Over the entire 20th century, housing prices never once roce above 131, the 1989 peak. But beginning around 2000 house prices seemed to reach for an entirely new equilibrium. In fact, even given the financial crisis, prices since 2000 fell below the 20th century peak for only a few months in late 2011. Real prices today are now back to 2004 levels and rising. As I predicted in 2008, prices never returned to their long-run 20th century levels.
As a matter algebra, house price = (rent) x (price/rent). If this time is different, it is due to a combination of higher rents and higher price/rent ratios. As I read the graph of prices against rents at the Economist, it looks like prices have been rising faster than rents, so an increase in the price/rent ratio is certainly a contributing factor, although more in other countries than in the U.S.
I think that in many parts of the world, including portions of the U.S., price/rent ratios are getting very high. If I were Alex, I would not stand in front of the sign that says “mission accomplished” claiming to have debunked the house price bubble.
If I were Alex, I would not stand in front of the sign that says “mission accomplished” claiming to have debunked the house price bubble.
Living in Southern California it is not mission accomplished as we need more housing, better transportation, etc. I know there is a lot of need of housing deregulation Socal is better than NoCal tbh but communities do need to work on this. However, I would recommend ways of improving traffic as well.
Seriously ask anybody why they don’t like more people, I bet 50%+ of responses are Traffic.
House prices have reached what looks like a permanently high plateau.
How much of this is driven by a few very hot markets (e.g. Seattle metro?)
And if it’s driven by:
a. People, at least past a certain age, want to live in single family houses with yards
b. There is only so much space for such desirable dwellings in any geographic area
c. Hot job markets (amazon, microsoft, etc.) will draw lots of people with money to these geographic areas.
So perhaps price/rent is in line with historical norms in say most of Wyoming, but nutso in Seattle metro. OK. Under what circumstances can it fall back to normal in Seattle metro? Item b. above cannot change. Items a. or c. could change.
Note that people moving to apartments may cause a reduction in supply of single family dwellings (eaten by apartment blocks) and thus drive UP the costs of the most desireable form (as in people pay the most money for it) of housing.
How much do a relative few markets drag the US market as a whole along this path?
Arnold, Arnold, Arnold.
http://idiosyncraticwhisk.blogspot.com/2017/08/housing-part-249-its-all-about-rent.html