Geographically, the disastrous housing bubble of the 2000s was heavily driven by the centrifugal force of rising home prices in California's coastal cities flinging people out into inland California, Nevada, and Arizona, where (along with Florida) the vast majority of defaulted dollars were lost before the onset of the recession, in which mortgage defaults were the first domino to topple.
From the L.A. Times today:
Southern California’s housing recovery barreled forward last month, pushing prices and sales to levels not seen in years as buyers faced stiff competition during the spring home buying season.
The median price reached $368,000 for all homes in the six-county Southland, which marked a 24.7% increase from the same month a year earlier and the highest price in five years. The number of sales, 23,034, hit the highest level for a May in seven years, real estate information provider DataQuick said Tuesday.
Historically low inventory and mortgage rates have ignited bidding wars and helped turn the housing market into an economic bright spot — in the Southland and nationwide. Investors have also played a major role in the recovery that began last year, purchasing run-down, lower-cost properties to fix up and then rent out.
Home prices in Los Angeles, Orange, Riverside, San Bernardino, San Diego and Ventura counties all posted double-digit increases last month compared with May 2012. In Los Angeles, the median skyrocketed 30.2% to $410,000.
The swift price increases have raised bubble concerns among some, but many experts note prices remain far from the peak and say the spikes will likely ease as inventory increases from new home construction and as more owners — lured by higher prices — place their homes on the market.
Still, May’s median price was 27.1% below a peak of $505,000 in 2007.
A major premise of current conventional wisdom about why we shouldn't worry about the Gang of Eight's amnesty bill is that because low skill immigration from south of the border had been relatively low from the economy's collapse in 2008 through about 20011, it will never, ever pick up again.
Perhaps, though, it would be prudent to wait awhile to see if that turns out to be true?
Okay, I'm sorry, forget I ever said anything so wacko extremist. Prudence is evil; all that matters in setting public policy is the Dream.
When I first started reading Steve's work online 9 or 10 years ago, his multiple referrals to Ben Franklin's formula (cheap land, high wages) stuck with me. That higher housing prices are seen as a sign of economic strength or prosperity show just how wacko we've become.
ReplyDeleteHow do I short this?
ReplyDeleteMe and Ben Franklin, a couple of un-American nutjobs.
ReplyDelete"A major premise of current conventional wisdom about why we shouldn't worry about the Gang of Eight's amnesty bill is that because low skill immigration from south of the border had been relatively low from the economy's collapse in 2008 through about 20011, it will never, ever pick up again."
ReplyDeleteThat's Michael Barone's prediction. And here is another prediction from Barone in 1995:
"But my impression is that the whole rotten structure of racial quotas is going to tumble down rapidly, given the speed with which the California Civil Rights Initiative has injected the issue into the political process. Affirmative action will die because it never had a strong place in Americans' hearts"
cognitive dissonance time.
ReplyDelete"Inflation is only 2%! Rejoice!" they are telling us inflation is super low.
"Housing prices up 25% in one year! Rejoice!" but now aren't they telling us inflation is super high?
so is it good or bad when prices go up? good when it's harder to buy houses or stocks, bad when it's harder to buy food or gasoline.
what about healthcare? that's going up 10% to 20% per year, for people who actually pay. that's not inflation? what about college tuition? steadily going up 5% per year as well.
at least the price of cars and trucks actually do only go up 2% or 3% per year. too bad real wages are only going 1% per year if that. so americans are losing buying power every year now. once PPACA is fully implemented, look out below. 29 hour a week obamacare special jobs will be the norm in the service industry.
Texas doesn't have this kind of price growth, despite a much higher (percentage) rate of population growth. And a larger share of Texas growth consists of domestic migrants, who presumably are more affluent than Mexican immigrants (although Texas obviously also has a lot of Mexican immigration).
ReplyDeleteThe point is that if immigration were to blame for rising home prices in Cali, it would be an even bigger problem for Texas. It's not, because immigration is not the real problem in Cali, but your overly restrictive and ridiculously politicized land use regulations, as has been documented by Glaeser and many other economists.
Immigration is not the real problem in Cali, it's the failure to construct countless Blade Runner-sized apartment buildings. Just ask Matthew Yglesias.
