I’ll express my gratitude to Craig Lazzara, global head of index investment strategy at S&P Dow Jones Indices, for saving me the trouble of resorting to gratuitous hyperbole in a futile attempt to somehow one-up myself while waxing hysterical about the US housing market.
“I find myself running out of superlatives,” Lazzara said, after the latest read on the Case-Shiller index showed another monumental increase.
We have indeed reached the point of diminishing returns when it comes to demanding more from the thesaurus while documenting the inexorable rise in US home prices.
The national index posted a 16.6% gain in May (figure below), data out Tuesday showed. That’s another record in data back to 1988.
The 20-city index rose 17%, the biggest YoY gain in 17 years.
“Price gains in all 20 cities were in the top quartile of historical performance [and] in 17 cities, price gains were in top decile,” Lazzara went on to say, again citing a flight to the suburbs as the proximate cause of the surge.
This is backward-looking, of course. More timely data suggests surging prices are finally starting to erode demand — at least at the margins. New home sales dropped a third month to the slowest pace since April of last year, data out earlier this week showed.
Read more: Is The US Housing Bubble Bursting?
I doubt seriously the utility of recapping the same story time and again. Everyone knows the narrative by now. Between pandemic dynamics, Fed policy and supply constraints, we’ve lost control of prices. And price spirals often resolve on their own when would-be buyers simply throw up their hands (“I ain’t got the money!”)
Eventually, this is expected to find its way into the inflation debate (figure below). As ever, that’s an immediately absurd thing to say because, for anyone currently trying to buy a home, it’s being debated right now, today. And hotly so.
In Phoenix, prices jumped 26% YoY in May, Tuesday’s data showed. In San Diego, they rose nearly 25%. And in Seattle, more than 23%. Charlotte, Cleveland, Dallas, Denver, and Seattle all logged record 12-month gains.
But don’t worry. As long as you own stocks and they keep rising at a ~70% YoY clip (figure below), you should have no problem affording that down payment.
I got a good laugh at that headline.
supercalifragilisticexpialidocious
Stein’s Law: “If something cannot go on forever, it will stop.” The $64,000 (or is it now $640,000) question: When?
We create a ton of money -> Stuff goes way way up in value -> People stop buying because it’s too expensive -> Things crash in value hurting those that bought -> we create a ton more money again
Definition of insanity = Keep repeating the same pattern over and over again but expect a different outcome.
So within the next 25 years an average 2 bedroom condo will be worth a million dollars, Apple will be worth a 100k dollars a share, gas will be 20 bucks a gallon, and the average upper middle class family will need to have 50 Million dollars saved up if they want to retire comfortably.
They’ll need another 10 million to put their kids through college.