patrick.net

Strategist says

Patrick says

The richest people already have the best houses. They are not really a factor in housing for ordinary people.

Some people just became rich through the stock market. So, while their incomes have not changed, their ability to purchase with their net worth has shot up.
Many people inherit wealth, allowing them to purchase homes far above what their income would allow. It happened to a friend of mine. A few years ago, his wife inherited a few million. They purchased a $million + home, a porsche and what not. The rest was carefully invested, giving them the ability to live beyond what their normal incomes would allow.
Bottom line......Income is not the only variable that determines what home a person can afford. Net worth is also a determinant.

Exactly. and the gap between the haves and have nots is growing.

null says

Supply and demand. If an increasing amount of supply is being absorbed as a luxury (second or third properties) or as empty investments (both domestic and foreign) then prices can rise faster than wages of primary buyers. The price of houses should rise or fall with wages with all other factors being constant, but the new reality is houses are both a commodity to be traded and a luxury item for the rich and kinda rich.

The rich bastards priced me out of a Malibu mansion over the Pacific. So I make do living where peasants live. So can everyone else based on what they can afford.

Strategist says

The rich bastards priced me out of a Malibu mansion over the Pacific.

Strat. Work harder not smarter. You're doing it all wrong. You think those rich bastards are smart ;).

PeopleUnited says

Exactly. and the gap between the haves and have nots is growing.

One main problem is that they can usually count being bailed out when the "carefully selected" - sorry Strat they aren't - investments go wrong. And the have-nots pay for this with increased per-capita debt and inflation. This is preventing vertical mobility between the haves and the have-nots. 2008 was a great equalizer, but they bailed the haves out.

Well tax and spend can help. In IL many 250-400k houses can have an annual tax of 8-15k a year-yes a year. Then you have houses 500-900k paying anywhere from 18-35k a year in taxes. You think these houses will ever go up CA style-hahaha!!

Good insight mell. The bailouts were for the already well to do, not much trickled down to mainstreet. The only real trickle down was inflation as all that bailout money pushed up and propped up prices that favor the upper class.

WookieMan says

Strat. Work harder not smarter. You're doing it all wrong. You think those rich bastards are smart ;).

You mean work smarter, not harder. Those rich celebrities... movie stars, basketball players, other athletes are usually dumb as hell. But you know what? I have always been happy with what I have. Some of my happiest times when young was in college, when I had nothing. Then I was happy when I had a family, but not much money. Then I was happy when my kids were growing up, because cheering for them at soccer games was the best fun I ever had. Then, when the kids went off to college I was happy, even though I had to pay their college costs. And now I'm still happy, because my youngest 21 year old (who I thought would be a loser, even though he was identified as "gifted" in school" ) graduated, found a real job, and is making money that surprised me.
Guys, wealth does not bring happiness. It's the little things you do with family and friends that bring you happiness. Trust me on this.
'

Housing expenses / all expenditures

Deflation in other segments allows more income thrown into housing.
Plus lower interest rates continue to push price up.
Plus also dis-saving. If home prices go up & up, people's home equity becomes their life savings, augmenting if not taking the place of 401k contributions etc.

All other markets are even more nuts than the USA -- Canada, Australia, England, the Nordic countries, probably even Germany by now.

Japan crashed a long time ago but the home prices in Tokyo are still quite high compared to the US (but 1% interest rates help out there a lot)

consumer household debt ratios:

Bellingham Bill says

Housing expenses / all expenditures

Deflation in other segments allows more income thrown into housing.

Deflation makes homes cheaper. Why is that bad

Bellingham Bill says

Plus lower interest rates continue to push price up.

Which is not deflation.

Bellingham Bill says

Plus also dis-saving. If home prices go up & up, people's home equity becomes their life savings, augmenting if not taking the place of 401k contributions etc.

Which is not bad. It makes it easy for old to survive.

Bellingham Bill says

consumer household debt ratios:

All of those countries spend less on health care then we do. Still the chart makes US look pretty good.

foreign investment

Patrick says

How can housing prices grow faster than wages?

Well, if Trump would actually do something about illegal immigration instead of being a complete pussy...

Strategist says

Income is not the only variable that determines what home a person can afford. Net worth is also a determinant.

The main determinant in my humble opine.

Middle East doesn't have this problem.....but Y?

just_passing_through says

Strategist says

Income is not the only variable that determines what home a person can afford. Net worth is also a determinant.

