https://fred.stlouisfed.org/series/MSPUS
The fed chart shows almost hockey stick growth in housing prices this year. How can the Zillow properties be underwater, did they just massively overpay up-front?
For comparison, since 2014 the US population has increased 4%.
Also, people aren't moving from somewhere to fill up your town, go on a random city subreddit and you'll see a different local mythology to explain the prices. It's happening everywhere though. There's literally no significant area that's seeing an exodus with decreasing prices. Not California, not libruhl lockdown states, not Texas, it's happening everywhere.
The reason is quite obvious. Just like bond values and yields are inversely correlated, mortgage rates and home values are inversely correlated. Here is a chart of the 30Y mortgage rate, it should explain everything.
People need to be willing to sign their lives away to pay off houses, otherwise rates would also be strongly tied to the price of everything from cars to toothpaste (they are very loosely, but those things don't cost 3x what they did in 2014).
1. The construction of new homes was limited in late 2019 early 2020. This was due to covid and labor shortages and supply lines being blocked.
2. Demand for homes rose to an all time high. The people in big cities said: "Why quarantine with nothing to do in my Manhattan apartment when I can buy a house and sell it when the pandemic is over. House prices always go up so I'll make money"
3. Zillow, banks, etc saw the fed start printing money which was going to lead us into an all-time high inflation rate. Their inflation hedge was simple: shift all liquids into long term stable solid assets. For most of human history this has been housing (single family and rental properties). Zillow specifically got a massive credit line via taking advantage of "zero risk" money from the fed via their bank.
4. Zillow + banks + the middle and upper class families start buying homes at a record high. This compounds with the lack of new supply.
5. Foreign speculators move in and see the increase in property value. The common wisdom of "prices only go up for homes" has encouraged them to invest in these properties. I know some people who have been doing this. Foreign speculators are concentrating on some limited markets (USA, Canada, and Australia).
Now that most of our liquid assets have shifted into properties any fluctuation in property value would have interesting implications so there will now be a large interest in keeping home prices high.
The core problem: properties are only worth what people are willing to pay for them. Regardless of what has been going on with inflation or how much money you have put into flipping it. If no one will buy the home for 200k over assessment then you have to lower the price. This is slowly causing a large reversal in the market. I've been seeing homes steadily creep back to what inflation would account for in price delta.
Do you have any data or more info about this? I think many of us young 'uns would just like some hope right about now.
I would however offer that if anyone can give me unfettered access the data of multiple MLSs I could generate some visualizations. I really really really want this data.
https://fred.stlouisfed.org/series/MSACSR
Supply is going up.
That's the only possibility available as far as I can see. I recall seeing the housing stock they favored were all in the hottest US markets, so they're exposed to small fluctuations at the extreme end of the histogram. Otherwise the US median home price curve still looks like a boost phase ballistic missile track as of Q3 2021.
Zillow only got into this flipping game in 2018. They've never seen anything but rapid price growth. I will not be surprised when we learn the place was off the hook with buyers snapping up properties with no adults at the table.
There is always someone caught way over extended when markets move. This time one of them is named 'Zillow.' Expect a bunch of tedious 'insider' stories from Wired et al; wrecked hotel suites and orgies and $2e6 super cars. All the usual.