Housing Market Bubble: No Way Out?

[SomeDude]

I read your entire post TF. Way out of what exactly?

[SomeDude]

Seriously the only way to a healthy housing market is to get the government out of it completely and stop using the tax code to alter behavior. Supply will meet demand at the right price across the country and at every income level. Ahhhh but you asked what the central planners think.....

Well good luck. I am sure they will have some very creative schemes! Those types never stop trying to think for everyone else. Maybe that's why lefties try to control everyone? They think they're doing us all a favor, we're just too dumb to realize it and we keep screwing up their brilliant plans!

[SomeDude]

I read your entire post TF. Way out of what exactly?

If the housing market continues to go up at the rate it's currently going, then within a few decades, the single family housing market of the United States will be 99% of the entire global GDP.

Ohhh no need to worry. It won't continue to go up at this rate. In fact..... houses prices have been trending down since 2006.......when priced in real money.

[SomeDude]

I read your entire post TF. Way out of what exactly?

If the housing market continues to go up at the rate it's currently going, then within a few decades, the single family housing market of the United States will be 99% of the entire global GDP.

Ohhh no need to worry. It won't continue to go up at this rate. In fact..... houses prices have been trending down since 2006.......when priced in real money.

Okay, but that sounds like a recursive calculation since the value of money is what it can buy and housing is about half of the average person's expenses.

Also, since housing has been going up more than gold, bonds, or the stock market, then if you're arguing housing is going down since 2006, then you'd also be arguing the stock market is really taking a nose dive, in terms of real money.

Which invites the question, what are the things "real money" is buying other than housing? I guess ammunition since the cost of 9mm went from $160 per 1000 round case to $900 a case since Floyd-1984 and the Biden election campaign hit.

What i meant is housing prices, at least as measured by the case shiller index and then priced in gold are the same as they were in 2015, 2010, the early 80's, 1975, the 30's and early 40's etc.

Housing prices ebb and flow with government schemes and so on, but they aren't even close to the bubble they were in 2006, at least priced in gold. Measuring them in dollars makes them look like they're going up, but that's true of almost anything.

As long a interest rates are kept stupid low by the government, prices for things most people borrow money for will stay up and this price distortion will cause big problems. Look at the college touition debacle. The government succeeded in making college extremely expensive and largely worthless at the same time for most students!

We just need smarter central planners. I'm sure Joe has a plan!!!

[doodle]

I'm in a similar predicament. Sold all my property a couple years ago. Staring at a ridiculous housing market today. Where I live single family home prices increased 100k in one month this summer!!!

The underlying problem from what I can gather is that vested homeowners and government are preventing development from occuring...and it doesn't help that a lot of housing is being tied up as investment vehicles due to low interest rates. Normally when prices shoot up, supply comes in to meet demand and stabalize price increases. That is not happening nearly fast enough today. Fundamentally americans have a warped idea of what a house is....it's not a piggy bank, or an investment vehicle. It's a long term depreciating asset. We should be striving for policies in this country that drive the price of these essential goods down, not up. No one celebrates higher food or clothing prices, I don't know why anyone would think higher housing prices benefit anyone either. I mean, you live in the thing and if you want to cash out you have to buy another one or rent.

My plan...cash for land. Land prices haven't leaped like housing prices have. They are up, but not nearly as much because getting a loan isn't very common. Then, as soon as construction material prices come down I'll begin construction. Luckily I can do most of the framing myself and sub out foundation and some of mechanicals. I'm looking to build something in the 900 square foot range (1/1) with a pre-planned addition of 2 bed/1 bath or potentially just a two car garage with apartment above....and leave the primary building site vacant for future development.

Houses to me are a practical good. A place to sleep and store my shit. I don't get anything emotional out of the experience or decorating etc. And house work and real estate taxes suck. I want as small a place as possible. Buying an older 2400 square foot house with half an acre will consume your life...

[doodle]

Oh, and a lot of house price increases are regional. There are many areas of country that haven't seen price increases like the american west and south have.

[doodle]

Red states...tenn, kentucky, alabama, arkansas, west virginia, ohio, mississippi...those are all very affordable. You can get a nice house for under 100k in most of those places.

[doodle]

The upside to a lot of those places for the MAGA crowd is that most of them are still stuck in the 1950s. West Virginia towns are like the land that time forgot. You can go back to the fabled America of yore without a time machine or political wrangling! Honestly, I have really fond memories of west virginia as a kid and I kind of get along with hillbillies so if I could convince my girlfriend to give up the west coast mountains for the appalachians I'd probably be driving across the country now.

The backwaters of America can be interesting places if you don't rely on having to live somewhere specific for a job. There are some really cool old riverfront boom towns in mississippi on the river chockablock full of mansions from back in the day that one can pick up for under 75k. The price increases in real estate are really concentrated in just a few regions of this country.

