Price Check on Aisle 298: US Housing ‘Prolonged Slump?’ Horsefeathers!

 

Went poking around real estate again today, and wanted to calibrate what I was seeing.  I am looking, but I don’t actually want to buy a house — I want to steal one.   So I check from time to time, as I have no particular schedule pressure, and recent years have been the wrong time to buy, hence I have bought nothing.  Incidentally, I knew that 2012 was the right time to buy — it just wasn’t right for me, which is galling.

Anyway, I have been window-shopping cheap houses again, and went for some context.  I understood that prices had been coming down, which I think may be an earlier-than-anticipated correction perhaps leading to a soft landing, rather than what I expected — a bursting bubble then another bailout. Every level of government tries to prop up property prices (regardless of value) because property taxes are based on city assessments or price paid, depending on the location. When prices fall, it’s supposed to be some kind of disaster, and when they soar, it’s supposed to be great. No wonder we keep blowing bubbles, and screw the buyers anyway– who cares what the filthy un-landed peasants want? Buyers are supposed to sign up for a lifetime of debt and the threat of forfeiture. I do not envy the young in anything these days.

So I understand that prices have been coming down from their overheated peak, which has been years in the making.  So imagine my surprise at this Fox News article on home prices, with passages like “The end may finally be in sight for a prolonged slump in the U.S. housing market,” “the dramatic decline in home prices,” and in a quote, “The sharpest declines for the U.S. housing market are now behind us.”

Where is this bloodbath?  Did I sleep through the apocalypse?  Hardly!  Here’s the Case-Schiller Index of US housing prices:

CSI my appurtenances!

See that tiny little dangling bit at the far, far, far right end of the graph?  That’s what the Fox News Goldman-Sachs mumbling heads are hyperventilating about.  CSI 298, down from a peak of 308, and you would think the Dow had tanked.  Where are the dowdy real estate agents plummeting to their deaths from hastily swept second-story barbettes?  What a shill article.  To get an idea how “motivated” somebody was to greenlight this article, look at one of the headlines that pops up in that article for more reading: “LOOKING TO BUY A HOUSE? IT’S THE WORST TIME IN A GENERATION TO DO SO.”  So the sellers aren’t exactly getting slaughtered.  The sky-is-falling reaction to the bare beginnings of an OBVIOUSLY needed correction is par for the course where our media is concerned — even “our” media.

So here’s the price-check part:  Am I under-appreciating this supposed cratering in house prices?  If the rise and (aspirational) fall in housing prices has affected any decision you’ve made recently, how so?  I confess that I am largely deaf to complaints of falling house value, because unlike any other investment, even if the darned thing goes to zero retail and keeps costing you taxes and maintenance, it still puts a roof over your head.  But my thinking is not necessarily the be-all-end-all for everybody.

Yet.

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  1. E. Kent Golding Moderator
    E. Kent Golding
    @EKentGolding

    I bought a house 20 or so years ago in a neighborhood and town my wife likes.   The process of selling the old house, buying a new house, and moving was so horrific that I speculated at the time that divorce may have been cheaper,  easier,  and more pleasant.

    My wife and I have lived happily here ( once actually IN the house ),   and I don’t plan to repeat the moving experience unless I retire,  in which case the move out of country or to a Red State would be worth the pain of buying, selling and moving.

    My wife does look at zillow,  and I do look at the real estate flyers.   It appears the amount people would pay me for my house is very ridiculous.    However, the amount I would need to pay to replace it would be ridiculous also.

    • #1
  2. Full Size Tabby Member
    Full Size Tabby
    @FullSizeTabby

    “Prolonged slump”?! Yeah, horsefeathers. 

