California is it’s own little universe.

Reuters - US housing starts drop to 9 month low in June.

“New U.S. home-building activity fell to a nine-month low in June and permits for new construction projects slipped as well, the latest indication of a cooling housing market as surging mortgage rates reduce affordability.

While multi-family construction gained ground as rising rents burnish the appeal of apartment projects, cushioning the overall decline, activity in the single-family segment dropped to a two-year low. Housing overall is set to have been a drag on U.S. gross domestic product in the second quarter.

Housing starts fell 2% to a seasonally adjusted annual rate of 1.559 million units last month, the lowest level since September 2021, the Commerce Department said on Tuesday. Data for May was revised higher to a rate of 1.591 million units from the previously reported 1.549 million units.

Economists polled by Reuters had forecast starts would come in at a rate of 1.580 million units. Permits for future homebuilding fell0.6% to a rate of 1.685 million units, also the lowest since September.”

Wow, the lowest in nine whole months...

Inflation is skyrocketing, interest rates are going up fast, supply chain and labor problems abound, etc. So, obviously, there are fewer people wanting to buy a home. I am surprised that housing starts have remained better than they were prepandemic.

However, there are two sides to the housing market, buyers and sellers. The housing market "drops" when more people need to sell than people who want to buy. A reduction in supply doesn't mean a reduction in home values, in fact, the shortage has largely been driving the insane prices. A reduction in buyers also doesn't mean a reduction in home values, unless there is a corresponding increase in sellers.

🙄. Read the first word in the title of the thread. You speak as if there is one market.

@ShadyWillowFarm said, "Read the first word in the title of the thread. You speak as if there is one market."

Wow, irony. You posted information about the aggregate new home construction market, both posts that I responded to were discussions on aggregate housing supply. So, in fact, it is you who have discussed the market as "one market." My response has simply been about the error of using aggregate housing supply to support a "drop" in the aggregate housing market.

If your concern is really about detached markets, then stop posting things about national housing starts or slowdowns in the construction industry.

The only discussion I posted was that CA is it’s own little universe. The numbers are coming from somewhere, and I asked posters to comment on what they’ve observed in their areas. We all know that the market is very specific to location.

California may be it's own little universe but isn't immune from RE price drops. The biggest housing drops for the month of June came out of California markets ranging from 1% to 4.5% month over month. doesn't sound like much but bigger than an one month change even in the housing crash in 2008. Will it continue?

I've been watching 4 separate new housing developments since February all within a few miles of me. The smallest, with 14 homes all sold in the mid 800K range, but the last one which is still for sale sits at $770K.

2 developments finished last fall ready for builders and took off like a rocket but fizzled out two month ago with asking prices dropping 5% to 6% from late February, with no digs for new foundations. Both built out by about 20%. The last started ground work in March, finished a model last month and just this week started the first basement, about 70 lots to go. All three are like ghost towns, no digging, no lumber or material deliveries and very few trades working.

Consider the losses a developer accrues every month when builders don't buy the lots. A fire sale will be coming on just the lots alone, and so will the home prices and the comps. You don't see it because you're not looking for the signs. It's a rolling snowball ready to start an avalanche.

Major companies implementing hiring freezes and expense reductions, Starbucks closing stores on the left coast, Walgreens, retailers of all kinds pulling out of the crime infested area's, inflation adding $5K to households, and the list goes on. Every dollar lost to an economy is a snowflake added to the snowball. The earth spins at 1000 mph but you don't see or feel it doesn't mean it's not, It's coming and my guess is October, you'll see and feel it then.

The practical question to ask, unless you're paying all cash, is: Where are monthly mortgage payments decreasing? If rhe asking price falls 5%, but 30-year mortgage rates increase from, say, 4.5% to 5.5%, the actual monthly mortgage payment has increased by over 6% on that "cheaper" home. That's one of the reasons why waiting for the market to drop is not necessarily a wise decision economically.

@ShadyWillowFarm said, "The only discussion I posted was that CA is it’s own little universe."