The main determinant in my humble opine.

If what you own goes up in value all the time due to inflation you will be in great advantage to those who start out without owning anything. It is imperative for prices of different goods/services to fluctuate and any attempt at bailing out a certain sector harm vertical movement.

Patrick says

The richest people already have the best houses. They are not really a factor in housing for ordinary people.

Patrick says

The richest people already have the best houses. They are not really a factor in housing for ordinary people.

Those certain people that have access to unlimited near 0% loans and hot money from overseas, looking for stuff to buy that generates income (rentals) could be a factor. Imagine being a working stiff trying to outbid people that get free money.

Dan8267 says

Well, if Trump would actually do something about illegal immigration instead of being a complete pussy...

You mean like obama and his 8 years in office and clinton in his 8 years too?

somecrappynumber says

You misunderstand Heraclitus point. If the rich already have the best, in a limited supply environment then the "next richest" will get the "next best" and so on and so forth. Ordinary people and anyone below them don't matter in the equation - the ordinary people are squeezed out and forced to rent, double up, move further away etc.

Exactly.

Strategist says

Guys, wealth does not bring happiness. It's the little things you do with family and friends that bring you happiness. Trust me on this.

True dat.

just_passing_through says

Strategist says

Income is not the only variable that determines what home a person can afford. Net worth is also a determinant.

The main determinant in my humble opine.

Most Americans' net worth is near or below zero.

Dan8267 says

Most Americans' net worth is near or below zero.

Probably so. The top 20% in terms of net worth or income could afford high priced homes.

mell says

If what you own goes up in value all the time due to inflation you will be in great advantage to those who start out without owning anything

My cousin Melinda and her husband Pat finally sold their home in McClain, VA that they paid $300,000 for in 1984 after sitting on it for three years and two years afte they'd moved into a condo:

https://www.zillow.com/homes/for_sale/7414-Dulany-Dr,-Mc-Lean,-VA-22101_rb/?fromHomePage=true&shouldFireSellPageImplicitClaimGA=false&fromHomePageTab=buy

P N Dr Lo R says

mell says

If what you own goes up in value all the time due to inflation you will be in great advantage to those who start out without owning anything

My cousin Melinda and her husband Pat finally sold their home in McClain, VA that they paid $300,000 for in 1984 after sitting on it for three years and two years afte they'd moved into a condo:

https://www.zillow.com/homes/for_sale/7414-Dulany-Dr,-Mc-Lean,-VA-22101_rb/?fromHomePage=true&shouldFireSellPageImplicitClaimGA=false&fromHomePageTab=buy

Good for them. Bad for everyone else.

Strategist says

Dan8267 says

Most Americans' net worth is near or below zero.

Probably so. The top 20% in terms of net worth or income could afford high priced homes.

the rest can rent forever or live in the shit zip codes.

PeopleUnited says

Probably so. The top 20% in terms of net worth or income could afford high priced homes.

the rest can rent forever or live in the shit zip codes.

We can't all live in $50 million mansions. Why is it wrong living in a home you can afford?
Our ancestors lived in squalor, slums, huts, caves and even trees. Most humans across the world still do.
Why are us Americans so upset with our living conditions, when we live better than the rest of the world?
We are spoilt rotten Americans.

Strategist says

PeopleUnited says

Probably so. The top 20% in terms of net worth or income could afford high priced homes.

the rest can rent forever or live in the shit zip codes.

We can't all live in $50 million mansions. Why is it wrong living in a home you can afford?
Our ancestors lived in squalor, slums, huts, caves and even trees. Most humans across the world still do.
Why are us Americans so upset with our living conditions, when we live better than the rest of the world?
We are spoilt rotten Americans.

Inreasingly the houses that are affordable require unreasonable commutes or are literally death traps, and/or require a lifetime of hard labor to "afford". The American dream of upward mobility is mostly a fairytale farce used to placate the working class. If everyone can't have access to decent affordable housing how are we any better than communists?

PeopleUnited says

We can't all live in $50 million mansions. Why is it wrong living in a home you can afford?
Our ancestors lived in squalor, slums, huts, caves and even trees. Most humans across the world still do.
Why are us Americans so upset with our living conditions, when we live better than the rest of the world?
We are spoilt rotten Americans.