[pmward]

Oh, and a lot of house price increases are regional. There are many areas of country that haven't seen price increases like the american west and south have.

THIS! Regional cost of living arbitrage is a thing. The places that are "bubble" prices usually are "bubble" prices for a reason... like there is a reason why the east and west coast have a WAY higher demand than South Dakota. As long as the premium cost to live in this more desirable parts of the country is considered worth it, then those prices will continue to go up. When they reach the point of "peak demand" then people will start relocating, other less popular regions will then play catch up on price increase (happening here in AZ right now) and those higher demand places will either stagnate or drop in price until the demand returns. In other words, all will be fine.

[doodle]

Oh, and a lot of house price increases are regional. There are many areas of country that haven't seen price increases like the american west and south have.

THIS! Regional cost of living arbitrage is a thing. The places that are "bubble" prices usually are "bubble" prices for a reason... like there is a reason why the east and west coast have a WAY higher demand than South Dakota. As long as the premium cost to live in this more desirable parts of the country is considered worth it, then those prices will continue to go up. When they reach the point of "peak demand" then people will start relocating, other less popular regions will then play catch up on price increase (happening here in AZ right now) and those higher demand places will either stagnate or drop in price until the demand returns. In other words, all will be fine.

AZ is a mystery to me of late. I've seen lots for sale that were literal sandboxes that were going for 30,000 or more per acre. Who even knows where you getting water in some of these places.

This summers fire season was a wake up call to me. The west has got serious issues on its hands if temperatures continue to increase and precipitation events decrease. Idaho and Montana are potential tinderboxes like california. If you've never gone through western fires it sucks....worse than any humidity or bugs you might have to deal with back east. It literally chokes you, even in your own house there is no escape.

From driving around for the last year Ive seen first-hand how many affordable funky out of the way places exist
In this country....not all of them are armpits either. If you're willing to go slightly off the beaten path you can pick up some amazing properties for under 200k in a lot of places. The American west has gotten insane by and large in terms of pricing. The south is a bit better in texas, florida, georgia....this sweet spot though now is all in flyover country. Plenty of really beautiful places as well.

[pmward]

Oh, and a lot of house price increases are regional. There are many areas of country that haven't seen price increases like the american west and south have.

THIS! Regional cost of living arbitrage is a thing. The places that are "bubble" prices usually are "bubble" prices for a reason... like there is a reason why the east and west coast have a WAY higher demand than South Dakota. As long as the premium cost to live in this more desirable parts of the country is considered worth it, then those prices will continue to go up. When they reach the point of "peak demand" then people will start relocating, other less popular regions will then play catch up on price increase (happening here in AZ right now) and those higher demand places will either stagnate or drop in price until the demand returns. In other words, all will be fine.

AZ is a mystery to me of late. I've seen lots for sale that were literal sandboxes that were going for 30,000 or more per acre. Who even knows where you getting water in some of these places.

This summers fire season was a wake up call to me. The west has got serious issues on its hands if temperatures continue to increase and precipitation events decrease. Idaho and Montana are potential tinderboxes like california. If you've never gone through western fires it sucks....worse than any humidity or bugs you might have to deal with back east. It literally chokes you, even in your own house there is no escape.

From driving around for the last year Ive seen first-hand how many affordable funky out of the way places exist
In this country....not all of them are armpits either. If you're willing to go slightly off the beaten path you can pick up some amazing properties for under 200k in a lot of places. The American west has gotten insane by and large in terms of pricing. The south is a bit better in texas, florida, georgia....this sweet spot though now is all in flyover country. Plenty of really beautiful places as well.

Yeah, I'm a big outdoors person, so it really comes down to weather more than anything for me. The nice thing about AZ is in the valley the winters are nice, and in the summer, when the valley is an oven, it's only a 90 minute drive up to the mountains and 70 degree weather. So I can spent lots of time outdoors year round. I would love to retire in SoCal on the beach, it's hard to beat 60-80 degree weather year round. The beach cities don't have as big of a fire risk. If that financially doesn't work out then I will likely do the snow bird deal in some fashion, keeping a place in AZ for the cold half of the year, and a place somewhere cooler for the warm half of the year, maybe like a cabin in the middle of nowhere in the mountains The SE doesn't really do it for me, as the humidity is just miserable. When I was in the military I spent some time on the gulf in both Mississippi and the FL panhandle. Both were just miserable with the humidity.

It's tough to find anywhere that is perfect. The fires are an issue, we haven't been as bad as CA in recent years, but we definitely have the potential. I mean the desert is basically a tinderbox in the summer months.

