Prices.... Going Up!!!
- Thread starter musichal
- Start date
I just got the pex and shark bite to do the upstairs bathroom which is over my new office before the carpet FINALLYSHOWSUPSOMEDAYIHOPE and just adding an outside frost free hose outlet and a in wall water source for the ice maker, my bill was over $300.
Mystic
We're all born mad
Soon enough, though gte next one ... or the ones after it ... might be in yuan.
Mystic
We're all born mad
^^^ Falling cost of lumbar aside, I've been studying this "sky is falling inflationary tocsins" for several weeks, before and especially since we started this thread.
Here's the thing: while there are, undoubtedly, many bubbles in the U.S. economy -- e.g. Bitcoin, the most obvious example -- we also have the proliferation of non-fungible tokens, as well as many stock prices that bear no relationship to plausible estimates of future earnings.
But none of this sets the stage for a 2008-2009 "type" economic collapse. Here's The Story Of The Great Recession, in case any of y'all have forgotten what went down.
In the years leading up to the Great Recession the housing bubble was driving the economy. This was easy to see for anyone who bothered to look at the GDP data the Commerce Department publishes every quarter. Residential construction had increased from its normal rate, which is around 3.5 percent of GDP, to a peak of 6.8 percent of GDP. Similarly, soaring house prices led to a consumption boom, as people spent based on the bubble created equity in their home.
When the bubble collapsed, and housing construction fell to less than 2.0 percent of GDP due to overbuilding during the bubble. There was nothing to replace the loss of 4.8 percentage points of GDP of annual demand (more than $1 trillion in today’s economy). Similarly, the bubble driven consumption boom collapsed, costing us another 3-4 percentage points in demand.
Simply put: the 2008-2009 financial crisis was just the market working its magic on the banks and other financial institutions that had been reckless in issuing and marketing loans.
So, let's return to June 2021.
A similar collapse in asset prices today would have no comparable impact on the real economy. If the roughly $1 trillion market capitalization in the digital currency market went to zero tomorrow, how would that affect the real economy? Bitcoin millionaires and The Billionaires would be disappointed, but who cares and so what? There would be no economy-wide plunge in consumption. The same is true with asset prices in other markets.
Thus have I come to regard most of the opinions and predictions being put forward by (so many!) persons whose only qualifications include (1) working for MSM or (2) managing "A Blog". What they are good at -- very good at in fact, is this: Irresponsible Fearmongering. And that's all.
PS: speaking of MSM sources, one of the worst -- or in this instance best -- examples of a writer spewing Irresponsible Fearmongering is NYTimes "economics analyst" Bill Cohan, an idiot when he's at his best and when he's not, oy.
Here's the thing: while there are, undoubtedly, many bubbles in the U.S. economy -- e.g. Bitcoin, the most obvious example -- we also have the proliferation of non-fungible tokens, as well as many stock prices that bear no relationship to plausible estimates of future earnings.
But none of this sets the stage for a 2008-2009 "type" economic collapse. Here's The Story Of The Great Recession, in case any of y'all have forgotten what went down.
In the years leading up to the Great Recession the housing bubble was driving the economy. This was easy to see for anyone who bothered to look at the GDP data the Commerce Department publishes every quarter. Residential construction had increased from its normal rate, which is around 3.5 percent of GDP, to a peak of 6.8 percent of GDP. Similarly, soaring house prices led to a consumption boom, as people spent based on the bubble created equity in their home.
When the bubble collapsed, and housing construction fell to less than 2.0 percent of GDP due to overbuilding during the bubble. There was nothing to replace the loss of 4.8 percentage points of GDP of annual demand (more than $1 trillion in today’s economy). Similarly, the bubble driven consumption boom collapsed, costing us another 3-4 percentage points in demand.
Simply put: the 2008-2009 financial crisis was just the market working its magic on the banks and other financial institutions that had been reckless in issuing and marketing loans.
So, let's return to June 2021.
