A weekend topic starting with Business Insider. "Investor Bill Gross warned of more pain for bond investors as US fixed-income assets head for an unprecedented three-year slump. 'The government first threw money out of a helicopter and almost all of it has been spent, sending inflation beyond all prior expectations. Taming it and lowering it to 2% will be most difficult and a bond bull market under those circumstances is hard to envision in a 3% future,' Gross said."

The Real Deal on California. "Call 2023 the year when a storm of events lashed the residential market in Los Angeles. Agent Rayni Williams of The Beverly Hills Estates noted that the adversity may have improved the L.A. market, as the escalating prices of the previous boom were not realistic. 'The way we were climbing, we were looking to have a $500 million to $800 million home in our lifetimes. It was getting astronomical. This is a great adjustment,' she said."

The San Francisco Chronicle in California. "Five decades ago, Richard Nixon was president, the Transamerica Pyramid was nearing completion and the typical home in San Francisco cost just over $28,000. That wasn’t an insignificant amount of money in 1970 — roughly $209,000 in 2022 dollars — but it was far less than the seven digits San Francisco homes are worth now. And it made for a far smaller ratio, according to census data, than currently exists between household income and home values. The median household income in San Francisco was about $10,500 in 1970, meaning it would take less than three years of annual income to afford the median price of a single-family home in the city."

"That has changed drastically, of course. In 2022, according to data from the American Community Survey, the annual household income in San Francisco, about $137,000, was only about 10% of the value of a typical home. Other major Bay Area cities have seen similar trends. The chart below shows how many years of annual earnings it would take the typical household in San Francisco and other Bay Area cities to afford a median-valued home in 1970 and 2022. For the nation overall, that value-to-income ratio was 4.3-1, up from 1.9-1 in 1970. In 1970, the typical San Jose or Oakland household could have purchased a home with just over two years’ earnings. In 2022, that would take more than nine years of income for San Jose households, or nearly 10 for Oakland."

"Berkeley, which now has the most expensive housing market among the four cities, saw an even bigger jump in its value-to-income ratio. The typical home was valued at 2.7 times the median household income in 1970 — the same as San Francisco — but in 2022 was valued at more than 15 times the median household income. In Oakland, households typically made less than $10,000 a year in 1970. But homes were generally cheaper there than in San Francisco and San Jose, so it would take just over two years’ worth of earnings to match that sum. Now, the median household income in Oakland last year was about $93,000, a nearly ninefold increase over the half-century. But the median home value was nearly $914,000, 42 times the value in 1970."

KTVB in Idaho. "'The best time to buy a house is yesterday.' That’s according to Boise Regional Realtors President Debbi Myers. She’s not being literal. Recent data from Agent Advice puts Idaho in the top ten for most expensive states to own a home in, and she's just saying that the best time to buy a house is already passed. But has it always been this tough to buy a home? Were things really all that easier years ago, say, in the '70s or '80s? Says Myers, 'The interest rates really do impact people. I know that in the 80s, they were three times what they are now, whatever they were. But also, home prices were $70,000. So, if you're paying 15% on a $70,000 loan, that impacts that payment a lot less than if you're paying 7% on a $700,000 loan, right? It's really out of whack.'"

"Wages have increased by 80%, but that's a lot less impressive when you learn the average consumer price index has more than quadrupled! And the big stat is home prices. Nationwide, the median home price has gone from less than $25,000 to $416,000!"

The Tri-City Herald in Washington. "New Benton County property assessments are out, and some homeowners are feeling shocked by the change in their property's value over the past year. The 2023 assessments are based on property sales through the end of 2022, a year of record home price increases in the Tri-Cities. Benton County Assessor Bill Spencer told the Herald that this year the county is 'playing catch up' with the record market seen over the past few years. The area in Benton County likely to have seen the largest average increases was a neighborhood north of the intersection of East Reata Road and Leslie Road. They saw an average increase of a whopping 29%."

"Most of those homes are in the R12 taxing district, which has Richland city taxes but is in the Kennewick School District. A home on the curve of Bruce Lee Lane jumped 46% in value from $313,000 to almost $457,000, county records show. A neighbor to the north soared by 52% from $287,000 to $436,000. Most of the homes in that section of R12 were built in the late '80s and early '90s and are listed as part of a subdivision named Lorayne J Ranch. Houses in Meadow Parke Estates, built in the early 2000s, didn't fare any better. One rose from $416,000 to $517,600. Another jumped a staggering $148,000 from $345,000 to $493,000. The first was sold this year in March for $510,000 and the latter was last sold in 2019 for $330,000. That 2023 sale will impact next year's estimates. Some of the highest jumps in the area were on Erica Drive where the three homes went up an average of 50%. Homes in that neighborhood are now valued around $550,000. Similar homes on the street sold for a difference of more than $100,000 in November 2021 and August 2022."

