Federal Reserve: signs abound that housing market is entering bubble territory

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Be wary of over confidence on either side. For my job I get exposure to some of the greatest minds on finance, and the amount of folks that predicted that the market would hit all time highs in the midst of record setting coronavirus numbers and new variants is zilch. The point being, people on an anonymous forum, most of whom are lawyers, doctors, lobbyists, stay at home moms, won’t be able to predict what happens to asset prices, so stop mentally masturbating on here even though it can be fun because it’s a waste of time.

They didn't predict a record high because it is fake.

All US assets from housing to stocks are grossly overvalued because of the Federal Reserve, massive amounts of money printing, massive injection of multi trillion dollar stimuluses, and too much credit liquidity. It is a fake diabetic sugar rush. Bubbles built on cheap and easy money they produce an environment of irrational exuberance when people all think stocks or housing only ever go up always end so badly when the sugar rush ends.

Agree on stock market.

Housing is different. People need a place to live. Unless people are foreclosing we won’t have a bubble “pop”.

This is EXACTLY (word for word) what all of the economists said when they were explaining why there wouldn’t be a crises in 2007.

I don’t know if the bubble will pop or not, but people saying stuff like this to explain why it won’t makes me think it’s more likely, rather than less.

It’s much different today. Predatory lending is not rampant. ARM loans aren’t going to jump out of control.

People were foreclosing because they were in precarious financial situations. That’s not the case today.

There are many ways asset bubbles can pop. I think the point PP was making was that in 2007 people were saying housing can’t pop because people will always need a place to live. They were wrong.

But since you mentioned precarious financial positions, it is way worse today. In the early 2000s, loan products were developed to allow nontraditional (subprime) borrowers buy a house. Looser lending standards, ARMs to bring down their interest rates, etc. This caused an increase in demand for housing, which lead to irrational exuberance (aka FOMO) and spurred a building boom. Turned out there were plenty of houses and then too many houses, and prices started to decline. When ARMs reset, people who had stretch could no longer afford their mortgage, but also could not sell for what they bought it for so they walked away. The banks holding these mortgages were screwed and by 2008 a liquidity crisis ensued. While banks went under, the stock market crashed, and people loss their jobs. It was during this recession that people REALLy started losing their homes. No job, no mortgage payment. So yes sub prime lending was like a match in the tinderbox, but there are other ways to pop that bubble, including other factors that could cause people to not be able to afford their mortgage.

In 2020, low interest rates, government stimulus, investment activity, and Covid lifestyle issues created a huge surge of demand that has lead to a very similar irrational exuberance (must buy now before I’m priced out forever!). These factors driving demand are truly transitory, and only the exuberance remains. But that exuberance is waning as interest rates have skyrocketed and make real estate look like not that great of a return in your investment anymore. The Fed is deliberately slowing down the economy. People will spend less and lose jobs (Powell himself said employment is too high!). More new houses in the pipeline than since 2006. And with inflation, people who stretched to the top of their preapprovals last year (see Dallas Fed article on price-income ratios) could really have a hard time making ends meet. In 2008, ARM adjustment is what sent these people over their limit - why not gas prices, food prices, and job loss in 2022-23?

I definitely think assets of all types are overvalued and we could be headed for a recession. That said, real estate is actually a buffer against inflation. If inflation continues at 7%/year, your mortgage payment gets 7% cheaper. It's definitely worse to be renting in a high-inflation situation

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Be wary of over confidence on either side. For my job I get exposure to some of the greatest minds on finance, and the amount of folks that predicted that the market would hit all time highs in the midst of record setting coronavirus numbers and new variants is zilch. The point being, people on an anonymous forum, most of whom are lawyers, doctors, lobbyists, stay at home moms, won’t be able to predict what happens to asset prices, so stop mentally masturbating on here even though it can be fun because it’s a waste of time.

They didn't predict a record high because it is fake.

All US assets from housing to stocks are grossly overvalued because of the Federal Reserve, massive amounts of money printing, massive injection of multi trillion dollar stimuluses, and too much credit liquidity. It is a fake diabetic sugar rush. Bubbles built on cheap and easy money they produce an environment of irrational exuberance when people all think stocks or housing only ever go up always end so badly when the sugar rush ends.

Agree on stock market.