Inreasingly the houses that are affordable require unreasonable commutes or are literally death traps, and/or require a lifetime of hard labor to "afford". The American dream of upward mobility is mostly a fairytale farce used to placate the working class. If everyone can't have access to decent affordable housing how are we any better than communists?

Is a 7,000 sq ft, beautiful, 20 year old house on a golf course affordable enough at $300K? My Aunt has been trying to sell it for 3 years, 3 or 4 hours South of Chicago.
Guys, if you want to live where the multi millionaires live, it might be easy if you were one. Other than that you can pray, and keep praying.
Why am i wrong?

The West in general is losing ground. The elites are moping up while the working class is on the hook for not just personal debt but national debts as well!

Debt: Use it Wisely, Fiscal Monitor, October 2016 - IMF
International Monetary Fund | October 2016 63
Table A1. Advanced Economies: General Government Overall Balance, 2007–21
(Percent of GDP)
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Australia 1.5 –1.1 –4.6 –5.1 –4.5 –3.5 –2.8 –2.9 –2.8 –2.9 –2.5 –1.7 –0.8 –0.2 0.0
Austria –3.9 –3.9 –5.3 –4.4 –2.6 –2.2 –1.3 –2.7 –1.2 –1.6 –1.5 –1.1 –1.0 –0.8 –0.7
Belgium 0.1 –1.1 –5.4 –4.0 –4.1 –4.2 –3.0 –3.1 –2.6 –2.7 –2.2 –2.0 –2.2 –2.3 –2.4
Canada 1.8 0.2 –3.9 –4.7 –3.3 –2.5 –1.9 –0.5 –1.3 –2.5 –2.3 –2.0 –1.6 –1.2 –0.9
Cyprus1 3.3 0.9 –5.5 –4.8 –5.7 –5.8 –4.4 –0.2 –1.4 –0.5 –0.6 –0.5 –0.1 –0.1 –0.1
Czech Republic –0.7 –2.1 –5.5 –4.4 –2.7 –3.9 –1.2 –1.9 –0.4 –0.6 –0.6 –0.4 –0.4 –0.4 –0.5
Denmark 5.0 3.2 –2.8 –2.7 –2.1 –3.5 –1.1 1.5 –1.7 –0.9 –1.9 –1.7 –1.5 –1.3 –1.1
Estonia 2.4 –2.9 –1.9 0.2 1.0 –0.4 –0.3 0.7 0.4 0.2 0.2 0.1 –0.1 –0.1 –0.2
Finland 5.1 4.2 –2.5 –2.6 –1.0 –2.2 –2.6 –3.2 –2.7 –2.4 –2.4 –2.0 –1.5 –1.1 –0.6
France –2.5 –3.2 –7.2 –6.8 –5.1 –4.8 –4.0 –4.0 –3.5 –3.3 –3.0 –2.7 –2.1 –1.5 –1.0
Germany 0.2 –0.2 –3.2 –4.2 –1.0 0.0 –0.2 0.3 0.7 0.1 0.1 0.2 0.4 0.5 0.6
Greece –6.7 –10.2 –15.2 –11.2 –10.2 –6.5 –3.5 –4.1 –3.1 –3.4 –2.7 –1.7 –1.7 –2.0 –2.6
Hong Kong SAR 7.3 0.1 1.7 4.1 3.8 3.1 1.0 3.6 0.6 1.5 1.5 0.9 1.2 2.1 2.1
Iceland 4.9 –13.1 –9.7 –9.8 –5.6 –3.7 –1.8 –0.1 –0.5 14.7 0.5 0.6 1.1 0.7 1.1
Ireland1 0.3 –7.0 –13.8 –32.1 –12.6 –8.0 –5.7 –3.7 –1.9 –0.7 –0.5 –0.3 –0.1 0.2 0.4
Israel –0.6 –2.7 –5.6 –4.1 –3.4 –5.0 –4.2 –3.4 –3.1 –3.4 –3.9 –3.9 –3.9 –3.9 –3.9
Italy –1.5 –2.7 –5.3 –4.2 –3.5 –2.9 –2.9 –3.0 –2.6 –2.5 –2.2 –1.3 –0.5 –0.1 0.0
Japan –2.1 –4.1 –10.4 –9.3 –9.8 –8.8 –8.6 –6.2 –5.2 –5.2 –5.1 –4.4 –3.9 –3.2 –3.1
