"Home Prices Are Out Of Hand Again"

Tyler Durden's picture

By Bloomberg strategist Christopher Maloney

Home Prices Are Out Of Hand Again

U.S. home prices appear to be getting out of hand again as the gap between home price growth and household real income growth is close to where it was just before the housing collapse.

It’s also notable, and worrying, that the housing market is back in a “flipping frenzy” with non-bank actors climbing aboard to fund the speculation.

Since 1999 year-end through 2015 home prices have risen 76% while household mean real income has grown less than 2%; the millennium-to-date gap between the two growth rates peaked at 84% during 2005-2006 and has risen back to 74% as of 2015 year-end. Gap at year-end 2007 was 75%.

This millennium through 2015 has seen average new and existing home sale prices rise 84% and 55%, respectively, despite the lack of income growth.

Existing and new home sales average prices peaked at $280.2k in June 2015 and $384k in Oct. 2014, respectively; both peaks exceeded levels seen during housing boom.

Over the same period outstanding home mortgage debt has risen 14%, though it’s notable that with the end of easy mortgage credit it has fallen 11% from its June 2008 peak.

Concurrent with this 11% fall, the homeownership rate (63.8% at 2015 year-end) has slid back to levels last seen in the mid-1960s.

Monthly U.S. single-family home price y/y growth hit a post-crisis peak of 10.85% in Oct. 2013 and has since leveled off at ~5% each month since July 2015; this is still easily outpacing growth in real income.

The disconnect between home price growth and the lack of real income growth has led homebuilders’ to turn to the higher-end of the market and for Ginnie Mae to take the lead in mortgage lending.

GNMA offers taxpayer-guaranteed loans to first-time homebuyers who have lower credit scores and smaller down payments than those who obtain loans through Fannie Mae or Freddie Mac.

Whereas from 2005-2007 GNMA pct share of net MBS issuance was ~2% each year, during 2014, 2015 and 2016 YTD it is ~67%, according to BofAML data.

Another severe downturn in home prices would be unlikely to play out in the agency MBS market in like manner to 2007-2008 as the Fed now holds ~33% of the outstanding universe and the U.S. taxpayer now guarantees almost all of the market with Fannie and Freddie remaining under government conservatorship.

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BabaLooey's picture

The asshat Frank Raines

Where's that "Babboon Straight Outta Compton" Maxine Waters?

She loves Frank Raines.


Doom Porn Star's picture

Put a red suit with bell-bottom slacks and a feathered hat on his head and Franklin will look exactly like the early 70's pimp that Maxine Waters used to work street corners for.

Maxine knows a flush mac daddy thug when she sees one.

JRobby's picture

Bubble frequency accelerating courtesy of your banking cartel let by the Fed

Never One Roach's picture

Instead of pushing for jobs, these peeples push for zero down free houses and more welfare.


What a culture!

Life of Illusion's picture







Doom Porn Star's picture

The entire mortgage market is now effectively a monopoly.

The counterfeiting racketeers have seized the market.

Paul Kersey's picture

Low interest rates push home prices. It's the low interest, Government backed mortgages that are causing the financialization of house prices. Bring mortgage interest rates back to 8%, where they were in 2000, before the "Greenspan put", and a $300.000 house payment would be over $31,000 per year PITI. Today, at the current rate of 3.25, that same loan payment would be slightly over $20,000 per year PITI. Also, the average new house size in 2000 was 2,266 SF. Today, it is 2,467. That 200 square foot difference, at $125 a square foot, adds another $25,000 to the price.    

Location is also a big factor in house prices. We sold our parents' house in 2006 for $570,000 (they paid $65,000 in 1963, new). It is now being offered for sale for $502,000. If mortgage interest rates went back to their historical average, the whole US housing market would collapse and prices would be in the toilet.

King Tut's picture
King Tut (not verified) Paul Kersey Sep 25, 2016 11:11 AM

Have no fear- Janet will start raising rates in Dec/sarc

Doom Porn Star's picture

Zip code 07108 in Newark, New Jersey is merely one of the worst in the region; Zillow maintains on it's website that it has a whopping 46% mortgage delinquency rate:


Look around and see just how bad the delinquency rates are for zip codes all over the US.


Some quick demograhics concerning Newark, NJ:



" With 281,944 people, Newark is the 1st most populated city in the state of New Jersey out of 565 cities. But watch out, Newark, because Jersey City with 264,290 people and Paterson with 147,754 people are right behind you.