Housing is different. People need a place to live. Unless people are foreclosing we won’t have a bubble “pop”.

This is EXACTLY (word for word) what all of the economists said when they were explaining why there wouldn’t be a crises in 2007.

I don’t know if the bubble will pop or not, but people saying stuff like this to explain why it won’t makes me think it’s more likely, rather than less.

It’s much different today. Predatory lending is not rampant. ARM loans aren’t going to jump out of control.

People were foreclosing because they were in precarious financial situations. That’s not the case today.

There are many ways asset bubbles can pop. I think the point PP was making was that in 2007 people were saying housing can’t pop because people will always need a place to live. They were wrong.

But since you mentioned precarious financial positions, it is way worse today. In the early 2000s, loan products were developed to allow nontraditional (subprime) borrowers buy a house. Looser lending standards, ARMs to bring down their interest rates, etc. This caused an increase in demand for housing, which lead to irrational exuberance (aka FOMO) and spurred a building boom. Turned out there were plenty of houses and then too many houses, and prices started to decline. When ARMs reset, people who had stretch could no longer afford their mortgage, but also could not sell for what they bought it for so they walked away. The banks holding these mortgages were screwed and by 2008 a liquidity crisis ensued. While banks went under, the stock market crashed, and people loss their jobs. It was during this recession that people REALLy started losing their homes. No job, no mortgage payment. So yes sub prime lending was like a match in the tinderbox, but there are other ways to pop that bubble, including other factors that could cause people to not be able to afford their mortgage.

In 2020, low interest rates, government stimulus, investment activity, and Covid lifestyle issues created a huge surge of demand that has lead to a very similar irrational exuberance (must buy now before I’m priced out forever!). These factors driving demand are truly transitory, and only the exuberance remains. But that exuberance is waning as interest rates have skyrocketed and make real estate look like not that great of a return in your investment anymore. The Fed is deliberately slowing down the economy. People will spend less and lose jobs (Powell himself said employment is too high!). More new houses in the pipeline than since 2006. And with inflation, people who stretched to the top of their preapprovals last year (see Dallas Fed article on price-income ratios) could really have a hard time making ends meet. In 2008, ARM adjustment is what sent these people over their limit - why not gas prices, food prices, and job loss in 2022-23?

Increases in gas & food prices for people in good financial positions aren’t comparable to skyrocketing mortgage payments for people who never should have had those loans.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Be wary of over confidence on either side. For my job I get exposure to some of the greatest minds on finance, and the amount of folks that predicted that the market would hit all time highs in the midst of record setting coronavirus numbers and new variants is zilch. The point being, people on an anonymous forum, most of whom are lawyers, doctors, lobbyists, stay at home moms, won’t be able to predict what happens to asset prices, so stop mentally masturbating on here even though it can be fun because it’s a waste of time.

They didn't predict a record high because it is fake.

All US assets from housing to stocks are grossly overvalued because of the Federal Reserve, massive amounts of money printing, massive injection of multi trillion dollar stimuluses, and too much credit liquidity. It is a fake diabetic sugar rush. Bubbles built on cheap and easy money they produce an environment of irrational exuberance when people all think stocks or housing only ever go up always end so badly when the sugar rush ends.

Agree on stock market.

Housing is different. People need a place to live. Unless people are foreclosing we won’t have a bubble “pop”.

This is EXACTLY (word for word) what all of the economists said when they were explaining why there wouldn’t be a crises in 2007.

I don’t know if the bubble will pop or not, but people saying stuff like this to explain why it won’t makes me think it’s more likely, rather than less.

It’s much different today. Predatory lending is not rampant. ARM loans aren’t going to jump out of control.

People were foreclosing because they were in precarious financial situations. That’s not the case today.

No, people were for closing because they were in precarious financial situations and they could not sell their house for what they bought it for.

Do you really think everyone who bought at the top of their DTI last year is in a great financial spot? Do you not see how inflation is affecting everyday Americans? What about the impending recession?

They were trying to sell because they couldn’t pay the mortgage.

Gas & food increases aren’t comparable to huge jumps in mortgages. People can adjust their driving and eating habits. They can’t adjust their mortgage payment.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Be wary of over confidence on either side. For my job I get exposure to some of the greatest minds on finance, and the amount of folks that predicted that the market would hit all time highs in the midst of record setting coronavirus numbers and new variants is zilch. The point being, people on an anonymous forum, most of whom are lawyers, doctors, lobbyists, stay at home moms, won’t be able to predict what happens to asset prices, so stop mentally masturbating on here even though it can be fun because it’s a waste of time.

