A weekend topic starting with Mark Zandi. "House prices are sizzling. Not just in swanky neighborhoods in the nation’s big cities or in resort towns. Not just in the suburbs or exurbs. Not just in inner cities or in rural areas. Just about everywhere. The median existing house price — half of homes sold for more and half for less — has surged to more than $350,000, about double what it was a decade ago."

"Just in the past year, the price for a typical home is up almost 20 percent. And in about one-fourth of the nation’s 400-plus metropolitan areas, prices have rocketed by more. Even in the mid-2000s just before that housing bubble burst, fewer than one-fifth of metropolitan areas had seen annual prices increase as much."

"So, are we in another housing bubble? No. Not yet. But I say this with less confidence than I did a year ago, and if current trends continue for another year, I won’t be saying it at all. The most graceful scenario is for prices to cool off, go more-or-less sideways, and allow incomes, rents and construction costs to catch up. This seems likely if mortgage rates soon push modestly higher, weighing on housing demand and ultimately prices."

"There will likely be some price declines in the most hyped-up parts of the housing market. But the price declines won’t be broad-based. The stronger job market will forestall foreclosures and distressed sales, and the housing shortage will put a proverbial floor under prices in many communities. Of course, a much darker scenario could unfold, in which house prices continue to quickly appreciate, speculation intensifies and a bubble inflates. This scenario doesn’t end well. House prices ultimately would experience a severe comeuppance with widespread price declines."

From WKRN in Tennessee. "Tom Brashear, Director of Development Services in Wilson County, knows where change is happening most. He says the area off I-840 and I-40, Central Pike and Stewart’s Ferry Pike, is a very active area with lots of subdivisions. Another fast-growing community in Wilson County is Gladeville — which includes a massive development that’s in the process of being built. We’re told it’s a more than 500-lot subdivision that’s going in to make room for those moving to a county some once considered far away."

"'I could certainly use a breather but I don’t want to see the economy crash either,' Brashear said, adding that up until about four years ago a busy year would have involved 1,200-1,600 housing starts. In 2021, they’re on track to see about 2,800."

"And these homes are rising in price. 'It used to be that the median home price was $315,000 a couple of years ago. Now, I have several buyers that are looking to be in Wilson County in Mt. Juliet, and they want to stay under $500K for a newer house, five years or newer and it is very hard to find under $500,000,' Wilson said."

From CNN Business. "Homeowners saw average home prices skyrocket nearly 20% through the third quarter compared to a year ago, according to the Federal Housing Finance Agency. It was the largest annual home price increase in the history of the agency’s House Price Index. And, in some hot markets, the price increase was double that."

"Homes also sold at a record pace, with sellers often fielding multiple competing bids and all-cash offers. Even homes that were disgusting or burned out sold quickly, and at amounts that were well over the asking price. 'It was an insane year,' said Matt Holm, an agent with Compass in Austin. Last January, he put a smaller five-year-old home on the market at $425,000, higher than comparable sale prices, and was flooded with offers. 'I stopped counting at 35 offers,' he said. The home sold for $545,000, a 30% increase over the list price."

"Another buyer, who bought a lakefront luxury home for $6 million in 2020, was offered $9 million a few months later and $11 million two months after that by buyers desperate for a lakefront property, Holm said. 'My sellers said, that’s a lot of money,' Holm said. 'They wanted to sell and get something as good or better. But they realized they shouldn’t sell because to get something a little bit nicer than what they had was going to cost $18 to $20 million. That is a remarkable jump for a calendar year.'"

From Barron's. "Hyman Minsky, the late American credit-cycle expert, taught us that a prolonged period of financial-market stability tends to set up the conditions for pronounced financial-market instability. By this he meant that as economic confidence rises and as asset prices soar, the financial system tends to make increasingly risky loans on the assumption that asset prices will rise forever. When asset prices eventually stop rising and when lenders realize that they might not get repaid, the whole credit-market house of cards collapses."

"If ever we have experienced a period of highly risky lending in the context of rapidly rising asset prices, it has to have been that of the past eighteen months. The financial system has lent with abandon even as U.S. equity valuations jumped to nose-bleed levels experienced only once over the past 100 years and as U.S. housing prices adjusted for inflation exceeded their 2006 pre-crisis peak. Fueling this lending spree was the approximately $5 trillion in Federal Reserve bond purchases in response to the pandemic that induced investors to stretch for yield."