A similar collapse in asset prices today would have no comparable impact on the real economy. If the roughly $1 trillion market capitalization in the digital currency market went to zero tomorrow, how would that affect the real economy? Bitcoin millionaires and The Billionaires would be disappointed, but who cares and so what? There would be no economy-wide plunge in consumption. The same is true with asset prices in other markets.
Thus have I come to regard most of the opinions and predictions being put forward by (so many!) persons whose only qualifications include (1) working for MSM or (2) managing "A Blog". What they are good at -- very good at in fact, is this: Irresponsible Fearmongering. And that's all.
PS: speaking of MSM sources, one of the worst -- or in this instance best -- examples of a writer spewing Irresponsible Fearmongering is NYTimes "economics analyst" Bill Cohan, an idiot when he's at his best and when he's not, oy.
Mystic
We're all born mad
^^^ PPS: speaking personally, I'm far more concerned about wage stagnation than inflation. Wage stagflation, a real phenomenon that started in earnest in the late 1960s as the power of unions, which had been quite strong under the National Labor Relations Act from the 1930s through the late 1950s and early 1960s, began to decline, with wage stagnation really taking hold (for good) starting in the late 1970s. As the cost of goods and services increase @ what are even modest & not unexpected rates, stagnant wages effectively imitate an inflationary state as spending power gradually declines. That's what's happening now in The States and in much of The EU Zone states, UK, and beyond. And we know why, the reason, the cause ... but one -- we -- cannot name that cause, as it will invite the inevitable political discourse.
Spitfirejoe
Cheap Audio Aficionado
It does "seem" that current inflationary forces are moderating, and that this recent run up in prices is explained by the economy simply roaring out of the slow down caused by the pandemic. Of course, time will tell...
What concerns me is the amount of cash being pumped into the markets, and the continued low (near zero) interest rates. Around here, people are building like there is no tomorrow. Housing is one thing (and is needed), but office space is growing like mad. I'm not sure we need that. The last time I saw this type of growth, entire sections of old cities fell to almost zero value, while the money moved to the new parts of town. I don't think that's going to be the case this time, but it makes me wonder...
In my small town (25,000) we have a new housing development going in that features "new starter" homes in the $150,000 range, and some duplexes, quads, 8 plexes, and apartments - all in the same area. We need the housing in those price ranges. There are also a few housing areas with higher priced homes (300 to 450 K), and two man-made lake areas with astoundingly high priced homes (for this town) up to 6 and even 7 figures. That's a lot for this area, but they are selling. We even have a new office space building going up, which is unheard of.
The old "downtown" area is suffering. There are some new small businesses making a stab at it; coffee shops, a custom bike shop, some antique dealers. Old line stores like hardware, men's clothing, etc. Are drying up and blowing away. This town is hell for restaurants. We're too close to Omaha for people who really "dine out", so a good restaurant struggles here. Fast food and casual dining is doing OK, I guess.
It's good to see prices moderating somewhat. I'm just concerned we haven't seen the end of this economic upset yet.
What concerns me is the amount of cash being pumped into the markets, and the continued low (near zero) interest rates. Around here, people are building like there is no tomorrow. Housing is one thing (and is needed), but office space is growing like mad. I'm not sure we need that. The last time I saw this type of growth, entire sections of old cities fell to almost zero value, while the money moved to the new parts of town. I don't think that's going to be the case this time, but it makes me wonder...
In my small town (25,000) we have a new housing development going in that features "new starter" homes in the $150,000 range, and some duplexes, quads, 8 plexes, and apartments - all in the same area. We need the housing in those price ranges. There are also a few housing areas with higher priced homes (300 to 450 K), and two man-made lake areas with astoundingly high priced homes (for this town) up to 6 and even 7 figures. That's a lot for this area, but they are selling. We even have a new office space building going up, which is unheard of.
The old "downtown" area is suffering. There are some new small businesses making a stab at it; coffee shops, a custom bike shop, some antique dealers. Old line stores like hardware, men's clothing, etc. Are drying up and blowing away. This town is hell for restaurants. We're too close to Omaha for people who really "dine out", so a good restaurant struggles here. Fast food and casual dining is doing OK, I guess.
It's good to see prices moderating somewhat. I'm just concerned we haven't seen the end of this economic upset yet.