The largest Newark racial/ethnic groups are Black (49.0%) followed by Hispanic (34.8%) and White (11.1%).

In 2014, the median household income of Newark residents was $34,012. Newark households made slightly more than Passaic households ($33,081) and Paterson households ($33,964) . However, 29.9% of Newark residents live in poverty."



JRobby's picture

Statistics on income do not include EIC and other assistance.

This is "holding on by a thread" country. Other areas with less EIC and assistance (higher incomes) are holding on by a thread on slightly higher cash flow.

Everyone holding on by a thread so vote for Obama/Hillary and maybe the Sheriffs won't throw you out on the street for 2 or 3 years.

This is the "change you can believe in" part because the realities are so harsh, if they don't kill you, they will warp your mind.

free4asking's picture

You know real estate! Good post. Same goes for autos. Why should a Chev pickup truck sell for $58,000?  Low interest rates!!!

Mazzy's picture

Not to mention all the added bells and whistles that go into most new homes.  Have you checked out the prices of light fixtures and ceiling fans, toilets, shower stalls, etc?  Those things add up and labor is aproximately 3/5ths of what goes into the actual house portion, with 2/5ths being material costs. 

Now add the cost of land, permitting and impact fees on top of all that and you'll realize why even the big builders are having trouble building homes that they can sell for a profit and why the small time guys are getting into the custom built industry (to cater to the top 5% who actually can have homes built).

theFNG's picture

They could raise rates and print money like crazy, or raise wages,  or greatly reduce taxes on the little guy, any of which would keep asset prices elevated in a high interest rate senario, because they have extra cash to spend.

Doom Porn Star's picture

Franklin Raines managed the largest GSE control fraud in history and then managed to get his name attached to the US patent for Carbon Credits to boot..

For an inept corrupt negro he has done pretty well for himself..

JRobby's picture

Euthanasia is the humane termination of a person with an incurable, terminal disease. 

Although one might argue that greed that knows no bounds coupled with psychotic sociopathy and narcissism is not a terminal disease. But it is for societies that fall victim to the schemes in a completely unregulated criminal regime.

The disease is incurable. 

wisehiney's picture

mel watt has the same baby mama as raines

dey looks jes alike

red1chief's picture

I get the point the author is making and I think there is some validity, but median income should be compared to median house prices, not average house prices.

RSDallas's picture

The bubble has existed for 18 months now and it's still not on the level it was in 2007.  Prices are begining to ease. Could be seasonal.  I would suspect, however, that we'll see prices continue to climb until China or Europe explodes or WWIII grows.

khakuda's picture

The Fed has done it again. Bubbles in stock prices bubbles and bond prices and bubbles in real estate.

Eahudimac's picture

The family guy character Cleveland Brown is based on Frank Raines. The thick, black mustache is legendary.

indygo55's picture

It's gonna be communism plain and simple. That's what they want. They own all the assets by printing money out of thin air and buying every asset under the sun for free. AND WE LET THEM DO IT LIKE DAZED ZOMBIES. 

RozKo's picture

Its actually going to be much worse than communism. Lets see, one world government with a cashless society coupled with technology that allows autonomous drones both on the ground and in the air, real time monitoring of everything each person does or where they go through chip implants. It will be a complete hell on earth, death will be the goals of those stuck in the 'new' system.   

King Tut's picture
King Tut (not verified) RozKo Sep 25, 2016 11:15 AM

These stupid govt fuckers can't pave a decent road  and they are going to maintain 10s of thousands of drones to keep an eye on everybody?

RozKo's picture

It won't be the stupid govt ones controlling things anymore, it will be very smart and efficient elite satanists. 

RyeWhiskey's picture

And we will be "sharing" (renting) their assets. Sharing eCONomy. Just ask airbnb, uber or any other globalist bs corp.

Seasmoke's picture

Fuck Fannie. Freddie. and Franklin.

I am Jobe's picture

Yeap sounds like a BIG HUGE BUBBLE that must be the FEDS policy. Now the fools that fall for it even better.

Father ¢hristmas's picture

Clearly, communism is the goal for the bottom, while socialism is the goal for the middle class, and plutocracy for those up top.

Fifty one percent of the country makes less than $30k/year.  Sixty two percent make less than forty.  Ya see those tent cities, smart ass?  That's the future, right there.