Cronkite News in Arizona. "The Phoenix City Council unanimously passed regulations on short-term rentals Wednesday following a Sept. 6 vote that legalized backyard casitas. Councilmember Debra Stark does not want short-term rentals to drive up housing costs even more in Phoenix, as she said they already have in other areas of the state like Sedona and Prescott. 'It’s an affordability problem, so people that actually work for the town of Sedona can’t even live in Sedona,' Stark said. 'I would say probably every city and town in Arizona is experiencing problems because of short-term rentals.'"

From Stockhead. "The Australian housing market is getting back to its familiar state of profitability after a curly few years, and has been delivering richer riches to sellers since the recovery trend in home values began in March this year. But it has not been all beer and skittles for the more recent buyers – as fulsomely rising interest rates, and a housing market where values are yet to fully recover from the recent downswing have created profit cracks which more buyers are falling into. Owner occupiers have incurred the most short-term nominal losses at 72.1%, as opposed to 27.9% by investors, a similar split to the portion of overall resales in the June quarter. Among the capital cities, Darwin had the highest volume of loss-making resales at 34.4%, followed by Perth at 12.3%."

"According to the 2023 Demographia Affordability Survey, the median multiple of house prices to income for major cities is 8.2 times in Australia versus around x5 in the UK & US. In Sydney, it’s x13.3, making the Harbour City the second least affordable housing market in the world, only behind Hong Kong. Australian markets have a median multiple of 8.2, up from 6.9 in 2019. This is an increase of 1.3 years of median household income. All five of Australia’s major housing markets have been severely unaffordable since the early 2000s. Sydney has the least affordable market, with a median multiple of 13.3, the second least affordable market internationally."

"With a median multiple of 9.9, Melbourne is the 86th least affordable of the 94 markets. Adelaide had a median multiple of 8.2, ranked 81st among the 94 markets. Brisbane, at 7.4 ranked 78th, while Perth, at 5.4 was the 50th least unaffordable market. Adelaide median house prices have increased 6.1 times the rate of inflation since 2020, as measured by the Consumer Price Index (CPI). Sydney prices increased 6.0 times the CPI, Brisbane 5.2 times, Melbourne 4.9 times and Perth 4.2 times. In each of these five housing markets, the house price inflation since 2000 exceeded that of all of the product groups constituting the CPI (such as food, clothing, transportation and education and health)."

From CBC News. "Inflation in Canada is showing no signs of slowing down, and the cost of rent and mortgages continues to rise — leading to an affordable housing crisis across the country. At the same time, the federal government has increased immigration targets and aims to bring in 500,000 permanent residents per year by 2025. Those figures don't necessarily include migrant workers and international students, who are all looking for housing. Immigration Minister Marc Miller said there's work to be done improving Canada's immigration system, especially when it comes to digitizing the process, but he believes the fault for the housing crisis has little to do with immigration."

"'Successive governments, Liberal or Conservative, have underfunded this critical area, and this is something that is not to be blamed on immigrants. The free debt that we've seen over the better part of a decade is no longer a present reality,' he said, referring to low interest rates."

The Globe and Mail. "'One of the things we know is that house pricing cannot continue to go up.' So said the Prime Minister at a recent press conference in London, Ont. Rarely, if ever, has a senior politician in Canada been courageous enough to affirm that home prices need to stall if we truly care about affordability. Provincial and federal leaders from all parties have tended to avoid this position – all while lamenting how surging prices lock more young people out of ownership, and into precarious housing. By disrupting this political pattern, the Prime Minister signals a clarity of purpose for change in our housing system that has not existed in my lifetime. Housing should be for homes first, and investments second."

"Our politics is addicted to rising home prices because we judge politicians to be strong economic managers when our country’s gross domestic product (GDP) grows on their watch. By doing so, we’ve created a pernicious incentive for elected officials. Real estate, rental and leasing has been the largest contributor to our economy for years. This has entangled our politicians in the misperception that their credibility as managers of the economy depends on their tolerating home values that skyrocket out of reach for young people."