    Perhaps the real estate news reporting has been infected with the same short term financial thinking that many businesses have been accused of (quarterly results are paramount, and annual reports is the farthest of our long term thinking). Driven by an increase in investment-driven (corporate) residential real estate ownership, especially at the cheap end of the market? A large corporate investor bought a few houses in my neighborhood at what turned out to be the very peak of the market (early summer 2022), expecting to flip them (do some minor fixing) and resell them quickly. The houses remain unsold and empty (January 2023). For an entity expecting to be in and out in a couple of months, having a property on inventory for eight months might seem like an eternity. 

    Or as people do, people got emotionally attached to the frenzied market of 2020 and 2021, and forgot that such a frenzied market was a very recent phenomenon that could not be sustained.

    For my friends in the business of transacting real estate, the rapidity of the switch in 2022 from “we have no inventory to sell” to “potential buyers can’t afford loans at today’s interest rates” does make the current slowdown seem more severe than it actually is. 

    • #2
  3. Miffed White Male Member
    Miffed White Male
    @MiffedWhiteMale

    Mortgage Interest rates have more than doubled.  That’s the story.

     

     

    • #3
  4. Front Seat Cat Member
    Front Seat Cat
    @FrontSeatCat

    Nothing is coming down. I checked the old town we  lived in and prices are still off the charts. I am now asking grocery store employees if prices are stabilizing and there’s a resounding no – going up! with a shake of the head.  Throw in the interest rates and it equals “we want you to own nothing and be happy.”

    Your best bet is to find a lot and build, or go to bank auctions.

    • #4
  5. John H. Member
    John H.
    @JohnH

    Last year, I windowshopped much as you did, albeit for two reasons unrelated to yours and to each other. The first was, I had guessed (correctly, as it turned out) that I was paying too much for homeowner’s insurance, and wanted an idea of what another house, already standing elsewhere in town, would cost if mine burned to the ground. The second was that I decided to get some very expensive work done on this 102-year-old house’s pier-and-beam underpinning. It was so expensive, I had to wonder if selling the house – and the vacant lot next door – made at least as much sense. The “foundation” work would not increase value: the next person to buy my holdings will be doing it for the land, not the improvements. With the proceeds from such a sale, I could get a new house. But I decided just to go ahead with the work. I decided that as costly as it was, I could afford it; and I decided that I like living right here, where I am right now.

    And no regrets, so far! I have not gone ahead with proposed fixes of cracked walls, or interior or exterior painting. But I will. In the meantime, I’ve got peace of mind, albeit of a strange sort: when I’m in my eighties, I may have worries but my house falling down will not be one of them. My house looks no different, and yet I am relaxed about it, whereas I used to worry about it. In any case, I never thought of it as an investment. Even if its value dwindled to nothing, it is as you say a roof over my head.

    • #5
  6. DonG (CAGW is a Scam) Coolidge
    DonG (CAGW is a Scam)
    @DonG

    Miffed White Male (View Comment):

    Mortgage Interest rates have more than doubled. That’s the story.

    And for a while, Blackrock and the big investment firms were buying a lot of stock.  The firms have stopped buying, but prices are sticky.  People will wait a long time before dropping a price. 

    Cities along with current owners use zoning to keep the stock of homes low and prices high.   People wanting to move to a city have no voice.

    • #6
  7. Dr. Bastiat Member
    Dr. Bastiat
    @drbastiat

    I really don’t consider my house to be an asset.  I spend money on it regularly to fix things.  It generates no revenue for me.

    I may have built up some equity in my house over the years.  But I can’t touch that money.  Unless I sell my house.  That I live in.  So it may be money, but it’s not usable money.

    A patient once told me that you can get rich in real estate.  If you plan to live for a very long time.

    • #7
  8. BDB Inactive
    BDB
    @BDB

    Miffed White Male (View Comment):

    Mortgage Interest rates have more than doubled. That’s the story.

    That’s certainly part of the story.  As Don G. alludes, another bubble was brewing in real estate.  Large firms were snapping up property driving prices up which also got the idiot short-term flippers all hot and bothered.  I support peoples’ right to cash in if they spot an opportunity, but I think a lot of those people are going to be stuck holding the bag.