"Economists and the Federal Reserve take comfort in the fact that today’s U.S. banking system is much better equipped to handle the bursting of an asset-price and credit-market bubble than it was in 2008. But this awareness seems to be blinding them to the high degree of exposure of the largely unregulated nonbank part of the financial system. That could be setting us up for a series of Long-Term Capital Management-like crises when the Minsky moment finally arrives. U.S. and world economic policymakers seem to be totally unprepared."

From Paul Wallis. "After two decades of almost zero Interest Rates for Certified Morons, reality seems to have decided to make a comeback. The Fed has actually mentioned raising interest rates. Well, how about that? The markets, therefore, are having another quite unnecessary if muted existential crisis. It’s their usual reaction to anything which requires sentience of any kind. The world’s favorite human-hating parasites are in a real tizzy about it."

"Let’s clarify – The ultra-low rates have made gigantic amounts of money for the Big End of Town, a very apt description anatomically. How could you NOT make money at those rates? Borrow at 0.25% and sell at 7-8%. That, pundits and other vermin, is a profit margin of about 3000%. Meanwhile, simultaneously screw anyone on Earth with a bank account and get their money for free, while charging them ridiculous amounts for the privilege. Fail totally to note that anyone with a working brain cell could offer interest of up to 7.9% and basically take over the market, and still make money. Ain’t you brilliant?"

"So these zero-IQ geniuses are much better off after a couple of decades of that. They’ve locked in at those rates, and now the rates are (shudder in one’s dear little booties) moving. Wind up the tired old dystopian analogies. 'Oh, whatever will become of us all? Where shall we go? What shall we do?'"

"Frankly, you allegedly conscious pseudo-human spam, I couldn’t give a damn. It’s a measure of the insularity and vacuity of an entire generation of utterly talentless nobodies in the investment sector. It makes infant-level Monopoly look like quantum physics. I’ve seen more credible competitive behavior among actual gravestones. The interest rate market is simply a cartel in any possible context, from wholesale to retail."

"After the same two decades of mindlessly driving prices for essentials through any number of roofs, inflation is suddenly an issue. Never mind insane prices for education, housing, and health. Someone’s now decided that current Main Street price moves are inflationary. Affordability has never been a market issue, of course. Low rates jacked up the sacred property prices. This fuelled property investment, credit, and probably the egos of a lot of two-dimensional policymakers and financiers."

"Some are predicting that 2022 will be better than 2021 for price rises. The problem with that is this 'improvement' is in comparison with 2021. So the baseline cost, already up, is a justification for saying further rises are somehow better. Regardless of the fact that these are cumulative rises. If you add 5% to 100 in 2021, then 5% to that in 2022, you get 110.25. Your net inflation has actually doubled. That’s better than what, exactly? Anyway – goods prices may go down or up, but the net costs of the money that pays for them don’t have to behave like that. Maybe the best shot is not to try to justify theory in the face of head-kicking contradictory facts?"

"Except also that tens of millions of people spending big money they don’t have in a very expensive market and having to buy back into that market tends to be costly. Portfolio values begin to look a bit…edgy. Defaults are more likely. Raise rates, and these market mayflies are likely to die like flies, in theory. High-end properties get hit hardest and fastest. Asset values tend to move around a lot, depending largely on what values people want to be visible."

"Those values will typically have nothing at all to do with actual sale prices. Even now, you only have to glance at prices in California to see a few obvious moves and a lot of upper-bracket stuff that’s been on the market for quite a while. The question is whether rates rises can trigger a panic stampede. You’d have to be a pretty timid soul to be bothered by a quarter-point move upwards, you’d think. The trouble is that every market has a lot of margin-dwellers. These guys are terrified of their own shadows, tax returns, etc."

"So the smell of smoke is likely, whether there’s a fire or not in interest rates. Impossible as it is to sympathize with the bloodsucking rates vampires. Unlike the sub-primes of 2008, this isn’t just massive amplified fraud. The market is actually chained to the cost of money in this case. That chain could become a noose for some, so it’s not quite the usual financial hypochondria about losing a few bucks."

"This is a comeuppance in so many ways. The good news is that some of America’s more conspicuously obnoxious trashy-peasant property investors obviously can’t and won’t be able to take higher rates, even slow small rises. You’ll hear squeals in the sewers of offshore finance, too. They’ll vanish in a well-deserved cloud of hydrogen sulfide much like their social skills."

"Finally – In the name of god knows what, can someone come up with more innovative ways of making housing and other REAL core inflationary costs more affordable? How often do we have to go sailing around this black hole of anti-prosperity lending practices?"