Summary: All of the madness is coming to a head in the housing market, so today, Wolf Richter and I get on the podcast to discuss what exactly is happening with buying and selling homes as a result of the current economy. San Francisco in particular is experiencing an interesting circumstance: seasonality is returning, which has been absent for most of the pandemic. We are seeing a rising market as well as individuals eagerly spending more money, which is stimulus driven. Tune in to hear about the interesting dichotomy between the economy and housing market, and what is to come in this industry. Highlights: -All of the madness is coming to a head in the housing market -People are reducing their asking prices—how can this be? -Every local market is different. In San Francisco, it is dominated by condos and has not gone anywhere in three years in terms of price. House prices have sky rocketed with a medium price at $2 million, dropping by 8% in July -Seasonality is returning, which we have not seen throughout the pandemic -Medium price dipped for single family houses, and for condos it jumped -The volume fell quite a bit; prices dipped a bit from the peak -There are very elevated prices at the moment, and this poses an issue as incomes do not match -Drops in prices bring buyers out -A lot of supply is coming on the market — this is the most new houses we’ve seen on the market since 2008 -Mortgage rates are still extremely low by historical standards. If mortgage rates go up, what will happen to the market? -The Fed is already talking about tapering its asset purchases, which will likely happen this fall. This affects mortgage rates and long term interest rates -The trend now is buying rental homes close together, which is more efficient than having single family homes scattered -In a rising market, foreclosures are extremely rare -We don’t have the situation of short sales -Does the shadow inventory still exist?, or have banks flushed this out This is pretty much gone, according to Wolf. -The carrying costs of vacant homes are very high, so this will probably bring more properties to the market -What does the housing market tell us about the broader economy? Every time there is a shortage within the economy, we see prices rise. -People are still eagerly spending money, which is stimulus driven -States are sitting on a lot of money they haven’t spent yet, which will be put to use soon -We are in an overstimulated economy - red-hot demand with supply constraints Useful Links: Financial Survival Network Wolf Street