    Hard to say, though.  My wife told me that a friend of hers bought a house last year in this same state, and did two things the article said — waived inspection and paid well over asking.  Sheesh.

    Well, good luck racing to the bottom.

    • #8
  9. Tex929rr Coolidge
    Tex929rr
    @Tex929rr

    Property prices went insane here and while the buying craze seems to have slowed prices haven’t dropped.  One ten acre tract near me sold three times during 2021.  We bought our retirement home in 1996 when we were still in our 30’s.  The value has increased roughly 6 fold since then .  I turned 65 last year which is the only thing that saved us several thousand dollars in property taxes.

    A law passed by the legislature a few years back requires taxing entities to reduce property tax rates if they will collect more that 3.5 percent more than the previous year. So every entity here reduced their rates last year.

    • #9
  10. Manny Coolidge
    Manny
    @Manny

    Prices tend to come down when interest rates go up. There is a range that buyers can usually afford. If the interest rates are driving the monthly payment up, then sellers have to come down to meet the buyers ability to pay. Or decide it’s not a good time to sell. That far, far, far right slope makes sense. The question is whether the slope continues downward or reverses or at least levels off. Of course I have no idea.

    Anyway, all news media hyperventilate over everything every day. That’s how they keep your interest.

    • #10
  11. Manny Coolidge
    Manny
    @Manny

    Dr. Bastiat (View Comment):

    I really don’t consider my house to be an asset. I spend money on it regularly to fix things. It generates no revenue for me.

    I may have built up some equity in my house over the years. But I can’t touch that money. Unless I sell my house. That I live in. So it may be money, but it’s not usable money.

    A patient once told me that you can get rich in real estate. If you plan to live for a very long time.

    Yeah, but you would be paying rent to live somewhere if you didn’t own a house. I’ve seen different analyses as to which is more economically advantageous, and you get differences of opinion. Still I’d rather own my own home. 

    • #11
  12. Unsk Member
    Unsk
    @Unsk

    I would be very skeptical of Case Schiller etc type of housing price and sales data at this moment. They clearly do not reflect reality.

    To try to put the current market in perspective, in LA area it was not uncommon for a market priced home  8 or 9 months ago to get thirty offers. Yes that’s right- thirty offers. A crazy situation never seen before.

    Now there has been a total reversal; not only are no offers coming in on real deals, there are not people even looking at homes on the market. The market is dead as a door nail.  I know this because while I am not an agent my family has been associated with a very active real estate firm for  decades and that firm has no sales at all.

    Yes, the Fed’s QE drove home prices through the roof but there are tens of millions of people who paid big bucks for their homes and would likely take a horrible bath if they sold now, so there are very few people willing to sell now. The only ones that are have to get out and are distressed sales.

    While prices may have come down 15-20-25% or whatever be aware that mortgage rates have doubled so even with such an substantial price reduction most homes are in effect more expensive to buy than a year ago.

    The housing market is tied strongly to employment. While there have been some large reductions in employment, the labor shortage for now has blunted their effect but if the Fed does not back off it’s current tight money path you could see soon some really large reductions in employment and a huge bloodbath in the housing market.

    • #12
  13. DaveSchmidt Coolidge
    DaveSchmidt
    @DaveSchmidt

    Lots of local governments are harvesting a windfall on property taxes due to assessments based on current market prices. 

    • #13
  14. BDB Inactive
    BDB
    @BDB

    Unsk (View Comment):
    While prices may have come down 15-20-25% or whatever

    Prices have come down a smidge, with an average 6% reduction being the forecast before the thing magically “bottoms out”(i.e., is bailed out through whatever means) six months from now.  Larger decreases in the overbuilt west, nothing in the already-tight mid-Atlantic.  Sigh.

    • #14
  15. Unsk Member
    Unsk
    @Unsk

    Prices have come down a smidge, with an average 6% reduction being the forecast before the thing magically “bottoms out”(i.e., is bailed out through whatever means) six months from now.  Larger decreases in the overbuilt west, nothing in the already-tight mid-Atlantic.  Sigh.

