1.) In Dec 2019, when Italian artist Maurizio Cattelan sold three editions of a banana taped to wall for over $120,000 each no one who had a pile of bananas at home thought “I’m rich. I can sell mine for that much too.”
2.) From Aug 2021 to Dec 2021 people began buying computer cartoon pictures of rocks (NFTs) for $600,0000 to $1.7 million each. Very very few people with the ability to draw a cartoon rock on a computer decided “I’m rich.” (It happened six different times I think, but I cannot readily verify the number.)
Each of these happened in at time when central banks the world over were “printing money” at a mad-hatter rate far faster than anything that had ever been done before. At that same time everything from real estate to Dogecoin to tech stocks was also selling for astronomical prices, yet somehow the people who own those things DID decide “I am rich.”
Now the money-printing is gone. The buyers are gone. The crazy prices are going . . . going . . . almost gone.
I live in a modest blue-collar middleclass neighborhood and when I saw that the house next to me sold for nearly $500,000 about a year ago, I knew thigs were getting ridiculous!
I live in a very rural part of central Kentucky and properties in my area were mostly getting gobbled up by foreign investors. A couple I know wanted to buy an 85-acre plot of land about 10 miles away from where I live and it was bought by Germans the day after it hit the market. It was the same case for a lot of houses sold in late 2021-mid 2022.
For a LONG time homes appreciated slowly and steadily, &
never went down in price, so what your neighbor’s home sold for really was a good indication of what you can get for yours. (Except for the '80s the Fed made only minor adjustments to interest rates.)
Then in the dot.com/9-11 era the Fed, and other central banks) put a cinderblock on the accelerator (maybe at the time) and has kept it on even since.
Super-Duper QE might have been a good idea as a short-term response to dot.com-9-11 might have been a good idea, but that was two decades ago.
They actually did worse stuff on top of that too, but the point is two decades is way to long for artificially low interest rates----> The result is home prices are now like a roller coaster and we have had two housing crises in 12 years. We are not better off.
I wanted to rebuild it a year ago but the lumber prices were ridiculous. They have fallen so fast. By spring it probably would have been 25% cheaper but I couldn’t wait any longer because of the shape it was in.
I almost bought at the height. (I did not see last year what I see this year.)
The main reason I didn’t is I live in a small town. There is not endless inventory. At the height prices were not only (very) high there simply were no more properties meeting my criteria.
Yup, you just have to save and wait it out. Something will eventually make itself available. Unfortunately, where I live we have investors buying up properties before an individual can make any progress towards buying.
The outlook is bad here (summer beach town in the Philadelphia market)
But right now . . . if a new listing comes on at the bottom of the price range for its class it sells in about 14 days. Apparently there are investors who want to pounce, and get invested before rates go any higher.
I am not sure this chart should have been made this way but it does show why a 2.1% drop in home prices (all that has happened so far) might seem severe.
I bought in 2012 at a fantastic price and could have made a lot of money when home prices peaked. The problem is, since that time, grandchildren now live a short distance and wifey-poo ain’t movin…
…
Yeah 2012 sounds about right. That would have been roughly the previous bottom.
The circa 2009 crisis was 3.5 years of falling, then 3 more years until prices recovered.
The best part was that I purchased two assets from the same bank, at the same time. One was a home and the other was a building. The bank allowed me to appropriate the total to each asset as I determined. I raised the building price, which increased the write-down component and decreased the home value, which tax wise, when it sells one day, will save a lot of money too. The funniest part is that the sale price of my home, has an asterisk by it, showing that it isn’t computed in the values of the homes around me. It was too low.