They didn't predict a record high because it is fake.

All US assets from housing to stocks are grossly overvalued because of the Federal Reserve, massive amounts of money printing, massive injection of multi trillion dollar stimuluses, and too much credit liquidity. It is a fake diabetic sugar rush. Bubbles built on cheap and easy money they produce an environment of irrational exuberance when people all think stocks or housing only ever go up always end so badly when the sugar rush ends.

Agree on stock market.

Housing is different. People need a place to live. Unless people are foreclosing we won’t have a bubble “pop”.

This is EXACTLY (word for word) what all of the economists said when they were explaining why there wouldn’t be a crises in 2007.

I don’t know if the bubble will pop or not, but people saying stuff like this to explain why it won’t makes me think it’s more likely, rather than less.

It’s much different today. Predatory lending is not rampant. ARM loans aren’t going to jump out of control.

People were foreclosing because they were in precarious financial situations. That’s not the case today.

No, people were for closing because they were in precarious financial situations and they could not sell their house for what they bought it for.

Do you really think everyone who bought at the top of their DTI last year is in a great financial spot? Do you not see how inflation is affecting everyday Americans? What about the impending recession?

They were trying to sell because they couldn’t pay the mortgage.

Gas & food increases aren’t comparable to huge jumps in mortgages. People can adjust their driving and eating habits. They can’t adjust their mortgage payment.

Sure you can. You can get roommates. You can rent out your place and move somewhere cheaper.

[Anonymous]

What % of mortgages are low down payment?

https://jfi.pm-research.com/content/31/1/27
“ Low initial down payment mortgages are significantly more likely to become seriously delinquent (90 days or more) than mortgages with traditional down payments of 20% or more.”

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Be wary of over confidence on either side. For my job I get exposure to some of the greatest minds on finance, and the amount of folks that predicted that the market would hit all time highs in the midst of record setting coronavirus numbers and new variants is zilch. The point being, people on an anonymous forum, most of whom are lawyers, doctors, lobbyists, stay at home moms, won’t be able to predict what happens to asset prices, so stop mentally masturbating on here even though it can be fun because it’s a waste of time.

They didn't predict a record high because it is fake.

All US assets from housing to stocks are grossly overvalued because of the Federal Reserve, massive amounts of money printing, massive injection of multi trillion dollar stimuluses, and too much credit liquidity. It is a fake diabetic sugar rush. Bubbles built on cheap and easy money they produce an environment of irrational exuberance when people all think stocks or housing only ever go up always end so badly when the sugar rush ends.

Agree on stock market.

Housing is different. People need a place to live. Unless people are foreclosing we won’t have a bubble “pop”.

This is EXACTLY (word for word) what all of the economists said when they were explaining why there wouldn’t be a crises in 2007.

I don’t know if the bubble will pop or not, but people saying stuff like this to explain why it won’t makes me think it’s more likely, rather than less.

It’s much different today. Predatory lending is not rampant. ARM loans aren’t going to jump out of control.

People were foreclosing because they were in precarious financial situations. That’s not the case today.

There are many ways asset bubbles can pop. I think the point PP was making was that in 2007 people were saying housing can’t pop because people will always need a place to live. They were wrong.

But since you mentioned precarious financial positions, it is way worse today. In the early 2000s, loan products were developed to allow nontraditional (subprime) borrowers buy a house. Looser lending standards, ARMs to bring down their interest rates, etc. This caused an increase in demand for housing, which lead to irrational exuberance (aka FOMO) and spurred a building boom. Turned out there were plenty of houses and then too many houses, and prices started to decline. When ARMs reset, people who had stretch could no longer afford their mortgage, but also could not sell for what they bought it for so they walked away. The banks holding these mortgages were screwed and by 2008 a liquidity crisis ensued. While banks went under, the stock market crashed, and people loss their jobs. It was during this recession that people REALLy started losing their homes. No job, no mortgage payment. So yes sub prime lending was like a match in the tinderbox, but there are other ways to pop that bubble, including other factors that could cause people to not be able to afford their mortgage.

