Category Home ownership Declining

May 3 2024

US Home Prices Nearing All-Time Highs


Posted originally on May 3, 2024 By Martin Armstrong 

House US Real Estate

Home prices in the US are near all-time highs. As I repeatedly stated, we can no longer look at real estate on the national level. Demand and value are contained to certain states and areas of certain states that the public has deemed most desirable, largely due to political factors such as taxes. Yet, at the moment, buyers are swiping up real estate where available. The S&P CoreLogic Case-Shiller posted a 6.4% gain in February after January’s 6% spike, marking the fastest uptick in home prices since November 2022.

The 20-city composite jumped 7.3% on an annual basis, rising from January’s posting of 6.6%. The 10-city composite saw an 8% annual rise, up from 7.4% in January. February was the third consecutive month of rising home prices in all cities, with Washington D.C., New York, San Diego, and Los Angeles experiencing all-time highs in price.

San Diego saw an 11.4% annual rise in home prices, the largest jump in the 20-city composite. Detroit and Chicago posted 8.9% annual gains. Yes, we will eventually see the red states surpass the blue. Smart money is moving into assets like real estate. The downside of real estate is that they impose a property tax on it annually, but investors enjoy that passive income.

There is a notion of “now or never” among first-time buyers as it simply no longer makes sense financially to rent. A person’s ability to qualify for that first downpayment has diminished with rising rental costs. Rental costs increased 3.15% from February 2023 to February 2024, further rising to 3.6% annually in March of this year. This is close to the pre-pandemic growth rate of around 4.1%, but rental pricing is up 36.6% from the pre-pandemic era. While difficult to judge on a national basis, the average rental now costs $1,983 per month, but it is much higher in places like New York City ($3,206 average) or San Francisco ($3,024) hence why we are seeing people sweeping up real estate there.

Shelter is 34% of CPI. The April 10 release from the Bureau of Labor Statistics found that shelter costs have risen for the past 40 months. In March, shelter costs were the largest contributing factor for core inflation. Rising home prices will not benefit the economy or lead to any positive indicators that inflation is waning.

Sep 2 2023

US Real Estate Market


Armstrong Economics Blog/Real Estate R-Posted Sep 2, 2023 by Martin Armstrong

QUESTION: Mr. Armstrong, You were the only one who forecasted that real estate would continue to rise in conjunction with the rate increases by the Fed. I have been following you only since 2020 and COVID-19. I am impressed with your computer and your analysis, which does not change with every passing headline. Can you elaborate on the real estate market a bit?

Thank you very much for the education.

FH

ANSWER: The traditional forecast on real estate is always one-dimensional. Homeownership has historically been in the top 5 of surveys about what Americans most want in life. Property values have been rising despite rising high prices combined with higher mortgage rates. There is little sign on the horizon before the ECM peaks in May 2024. Analysts have been confused and caught up in this economic conundrum of the continued economic growth that has defied all their recession predictions.

Normally, housing has been one of the sectors that has been the most sensitive to interest rates. Over the past two years, mortgage rates have risen from less than 3% to more than 7%. That means that the median family today faces mortgage payments that have doubled from roughly 14% of monthly household income in 2020 to nearly 29%  by mid-2023. This is the strongest rise since the economic turm on our ECM when it bottomed in 1985.65.

Nevertheless, the conundrum that has baffled traditional analysts has not led to a decline in house prices as they expected. They paused during the COVID-19 lockdowns and fell in the Blue States, which had the most draconian COVID-19 measures. Currently, housing prices during the second quarter of this year rose at an annualized pace of 15% according to the S&P Case-Shiller index.

There is a tight supply in the South, where much of the migration has taken place. I get, on average three calls a week asking if I want to sell my house here in Florida. The annual sales of property nationally have been around $2 trillion.  Smart institutional investors have been shifting from public unsecured debt to private mortgages. The average person does not look at CPI numbers or GDP numbers. They look at the cost of this rising, and the confidence in the Biden Administration has been collapsing. When people no longer trust the government, they shift to the private sector. So add to that the great migration from Democratic states to the southern red states, and you will see collapsing real estate values in places like San Francisco and Chicago in comparison to even Wall Street, have been quietly moving to the Miami region. There are still buyers in the market and a shortage of supply in the Red States like Florida. Thus, sales have declined, but this appears to be more the result of the decline in supply.

Additionally, the rising inflation in materials means that the replacement cost of homes is often higher than the prices being paid, not to mention the waiting time for construction. The sheer replacement costs of housing have skyrocketed. Even pain was in short supply thanks to the COVID-19 lockdowns. This has impacted the market, and traditional analysis simply never considered that the replacement costs on preexisting houses, in many cases, are 40% to 100% higher. Add to that the shortage in labor. It was very hard to find a contractor in Florida who even was available. Most contractors I talked to were booked beyond 2024.

Newly built homes account for about one-third of active listings in 2023. This was up from an average of 13% over the two decades before pre-COVID-19. Add to all of this is the influx of foreign money looking at US property as a hedge against future wars and destabilization of the monetary system. Then we have had funds like Blackrock buying property and renting them out.

Sep 1 2023

The Cost of Homeownership in the US Spiked 91% in Two Years


Armstrong Economics Blog/USA Current Events Re-Posted Sep 1, 2023 by Martin Armstrong

The US housing market has not been this unaffordable since 1984, a new study finds. Analysts at Black Knight analyzed home prices, income, and interest rates on a monthly basis going back to 1975 and found that the average mortgage today would cost $2,423 per month on a 30-year fixed with 20% down. This marks a 91% increase in housing costs over the past two years alone.