Korea 2.2 1.5 0.0 1.5 1.7 1.6 0.6 0.4 0.3 0.8 1.1 1.6 2.1 2.2 2.3
Latvia 0.6 –3.2 –7.0 –6.5 –3.1 0.1 –0.6 –1.7 –1.8 –1.2 –1.2 –0.1 –0.4 –0.5 –0.5
Lithuania –1.0 –3.3 –9.3 –6.9 –8.9 –3.1 –2.6 –0.7 –0.2 –0.3 –0.5 –0.5 –0.5 –0.5 –0.5
Luxembourg 4.2 3.4 –0.7 –0.7 0.5 0.3 0.8 1.7 1.3 1.2 0.0 –0.1 –0.3 –0.3 –0.3
Malta –2.3 –4.2 –3.3 –3.2 –2.6 –3.6 –2.6 –2.0 –1.5 –0.8 –0.7 –0.6 –0.5 –0.5 –0.5
Netherlands 0.2 0.2 –5.4 –5.0 –4.3 –3.9 –2.4 –2.3 –1.9 –1.1 –0.7 –0.4 –0.2 0.0 0.2
New Zealand 3.2 1.3 –1.7 –5.9 –5.4 –1.8 –1.0 –0.3 –0.2 –0.4 –0.3 0.0 0.6 0.9 0.9
Norway 17.0 18.5 10.3 10.9 13.2 13.5 10.5 8.4 5.5 3.0 3.2 3.5 3.6 3.5 3.5
Portugal –3.0 –3.8 –9.8 –11.2 –7.4 –5.7 –4.8 –7.2 –4.4 –3.0 –3.0 –2.9 –2.9 –2.9 –2.9
Singapore 10.1 6.1 0.0 6.0 8.7 7.9 6.7 5.5 2.6 2.4 2.4 2.5 2.9 2.8 3.2
Slovak Republic –1.9 –2.3 –7.9 –7.5 –4.1 –4.3 –2.7 –2.7 –3.0 –2.3 –2.2 –2.0 –1.9 –1.9 –1.9
Slovenia 0.3 –0.3 –5.4 –5.2 –5.5 –3.1 –13.9 –5.8 –3.3 –2.3 –2.3 –2.4 –2.6 –2.7 –2.8
Spain1 2.0 –4.4 –11.0 –9.4 –9.6 –10.4 –6.9 –5.9 –5.1 –4.5 –3.1 –2.7 –2.3 –2.2 –2.1
Sweden 3.3 2.0 –0.7 0.0 –0.1 –0.9 –1.3 –1.5 0.0 –0.4 –0.7 –0.4 0.1 0.3 0.3
Switzerland 1.6 1.8 0.6 0.3 0.5 0.0 –0.2 –0.2 –0.2 –0.3 –0.3 –0.2 –0.2 –0.2 0.0
United Kingdom –2.9 –4.9 –10.5 –9.5 –7.6 –7.7 –5.7 –5.6 –4.2 –3.3 –2.7 –2.2 –1.1 –0.7 –0.7
United States2 –2.9 –6.7 –13.1 –10.9 –9.6 –7.9 –4.4 –4.2 –3.5 –4.1 –3.7 –3.3 –3.5 –3.6 –3.7
Average –1.2 –3.5 –8.8 –7.7 –6.3 –5.5 –3.7 –3.3 –2.8 –3.0 –2.8 –2.3 –2.1 –2.0 –2.0
Euro Area –0.6 –2.2 –6.3 –6.2 –4.2 –3.7 –3.0 –2.6 –2.1 –2.0 –1.7 –1.4 –1.0 –0.7 –0.6
G7 –2.1 –4.5 –10.0 –8.8 –7.4 –6.4 –4.4 –3.8 –3.2 –3.6 –3.3 –2.8 –2.6 –2.5 –2.5
G20 Advanced –1.8 –4.2 –9.5 –8.3 –7.0 –6.0 –4.1 –3.6 –3.0 –3.4 –3.1 –2.6 –2.4 –2.2 –2.2
Source: IMF staff estimates and projections. Projections are based on staff assessment of current policies (see Fiscal Policy Assumptions in text).
Note: For country-specific details, see Data and Conventions in text, and Table B.
1
Data include financial sector support. For Cyprus, 2014 and 2015 balances exclude financial sector support.
2
For cross-country comparability, expenditure and fiscal balances of the United States are adjusted to exclude the imputed interest on unfunded pension liabilities and the imputed compensation of employees,
which are counted as expenditures under the 2008 System of National Accounts (2008 SNA) adopted by the United States, but not in countries that have not yet adopted the 2008 SNA. Data for the United States
in this table may thus differ from data published by the U.S. Bureau of Economic Analysis.