You posted, "Reuters - US housing starts drop to 9 month low in June." & "There are aritlces (sic) coming outs about housing prices dropping world wide. [...] U.S. Housing Market Is in a 'Meltdown': Economist"

Those are both things that you posted on a discussion board and my discussion of those things as problematic doesn't change whether you are discussing the housing market in aggregate or the separated markets.

Housing starts and builder confidence are not indicative of the value of the housing market. I didn't limit my comments to the aggregate market just because your articles were, my critique stands in both cases. It is entirely possible that someone sees a slowdown in new home construction in their market, while their market is still appreciating nicely. I really don't know why you felt my response couldn't be related to individual markets when you apparently felt your articles could be.

Give it a rest, dude. No one cares what you think about me.

I addressed the things that you posted and provided thoughts on those things. I have not said a single negative word about you. Nor do I have a clue who you are, so honestly, I don't think anything about you.

I have addressed the things you posted on this thread, because I think your implication is wrong. The implication from your posts are that we are heading towards a down real estate market, as you are neglecting to post the articles that note the real estate slowdown is not indicative of downward trend in values.

A slowdown is different than a crash or a down market. The real estate market slows down all the time without losing value. We often refer to these times as "buyer's markets." Typically we see buyers demand more in a buyer's market, such as additional repairs, or money towards closing costs, etc., but rarely do we see house values fall.

Of course, 2008 was the exception, as you had derivative instruments driving the value of the underlying investment. However, that is not what is happening right now.

So if housing starts are down, that means more people will stay put, which will reduce the supply of used houses for sale, which could drive up prices still?

ShadyWillow, just ignore it. Some posters just pick fights. I always think of 7 year old boys in the school playground seeing who can p the farthest.

It’s complicated, also highly dependent on increasing populations, affordability, job markets, the economy , etc.

I understand how difficult it is to escape your bias, I am guilty of that. I "pick fights" against unresearched or selectively researched positions. I respectfully submit that @sushipup2 has decided to see the "p the farthest," in too many posts, as that ad hominem gets tossed about by @sushipup2 whether or not it is fitting.

My posts on this thread are either on topic, or a defense of an accusation that they are not on topic. I understand that people don't like their positions challenged these days, but if you are going to make a post on a forum then you should be willing to accept that challenge and discuss it. My two posts that were supposedly picking a fight were about housing starts as a leading indicator of the housing market... they are not.

Here you go... Housing starts are in blue, average home prices in red...

Can you see that housing starts are not a leading or trailing indicator of house prices? A market drop occurs when the assets in the market decrease in value, so a housing market drop means that house values are going to go down. That could happen, but it isn't going to happen because of housing starts going down.

While these are aggregate numbers, they certainly apply to local markets. If I am missing some relationship between the housing market and housing starts, please enlighten me. However, if you are just going to call me a meaner for having and supporting a position different than yours, well I guess that is your prerogative.

U.S. Home Prices Hit Record of $416,000 in June as Sales Continued to Slide

The housing market and construction have cooled as higher interest rates start to bite

By David Harrison............. and Nicole Friedman.............

The U.S. hous­ing mar­ket is rapidly cool­ing as record prices and ris­ing mort­gage rates weigh on home sales, lock­ing out po­ten­tial buy­ers…

The hous­ing mar­ket has frozen as par­tic­i­pants ad­just to the in­crease in mort­gage rates, said Mark Zandi, chief econ­omist at Moody’s An­a­lyt­ics…

A hous­ing slump could deal an­other blow to eco­nomic growth, al­ready hob­bled by ac­cel­er­at­ing in­fla­tion. Growth con­tracted at a sea­son­ally ad­justed an­nual rate of 1.6% in the first quar­ter, ac­cord­ing to the Com­merce De­part­ment and some econ­o­mists ex­pect growth to record an­other de­cline or barely ad­vance in the April-to-June pe­riod…

@ShadyWillowFarm - I suspect our friction is my misunderstanding of your point and I am going to ask you to clarify. You started a thread about the housing market dropping, which I interpreted as the classic definition of a market drop meaning a loss in value.