I hope lumber prices come down, I just had a chair leg go through a soft board on my deck, so replacing the decking just moved to the top of the project list!
I think interest rates have to start going up at some point, they've been held super low for such a long time. Once mortgages get into the 5-10% range instead of the 2-3% range housing prices will start to correct themselves at least somewhat. Around here you're literally seeing burned out buildings listed for $500k, that's not sustainable.
I think interest rates have to start going up at some point, they've been held super low for such a long time. Once mortgages get into the 5-10% range instead of the 2-3% range housing prices will start to correct themselves at least somewhat. Around here you're literally seeing burned out buildings listed for $500k, that's not sustainable.
So what is it that's driving the economy today? Perhaps free money? What happens when that goes away? What happens when the Fed decides to raise interest rates (perhaps as a hedge against inflation)? Will people start dumping those overpriced stocks and buy bonds? They certainly won't be able to buy the houses they are now. Nor many other things that require financing.
The moratorium on foreclosures is due to expire at the end of this month (unless they extend it). How will the actual foreclosure of those properties affect the market?
Several other, world event things are going on (that I won't get into here) that will also be in play in the near future. All things considered (from my perspective), I don't see how we can avoid a worldwide recession, or worse.
As an aside: There was a local TV report about several rental apartments where the AC was not working (we're breaking heat records here) and the owner hasn't done anything about it. My first thought was to wonder how many of those tenants are taking advantage of the no evict laws currently in place. I realize that some have no money, and therefore no choice. However, without that income, perhaps the owner simply has no money for repairs. Of course, that wasn't mentioned in the report.
Mystic
We're all born mad
Valid points. My bet is that the Fed will not increase interest rates. Past that, there's a lot that could happen, including one or more (very large) international armed conflict(s) - always good for keeping the economy chugging along.
YY1
Addicted Member
Fed has already discussed raising interest twice this week.
No one ever talks about who pays the landlords bills when the tenants don't pay.
They don't qualify for covid based relief because they don't have any employees.
I think the housing bubble is unrelated to other factors as some if not most of those other factors seem to be mitigating themselves as supply chains come back on line.
No one ever talks about who pays the landlords bills when the tenants don't pay.
They don't qualify for covid based relief because they don't have any employees.
I think the housing bubble is unrelated to other factors as some if not most of those other factors seem to be mitigating themselves as supply chains come back on line.
well our effective annualized inflation rate for consumers is 20%, the fed SHOULD raise rates in 1 month tranches to 4%. yeah, its gonna increase cost for those that bought on time except fixed loans but I see car commercial after commercial for .9% and homes for 2.5-2.75
when the interest rate is less than a monthly inflation rate - you pay people to buy on credit. plus we dropped up to $7K in most families laps, tax free. bad decisions heaped on top of rotten monetary policy like we are pretending 1979 and 2009 never happened. you will note with glee that gold has dropped less than what it hit when I was in HS...so that hedge lost people money long term.
nothing is working the way it needs to at present.
when the interest rate is less than a monthly inflation rate - you pay people to buy on credit. plus we dropped up to $7K in most families laps, tax free. bad decisions heaped on top of rotten monetary policy like we are pretending 1979 and 2009 never happened. you will note with glee that gold has dropped less than what it hit when I was in HS...so that hedge lost people money long term.
nothing is working the way it needs to at present.
Uncle Fester
Super Member
I see a lot of the signs happening now that I saw in 2006, namely my modest home being valuated way past what it actually is worth.
Back in 2005 or 2006, I remember getting a call out of the blue from a realtor asking if I had considered selling my home. Houses were selling like hotcakes, with people not haggling over price, but offering thousands of dollars over asking price, knowing that
if they didn't, someone else would.
So, I asked her what I could get for my property, and she said three hundred and fifty thousand, easy. I was stunned. My house is small, converted cottage, no basement...there was no way I thought it would possibly be worth that much.
That was fifteen years ago....now?
Zillow has my property estimated at almost four hundred thousand....unbelievable.
We are probably heading for a plunge over a cliff of some kind.