In 2020, low interest rates, government stimulus, investment activity, and Covid lifestyle issues created a huge surge of demand that has lead to a very similar irrational exuberance (must buy now before I’m priced out forever!). These factors driving demand are truly transitory, and only the exuberance remains. But that exuberance is waning as interest rates have skyrocketed and make real estate look like not that great of a return in your investment anymore. The Fed is deliberately slowing down the economy. People will spend less and lose jobs (Powell himself said employment is too high!). More new houses in the pipeline than since 2006. And with inflation, people who stretched to the top of their preapprovals last year (see Dallas Fed article on price-income ratios) could really have a hard time making ends meet. In 2008, ARM adjustment is what sent these people over their limit - why not gas prices, food prices, and job loss in 2022-23?

But we don't have the over-supply issues we had in 2007-2008. We literally lost a decade of building capacity after the Financial Crisis. We still have a big supply shortage, particularly in areas within 45 minutes of major job centers.

Sure, there's plenty of 1BR apartments out there. But the 3BR and 4BR houses that families need are in very short supply and are selling at a huge premium.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Be wary of over confidence on either side. For my job I get exposure to some of the greatest minds on finance, and the amount of folks that predicted that the market would hit all time highs in the midst of record setting coronavirus numbers and new variants is zilch. The point being, people on an anonymous forum, most of whom are lawyers, doctors, lobbyists, stay at home moms, won’t be able to predict what happens to asset prices, so stop mentally masturbating on here even though it can be fun because it’s a waste of time.

They didn't predict a record high because it is fake.

All US assets from housing to stocks are grossly overvalued because of the Federal Reserve, massive amounts of money printing, massive injection of multi trillion dollar stimuluses, and too much credit liquidity. It is a fake diabetic sugar rush. Bubbles built on cheap and easy money they produce an environment of irrational exuberance when people all think stocks or housing only ever go up always end so badly when the sugar rush ends.

Agree on stock market.

Housing is different. People need a place to live. Unless people are foreclosing we won’t have a bubble “pop”.

This is EXACTLY (word for word) what all of the economists said when they were explaining why there wouldn’t be a crises in 2007.

I don’t know if the bubble will pop or not, but people saying stuff like this to explain why it won’t makes me think it’s more likely, rather than less.

It’s much different today. Predatory lending is not rampant. ARM loans aren’t going to jump out of control.

People were foreclosing because they were in precarious financial situations. That’s not the case today.

There are many ways asset bubbles can pop. I think the point PP was making was that in 2007 people were saying housing can’t pop because people will always need a place to live. They were wrong.

But since you mentioned precarious financial positions, it is way worse today. In the early 2000s, loan products were developed to allow nontraditional (subprime) borrowers buy a house. Looser lending standards, ARMs to bring down their interest rates, etc. This caused an increase in demand for housing, which lead to irrational exuberance (aka FOMO) and spurred a building boom. Turned out there were plenty of houses and then too many houses, and prices started to decline. When ARMs reset, people who had stretch could no longer afford their mortgage, but also could not sell for what they bought it for so they walked away. The banks holding these mortgages were screwed and by 2008 a liquidity crisis ensued. While banks went under, the stock market crashed, and people loss their jobs. It was during this recession that people REALLy started losing their homes. No job, no mortgage payment. So yes sub prime lending was like a match in the tinderbox, but there are other ways to pop that bubble, including other factors that could cause people to not be able to afford their mortgage.

In 2020, low interest rates, government stimulus, investment activity, and Covid lifestyle issues created a huge surge of demand that has lead to a very similar irrational exuberance (must buy now before I’m priced out forever!). These factors driving demand are truly transitory, and only the exuberance remains. But that exuberance is waning as interest rates have skyrocketed and make real estate look like not that great of a return in your investment anymore. The Fed is deliberately slowing down the economy. People will spend less and lose jobs (Powell himself said employment is too high!). More new houses in the pipeline than since 2006. And with inflation, people who stretched to the top of their preapprovals last year (see Dallas Fed article on price-income ratios) could really have a hard time making ends meet. In 2008, ARM adjustment is what sent these people over their limit - why not gas prices, food prices, and job loss in 2022-23?

But we don't have the over-supply issues we had in 2007-2008. We literally lost a decade of building capacity after the Financial Crisis. We still have a big supply shortage, particularly in areas within 45 minutes of major job centers.

