering Canada median national housing prices is almost double that of the US now.
I would agree that the US is likely not in a bubble now, but Canada sure as hell is.
Re: ‘Housing in ‘07 wasn’t a bubble” is a true statement that almost no one believes
#5That chart of vacancies is an oversimplification. It's too smoothed. For example the vacancies should have a breakdown into per-month bands. Rentals of not-direct 'apartment' style units should be counted in some other category of profiteering.
Each https://en.wikipedia.org/wiki/Metropolitan_statistical_area in the US should have a graph per major downtown, for suburbs within a given rush hour commute distance (1 hour, 2 hour, 3 hour) and then each state for outlying areas (anything outside of another graph).
Re: ‘Housing in ‘07 wasn’t a bubble” is a true statement that almost no one believes
#6It would probably be more accurate to call it a subprime mortgage bubble.
Those were the assets that were significantly over-priced. Or one could argue that in '07 they were correctly priced given the questionable assumption that home values would only increase.
Home values themselves were high but definitely not in bubble territory. It was the derivatives that amplified those high home values. Specifically mortgages that couldn't be paid unless home values continued to increase. That kind of asset is very bubbly, an asset that only has value under a certain transient conditions, and the rating agencies marked them as relatively safe.
Re: ‘Housing in ‘07 wasn’t a bubble” is a true statement that almost no one believes
#7Yeah, and people still keep moving to the Phoenix metro area. The housing market is now closed for median income families as a result of the constant growth and the housing inventory here being dried up. I want to emphasize that: if you're a median household income, middle class family moving to Phoenix, you can no longer afford homes here. There's zero inventory. ARMLS listings will produce nothing . That's not an e…
Zillow shows ~650 houses (sfh+town home) in Phoenix in the last 30 days.
It seems the median list price is 1/5th of bay area prices.
Re: ‘Housing in ‘07 wasn’t a bubble” is a true statement that almost no one believes
#8It would probably be more accurate to call it a subprime mortgage bubble. Those were the assets that were significantly over-priced. Or one could argue that in '07 they were correctly priced given the questionable assumption that home values would only increase. Home values themselves were high but definitely not in bubble territory. It was the derivatives that amplified those high home values. Specifically mortgages…
no one would have called it a bubble if it didn't pop.
the pop came from the supply side, tons of mortgage companies selling now-cheap houses trying to claw back their money from bad loans.
they patched the hole though, and now mortgages are larger than ever. great news for the banks and existing homeowners, bad news for anyone else.
Re: ‘Housing in ‘07 wasn’t a bubble” is a true statement that almost no one believes
#9Paul Krugman described the effect memorably in 2005. https://www.nytimes.com/2005/08/08/opinion/that-hissing-soun... "Then there are the numbers. Many bubble deniers point to average prices for the country as a whole, which look worrisome but not totally crazy. When it comes to housing, however, the United States is really two countries, Flatland and the Zoned Zone. In Flatland, which occupies the middle of the count…
Which is crazy, because you would think that Australia was mostly Flatland! It's the size of the continental US, with a population lower than Texas.
Everyone here lives in the capital cities, and last I looked there were almost no tech jobs at all further up the coast between Sydney and Brisbane.
I wonder if pandemic working from home is going to change this, some of our devs have already moved up the coast...
Re: ‘Housing in ‘07 wasn’t a bubble” is a true statement that almost no one believes
#10Something funny about bubbles. I’ve heard it said that housing prices in 2005 were outrageous, so much that they could only possibly be justified if the population somehow banded together to stop most new housing from being built. Likewise I’ve also heard something about the dotcom bubble- that the valuations of tech firms in 2001 were outrageous. That the multiples given could only ever be sustained if American consumer tech came to dominate the world…