The $2,423 figure represents 38.3% of the median household income, despite home ownership costing only 24% of the median household income for the past 25 years. This study does not take into account that many do not put down the 20% downpayment due to rising closing costs, insurance costs, and taxes. The current 30-year fixed mortgage is around 7.23% at the time of this writing, marking a 20-year high. For housing affordability to reach 24% of the median income, the average household would need to earn 60% more or home prices would need to decline by 27%.

Home prices are at their highest level in 30 of the 50 largest metros. People are continuing to flee to more desirable areas for financial and political reasons, and with historically low inventory, prices will not decline any time soon in those areas.

Worse still, 344,000 US homeowners owe more than their home is worth, which is a 70% uptick from last year. In Florida, insurance rates alone are causing many longtime residents to flee. I will discuss that in more depth in another post. The housing crisis is in full swing, but this is by design. The globalists have said countless times that they want the world to become perpetual renters who own nothing. Never before has the average man had to go to battle with investment firms to own a piece of the American dream.

Aug 10 2023

Homelessness in the US at All-Time High


Armstrong Economics Blog/Real Estate Re-Posted Aug 10, 2023 by Martin Armstrong

The housing crisis has become a massive issue in America. People with decent jobs are unable to afford housing, and those who were already down and out have little chance of survival. Then we poured the migrant crisis on top of the fire and have created a situation that is turning America into a second-world nation. Not so coincidentally, most of the homeless population lives in blue cities. The US spent over $51 billion on the homeless crisis last year, but where has the money gone?

Homelessness in the US has spiked by 65% since 2016! The Annual Homelessness Assessment Report said it is common for half a million people to be experiencing homelessness on any given night. The data is not in for 2023 when the migrant crisis really took hold after title 42 came to an end, so these figures I will present are nothing compared to our current reality in 2023. For every 10,000 Americans, 18 do not have a home. Around 72% are single adults, but an alarming 28% are families living with children. Five percent of the homeless population are unaccompanied youth under 25. Our veterans compose 6% of the homeless population as well.

Native Hawaiian or Pacific Islanders have the highest rate of homelessness with 121 out of every 10,000 people living in crisis. The Black community has a disproportionate amount of homeless too with 48.2 of every 10,000 experiencing homelessness. Native Americans come in at a close third with 44.9 out of every 10,000 having no place to call home. Sixty-eight percent of all homeless individuals are male.

The US Federal government spent over $51 billion to combat the homeless crisis in 2022, but then our government took measures to worsen the matter, and economic conditions have made it nearly impossible for those with nothing to find shelter. The National Alliance to End Homelessness estimates that a chronically homeless person will cost the taxpayers an average of $35,578 per year. Yet, where is this money going? When the migrants came through, we managed to find housing and convert buildings into temporary shelters until cities became overrun and it was impossible to manage — the federal bill for homelessness in FY22-23 will be astonishing.

As of March 2022, these cities saw the largest populations of unhoused individuals:

  • Los Angeles City & County 65,111
  • New York City 61,840
  • Seattle/King County 13,368
  • San Jose/Santa Clara City & County 10,028
  • Oakland, Berkeley/Alameda County 9,747
  • Sacramento City & County 9,278
  • Phoenix, Mesa/Maricopa County 9,026
  • San Diego City and County 8,427
  • San Francisco 7,754
  • Metropolitan Denver 6,884

We can see a pattern here, given that these are blue cities. Politicians touted many of these areas as “sanctuary cities” and encouraged tens of thousands of people to use the last of their resources to relocate there. And now, these people have nowhere to stay and no resources to leave. Promising sanctuary should have been a crime in itself. Criminalizing homelessness will not solve the solution and will only further burden the taxpayers. Anyone living in a major American city will tell you first-hand that the number of unhoused people has exploded in the past year. This is a SERIOUS and growing problem that is not being addressed. The government is continually throwing more money at the problem, but it is only worsening.

Jul 20 2023

Freedom Flyers


Armstrong economics Blog/Real Estate Re-Posted Jul 20, 2023 by Martin Armstrong

Have you ever noticed a decorative eagle plaque above a home in America? This was once a popular symbol back in the day to symbolize freedom from mortgage payments. Homeowners would adorn their houses with this symbol to indicate that they were free from the bank and owned their home free and clear. Around 40% of owner-occupied homes have been paid off, further adding to the housing inventory crisis.

The 2022 Federal Housing Finance Agency reported in 2022 that 84% of outstanding mortgages locked in a rate below 5%, while 63% secured a rate at or below 4%. Mortgage rates surpassed 8% last week and those who own are unlikely to sell. While some point to double-digit mortgage rates in the past, it was not difficult for buyers to put down 40% upfront since housing prices were low in comparison to wages. This was also a time when the cost of living supported a traditional lifestyle where only one partner was required to work.

Although COVID and low rates created strong demand, the underlying issue is the Great Reset. Institutions are set to own 40% of all single-family rentals by 2030, precisely on time for Agenda 2030. Regular buyers have been outbid by institutions coming in with cash payments. BlackRock is now the largest landowner in America. This is all by design. They do not want people to afford a home because then there would be no need for 15-minute cities, and forever renters living in ADUs. The inventory issue will not recover because no one can outbid the institutions who do not need to borrow money.