Sure, there's plenty of 1BR apartments out there. But the 3BR and 4BR houses that families need are in very short supply and are selling at a huge premium.

Really? Then why such a big and drastic jump in 2020-21? What were those families doing before? Do you think America just grew a bunch of families in the summer of 2020?

We are about to have a major oversupply issue once the houses in the pipeline hit the market.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Be wary of over confidence on either side. For my job I get exposure to some of the greatest minds on finance, and the amount of folks that predicted that the market would hit all time highs in the midst of record setting coronavirus numbers and new variants is zilch. The point being, people on an anonymous forum, most of whom are lawyers, doctors, lobbyists, stay at home moms, won’t be able to predict what happens to asset prices, so stop mentally masturbating on here even though it can be fun because it’s a waste of time.

They didn't predict a record high because it is fake.

All US assets from housing to stocks are grossly overvalued because of the Federal Reserve, massive amounts of money printing, massive injection of multi trillion dollar stimuluses, and too much credit liquidity. It is a fake diabetic sugar rush. Bubbles built on cheap and easy money they produce an environment of irrational exuberance when people all think stocks or housing only ever go up always end so badly when the sugar rush ends.

Agree on stock market.

Housing is different. People need a place to live. Unless people are foreclosing we won’t have a bubble “pop”.

This is EXACTLY (word for word) what all of the economists said when they were explaining why there wouldn’t be a crises in 2007.

I don’t know if the bubble will pop or not, but people saying stuff like this to explain why it won’t makes me think it’s more likely, rather than less.

It’s much different today. Predatory lending is not rampant. ARM loans aren’t going to jump out of control.

People were foreclosing because they were in precarious financial situations. That’s not the case today.

There are many ways asset bubbles can pop. I think the point PP was making was that in 2007 people were saying housing can’t pop because people will always need a place to live. They were wrong.

But since you mentioned precarious financial positions, it is way worse today. In the early 2000s, loan products were developed to allow nontraditional (subprime) borrowers buy a house. Looser lending standards, ARMs to bring down their interest rates, etc. This caused an increase in demand for housing, which lead to irrational exuberance (aka FOMO) and spurred a building boom. Turned out there were plenty of houses and then too many houses, and prices started to decline. When ARMs reset, people who had stretch could no longer afford their mortgage, but also could not sell for what they bought it for so they walked away. The banks holding these mortgages were screwed and by 2008 a liquidity crisis ensued. While banks went under, the stock market crashed, and people loss their jobs. It was during this recession that people REALLy started losing their homes. No job, no mortgage payment. So yes sub prime lending was like a match in the tinderbox, but there are other ways to pop that bubble, including other factors that could cause people to not be able to afford their mortgage.

In 2020, low interest rates, government stimulus, investment activity, and Covid lifestyle issues created a huge surge of demand that has lead to a very similar irrational exuberance (must buy now before I’m priced out forever!). These factors driving demand are truly transitory, and only the exuberance remains. But that exuberance is waning as interest rates have skyrocketed and make real estate look like not that great of a return in your investment anymore. The Fed is deliberately slowing down the economy. People will spend less and lose jobs (Powell himself said employment is too high!). More new houses in the pipeline than since 2006. And with inflation, people who stretched to the top of their preapprovals last year (see Dallas Fed article on price-income ratios) could really have a hard time making ends meet. In 2008, ARM adjustment is what sent these people over their limit - why not gas prices, food prices, and job loss in 2022-23?

But we don't have the over-supply issues we had in 2007-2008. We literally lost a decade of building capacity after the Financial Crisis. We still have a big supply shortage, particularly in areas within 45 minutes of major job centers.

Sure, there's plenty of 1BR apartments out there. But the 3BR and 4BR houses that families need are in very short supply and are selling at a huge premium.

Really? Then why such a big and drastic jump in 2020-21? What were those families doing before? Do you think America just grew a bunch of families in the summer of 2020?

We are about to have a major oversupply issue once the houses in the pipeline hit the market.