[doodle]

Yeah, the elevation vs valley arrangement in the southwest is cool. Flagstaff and Sedona have a pretty cool complimentary climates...vegas even has mt. Charleston which will stay in the 70s while it might be over 100 on valley floor. It's about 5 degrees for every 1000 feet of elevation so even in New Mexico you have escapes. It isn't the ideal of So. Cal but pretty close. There are pockets out east as well like that in and out of blue ridge or Appalachia. Climate does matter, but having lived in a bunch of different ones over the years I've learned that you quickly adapt. I never thought I'd make it out of florida...that warm weather had thinned my blood quite a bit. But I'm doing fine up in the mountains. Anything over 80 and I feel like I'm having heatstroke now. That used to be long pants weather for me a few years ago.

[pmward]

Yeah, the elevation vs valley arrangement in the southwest is cool. Flagstaff and Sedona have a pretty cool complimentary climates...vegas even has mt. Charleston which will stay in the 70s while it might be over 100 on valley floor. It's about 5 degrees for every 1000 feet of elevation so even in New Mexico you have escapes. It isn't the ideal of So. Cal but pretty close. There are pockets out east as well like that in and out of blue ridge or Appalachia. Climate does matter, but having lived in a bunch of different ones over the years I've learned that you quickly adapt. I never thought I'd make it out of florida...that warm weather had thinned my blood quite a bit. But I'm doing fine up in the mountains. Anything over 80 and I feel like I'm having heatstroke now. That used to be long pants weather for me a few years ago.

Haha, yeah it's 70 degrees here now and it's hoodie and sweat pants weather for me, haha. Growing up in MI 50 degrees was short and T-shirt weather! And yeah here's the thing... I could have a place in Phoenix and somewhere up in the mountains (like Flagstaff, CO, UT, or even somewhere out east in Appalachia) and live cheaper than in SoCal. But I lose the convenience of living in one home year round. There's the tradeoff. But I need outdoor access year round. I could not move back somewhere where the weather was miserable for long stretches of the year. I still don't know ultimately what I'll end up choosing, so for now both options are on the table. In the meantime we will see how my investment performance is over the next few years...

[doodle]

Yeah, the elevation vs valley arrangement in the southwest is cool. Flagstaff and Sedona have a pretty cool complimentary climates...vegas even has mt. Charleston which will stay in the 70s while it might be over 100 on valley floor. It's about 5 degrees for every 1000 feet of elevation so even in New Mexico you have escapes. It isn't the ideal of So. Cal but pretty close. There are pockets out east as well like that in and out of blue ridge or Appalachia. Climate does matter, but having lived in a bunch of different ones over the years I've learned that you quickly adapt. I never thought I'd make it out of florida...that warm weather had thinned my blood quite a bit. But I'm doing fine up in the mountains. Anything over 80 and I feel like I'm having heatstroke now. That used to be long pants weather for me a few years ago.

Haha, yeah it's 70 degrees here now and it's hoodie and sweat pants weather for me, haha. Growing up in MI 50 degrees was short and T-shirt weather! And yeah here's the thing... I could have a place in Phoenix and somewhere up in the mountains (like Flagstaff, CO, UT, or even somewhere out east in Appalachia) and live cheaper than in SoCal. But I lose the convenience of living in one home year round. There's the tradeoff. But I need outdoor access year round. I could not move back somewhere where the weather was miserable for long stretches of the year. I still don't know ultimately what I'll end up choosing, so for now both options are on the table. In the meantime we will see how my investment performance is over the next few years...

I've been free of property now for two years and it has its upsides. There is something very liberating about the nomadic gypsy lifestyle. I'm sure mark could speak more to that...I believe he lives out of a backpack. I live cheap and don't need to save anymore so I'm fine working whatever so as to just avoid having to tap into reserves. I plan to bounce around for a while longer. I've found it pretty easy just to pick up jobs here and there and a place to live...or we just live out of my van and it's fun always seeing what's over the next hill. Eventually I'd like to settle on a piece of raw land or maybe a house but I'm in no rush with these prices right now and there are so many places to choose from that it frankly hard to make a decision.

[pmward]

Yeah, the elevation vs valley arrangement in the southwest is cool. Flagstaff and Sedona have a pretty cool complimentary climates...vegas even has mt. Charleston which will stay in the 70s while it might be over 100 on valley floor. It's about 5 degrees for every 1000 feet of elevation so even in New Mexico you have escapes. It isn't the ideal of So. Cal but pretty close. There are pockets out east as well like that in and out of blue ridge or Appalachia. Climate does matter, but having lived in a bunch of different ones over the years I've learned that you quickly adapt. I never thought I'd make it out of florida...that warm weather had thinned my blood quite a bit. But I'm doing fine up in the mountains. Anything over 80 and I feel like I'm having heatstroke now. That used to be long pants weather for me a few years ago.