ReplyDeletehttp://online.wsj.com/article/SB10001424127887323463704578497143338013974.html
ReplyDeleteThat higher housing prices are seen as a sign of economic strength or prosperity show just how wacko we've become.
ReplyDeleteI've always felt the same about using housing startups as an economic health indicator.
So are you planning to sell your house?
ReplyDeletehttp://www.algemeiner.com/2013/06/10/dutch-politician-geert-wilders-%E2%80%98what-we-need-today-is-zionism-for-the-nations-of-europe%E2%80%99/
ReplyDeleteBut it's Zionists who are pushing open immigration from the 3rd World.
Steve,
ReplyDeleteThis article has to be read to be believed. Apparently, Jim Rogers is unaware of the exorbitant housing prices in Singapore.
Direct quote: “if Singapore cannot get enough labor, it will have to raise wages. Inflation will rise and Singapore might price itself out of the market over the next few years.” Yes, in our current globalist system, raising wages is a bad thing. Luckily, one of the commenters seems to have common sense (and even quotes you!)
http://www.forbes.com/sites/davidyin/2013/06/06/singapore-needs-immigrants-says-jim-rogers/
"The point is that if immigration were to blame for rising home prices in Cali, it would be an even bigger problem for Texas."
ReplyDeletewhich is closer to china? the west coast, or texas?
canada has the same dynamics. vancouver is swamped with wealthy chinese immigrants jacking up the price of a small house to 1 million dollars. meanwhile in the middle of nowhere oil land, alberta, houses don't cost nearly as much.
Dream or delusion?
ReplyDeleteIn fairness, the middle class voting bloc is primarily composed of homeowners who have little in savings besides their home equity, and therefore are glad for the price run-up.
ReplyDeleteNot sure how long it can be sustained when even people with upper-middle-class incomes like myself can't financially justify buying a house at current prices.
This time it's different!
ReplyDeleteWith the very real possibility of the flood gates being permanently opened to everybody in the third world and their brother, now might be the time to buy up to a neighborhood where the new influx cannot reach for another generation or two. Some places will become unlivable while others will become islands of the past to remind us of how things could have been.
ReplyDeleteWhat a relief. For a brief moment, it was looking like my generation might be able to purchase starter homes some day. Some of us might have even formed new families, had our morals been warped by perverse incentives like affordable housing.
ReplyDeleteI gladly cede any chance at fecundity to a coalition of red princelings, banksters, boomer degenerates, and semi-literate mayans. This is what progress looks like. Things are looking up again, and there's nothing you angry extremists can do about it.
-The Judean People's Front
"Prof. Woland said...
ReplyDeleteWith the very real possibility of the flood gates being permanently opened to everybody in the third world and their brother, now might be the time to buy up to a neighborhood where the new influx cannot reach for another generation or two. Some places will become unlivable while others will become islands of the past to remind us of how things could have been."
Boise is a buy. White flight on a continental basis.
"Housing prices up 25% in one year! Rejoice!" but now aren't they telling us inflation is super high?
ReplyDeleteso is it good or bad when prices go up? good when it's harder to buy houses or stocks, bad when it's harder to buy food or gasoline.
"Asset" inflation i.e. inflation in real estate assets, financial assets like stocks, etc. are portrayed as good since they're disproportionately owned by the wealthy.
There is still a lot of shadow inventory in the Sand States being held back by mortgage holders, and that has affected supply enough to create enough demand to artificially inflate prices. So unless the average income in the affected areas has risen by 25% or so since the market bottomed out, this cannot be sustained.
ReplyDeleteOff topic, but "Hispanic" related -
ReplyDeleteCheck out this White man from good ole UTAH!!: Anthony James Prater, also known as Demon or Demon Prater
Is this ever going to stop? Why does America have people "in charge" who keep on playing these games? Why?
As an Indian, I have to say that about 99 per cent of Americans are utterly clueless about what a land bonanza they have. A friend of mine recently bought a 6 bedroom house close to Westport, Connecticut for around $ 1 million - a house with 6 bedrooms, 7 bathrooms, 4 acres of land , a swimming pool, a private gym, a home theater in the basement and a wine cellar. To get the same deal in India in or near any major Indian city, you would spend at least 10 times that (if not a lot more).