So the market will soften wherever those homes are being built. Note: not existing hot markets with limited new construction - like inner DC area.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Be wary of over confidence on either side. For my job I get exposure to some of the greatest minds on finance, and the amount of folks that predicted that the market would hit all time highs in the midst of record setting coronavirus numbers and new variants is zilch. The point being, people on an anonymous forum, most of whom are lawyers, doctors, lobbyists, stay at home moms, won’t be able to predict what happens to asset prices, so stop mentally masturbating on here even though it can be fun because it’s a waste of time.

They didn't predict a record high because it is fake.

All US assets from housing to stocks are grossly overvalued because of the Federal Reserve, massive amounts of money printing, massive injection of multi trillion dollar stimuluses, and too much credit liquidity. It is a fake diabetic sugar rush. Bubbles built on cheap and easy money they produce an environment of irrational exuberance when people all think stocks or housing only ever go up always end so badly when the sugar rush ends.

Agree on stock market.

Housing is different. People need a place to live. Unless people are foreclosing we won’t have a bubble “pop”.

This is EXACTLY (word for word) what all of the economists said when they were explaining why there wouldn’t be a crises in 2007.

I don’t know if the bubble will pop or not, but people saying stuff like this to explain why it won’t makes me think it’s more likely, rather than less.

It’s much different today. Predatory lending is not rampant. ARM loans aren’t going to jump out of control.

People were foreclosing because they were in precarious financial situations. That’s not the case today.

There are many ways asset bubbles can pop. I think the point PP was making was that in 2007 people were saying housing can’t pop because people will always need a place to live. They were wrong.

But since you mentioned precarious financial positions, it is way worse today. In the early 2000s, loan products were developed to allow nontraditional (subprime) borrowers buy a house. Looser lending standards, ARMs to bring down their interest rates, etc. This caused an increase in demand for housing, which lead to irrational exuberance (aka FOMO) and spurred a building boom. Turned out there were plenty of houses and then too many houses, and prices started to decline. When ARMs reset, people who had stretch could no longer afford their mortgage, but also could not sell for what they bought it for so they walked away. The banks holding these mortgages were screwed and by 2008 a liquidity crisis ensued. While banks went under, the stock market crashed, and people loss their jobs. It was during this recession that people REALLy started losing their homes. No job, no mortgage payment. So yes sub prime lending was like a match in the tinderbox, but there are other ways to pop that bubble, including other factors that could cause people to not be able to afford their mortgage.

In 2020, low interest rates, government stimulus, investment activity, and Covid lifestyle issues created a huge surge of demand that has lead to a very similar irrational exuberance (must buy now before I’m priced out forever!). These factors driving demand are truly transitory, and only the exuberance remains. But that exuberance is waning as interest rates have skyrocketed and make real estate look like not that great of a return in your investment anymore. The Fed is deliberately slowing down the economy. People will spend less and lose jobs (Powell himself said employment is too high!). More new houses in the pipeline than since 2006. And with inflation, people who stretched to the top of their preapprovals last year (see Dallas Fed article on price-income ratios) could really have a hard time making ends meet. In 2008, ARM adjustment is what sent these people over their limit - why not gas prices, food prices, and job loss in 2022-23?

But we don't have the over-supply issues we had in 2007-2008. We literally lost a decade of building capacity after the Financial Crisis. We still have a big supply shortage, particularly in areas within 45 minutes of major job centers.

Sure, there's plenty of 1BR apartments out there. But the 3BR and 4BR houses that families need are in very short supply and are selling at a huge premium.

Really? Then why such a big and drastic jump in 2020-21? What were those families doing before? Do you think America just grew a bunch of families in the summer of 2020?

We are about to have a major oversupply issue once the houses in the pipeline hit the market.

Uh, yes. Millennials are now in their PRIME family formation years: 2018 to 2026. These are the children of Boomers, who now have significant housing demands. And the Boomers have been loathe to downsize, which is keeping inventory locked up and under-utilized.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Be wary of over confidence on either side. For my job I get exposure to some of the greatest minds on finance, and the amount of folks that predicted that the market would hit all time highs in the midst of record setting coronavirus numbers and new variants is zilch. The point being, people on an anonymous forum, most of whom are lawyers, doctors, lobbyists, stay at home moms, won’t be able to predict what happens to asset prices, so stop mentally masturbating on here even though it can be fun because it’s a waste of time.

They didn't predict a record high because it is fake.

