Friday Update December 17, 2021
313 and bottoming out I guess. That's the total number of existing single family homes on the market today. 673 sales closed between December 1 and today with a median sold price of $456,000 or 100.04% of the original list price. This spring we were running like 104% list to sold price ratio. Do not interpret this a buyer's market in any kind of way. It's not.
Graphs are fun because they're like a picture of numbers. Numbers can be boring but graphs put everything right out on the axis.
The little gray line on the left is the recession after the 9/11 attacks. Big fat line in the middle is the "Great Recession". The little tiny line on the right is apparently how long the recession from Covid lasted.
The blue line going up at a faster and faster pace over the last 21 years is where inflation comes from. That is the amount of M2 money in existence and I bet you can figure out which way the line will go next year, probably the year after that and so on.
But inflation is transitory, its supply chain disruptions causing all these price increases. What a wonderful load of bullshit, yall.
I've been selling real estate since 2013 and one thing I never get tired of hearing (so sick of hearing this) is how next year rates are going up. Mediocre lenders and thirsty social media rockstar agents start pumping little memes about how today is the best time ever to buy a house because tomorrow interest rates are going up. The Fed said they're going to do it! So it must be true. The Fed announced that rates are going up next year and guess what happened to yields on treasury bonds? They fell slightly. 10 year bonds are around 1.40%, briefly dropping to 1.38% earlier today as the stock market tries to figure out whether to crash or rally.
If the Fed does raise rates as aggressively as they say they will then you can expect a crash in the stock market, resulting in the Fed dropping rates back to 0% or my bet for the long haul is less than 0. See 2018 for reference.
Hip hip. Hooray to lumber finally having a red day and coming down slightly below $1,100/1000 board feet. What a nice little drop in the bucket in the context of building materials as a whole.
One of my buddies forwarded me an email the other day from US Gypsum which makes the brand name Sheetrock and other wallboard type products. Starting January 3 their wholesale pricing on Sheetrock is going up 30%, all tape, mud, corner beads etc going up 10% and certain products going up as much as 50%. Permanently, not temporarily. Because transitory inflation only exists in central bank propaganda that is swallowed and regurgitated by morons.
Some fun with house numbers. 2 years ago a sheet of subfloor cost like 14 bucks. In May of this year it cost like 80 bucks for a bit. A couple weeks ago it was around $33, earlier this week it was like $42 and low and behold today it's $33 again. The big take away is its for sure not $14. This carries across pretty much every aspect of building materials and continues steadily into the price of the labor to put it all together. Good luck planning out a construction budget and even better luck trying to build "affordable" housing in this environment.
The CPI data came out showing that "shelter" prices increased 3.8% over last year. Meanwhile in real life apartment rents in areas like Phoenix doubled since last year, and real estate pricing is up 31%. The Springs isn't as crazy but a 3.8% increase as compared to the roughly 20% we have seen would be an absolute gift to anyone on the buyer/tenant side of the market. I say this only to point out that just like everything else our government says and does, the CPI is fake and the numbers that make it up are manipulated if I say it politely. Manufactured if I'm honest. Driving a pre determined narrative to the masses if I'm overly blunt with it.
I'm not going to lie to you though. Owning real estate in this environment is pretty cool. Without doing anything special and honestly doing quite a few things wrong or stupidly owning real estate has worked beautifully as an inflation hedge. There are totally days where I think to myself, "self, fuck this, sell everything and disappear into the Argentine Andes". And the crazy thing is that by dumping the few houses that I own I could actually do that. And another brutally honest thing is that by owning several houses that all cash flow super duper well I really don't give a shit about what happens with the market in the short run. Because real estate is for the long haul and going up to the numberpicture at the top you can easily see what will happen over the long term with real estate valuations. Land is limited. Materials are limited. Labor is limited. The Fed's ability to put numbers on a screen is unlimited.
So in a nutshell today is a God awful day to buy a house, but it's an even shittier day to be a renter, and 20 years from now you'll think to yourself like I do "self, I made a lot of mistakes but having this fat chunk of equity isn't one of them". Or you'll think to yourself "fuck, how is this 1 bedroom apartment $6,200 a month?". Up to you.