A weekend topic starting with KTUV. “Like many homeowners across the country, Santa Claus has benefited from skyrocketing home values, according to Zillow — which values his sprawling North Pole property at more than $1 million. A searing hot housing market this year, fueled by ultra-low mortgage rates, a thin inventory of properties for sale and many would-be buyers’ desire for more living space during the pandemic, led to record U.S. home prices.”
“This apparently carried over to the North Pole, as the online real estate marketplace now values the Clauses home at $1,031,401. Zillow predicts that Santa’s home will appreciate nearly 14% over the next year, which is in line with forecasted home value appreciation across the U.S.”
From KMTR in Oregon. “Heading into the new year, the Lane County housing market continues to see low inventory and high demand. They are going quick and they are going high – the median price in Eugene-Springfield is $421,000. ‘$421,000 here in Eugene is crazy, just crazy,’ exclaimed Marcia Edwards, Principal Broker at Windermere Real Estate.”
The San Mateo Daily Journal in California. “Home prices on the Peninsula were pretty steady for years. You could pick up a decent two- or three-bedroom starter house anywhere from $5,000 to $35,000 from the 1950s to the ’70s. Of course, people made significantly less back then. Don’t believe me? Ask someone who bought one back then. Oh, they’ll tell you. In the 1980s, prices rose a bit, and you could pick up the same house for around $100,000. In the latter part of the 1990s, the prices went up to about $200,000.”
“It was during the dot-com boom that saw prices double, so a house that previously went for $200,000 was now $400,000, or even higher. Up until 2008, such a house would go for $650,000, or even higher. While there was a slight dip during the dot-com bust and recession of the early 2000s, it didn’t take long for the housing bubble to grow. At the same time, the credit default swap market peaked in 2006 with inflationary pressures tweaked through higher interest rates that spurred interest in exotic loan offerings like adjustable rate mortgages with terms as short as seven years.”
“By 2008, people with these loan offerings seeking to benefit from the housing bubble caused market instability when they started defaulting. And we had the crash. Home prices here adjusted lower. So now that house that was $650,000 was $450,000. Some were able to get in on the housing market, but many other homes were bought by banks to hold for when prices were on the rise again.”
“It didn’t take long for that to happen and the new rise began in 2010, with another rush of jobs into the area with the high-tech surge. It took less than a decade for home prices to double from $450,000 for a small starter home to $900,000. And now that same home is $1.1 million, or more.”
“From 2008 to 2012, there were a number of quantitative easing measures put into place by the Federal Reserve to ease the recovery. There was QE 1, QE 2, QE 3 and Operation Twist, which was part of quantitative easing. All that essentially meant the Federal Reserve bought bonds to inject money into the economy. It also meant yield of Treasury bonds stayed low and investor interest in the stock market or other ventures stayed high. This meant there was more venture capital to be spent, and it was spent around here.”
From Philip Pilkington at Newsweek. “In the second week of December, the Federal Reserve Open Market Committee (FOMC) met for the first time since Chairman Jerome Powell conceded that ongoing inflation is unlikely to be transitory. The meeting’s inconsistent conclusions are unlikely to inspire confidence. There is a distinct possibility the Federal Reserve is about to hit a wall, and that its very constitutional underpinnings will soon come into question.”
“In essence, they argue that setting monetary policy is akin to solving an engineering problem—say, calculating how wide the arches on a bridge should be. This supposed objectivity itself depends on a theory known as the ‘equilibrium rate of interest’—known in the economic literature as the R*. The R* is the rate of interest at which the rate of employment is maximized, and the rate of inflation is stable. The R* is to central banks what the crown is to the King—it gives them their authority and their credibility. If the R* is an illusion, then central banks do not have the capacity to ‘objectively’ set the rate of interest.”
“Developments taking place in the economy today, however, may finally threaten its regal hegemony. The reality is that the Fed is between a rock and a hard place. For the past decade, it has maintained extremely low interest rates to try to generate economic growth. These low rates have given rise to manias in multiple markets—from stock markets to bond markets to housing markets. The Fed economists know that if they slam their foot on the brakes, these markets will fall—hard. On the other hand, if they do not raise rates and inflation continues to spiral, they will be blamed for the chaos. By pursuing their policy of choice for the past 40 years—which in practice has meant ever lower interest rates—they have painted themselves into a corner.”
“This brings us back to the hallowed R*. According to the R* theory there is always an obviously correct choice. After all, monetary policy is just an engineering problem, right? And the Fed economists are brain boxes that we trust to solve this giant engineering problem, right? Well, no, it would seem not.”
“If November-Jerome Powell is correct and inflation is not transitory, then the theoretical basis on which the Fed rests its claims to independence is cooked. The FOMC therefore must hope and pray that December-Jerome Powell is correct, and that inflation will die down of its own accord in 2022. I believe that American football fans refer to this sort of strategy as a Hail-Mary pass.”
“As the theoretical basis for monetary policy hollows itself out, expect the public to be livid. Not only will prices rise as pay checks fail to keep pace, but people’s savings will be obliterated. If someone wants to keep some or all of her savings in a simple bank savings account, her wealth will be eroding at a pace of anywhere between 4.5 percent and 6 percent annually. The average Joe will not need to understand the nuances of the R* theory to realize that this situation is absurd. The Fed’s credibility now rests on a punt and a prayer.”
From Spiked. “Recently, it has become standard media gospel that the most ‘progressive’ way to solve the housing crisis in America is to build over the hitherto leafy suburbs of property hotspots with smaller, more tightly-spaced ‘living units’. This is known as ‘urban infill’, or, in a twist that would do political term-coiner-in-chief Frank Luntz proud, ‘upzoning’. In the course of ‘upzoning’, what was once a single-family suburban home could, for example, be subdivided into apartments or reorganised as a ‘co-living’ arrangement with ‘secure bedrooms’ (previously known as ‘a boarding house’), while the backyard could host ‘a tiny… home on wheels’ (previously known as ‘a trailer’) or, under some proposals, a yurt.”
“Unsurprisingly, upzoning turns out to be very easy and very profitable. What is billed as a saintly progressive effort to ‘provide affordable housing’ is also a giveaway to developers rushing to build ’em cheap and stack ’em high on land that was, until recently, off-limits to them, because it was zoned for low-density residential living.”
“Dismayed residents and affordable-housing organisations have been vocal in their condemnation of ‘upzoning’. But, in a consummate example of woke-jacking (that is, subverting woke concepts for one’s own selfish ends), they have been dismissed as racists. The sheer efforts that have been made here, show how much is at stake.”
“So, instead of allowing those properties to meet a natural price point in a market of limited buyers faced with high property and inheritance taxes and preferably cut off from foreign investment, it has been decided that actually immigrants and people of colour love living in cramped, multi-generational households, up to and including ‘affordable’ duplexes built behind these same postwar bungalows that have been transformed into the equivalent of a highway motel for tech workers. By those lights, it’s practically anti-racist to deregulate in a manner that allows multiple families to inhabit the same property previously occupied by one, paying, as they do so, more money to receive less value (according to some calculations up to $919 for a room in a boarding house in Portland).”
“The New York Times simply referred to America-past as ‘a more middle-class country’ than America-present, accepting social stratification and lifetime unfairness as a given. Perhaps, as the World Economic Forum once infamously and ill-advisedly put it, in the future, ‘you’ll own nothing and be happy’. And if you’re not happy, you’re a racist.”