All US assets from housing to stocks are grossly overvalued because of the Federal Reserve, massive amounts of money printing, massive injection of multi trillion dollar stimuluses, and too much credit liquidity. It is a fake diabetic sugar rush. Bubbles built on cheap and easy money they produce an environment of irrational exuberance when people all think stocks or housing only ever go up always end so badly when the sugar rush ends.

Agree on stock market.

Housing is different. People need a place to live. Unless people are foreclosing we won’t have a bubble “pop”.

This is EXACTLY (word for word) what all of the economists said when they were explaining why there wouldn’t be a crises in 2007.

I don’t know if the bubble will pop or not, but people saying stuff like this to explain why it won’t makes me think it’s more likely, rather than less.

It’s much different today. Predatory lending is not rampant. ARM loans aren’t going to jump out of control.

People were foreclosing because they were in precarious financial situations. That’s not the case today.

There are many ways asset bubbles can pop. I think the point PP was making was that in 2007 people were saying housing can’t pop because people will always need a place to live. They were wrong.

But since you mentioned precarious financial positions, it is way worse today. In the early 2000s, loan products were developed to allow nontraditional (subprime) borrowers buy a house. Looser lending standards, ARMs to bring down their interest rates, etc. This caused an increase in demand for housing, which lead to irrational exuberance (aka FOMO) and spurred a building boom. Turned out there were plenty of houses and then too many houses, and prices started to decline. When ARMs reset, people who had stretch could no longer afford their mortgage, but also could not sell for what they bought it for so they walked away. The banks holding these mortgages were screwed and by 2008 a liquidity crisis ensued. While banks went under, the stock market crashed, and people loss their jobs. It was during this recession that people REALLy started losing their homes. No job, no mortgage payment. So yes sub prime lending was like a match in the tinderbox, but there are other ways to pop that bubble, including other factors that could cause people to not be able to afford their mortgage.

In 2020, low interest rates, government stimulus, investment activity, and Covid lifestyle issues created a huge surge of demand that has lead to a very similar irrational exuberance (must buy now before I’m priced out forever!). These factors driving demand are truly transitory, and only the exuberance remains. But that exuberance is waning as interest rates have skyrocketed and make real estate look like not that great of a return in your investment anymore. The Fed is deliberately slowing down the economy. People will spend less and lose jobs (Powell himself said employment is too high!). More new houses in the pipeline than since 2006. And with inflation, people who stretched to the top of their preapprovals last year (see Dallas Fed article on price-income ratios) could really have a hard time making ends meet. In 2008, ARM adjustment is what sent these people over their limit - why not gas prices, food prices, and job loss in 2022-23?

But we don't have the over-supply issues we had in 2007-2008. We literally lost a decade of building capacity after the Financial Crisis. We still have a big supply shortage, particularly in areas within 45 minutes of major job centers.

Sure, there's plenty of 1BR apartments out there. But the 3BR and 4BR houses that families need are in very short supply and are selling at a huge premium.

Really? Then why such a big and drastic jump in 2020-21? What were those families doing before? Do you think America just grew a bunch of families in the summer of 2020?

We are about to have a major oversupply issue once the houses in the pipeline hit the market.

Uh, yes. Millennials are now in their PRIME family formation years: 2018 to 2026. These are the children of Boomers, who now have significant housing demands. And the Boomers have been loathe to downsize, which is keeping inventory locked up and under-utilized.

Uh huh. And what were they doing before? And do you think there were no families before millennials? It’s not like there’s some sort of magic cutoff that just so happened to coincide with summer 2020.

[Anonymous]

Anonymous wrote:

Anonymous wrote:A research note written by economists at the Dallas Fed do not speak for "The Fed" (ie., the Board of Governors).

The regional Federal Reserve Banks have full license to publish whatever they want when it comes to research, predictions, etc. This article was not vetted by anyone at the Fed Board nor does it speak on behalf of "The Fed."

The language used in the note is quite measured and there's a bunch of posters on this thread (trolls?) who are sensationalizing the research note and adding hyperbole.

This is correct.

