re: Why do the talking heads keep mentioning the 150% run up in the last 4 years

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I'm just taking note that prices will likely rise to 2008 levels either this summer or next year, and that is definitely a little strange considering how bad the economy has been, and how everyone in 2009 & 2010 kept saying things like "we'll never see prices like we had again for another 50 years."

So it may not be a bubble, but whatever it is, it doesn't look very healthy either.

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well, not to belabor the point, but the peak was a bit before 2008. looking longer-term (the last several months notwithstanding,) i think we're near where we would have been had there been no bubble.



also note that this is with shadow/REI inventories lower than recent years, and alot of older-than-the-norm youngish "households" currently living with families and such.

now, since march or so, i have seen reports of prices and volumes (in BR, for example) in the ranges of +15% year-over-year. that might become a problem if it doesn't get back down to a more normal pace

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2008-AVG = $198,100
2009-AVG = $172,500
2010-AVG = $172,900
2011-AVG = $166,100
2012-AVG = $176,800
June 2013 = $214,200 (preliminary numbers)

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Okay - a little alarming, but I'm curious to know why (because it's not inflation and it's not rising owner/occupancy rates) - part of it is sustained low interest rates, but that spike from last year to this (assuming it holds) is a "tap the brakes" moment, at the very least.

18%? That's a definite bump, if not a bubble.

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well, not to belabor the point, but the peak was a bit before 2008. looking longer-term (the last several months notwithstanding,) i think we're near where we would have been had there been no bubble.

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Tell me about it. That's what I kept trying to tell people back around 2010, but there are always other factors at play than just overall historical price trends.

The absolute peak in real dollar terms was the winter of 2005-2006, and if the economy was normal right now, then the prices would make sense. It's the faddish nature of the investments, and the fact that higher prices aren't tied to higher employment rates, that is troubling.

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the fact that higher prices aren't tied to higher employment rates, that is troubling.

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I concur with this point. However, as TBF said, there is foreign investment, as well as domestic entities who are flush, and looking for a place to park money. These are not as likely to sell in a crash and walk away. However, there is danger if even the rental market weakens due to chronically high rates of unemployment/underemployment - we already have a generation that is living with their parents. This will take 15 or 20 years to reverse.

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don't think you can plausibly blame Greenspan for lengthy 30-year secular interest rate cycles. He didn't cause the run-up in rates from 1950 to 1980

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Fair enough.

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and he didn't cause the run-down in rates from 1980 to now... nor did he cause the immense global deflationary pressures caused by the globalization following the USSR's collapse, with NAFTA, GATT, the WTO & China, the EU/EMU/EFTA, etc.

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He was definitely part of this, though. His single-minded focus on depressing interest rates was a mistake. If you don't believe me, listen to him:

LINK

The inability to price risk (or gain a return on relatively stable investments) has driven a good bit of the volatility over the past 6 years.

The labor market is related to this, but they do operate on somewhat independent tracks at times.

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18%? That's a definite bump, if not a bubble.

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Ace that 18% isn't really a big deal bc basically people were getting pre-approved for certain payments whether it be $1000/month, $2000/month whatever and now their payment could buy more so they were able to up their budget for a home.

I know I'm looking at condos in miami now and Im preapproved and had I bought 2 months ago I would have been a whole 1% lower and would have been able to finance that much more. So I think that 18% is more thanks to the low rates, but this time as rates rise, people who don't have to sell won't have to bc they'll either be locked in at low rates or will have paid cash.

Yes those who have to sell as rates rise will be in for a big shocker, but I really think most families THAT OWN HOMES are healthier financially than ever before. People are like corporations, the smart ones learned from the last time and now have more saved and are better prepared with better loans and less of the toxic type.

Now for the average american....I don't think he/she is better off today than back then, but the average american isn't a homeowner. The average homeowner in the US is a middle class or above american or a foreign investor or investment vehicle.

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His single-minded focus on depressing interest rates

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The link you gave was an article about fin-reg issues, and I don't like the Fed even being involved with all that nonsense anyway.

The real estate bubble had already started in 1996 or 1997 though, so whatever mistakes Greenspan made around 2003 are largely irrelevant. No matter what he did, he couldn't have stopped the inevitable. That's always been my point.

It's not like Greenspan was some super dove on interest rates and inflation. Far from it. He produced much lower inflation rates than Volcker, and he did try to tamper down expectations and prick asset bubbles more than once. He was just constrained by the situation he found himself in. A different person in his shoes might have done things slightly different at the margins, but in the grand scheme of things, it would have made little difference. For all the hyped up "maestro" talk, in reality Greenspan was a lot more ineffectual and lacking in genuine economic influence than people make him out to have been.

At least that's my story.

P.S. -- And I don't know shite about real estate in particular. To me it's just part of a larger picture of monetary policy that I'm interested in, and so I look to it for signs of bigger macroeconomic trends that might be occurring.

Kids & school years probably has a lot to do with it.

Here is some peak month data for context:

2013-Jun, 214.2
2012-Jun, 188.8
2011-Jun, 175.6
2010-Jun, 182.9
2009-Jun, 181.8