Real Estate Bubble? A Repeat of 2008?

https://fred.stlouisfed.org/series/csushpinsa

The rise of the S&P/Case-Shiller U.S. National Home Price Index graph line is roughly rising at twice the rate of the lead up to the 2008 real estate implosion. And interest rates will be rising to fight inflation.
How does this end well?

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How does this end well?

Declare victory and walk away from it, telling the public it is the fault of the other side if they screw up the victory already declared.

In 1990 a bunch of families were transferred to central NJ after being acquired by another company. It was right after the real estate bubble had burst.

We were told that no-one had sold a house in my development (of 102 houses) in two years. They were not willing to sell at a loss wiping out equity.

You might suspect that only a foreclosure would put a house on the market. And wouldn’t the mortgage holder rather wait for better prices too.

It probably does mean a major slow down in new house construction. Unless they can build them smaller and cheaper. The impact should be deflation in materials prices and maybe labor.

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build them smaller and cheaper.

High rises reduce the cost of land per unit built–if land is the single largest factor in the price of a residence. However, that does not work with single family dwellings.

The current trend will continue: Working from home (at least part time) becomes more the norm. That means a shifting of the cost of a house because part of it can then be written off as a business expense. If a job is 100% work from home, then the person can be anywhere in the world as long as he/she has a good Internet connection. Some outstate (i.e. outside the big cities) telephone/cable companies installed fiber optic cable for this specific reason. To attract relatively high-tech businesses to areas with a significantly lower cost of living yet with access to the Internet tools the target businesses need to attract and retain good employees.

If we get a repeat of 2008, I may upgrade to a home with a golf simulator.

intercst

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The rise of the S&P/Case-Shiller U.S. National Home Price Index graph line is roughly rising at twice the rate of the lead up to the 2008 real estate implosion. And interest rates will be rising to fight inflation.

The reasons for the 2008 bubble, weak loan criteria, has nothing to do with today’s supply/demand driven rise in prices. Interest rates are still sub 4% for a 30 year FRM, (at least as of a couple weeks ago,) and indeed in 2008 the rate was higher at 5.76%. http://www.freddiemac.com/pmms/pmms30.html

The way that housing prices will stop rising will come when there is equilibrium between supply and demand. Rising inflation will impact the new build housing market harder than the existing re-sale market, as labor and materials and land rise in price. This will have the effect of keeping housing supply constrained, while not meaningfully decreasing demand. Rising income will have to be applied to housing, and there may be a need to buy less than you used to be able to afford, but renters have seen how unstable the rental market is for them with rents spiking everywhere. IMO the only way we will see a large impact on housing is if the mega corporation buying of single family homes to put in the rental market sours, and the corporations decide it is no longer an attractive pursuit. This could come about by government regulation, but would mean elimination of a free market.

Short term, with rising rates, rising rents and ever decreasing supply of homes for sale, demand is spiking. Even our 24 year old, who is moving to a hot housing market, is expressing a desire to buy ASAP as fear of getting stuck in skyrocketing rents sets in. It’s worse than FOMO, given you have to live somewhere, and missing out is not an option. I expect gov’t intervention limiting tax benefits of holding real estate for those with more than 10 properties, (or so,) but probably not anytime soon. Lots on their plate.

IP,
holding for now, but no longer considering selling in the next year or two

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