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Comment by Animats | Hacker News Reader

"Real estate share of output near an all-time high" indicates that a new real estate crash is likely.

Median house price / median income is getting high again. Historically, that's around 2.2. Much higher, and people can't make the mortgage payments.[1] Then the mortgage default rate starts climbing. Then the bubble pops.

But it takes a long time. The time constants in real estate are many years long.

[1] http://www.economist.com/blogs/graphicdetail/2016/08/daily-c...

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I would point out that the chart refers to Canada which never really had the real estate bubble pop in 2008 because it never had the credit crisis because banks are generally more conservative in Canada. However, the bubble is there and has been growing for a very long time, just slower than it did in the U.S..

I recently read about a house sold in San Francisco for 19.1m. This is the first time it has been on the market since 1971, when it was sold for 131k, which is 991k "inflation adjusted". Either there's more inflation than the official statistics, or there is a systemic bubble that will lead to the first default of the entire US economy in 35-40 years.

I highly doubt you can make these generalized assumptions from the sale of a single house.

Sure, but it can point you in a direction for inquiry.

Inflation in the Bay Area is around 20% YoY, based on price increases in the housing market.

This pretty much seems reasonable. Housing demand should probably depend mostly on the amount of wealth (maybe this should be income?) in the area. It seems possible that wealth in the valley is growing at 20%.

20% growth would mean the wealth in the area would double every 3.46 years.

This morning, it was announced that the US GDP grew at an annual rate of 2.9% last quarter, accompanied by the WSJ headline "US Economy Roars Back" [1].

20% growth is nowhere near "reasonable".

[1] http://www.wsj.com/articles/u-s-economy-grew-2-9-in-third-qu...

Inflation, not growth. You get less house for the same money.

GDP is a measure of income, not wealth. It makes sense that wealth matters more for house prices than income, because it's a ~ one time purchase.

Let's try letting private banks issue money as debt just one more time, I'm sure it will be fine!

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