However, you keep posting things that have nothing to do with falling house prices but a lot to do with the supply of available homes. If you were asking about where are we starting to see fewer homes up for sale, then I completely misconstrued your question.

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"A hous­ing slump could deal an­other blow to eco­nomic growth, al­ready hob­bled by ac­cel­er­at­ing in­fla­tion. Growth con­tracted at a sea­son­ally ad­justed an­nual rate of 1.6% in the first quar­ter, ac­cord­ing to the Com­merce De­part­ment and some econ­o­mists ex­pect growth to record an­other de­cline or barely ad­vance in the April-to-June pe­riod…"

Again, a housing slump is not a drop in the housing market, it is fewer homes being sold.

That article is discussing the growth of the economy at 1.6% and how that could slow from a 1.6% increase to a lower increase. Which is not a recession, they are not predicting a contraction, just slower GDP growth. We might also note, that the average quarterly growth rate of the U.S. economy (GDP) is just over .8 percent, so while a drop is something we would rather not see, the first quarter was still double the average growth rate.

Just my 2 cents, I am sure I can find some article that would support it but I am not sure I would put any more weight into that article than my analysis, which you should put zero weight into.

I suspect that house prices/values will pause as we adjust to higher interest rates. After that adjustment period, I suspect that house prices will again rise.

Let's remember that mortgage rates are not high, they are just higher than they have been, but so is inflation. I assume we have all heard the saying that real estate is the best hedge against inflation. I suspect that will come into play in short order if inflation continues. Although, interest rates are higher, the payment is still fixed. So while buyers are paying $1,750 more each year per $100,000 borrowed than they were a year ago, that payment is fixed over the life of the loan. In the end, you are still going to have a house that appreciates at or near the inflation rate and a payment that is fixed at an interest rate less than the inflation rate.

Let's also remember that rents are not fixed for any reasonable term, so rents are definitely going to rise with inflation and since home values and rental rates are complementary markets, house prices should increase as rents increase (they always have before). To illustrate this the average rent in the U.S. has increased from $1,104 in 2020 to $1,326 in 2022, that really doesn't seem so bad. However, the average asking rent is now $1,900... which is pretty high (asking rent is the average rental rate for available properties).

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Before you go out and do anything based on my analysis, run over to r/superstonk where there are a lot posters who believe I am wrong, they are all betting the housing market is minutes from collapse. It might well be, I just don't see it.

Yeah, you are completely missing all context. I am not trying to make a “point.” I asked a simple question, and am interested in what is happening in different places with the market.

I see it Bry as well as the stop light ahead. The wisest rule in investment is: when others are selling, buy. When others are buying, sell. Those investors you mentioned forgot the rule and are running every stop light ahead and will crash, and you were schooled in traditional economics, so no disrespect meant but times have changed. What you have learned is obsolete as written in stone, and I do not believe any past Economist would of proposed the presently taught economic theories If they were told the world would have 8 billion people, natural resources would become depleted, and weather patterns would change the scope of agriculture.

If so some of those theories would be entirely different with exception to maybe the power theory of value. So you really don't see it coming do you. The signs are everywhere and just the inflation factor is forcing people to use their savings, run up credit cards and default on auto loans. Heating cost this winter will be very ugly, and property tax bills will be off the charts next year, with the net sum adding up to tanking Discretionary spending. Please look up Biflation, it's something you didn't learn in college, coined in 2003.

Those single family home investors also have a slight problem from competition who didn't buy at the top of a bubble and have the flexibility to undercut the new kids in town. Atlanta George has 5800 single family homes (apartments and condos excluded) up for rent right now on zillow with the ability to see the pricing history. One I have up now started at $1645 in April and still on the market after many price cuts now asking $1445. 3 months empty so there is a limit.