Notice the people living in those tent cities are invisible, you won't see them on your nightly news.  Privatized gains and socialized losses, while the plutocracy skims a little off of both cause they play both ends against the middle.

You're gonna have unskilled/obsolete-skilled workers either employed doing menial tasks or sitting on their ass drunk and high in the park all day before heading back to the tent.  Completely dependent on the dole.

Then you're gonna have a sliver of a faggy bullshit middle class populated by service industry workers and managers with their wages, health care, and housing supplemented by .gov/BIS.

Then you'll have Pluto at the top.  An icy exoplanet of wealthy sociopaths-turned-psychopaths lording over a huge distant world of unwashed huddled masses like intergalactic zookeepers.

WTFUD's picture

Can't knock a good poke. Dick wiped its feet before entry.

I've got a theory that this is a native American plan to put everyone back into a teepee. s/c

Lost in translation's picture

Everything you wrote from "notice the people..." On down describes perfectly, to the letter, everything I see in my daily commute.

From the 5 to the 57 to the 10, from south Orange County to Santa Monica, it appears exactly as you've described it.

Kagemusho's picture

OMFG. Just like Jerry Pournelle's old 1970's science fiction stories about a future  'CoDominium', about 'Welfare Islands' full of people like you just described, kept placid on Gub'mint supplied dope, starchy foods and mind-numbing Tri-V, but not allowed to leave the reservation unless they were willing and able to get a job. After a while they became involuntary colonists to distant planets, in order to clean out the nests, so to speak.The rest of society was exactly as you described.

Damn, Fiction is becoming Reality day by day.

PaperTaperFakerCaper's picture

Russell Means (RIP):   Welcome to your new, new, much better than new American Reservation.



4:16...... American Apathy

1:29:57... ABS and all Americans as "coupons"

1:34:00... Welcome to the Reservation.  Welcome to all Americans! 

YesWeKahn's picture

Sure, my kids will one day buy homes from the Federal reserve.

Miss Informed's picture

Only leases will be available.

Chet Ricco's picture

Speaking of out of hand, Hillary is sure tight lipped on Weiner. What??? Why is everyone looking at me funny?

Kagemusho's picture

Good thing I wasn't drinking anything, or I wouldn't have a monitor now. That's a keeper.

PaperTaperFakerCaper's picture

And sHillary warning about IT-security threats, as she did in Aug., 

is like Weiner warning about sexting.

brushhog's picture

"Since 1999 year-end through 2015 home prices have risen 76% while household mean real income has grown less than 2%; "

You have to compare apples to apples, though. Wages here are calculated x inflation....home prices are not. So if inflation has averaged 2% for the past 16 years, then wages have risen about 34% in nominal terms in order to show real growth of 2%. It's still pretty bad, a 42% difference.

PaperTaperFakerCaper's picture

100 * 74/34  ~ 2.18.  It's a 218% difference. 

If you could measure the real effects, the Depression in capability to own and how it plays out (nonrecovery and distortion), the loss is mountainous.

Binkerthebear's picture

Raines should have said that about the stock market and he'd have been right.

lucky and good's picture

The housing picture is not brightening and most likely will not because the benefits of historically low-interest rates in mainly behind us. The future of the housing market is a topic that has been subject to a great deal of debate and can be somewhat confusing. It should be noted that much of the new construction is in apartments and not single family dwellings. In much of the country, units are being built using cheap money flowing from the Fed and Wall Street under the idea that if it is built "they will come."

Currently, we have a shortage of "qualified" buyers and renters and it seems that government policies are pushing on a string and calling it demand. The low end of this market is driven by Fannie, Freddie, and the FHA all insuring 3.5% down payments from borrowers that lack substantial collateral. We have a situation where when someone who can barely pay the rent is encouraged by the government to buy a house they can neither afford or maintain. The piece below delves deeper into the housing market debate.


hoagy goldmikel's picture
hoagy goldmikel (not verified) Sep 25, 2016 2:35 PM

this paragraph took the wind right of the sails of the article's objective.


Over the same period outstanding home mortgage debt has risen 14%, though it’s notable that with the end of easy mortgage credit it has fallen 11% from its June 2008 peak.

zippy_uk's picture

HOUSE OWNER - "I own a big house!"

BYSTANDER - "Did you pay cash?"

HOUSE OWNER - "No its a low interest mortgage with no money down!"

BYSTANDER - "Then the bank owns YOU!"