ReplyDeleteIf we see another 30% increase in LA, that would break the 2007 record at the height of the last bubble. So just one more year of that and we're in territory higher than the last bubble in LA.
ReplyDeleteSecond, a lot of this is driven by investment banks. Goldman Sachs is knee-deep in distressed and foreclosed assets.
A lot of Chinese rich businessmen are buying 2nd, 3rd and sometimes 4th properties because their own government has forbidden them to speculate(many Chinese cities now forbid new apartment sales to wealthy speculators), plus that these Chinese businessmen often want a foot in America in case the government goes nuts on them. I saw a survey that stated that 60% of Chinese multi-millionaires have either planned for or are actively preparing to move overseas(I think it's likely it's their children and/or parts of their family).
The fear that many have is that once the speculating investment banks start to mass-sell their investments onto the market for a profit, the prices will plunge since these prices are not driven by consumer demand(as the American consumer has on average 13% lower inflation-adjusted income than compared to the beginning of the last decade).
I don't know about that. The Obama administration wants to loosen credit rules. This boom-bust cycle repeats itself over and over again.
P.S.
Here's a counter-argument from the Economist:
http://www.economist.com/news/united-states/21579030-recovering-prices-have-yet-inflate-any-big-cities-bubble-hunting
So in the last housing bubble we had growth in housing prices that was unsustainable, but at least the temporary bonanza was shared by anyone who could sign a mortgage application. Now that lending restrictions are tighter, the wealth from increased prices is flowing to homeowners who were well off enough to survive the last crash, to cash buyers who bought in the dip, and to those with excellent credit - i.e. the better off among us. And so long as interest rates are kept at zero, why should we expect the prices to drop anytime soon, especially in areas like Southern California?
ReplyDeleteSo the new housing boom follows the general rule of the last five years. Low interest rates don't result in real economic growth, but rather in more wealth for asset holders.
"Investors have also played a major role in the recovery that began last year, purchasing run-down, lower-cost properties to fix up and then rent out."
ReplyDeleteNot "have also", the investors are what's driving this PERIOD. Think: what happens to prices when 35% of the buyers pull out? That's about the percentage of sales that are being done by large institutional investors in the sand states. They're trying to find something sonewhere to spend their shiny new Bernanke Bux on. But the game is up, the big investors have stopped buying and are moving on. Expect a massive correction this summer, possibly.
In other words it's more BS being fed to us to make us think everything is fine.
Matthew 5:45 is wrong once again. The rain is falling on the just more that the unjust.
ReplyDeleteSome of us benefit greatly from housing inflation. I personally rejoice when I see runaway housing inflation. I reap the benefits. I also prosper when there are more murders and violent crime.
I'm not alone. Qui bono? indeed.
Albertosaurus
But it's Zionists who are pushing open immigration from the 3rd World.
ReplyDeleteThere's no "but" there. Zionism for the Nations of Europe would mean Europeans pushing immigration from the (non-Muslim!) 3rd World, to Israel. Then the Zionists would stop pushing open immigration from the 3rd World into European nations.
There's only one way to get what you want; be willing to slap everyone else around. Otherwise, you're relying on luck, and luck always fails.
—Europeans “need to follow the example of the Jewish people and re-establish their nation-state” to counter the growing Islamization of their countries, Dutch politician Geert Wilders said Sunday in Los Angeles.
ReplyDeleteNow, I've never been particularly comfortable with European Nationalism's toadying to Zionists. But that quote, my friends, is how the game is played. WTF can the Zionists do, but curse through rictus grins and try to kill him with backroom deals?
I suspect American patriotards are ripe for this line of attack. One hopes our pols will one day grow a spine and use it.
"Westport, Connecticut for around $ 1 million"
ReplyDeleteAs a resident of Westport, CT, I doubt your friend is being honest on the price. More like tem million for that size, maybe more.
Is that in 2008 dollars or QE II devalued 2013 dollars?
ReplyDeleteA friend's son put his 2 bedroom/2 bath starter home 20 miles south of Boston on the market in 2008/2009 for $379K, a price he wouldn't move from and therefore he didn't sell. He's ecstatic now because he sold it last month for his $379K. But I was the a$$hole at the party who asked him how much gas cost in 2008/2009.