Another competitor is the family unit. 60 million U.S. residents over 18 of age live with multiple generations under one roof, so not every person without a house needs to rent from Mr. potter. Those dopes scooped up homes at the top of a bubble and the housing market will pop with a sonic boom. Since 1890 home values always mirrored the rate of inflation, with periods of booming bubbles followed by pops, and at times prices dropped well below the rate of inflation (this is when you invest) but they always returned to the inflation trend line. 2018 and 2019 inflation was around 2%, 2020 around 6% and this year pushing 10%, while houses prices rose 50% to 150% in the same period. Darn right prices are going to fall, and fall hard.

Those investment companies will end up like the subprime mortgage companies of 2008, but my biggest curiosity is why cryptocurrencies aren't at zero yet. Totally worthless at any price and belong in the trash can with Beanie Babies, just a toy people think has value.

I am not discussing any macroeconomic theories. This is simple supply and demand and I assure you that hasn't changed at all.

Sometimes people are buying on the way up and sometimes people are selling on the way down. I would argue the wisest rule of investing is never invest in what you don't understand, and will further argue that almost every crash could have been avoided had the market headed that wisdom, but that is beside the point.

The question is was the latest increase in the housing market a bubble or a correction. Just because prices went up doesn't mean that it was a bubble. Why did prices go up? That is something we know pretty well...

After 2008 rules for mortgages put downward pressure on prices because of massive pressure for conservative appraisals. When the pandemic happened household savings skyrocketed and the extra cash released homebuyers from the appraisal problem as they had extra cash to make up the gap between approved borrowing amounts and loan appraisals. So house prices jumped which itself cascaded because appraisals also went up. However, it is important to understand that there is still not enough entry level housing to approach satisfying demand. So just because the real estate market went up doesn't mean that it was on a bubble.

Some other comments on your observations, rather than finding a single property in a city of 6.1 million people and trying to support a macroeconomic model with it, why don't we just use the rental vacancy rates...

2017 - 7.2

2018 - 6.9

2019 - 6.8

2020 - 6.3

2021 - 6.1

2022 - 5.8

So it seems that people are paying for the higher rental rates, as the percentage of unoccupied units is decreasing and the average rent is increasing. I have more applications for a rental property today than I did five years ago and the rents have certainly increased.

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I assure you that Cantillon effects are taught in college, however, I don't really see how biflation applies here as it requires a debt deflation. This is not to say that we are not seeing Cantillon effects from the stimulus package, but the stimulus package wasn't designed to fight debt deflation nor do we have debt deflation happening now so there is no need to issue any type of asset stabilization incentive. Are you suggesting that the government will respond to a falling housing market with increases in the money supply to bail out homeowners?

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Multigenerational households have increased but so have one-person and single parent households. So we are not seeing a reduction in demand.

Apparently Boise - making headlines this morning.

Boise’s Housing Market Boomed Early in the Pandemic. Now It Is Cooling Fast.
‘Zoomtowns’ that drew remote workers are now expecting prices to fall as interest rates rise and companies call employees back to the office

Boise’s Housing Market Boomed Early in the Pandemic. Now It Is Cooling Fast.
‘Zoomtowns’ that drew remote workers are now expecting prices to fall as interest rates rise and companies call employees back to the office

The Canadian market is dropping, now down 23% since its high in Feb. In my area, For sale signs are poping up all over. Gone are bidding wars, offers without home inspections etc. Wish we would have sold way back fhen…

Our current local market seems to be like this: low inventory coming up for sale in the middle of the market, very little to nothing coming on to the market in some neighborhoods. Lots of relatively inexpensive stuff coming onto the market in outlying neighborhoods. I think a lot of this may be owned by investors. In my general vicinity, the new construction market is going strong, but everything is priced at over $1M, and there are some in the $10M+ range. And although the sales are slow in a new building where everything is over $1M, it's the $10M + units that have sold and the "less expensive" units are not.

No question of where the Canadian market has been and where it's going.

And the big banks are unanimous in their future projections. See TD here. Royal Bank of Canada (the largest mortgage lender in the country) here. And Desjardins here.