    In any of the “hot” markets a few months ago, there likely has been a disastrous reckoning from  the high interest rates with very poor sales, but the high interest rates are keeping homes off the market for now because those sellers will take a huge beating. With such few sales, the sales data these forecasts are based upon are not simply realistic with not a broad base of data.  Do not believe those forecasts. They are way off.

     The biggest declines in sales I have seen are only of the 20-25% variety. How  do you  reconcile that with way over the top sales just nine months ago to  absolute  zero now. You can’t. Of course the FED and  BLS have shown to be lying ridiculously about apartment rents and total employment these past few months to justify the FED’s peddle to the metal raising of interest rates in the face of a recession. The only time in history where something like that happened before was in 1931 where the FED caused the great Depression.  The FED’s tight money has already caused the M2 money supply to go negative meaning there is less money in the economy to fund new businesses or projects  so there must be a severe  contraction coming. There has not been a contraction in M2 for a very long time, at least long before Nixon closed the gold window and probably in the Depression.  

     The LA market is not only one that went through the roof. There are many throughout the country and all those markets are in the same bad fix. 

    Also, there will not be a “bailout” of the housing market. There have only been “bailouts” of the corrupt Corporatist banking and corporate interests. The likelihood is that rates will be high for several months before they come down, if at all,  and the effect of those reductions typically will  not be felt for another six to nine months after a FED action  so the housing market will not get going again for a long time. That said while the FED has said  it can easily revive the economy,  which is another big fat lie,  historically their best option has always and only  been to lower interest rates which is felt most quickly in the housing market to spur the economy, but that will take many months in this very depressed market where conditions have to substantially improve to get sales going again.  

    • #15
  16. DonG (CAGW is a Scam) Coolidge
    DonG (CAGW is a Scam)
    @DonG

    Dr. Bastiat (View Comment):
    I really don’t consider my house to be an asset.  I spend money on it regularly to fix things.  It generates no revenue for me.

    In addition to the 1% or so you pay on upkeep, you might be paying 2%/year in taxes and insurance.  Paying a 3% annual fee on an investment is really bad.  That is about 100X the fee of a broad stock market ETF.

    • #16
  17. BDB Inactive
    BDB
    @BDB

    Unsk (View Comment):
    Also, there will not be a “bailout” of the housing market.

    I think you know what I mean — prices will not be allowed to correct downward.  Instead, some other horse manure will be applied, so that buyers pay twice; once for the manure, and once for the pricey fertilized house.  Anything but falling house prices.

    • #17
  18. DonG (CAGW is a Scam) Coolidge
    DonG (CAGW is a Scam)
    @DonG

    • #18
  19. BDB Inactive
    BDB
    @BDB

    DonG (CAGW is a Scam) (View Comment):

    Dr. Bastiat (View Comment):
    I really don’t consider my house to be an asset. I spend money on it regularly to fix things. It generates no revenue for me.

    In addition to the 1% or so you pay on upkeep, you might be paying 2%/year in taxes and insurance. Paying a 3% annual fee on an investment is really bad. That is about 100X the fee of a broad stock market ETF.

    Paying 3% on an ETF in addition to paying rent would be silly.

    • #19
  20. The Reticulator Member
    The Reticulator
    @TheReticulator

    DonG (CAGW is a Scam) (View Comment):

    Unless you have some very specific purpose in mind, it’s hard to eyeball a chart of rate vs time, as compared to a chart of price vs time. 

    • #20
  21. CarolJoy, Not So Easy To Kill Coolidge
    CarolJoy, Not So Easy To Kill
    @CarolJoy

    BDB (View Comment):

    Unsk (View Comment):
    While prices may have come down 15-20-25% or whatever

    Prices have come down a smidge, with an average 6% reduction being the forecast before the thing magically “bottoms out”(i.e., is bailed out through whatever means) six months from now. Larger decreases in the overbuilt west, nothing in the already-tight mid-Atlantic. Sigh.