The Federal Reserve Bank of Dallas is part of the Federal Reserve System (because of course it is). But the papers written by staff-level economists are very different things than the statements of "The Fed." The latter indicates how policymakers are thinking, and thus get scrutinized in excruciating detail in case any nuance in choice of words might signal what the Fed policymakers will do in the future. The former is just a presentation of research, and while it being published by Fed economists will give that research more weight than some other economic research, it's a much different thing than "The Fed" speaking on a topic. I'm not up on how it works in the Fed, but in other agencies with lots of economists (e.g., the FTC), the economists have lots of leeway in their research; IIRC, for example, they don't have to get their research approved by the Commission before publishing. It's part of how the Fed and the FTC and other agencies with lots of Ph.D. economists manage to attract and keep those economists—by letting them do research that doesn't have to be approved by the political levels.

That's why there's this big disclaimer at the bottom of the article in question, for example:

The views expressed are those of the authors and should not be attributed to the Federal Reserve Bank of Dallas or the Federal Reserve System.

That's not just boilerplate. They actually mean it.

This part is true. I just had my first work experience with a researcher at one of the Fed regional banks and I was very surprised how much the choice of research is up to the individual economist. And how there doesn't appear to be any overarching "Federal Reserve" research strategy. They publish pieces like this on all kinds of topics and I don't imagine the Board of Governors has any say over what is included. At least in the field of work I am in!

[Anonymous]

This is just cover. Let’s say there is a popped bubble, why didn’t they see it; oh but they did here’s the paper. If there is no bubble this paper will hit dustbin and no one cares.

[Anonymous]

This is a great thread! Thank you all!

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I'm confused by everyone referring to the Fed. The Fed has made no such statement. People are referencing an article published by staff at the Federal Reserve Bank of Dallas, a private entity.

Um, no. No, no, no, no. The statements quotes by these various articles were issued by the Federal Reserve Bank of Dallas, which is one of 12 regional banks that (with the Board of Gov in DC) makes up the Federal Reserve. Which is the central bank of the United States. It is not a private entitle. Referring to these statements as issued by the Fed is entirely correct.

https://www.bloomberg.com/news/articles/2022-03-29/dallas-fed-sees-signs-a-housing-bubble-is-brewing-in-the-u-s

You can say "no" as many times as you want. One of us is an expert on the Fed, and it's not you. The Federal Reserve Board is a federal agency; the Reserve Banks are not. An article on a Reserve Bank web page by some research staff is not even an official position of the Reserve Bank, let alone the Federal Reserve System. But please, go ahead and mansplain away. It's very clear you have no idea what you're talking about.

Let’s talk again in a week.

Huh? That response makes no sense. This is a pure factual question that mansplaining PP is simply wrong on.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:A research note written by economists at the Dallas Fed do not speak for "The Fed" (ie., the Board of Governors).

The regional Federal Reserve Banks have full license to publish whatever they want when it comes to research, predictions, etc. This article was not vetted by anyone at the Fed Board nor does it speak on behalf of "The Fed."

The language used in the note is quite measured and there's a bunch of posters on this thread (trolls?) who are sensationalizing the research note and adding hyperbole.

This is correct.

The Federal Reserve Bank of Dallas is part of the Federal Reserve System (because of course it is). But the papers written by staff-level economists are very different things than the statements of "The Fed." The latter indicates how policymakers are thinking, and thus get scrutinized in excruciating detail in case any nuance in choice of words might signal what the Fed policymakers will do in the future. The former is just a presentation of research, and while it being published by Fed economists will give that research more weight than some other economic research, it's a much different thing than "The Fed" speaking on a topic. I'm not up on how it works in the Fed, but in other agencies with lots of economists (e.g., the FTC), the economists have lots of leeway in their research; IIRC, for example, they don't have to get their research approved by the Commission before publishing. It's part of how the Fed and the FTC and other agencies with lots of Ph.D. economists manage to attract and keep those economists—by letting them do research that doesn't have to be approved by the political levels.

That's why there's this big disclaimer at the bottom of the article in question, for example:

The views expressed are those of the authors and should not be attributed to the Federal Reserve Bank of Dallas or the Federal Reserve System.

That's not just boilerplate. They actually mean it.

This part is true. I just had my first work experience with a researcher at one of the Fed regional banks and I was very surprised how much the choice of research is up to the individual economist. And how there doesn't appear to be any overarching "Federal Reserve" research strategy. They publish pieces like this on all kinds of topics and I don't imagine the Board of Governors has any say over what is included. At least in the field of work I am in!

The Board has no say over the publications of Reserve Bank economists. It's particularly notable here that the lead author is an RA, not even an economist.