Also, the stock market was overvalued at that time.
Back in 2005 or 2006, I remember getting a call out of the blue from a realtor asking if I had considered selling my home. Houses were selling like hotcakes, with people not haggling over price, but offering thousands of dollars over asking price, knowing that
if they didn't, someone else would.
So, I asked her what I could get for my property, and she said three hundred and fifty thousand, easy. I was stunned. My house is small, converted cottage, no basement...there was no way I thought it would possibly be worth that much.
That was fifteen years ago....now?
Zillow has my property estimated at almost four hundred thousand....unbelievable.
We are probably heading for a plunge over a cliff of some kind.
Also, the stock market was overvalued at that time.
Spitfirejoe
Cheap Audio Aficionado
My first house was purchased in 1982, I think. Brand new, but small with just less than 1000 sq. ft. on the main level, 3 bedrooms, one bath, double garage attached, nice yard with no landscaping. We paid $48,900. First mortgage was at 12.75% adjustable. (Remember those days?) That went down quickly, as I thought it would. We refinanced once to get it around 6%. I finished a large part of the basement to add a family room with a home theater and kid's play area, added a small "kitchenette" kind of area, and walled off the laundry. Painted the house before we sold it after 14 years. It needed a roof replacement, but it was clean and looked good. More than doubled my money - asked $99,900 and they offered an even $100 K.
Never, ever thought I could do that again.
Two neighbors recently listed their homes. One sold at about double what they paid for it 10 years ago. The other one just listed, but she only moved in 2 years ago and has listed it at about 175% or her purchase price. She's done some nice upgrades - wood floors, painted over some odd color choices by the previous owners, fenced the back yard. Previous owners STRUGGLED to sell the house 2 years ago, so I think she's being unrealistic with her price. I hope not, though! If she's correct, we could possibly double our money on this house when we move in a few years. Well, maybe not - I've put a LOT into it lately, and wife wants to do more. But still - a good "profit".
A good home is the best investment for the middle class. Always has been, maybe always will. A few years ago, I was advising younger people to think carefully before buying a home, and to buy in the RIGHT neighborhoods only. The ones that did buy are sitting on a huge run up in value - so they did very well. I didn't think that would happen, but low interest rates REALLY drive that part of this economy.
Agree that interest rates need to go up some. We are at the point where the fed has it's hands tied if things start to go south again. I don't think that's going to happen. We may have a "shake the nuts out of the trees" correction, but I don't see a recession happening. There is just too much activity in the economy for a recession - I think! Who knows...
Never, ever thought I could do that again.
Two neighbors recently listed their homes. One sold at about double what they paid for it 10 years ago. The other one just listed, but she only moved in 2 years ago and has listed it at about 175% or her purchase price. She's done some nice upgrades - wood floors, painted over some odd color choices by the previous owners, fenced the back yard. Previous owners STRUGGLED to sell the house 2 years ago, so I think she's being unrealistic with her price. I hope not, though! If she's correct, we could possibly double our money on this house when we move in a few years. Well, maybe not - I've put a LOT into it lately, and wife wants to do more. But still - a good "profit".
A good home is the best investment for the middle class. Always has been, maybe always will. A few years ago, I was advising younger people to think carefully before buying a home, and to buy in the RIGHT neighborhoods only. The ones that did buy are sitting on a huge run up in value - so they did very well. I didn't think that would happen, but low interest rates REALLY drive that part of this economy.
Agree that interest rates need to go up some. We are at the point where the fed has it's hands tied if things start to go south again. I don't think that's going to happen. We may have a "shake the nuts out of the trees" correction, but I don't see a recession happening. There is just too much activity in the economy for a recession - I think! Who knows...
Spitfirejoe
Cheap Audio Aficionado
Yeah...
I suppose we all think our past experience is going to repeat itself. They are selling their current homes at a "profit" and believe this new purchase will do the same. Maybe, maybe not. Only thing I've proven to myself is I have NO idea what the markets are going to do.