Bank of Canada prime, on which all bank rates hinge, is expected to rise at least another 30%, (from 2.5%-3.5%) this Thursday. Bank of Canada governor Tiff Macklem is evidently determined to be the most macho central banker in the G7.

My local area is holding steady, still pretty hot in some spots. My target area seems to have cooled off considerably, although not really dropped. People who are buying are people who want to live in a home they own, in a specific location. If you plan on living in a house for 10 or more years, you are more concerned with the house being a home than an investment.

^^people in my area are looking for homes. There are a lot of 2nd homes in one section of my target area.

“The S&P Core­L­ogic Case-Shiller Na­tional Home Price In­dex, which mea­sures av­er­age home prices in ma­jor met­ropolitan ar­eas across the na­tion, fell 1.1% in Au­gust from July, the sec­ond straight month-over-month de­cline. The Au­gust de­cline was also the big­gest month-on-month de­crease since De­cem­ber 2011.”

I've been getting reports from this RE research company for 12 years. This is the latest video report that came out today. I like the graphs/charts they show.

Altos Research - Real estate inventory still climbing into November

Inventory continues to climb as buyers are at a standstill. Nationally, we have 40% more inventory than last year at this time, with some regions getting hit harder than others. And while we still have a third fewer homes on the market now than we did at the end of October 2019, that gap is closing by 1-1.5% per week.

Meanwhile price reductions have not abated. This week almost 43% of homes on the market have had a price cut. As with inventory this is highly regional, but there are a lot of markets where more than 50% of the homes for sale have had a price cut.

In this week's Altos update, I talk about which market is seeing the biggest rise in inventory, check in on pending sales, new listings, and home prices, and more.

Video report:

https://www.youtube.com/watch?v=AE1DH2hZlXY

I look at listings on a regular basis and I notice a lot of price reductions lately. NJ.

I’m in rural Missouri. Prices are going down in a gradual manner for the past 2 months, especially in the higher price range of homes.

Highly tillable farmland is not dropping, though. I saw a news story that a quality acreage in rural Iowa sold recently for $30,000/acre, setting an all time high record.

Of course, you need to balance the home price vs the fact that home loan interest rates have double in the past year.

Yes, you may be noticing price "reductions" because of what rising interest rates are doing to affordability. Unless you can pay all or mostly in cash, you don't benefit from these kinds of situations. There are many people who have quit looking for houses, especially if they are first time buyers, because they can no longer afford the increased payments that are required, even on houses that have declined a bit in asking price.

Update from Cape Cod where homes were flying off the market for way above asking price, with no contingencies. I see a few new listings, but they will linger. The COVID panic has stalled.

Late comer sellers missed the boat.

Cash is always king. 🙂

A friend in Northern California, the Bay Area, just retired and is getting her home ready to sell. She reports that the huge layoffs in the tech industry have brought sales to a standstill. People with jobs are hesitant to take the plunge for fear of future layoffs.

So real estate prices come down in response to higher interest rates and to job insecurity. There are really no benign reasons for prices to drop. Someone is always getting hurt.

In 2008/2009, prices and sales plummeted because prices had been run up because of the cheap credit and lax lending standards,

Someone is always getting hurt?????

I just follow my township in SW PA. The high priced homes in HOAs are taking longer to sell and listing price reductions. I think the HOAs have reached their saturation point. Otherwise everything else is selling well, high to low price non HOAs.

Hurt: the homeowner can't get the price that the neighbor with a similar house got 6 months ago. Hurt: the homebuyer who suddenly can no longer qualify for a loan.

That’s not hurt at all. Markets go up and down all the time.

^^ I think sushipup mean the people hurt, not the market.

The people don’t “hurt.” Due to market changes, an asset is not worth the same as it was before. And the market will keep going up and down, guaranteed. The price of food goes up, you eat more chicken and less beef/seafood. Are you hurt? No. You just don’t have what you want. You can’t sell your house for what your neighbor did? Should have sold it when the market was higher. There is no injury just a missed opportunity. Also know as risk. You accepted that risk when you bought the house, and every day that you don’t sell the house, you accept the risk that the house may plummet in value today or any day.