    A lot of what is driving the owners of Calif homes for sale  on the market is the fatigue over continual wild fires.

    I mean, tax policies, WOKE stupidity and more figure into it as well. But those items are nothing compared to spending each summer with a suitcase by the door “just in case.”

    • #21
  22. Annefy Member
    Annefy
    @Annefy

    CarolJoy, Not So Easy To Kill (View Comment):

    BDB (View Comment):

    Unsk (View Comment):
    While prices may have come down 15-20-25% or whatever

    Prices have come down a smidge, with an average 6% reduction being the forecast before the thing magically “bottoms out”(i.e., is bailed out through whatever means) six months from now. Larger decreases in the overbuilt west, nothing in the already-tight mid-Atlantic. Sigh.

    A lot of what is driving the owners of Calif homes for sale on the market is the fatigue over continual wild fires.

    I mean, tax policies, WOKE stupidity and more figure into it as well. But those items are nothing compared to spending each summer with a suitcase by the door “just in case.”

    I have no idea what is going on. We had neighbors across the street that listed their house at a price that JY and I describe as “Hope they get it”. It took three offers that eventually fell out of escrow, but fourth time was a charm and they got their price. Plus.

    We’re in the foothills of the San Gabriels, and if I mention our most recent wildfires, people quirk an eyebrow, trying to remember. (We were on evacuation alert for 2+ weeks, and when that calmed down a little we had an earthquake)

    California: where short memories are a curse and a blessing.

    • #22
  23. DonG (CAGW is a Scam) Coolidge
    DonG (CAGW is a Scam)
    @DonG

    CarolJoy, Not So Easy To Kill (View Comment):

    A lot of what is driving the owners of Calif homes for sale  on the market is the fatigue over continual wild fires.

    I mean, tax policies, WOKE stupidity and more figure into it as well. But those items are nothing compared to spending each summer with a suitcase by the door “just in case.”

    I am doubtful.   Maybe a few 1000 people live on the forest boundary worry, but CA has 40 million people mostly living is sprawling suburban neighborhoods. 

    • #23
  24. Tex929rr Coolidge
    Tex929rr
    @Tex929rr

    DonG (CAGW is a Scam) (View Comment):

    I am doubtful. Maybe a few 1000 people live on the forest boundary worry, but CA has 40 million people mostly living is sprawling suburban neighborhoods.

    The urban/wildland interface in California is enormous, and in recent years the same problem has developed along the Balconies Escarpment in Texas.  Probably 1/3 of the people in my county alone (about 15 thousand people) live at risk of wildfires.  We are currently in “exceptional drought” status, which none of us had ever heard of until about ten years ago; we all thought “extreme” was the worst category.  Last spring a series of wildfires claimed a few steuctures but there were a couple of days when fire resources were almost exhausted.  And unlike most wildfires, these were mostly started by lightning. We are working hard to educate people on making their properties safer and more defensible but it’s not easy.

    During one exercise we showed elected county officials how a wildfire could quickly burn through large acreage subdivisions.  They didn’t get why we wanted them there until we pointed out how much taxable value would be destroyed. 

    • #24
  25. DaveSchmidt Coolidge
    DaveSchmidt
    @DaveSchmidt

    DonG (CAGW is a Scam) (View Comment):

    CarolJoy, Not So Easy To Kill (View Comment):

    A lot of what is driving the owners of Calif homes for sale on the market is the fatigue over continual wild fires.

    I mean, tax policies, WOKE stupidity and more figure into it as well. But those items are nothing compared to spending each summer with a suitcase by the door “just in case.”

    I am doubtful. Maybe a few 1000 people live on the forest boundary worry, but CA has 40 million people mostly living is sprawling suburban neighborhoods.

    Many of California’s 40 million have a 9mm by the door just in case.