Haha, yeah it's 70 degrees here now and it's hoodie and sweat pants weather for me, haha. Growing up in MI 50 degrees was short and T-shirt weather! And yeah here's the thing... I could have a place in Phoenix and somewhere up in the mountains (like Flagstaff, CO, UT, or even somewhere out east in Appalachia) and live cheaper than in SoCal. But I lose the convenience of living in one home year round. There's the tradeoff. But I need outdoor access year round. I could not move back somewhere where the weather was miserable for long stretches of the year. I still don't know ultimately what I'll end up choosing, so for now both options are on the table. In the meantime we will see how my investment performance is over the next few years...

I've been free of property now for two years and it has its upsides. There is something very liberating about the nomadic gypsy lifestyle. I'm sure mark could speak more to that...I believe he lives out of a backpack. I live cheap and don't need to save anymore so I'm fine working whatever so as to just avoid having to tap into reserves. I plan to bounce around for a while longer. I've found it pretty easy just to pick up jobs here and there and a place to live...or we just live out of my van and it's fun always seeing what's over the next hill. Eventually I'd like to settle on a piece of raw land or maybe a house but I'm in no rush with these prices right now and there are so many places to choose from that it frankly hard to make a decision.

Yeah I've also put thought into my first few years of "retirement" staying put in AZ for the cold half of the year, and getting a nice camper for the cooler part of the year and going and living different places. The benefit of that is it's cheap, it also lets me test a bunch of places out to see if anywhere feels like "home" for the summer months. You leave a place with a much different impression after living somewhere for 2-3 months vs the typical 1-2 week trip.

[Libertarian666]

The way out is when one of two things happens:
1. The dollar collapses completely, so houses will be $1 billion but an ounce of gold will also be $1 billion, or
2. The Fed finally throws in the towel and stops printing money to buy all the trillions in Treasuries.

One of those will happen eventually; we just don't know when or which one.

In the meantime, keep renting. Houses aren't really a good investment; they just look like it because of leverage during inflation.

[SomeDude]

Tomfoolery what about just decent furniture and things in your apartment and instead of having value tied up in real estate you can't transport, you have physical gold in your possession?

The government won't be able to screw with you as easy as they will if you own a house.

A good carry gun and ammo are definately a good idea.

[I Shrugged]

I say that 30 yr mortgages below 3% are like stealing. Get one while you can.

[SomeDude]

I say that 30 yr mortgages below 3% are like stealing. Get one while you can.

There's the other argument. Inflation alone is likely to pay for half your home if you buy now and lock in 30 years. My wife and i were upgrading from our starter home this year and locking in 2.75%. I had to back out right before closing since my wife was bedridden with a miserable pregnancy. Moving was too much stress.

Prices feel very high but borrowing all that money at nothing interest was attractive.

[doodle]

Tom, are you opposed to living in most red states? There are so many affordable states out there with housing prices for a third of the figures you posted. Do you have to purchase in a specific market?

[vnatale]

I never looked at a house as an investment. I looked it as a place that I "own" with all the benefits that come with ownership, many of which were enumerated above by tomfoolery.

The main benefit is complete independence from any landlord telling me what I could not do.

I've owned my house since April 30, 1982. During all that time the only things the governments have made me do regarding my house is pay my real estate taxes and connect to the sewer line once it was installed on my street.

They don't make me keep any sidewalks shoveled since I do not have any. They have never complained when I let my "lawn" grow to waist level.

In addition to both obtaining freedom from a landlord's dictates and being too close to neighbors, buying a house gave me permanence where I did not have to leave because something happened to the ownership of the property I had been renting.

I have never regretted home ownership for a second. Fits into my personality of always wanting to own if possible and wanting to be as independent as possible.

Vinny

[Mark Leavy]

The main problem with this plan is picking a good place to store the gold. I could imagine, hypothetically if a decade ago I picked a place like Portland and now it's occupied territory, I wouldn't want my gold there!

You don't want to go there. I just emptied out my storage in Portland a few hours ago.
This town is dead and will never recover.

Safe Deposit boxes are cheap. I'm distributing everything across multiple boxes in the USA - all small town local banks in areas that are friendly to the kind of things you like, tom. South Dakota, Nevada, Utah, 'The state of Jefferson', those sorts of places...

I setup a small checking account at each bank and setup automatic payment for the boxes.

[Mark Leavy]

And to continue that thought...

You have the same issue when trying to select a place to own property. A lot can change in 20 years. Imagine if you had bought a house in Portland.

[I Shrugged]

And to continue that thought...

You have the same issue when trying to select a place to own property. A lot can change in 20 years. Imagine if you had bought a house in Portland.

You sell it and move.
I think you guys are rationalizing something deeper.

[Mark Leavy]

And to continue that thought...

You have the same issue when trying to select a place to own property. A lot can change in 20 years. Imagine if you had bought a house in Portland.

You sell it and move.
I think you guys are rationalizing something deeper.

That plan worked