If you purchase a house for $400,000 and your neighbor is able to purchase the exact same house a month later for $350,000. Then you have a $50,000 loss. That loss may remain unrealized for many years and the price of the house may go up and down over those years, but you always have a $50,000 loss if you could have purchased the house a month later for $50,000 less. There is no situation in the future where that $50,000 difference will be erased. No matter how much you are able to sell the house for in the future, your neighbor will always be able to realize $50,000 more than you.

We think of losses happening only when we sell an asset, but in reality the problem exists when you pay too much for a home rather than when you sell it. You are just holding it and hoping one day the relative effect of that loss is not so big.

Additionally, drops in the housing market limit the ability to sell homes when the need arises. We had an entire global financial crisis triggered by a U.S. housing bubble. I assure you that people got hurt during that time.

@bry911, you state " There is no situation in the future where that $50,000 difference will be erased. No matter how much you are able to sell the house for in the future, your neighbor will always be able to realize $50,000 more than you. ", but that is not correct. if the timing of the sale is different for both the houses, there could be a scenario where the "50000 loss" is erased, or more.

@ladybug A 9a Houston area - your neighbor will always be able to realize $50,000 more than you. ", but that is not correct. if the timing of the sale is different for both the houses, there could be a scenario where the "50000 loss" is erased, or more.

You are just adding a variable to make the math work. It is true but not relevant to the point. You could also find pirate's treasure buried in your yard and your house would be better off.

However, you still would have been $50,000 better off if you bought the house for $50,000 less. So if you had waited a month and bought the same house, you would have $50,000 more after selling, no matter how much you sell it for. The fact that you overpaid for the home is permanent.

At any point in the future, no matter how much you sell the house for, you would have been better off had you paid what your neighbor did.

Sounds like we all need to be on massive amounts of opioids if the definition of “hurt” is that someone made more money than you did. You still have a roof over your head. Boo effing hoo if the neighbors made more money than you did.

“Sounds like we all need to be on massive amounts of opioids if the definition of “hurt” is that someone made more money than you did. You still have a roof over your head. Boo effing hoo if the neighbors made more money than you did.“

LOL… do you understand how paying for things works? If you pay more for a home than you should have, that is not someone making more money than you… it is you having less money. Since money is fungible and prices are increasing, what would you call it?

Your other assertion, that ”you still have a roof over your head,” is also incorrect, because what if you don’t. Foreclosures, are up 175% in one year and are expected to increase much further. Foreclosure starts are up more than 500% and past due mortgages are now sitting at more than 2%. Let’s not forget that we are facing an inverted yield curve right now and it is the 3 month / 10 year inversion, which is particularly concerning.

People being locked into an upside down house as money tightens is damaging to those people… so just because you are not hurt by this, doesn’t mean some people aren’t.

Well, I will admit that it's a first world problem, but it still hurts......we've been house hunting for well over a year. Trying to downsize. Housing stock in our area is very tight, and it's a solidly middle class area. We didn't win bidding wars multiple times, so we're still in the market. But, over the past few months, our too big and too fancy home has started to decrease in value at a much quicker rate than our target properties. Meanwhile, interest rates are shooting up, so when we do find a home, the mortgage will be much more expensive if we need one, which, given the declining value of larger homes in our area, we might.

Again, first world problem. We have a roof over our heads. We can pay the bills. But it hurts to be stuck in a home we wish we could get out of...and if we can get out of it, it hurts to take a financial hit to do so. Glad we're not too close to retirement....if we were, and downsizing was a big part of the game plan, retirement might be put on hold.

I really feel for potential first time buyers too....the craziness of the last two years, and now the interest rate increases mean more people are stuck renting. We were burned during the 2008 crash, so I know renting is not necessarily a bad thing, but so many are having to put off ownership which has a lot of value beyond just building equity.

Sit tight. It will swing your way.

Bank troubles.

Following "Roger Trock" who is a proven spam/editor.