PeopleUnited says

The West in general is losing ground. The elites are moping up while the working class is on the hook for not just personal debt but national debts as well!

Stop it PU, the poor don't pay enough taxes. It's the middle class that is on the hook for all the debts.

Patrick.net has come full circle.

We came here in wait for the housing bubble to burst. Now we're rehashing old hat.

So what is the bubble, waiting to froth right now?

Stock Market? Will it double yet before crashing?

errc says

So what is the bubble, waiting to froth right now?

There is no bubble. They don't come very often.

errc says

Stock Market? Will it double yet before crashing?

No one knows, but double it will, because it always doubles over time.

Newbie123 says

At some point we will see another recession. In a job-loss recession housing prices will start to come down.

https://fred.stlouisfed.org/graph/?g=eUvz
blue is total jobs, dotted green is full employment (showing we're still ~5M short of the 1999 full employment)

Red is annual YOY % rise in consumer debt (right axis) and in my book were the drivers of the 1990 and 2000 recessions, and of course the 2007-2009 Great Recession.
Falling consumer debt take-on also preceded the 1960-1980s recession, too.

Thing is, 2010-2012 cleared a lot of balance sheets, and aside from the $1T in student loans they're saddled with Gen Y is going to start borrowing a lot of money this decade and next. The Fed adding trillions 2009-2013 didn't hurt, either.

And their parents are going to start consuming a lot of health dollars, and spending their retirement income, and also leaving trillions to said Gen Y as they start dying en-masse next decade (~4M/yr boomers entered this world 1946-1964 so ~4M boomers/yr are going to leave by 2036)

Recessions are not exogenous events, there have endogenous causes -- the seeds of destruction are within the larger economy as it grows.

Newbie123 says

Unless the market comes down by 30%+ I wont buy

errc says

Patrick.net has come full circle.

We came here in wait for the housing bubble to burst. Now we're rehashing old hat.

So what is the bubble, waiting to froth right now?

Stock Market? Will it double yet before crashing?

I don't know if anyone could even imagine that interest rates would ever drop to near 0 and they would print their way out of the problem. Most thought that printing was not an option. Now that it doesn't seem to matter, anything is possible. But those with access to the billions can and will buy all the good stuff and leave the regular folk to fight over the high priced crumbs.

A few comments on the economy in general.

The labor force participation rate (LFPR) is still at historical lows but seems to have stabilized. https://tradingeconomics.com/united-states/labor-force-participation-rate
You also have to look at wages. If good manufacturing jobs are being replace by barista and waiter jobs, that can’t be healthy.

Slow wage growth is a key sign of how far the U.S. economy remains from a full recovery.
http://www.epi.org/nominal-wage-tracker/
And lest you think that retiring boomers are driving the LFPR down, in workers 65 and older, the LFPR has been heading up. Perhaps many cannot afford to retire. https://fred.stlouisfed.org/series/LNU01375379

komputodo says

I don't know if anyone could even imagine that interest rates would ever drop to near 0 and they would print their way out of the problem.

Right at the bottom I posted somewhere that it was probably a good time to buy since the Fed's QE would turn things around.

What I didn't appreciate was that interest rates would stay down in such an environment.



Blue is QE pulses, red is prime rate, green is Fed Funds rate.

The Fed turns the dials, the economy responds.

"And lest you think that retiring boomers are driving the LFPR down, in workers 65 and older, the LFPR has been heading up. Perhaps many cannot afford to retire."

No, an aging workforce is absolutely driving the LFPR down. True the LFPR has been heading slightly up for workers 65 and older, but it's still WAYYYY below the LFPR for workers 25-50. As the workforce ages, the overall LFPR goes down (even when the 65 and older LFPR rises slightly).

Patrick says

The richest people already have the best houses. They are not really a factor in housing for ordinary people.

When I say the richest I mean the people above average. There a lot of young people with good incomes that need and can get a house. This still leaves out a large portion of the population.

Bellingham Bill says

Deflation in other segments allows more income thrown into housing.

This may be a reason why authorities feel it's necessary to push up housing prices (and healthcare and education) but doesn't explain how the market goes up.