Brother has listed his house at over $600,000. Paid around $300K a long while ago. NICE house in a good area. No kids at home anymore, so he says they will live in an apartment for a couple years until he retires and then buy when prices come down to earth. They want to move to a different state at that point, and he believes this is the time to sell. Can't say I disagree.
Mystic
We're all born mad
Re: Rising Cost Of Housing in USA
The Joint Center for Housing Studies (JCHS) at Harvard University just released a report on this topic called The State Of The Nation's Housing 2021. (DL report here: https://www.jchs.harvard.edu/state-nations-housing-2021)
Executive Summary:
The main cause of the climbing cost for homes is that the unexpected;y rapid decrease in the number of homes for sale has produced double-digit percent increases in home prices.
The report states that the supply of existing homes for sale has never been tighter. The combination of robust demand and limited supply lifted home prices to their fastest pace in over a decade.
As of February 2021, the number of homes on the market had fallen 37 percent over the last two years, the report found. Only 870,000 single-family homes are available for sale, the lowest number since 1982. Meanwhile, home prices rose 13 percent year over year as of March 2021 nationally. In certain "hot markets", e.g., Austin (TX), prices rose by over 20 percent.
The report notes that record-high building material costs aren't helping matters. The price of new home construction inputs has increased 14 percent over the past year, with softwood lumber prices alone jumping 83 percent, according to the JCHS study. That's added $36,000 on average to the cost of a new single-family home. Also, U.S. tarifs on Canadian lumber are only fueling these cost increases.
Finally, higher demand for homes—produced by a mix of low interest rates, high rates of household formation, and an explosion in remote work—have also contributed to the price spike.
Also noteworthy is that housing construction fell 5.5 million units short of historic levels over the past 20 years, according to a report from the National Association of Realtors (NAR).
(DL NAR report: https://www.nar.realtor/newsroom/on...ponse-needed-to-address-housing-supply-crisis)
So, it seems that classical economics, i.e., the law(s) of supply and demand, are the most likely cause for the seemingly sudden, skyrocketing price rise in homes.
Not much opportunity for a "buble" to burst where a nation has ~ 870,000 units available and hundreds of thousands of buyers ... including such hedge fund giants as State Street and BlackRock, which are buying up thousands of SFH as part of their RE investment portfolios.
The Joint Center for Housing Studies (JCHS) at Harvard University just released a report on this topic called The State Of The Nation's Housing 2021. (DL report here: https://www.jchs.harvard.edu/state-nations-housing-2021)
Executive Summary:
The main cause of the climbing cost for homes is that the unexpected;y rapid decrease in the number of homes for sale has produced double-digit percent increases in home prices.
The report states that the supply of existing homes for sale has never been tighter. The combination of robust demand and limited supply lifted home prices to their fastest pace in over a decade.
As of February 2021, the number of homes on the market had fallen 37 percent over the last two years, the report found. Only 870,000 single-family homes are available for sale, the lowest number since 1982. Meanwhile, home prices rose 13 percent year over year as of March 2021 nationally. In certain "hot markets", e.g., Austin (TX), prices rose by over 20 percent.
The report notes that record-high building material costs aren't helping matters. The price of new home construction inputs has increased 14 percent over the past year, with softwood lumber prices alone jumping 83 percent, according to the JCHS study. That's added $36,000 on average to the cost of a new single-family home. Also, U.S. tarifs on Canadian lumber are only fueling these cost increases.
Finally, higher demand for homes—produced by a mix of low interest rates, high rates of household formation, and an explosion in remote work—have also contributed to the price spike.
Also noteworthy is that housing construction fell 5.5 million units short of historic levels over the past 20 years, according to a report from the National Association of Realtors (NAR).
(DL NAR report: https://www.nar.realtor/newsroom/on...ponse-needed-to-address-housing-supply-crisis)
So, it seems that classical economics, i.e., the law(s) of supply and demand, are the most likely cause for the seemingly sudden, skyrocketing price rise in homes.
Not much opportunity for a "buble" to burst where a nation has ~ 870,000 units available and hundreds of thousands of buyers ... including such hedge fund giants as State Street and BlackRock, which are buying up thousands of SFH as part of their RE investment portfolios.
