Aug 25, 2021
Summary:
All of the madness is coming to a head in the housing market, so
today, Wolf Richter and I get on the podcast to discuss what
exactly is happening with buying and selling homes as a result of
the current economy. San Francisco in particular is experiencing an
interesting circumstance: seasonality is returning, which has been
absent for most of the pandemic. We are seeing a rising market as
well as individuals eagerly spending more money, which is stimulus
driven. Tune in to hear about the interesting dichotomy between the
economy and housing market, and what is to come in this
industry.
Highlights:
-All of the madness is coming to a head in the housing market
-People are reducing their asking prices—how can this be?
-Every local market is different. In San Francisco, it is dominated
by condos and has not gone anywhere in three years in terms of
price. House prices have sky rocketed with a medium price at $2
million, dropping by 8% in July
-Seasonality is returning, which we have not seen throughout the
pandemic
-Medium price dipped for single family houses, and for condos it
jumped
-The volume fell quite a bit; prices dipped a bit from the peak
-There are very elevated prices at the moment, and this poses an
issue as incomes do not match
-Drops in prices bring buyers out
-A lot of supply is coming on the market — this is the most new
houses we’ve seen on the market since 2008
-Mortgage rates are still extremely low by historical standards. If
mortgage rates go up, what will happen to the market?
-The Fed is already talking about tapering its asset purchases,
which will likely happen this fall. This affects mortgage rates and
long term interest rates
-The trend now is buying rental homes close together, which is more
efficient than having single family homes scattered
-In a rising market, foreclosures are extremely rare
-We don’t have the situation of short sales
-Does the shadow inventory still exist?, or have banks flushed this
out This is pretty much gone, according to Wolf.
-The carrying costs of vacant homes are very high, so this will
probably bring more properties to the market
-What does the housing market tell us about the broader economy?
Every time there is a shortage within the economy, we see prices
rise.
-People are still eagerly spending money, which is stimulus
driven
-States are sitting on a lot of money they haven’t spent yet, which
will be put to use soon
-We are in an overstimulated economy - red-hot demand with supply
constraints
Useful Links:
Financial Survival Network
Wolf Street