"As politicians break their political addiction to rising home values, many homeowners will need to break their personal addiction, too. It has become the expectation (dare I say, hope?) that the value of our principal residences will rise, because their increasing value offers a relatively easy path to financial security and retirement savings. Since 1977, Canadian homeowners have gained trillions in housing wealth – most of it sheltered from taxation. In the light of such windfalls, it’s not surprising that many of us have come to bank on our home as an investment that will simply keep rising in value. This expectation has caused us to blur the distinction between building our wealth by paying off a large mortgage versus hoping the value of our residence will grow exponentially."

"The former is a strategy to gain equity through hard work and sacrifice over 25-plus years by paying off a large debt. The latter is the over-commodification of housing by which purchasers search for wealth windfalls from housing, which comes at the expense of preserving affordable homes for those who follow. This over-commodification has been normalized in much of B.C. and Ontario for years, and has spread more recently across the country in conjunction with the ultralow interest rates made available during the pandemic."

From Philip Pilkington. "In 2009, something curious was going on with the U.S. housing supply. That year, the Ohio state senate established the Cuyahoga Land Bank—a private, non-profit, government-purposed entity designed to strategically acquire run-down properties and return them to productive use. But when it was first established, the Land Bank found itself not restoring properties, but demolishing them. The process became known as 'burying the dead' and each demolished property cost the bank around $7,500. These properties came from the big banks. Apart from getting rid of the derelict properties, it was hoped that the demolitions would firm up the price of housing, which at the time was in steep decline."

"Judging by the analysis of many housing experts in the lead-up to the financial crisis, it made no sense that the Land Bank ended up with so many unsold properties. At height of the property boom that led to the 2008 financial crisis, news outlets and financial analysts across the country—indeed, across the world—were telling anyone who would listen that the spiraling prices and frantic home-building boom was a response to a supply shortage in the market. Equipped with the tools of an undergraduate economic textbook, these analysts explained to the public that prices rise when demand outstrips supply."

"But if the increase in housing prices in the run-up to 2008 were driven by a lack of housing supply, why did prices suddenly crash? And why, in 2009, were states like Ohio establishing Land Banks that would demolish properties that could not be sold? These questions were never answered because they were never asked. After the housing market collapsed, financial markets went into meltdown and the economy fell into deep recession. The public, focused on the unemployment problem and the chaos in the financial markets, forgot all about the prophets of the supply-side that had cheered on the housing mania."

"Does this sound familiar? It is precisely where we are today. Once again, housing prices have increased far past any fair value metric. Inflation-adjusted house prices are higher today than they were at the peak of the previous housing mania in March 2006. The same is true of the ratio between house prices and incomes. And once again the prophets of the supply-side are descending from the mountaintop, carrying a stone tablet with a supply and demand graph etched into its face."

"Just as in the run-up to 2008, however, it seems far more likely that financialization is driving up the price of property. That is, speculative investors are driving up the price of housing because they view it not as a good to be used, but as an asset that can earn them money—both through the rental yield and future price appreciation. When we examine the evidence, it looks like this housing upcycle is even more obviously driven by speculative investment than the pre-2008 housing market was."

"The other force driving this unusual housing bubble is regulation. After the collapse of 2008, the Dodd-Frank Bill put a cap on the amount of risky lending the banks could engage in. But capitalism abhors regulation, and there are always ways to get around it. In the case of the recent increase in housing prices, we have seen the so-called 'shadow banking system'—that is, non-bank financial entities—stepping into the space where banks cannot be due to the new regulations. Credit, like life, tends to find a way—a lesson overzealous regulators might learn after the collapse of the present property bubble."

"So, when will the bubble burst? Well, it looks like it already has. Rising interest rates have started to impact the market and prices have been declining since April of this year. The last time we saw house prices go into decline was in March 2007. The investment figures are starting to bear this out too. Private residential fixed investment has been falling since the third quarter of last year. The last time we saw private residential fixed investment start to fall was in the third quarter of 2006."

"If and when the housing market collapses, the American economy will fall into recession—a real one with widespread construction layoffs, not a mere 'technical recession' with two quarters of contracting growth. Depending on where the bodies are buried, a collapse in house prices and purchases may also lead to a financial crisis. At that point, the public will be distracted by the economy and the prophets of the supply side will, as they did in 2008, slip quietly out the back door—a trick the barflies call an 'Irish exit.' Let's hope that this time, policymakers don't forget them so easily."