    • #25
  26. BDB Inactive
    BDB
    @BDB

    DaveSchmidt (View Comment):

    DonG (CAGW is a Scam) (View Comment):

    CarolJoy, Not So Easy To Kill (View Comment):

    A lot of what is driving the owners of Calif homes for sale on the market is the fatigue over continual wild fires.

    I mean, tax policies, WOKE stupidity and more figure into it as well. But those items are nothing compared to spending each summer with a suitcase by the door “just in case.”

    I am doubtful. Maybe a few 1000 people live on the forest boundary worry, but CA has 40 million people mostly living is sprawling suburban neighborhoods.

    Many of California’s 40 million have a 9mm by the door just in case.

    My fire extinguisher of choice.

    • #26
  27. CarolJoy, Not So Easy To Kill Coolidge
    CarolJoy, Not So Easy To Kill
    @CarolJoy

    DonG (CAGW is a Scam) (View Comment):

    CarolJoy, Not So Easy To Kill (View Comment):

    A lot of what is driving the owners of Calif homes for sale on the market is the fatigue over continual wild fires.

    I mean, tax policies, WOKE stupidity and more figure into it as well. But those items are nothing compared to spending each summer with a suitcase by the door “just in case.”

    I am doubtful. Maybe a few 1000 people live on the forest boundary worry, but CA has 40 million people mostly living is sprawling suburban neighborhoods.

    Tell that to the people of the city of Santa Rosa, which on Sunday  Oct 8th 2017 experienced a firestorm aided by winds of up to 80mph. (The city’s population is ~ 175,000 people.)

    From Wikipedia:

    Tubbs Fire
    The Tubbs Fire was a wildfire in Northern California during October 2017. At the time, the Tubbs Fire was the most destructive wildfire in California history, burning parts of Napa, Sonoma, and Lake counties, inflicting its greatest losses in the city of Santa Rosa.Wikipedia
    Location:Sonoma County, California, Napa County, California, U.S.
    Cost:~$1.3 billion (2017 USD)
    Date(s):October 8, 2017 – October 31, 2017 (2017-10-31)

    Its destructiveness was surpassed only a year later by the Camp Fire of 2018.

    The Tubbs Fire was one of more than a dozen large fires that broke out in early October 2017, which were simultaneously burning in eight Northern California counties, in what was called the “Northern California firestorm”. By the time of its containment on October 31, the fire was estimated to have burned 36,810 acres; at least 22 people were believed to have been killed in Sonoma County by the fire. The fire started near Tubbs Lane in the rural northern part of Calistoga, in Napa County. It destroyed more than 5,643 structures, half of which were homes in Santa Rosa.

    ################

     

    • #27
  28. DonG (CAGW is a Scam) Coolidge
    DonG (CAGW is a Scam)
    @DonG

    CarolJoy, Not So Easy To Kill (View Comment):

    DonG (CAGW is a Scam) (View Comment):

    CarolJoy, Not So Easy To Kill (View Comment):

    A lot of what is driving the owners of Calif homes for sale on the market is the fatigue over continual wild fires.

    I mean, tax policies, WOKE stupidity and more figure into it as well. But those items are nothing compared to spending each summer with a suitcase by the door “just in case.”

    I am doubtful. Maybe a few 1000 people live on the forest boundary worry, but CA has 40 million people mostly living is sprawling suburban neighborhoods.

    Tell that to the people of the city of Santa Rosa, which on Sunday  Oct 8th 2017 experienced a firestorm aided by winds of up to 80mph. (The city’s population is ~ 175,000 people.)

     

    The overlap of the city and fire is small.  Wildfires are a boundary problem and the people that live on the boundary in the Southwest should be smart about fire safety.  People leave California primarily because of bad governance, which makes life unsafe and expensive and chases employers away.  That governance often prevents fire safety measures. 

    Cal Fire issued a map on Oct. 2, 2020, comparing the 2020 Glass Fire with the 2017 Tubbs Fire.

    • #28
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