Tonight: The housing market is giving early-2000s energy, and that's not a good sign. Let's get into it. By Allison Morrow |
|
|
To anyone watching the absolutely bananas US housing market over the past two years, it might be surprising to learn most economists have been loath to label it the B-word. Bubble, that is. Price surges don't necessarily mean we're in a bubble. There are plenty of reasons why home prices have risen steadily over the past decade — and skyrocketed in the past two years — such as supply and demand imbalances, rising labor and construction costs and low interest rates. But new research suggests we're now entering bubbly territory. Home prices are becoming "unhinged from fundamentals," according to a report from the Federal Reserve Bank of Dallas. Key quote: " Our evidence points to abnormal US housing market behavior for the first time since the boom of the early 2000s," researchers wrote. Quick flashback: - Back in the late 90s and early aughts, a flood of easy credit and lax lending standards resulted in the 2007 housing market crash. That left millions of homeowners owing more on their homes than they were worth.
- The resulting credit crisis helped usher in the Great Recession.
This time, economists are worried about a different scenario. Lenders and financial institutions have cleaned up their act since then, so it's unlikely we'll see a repeat of 2007. But prices may be rising to a point economists call "exuberance" — sounds happy, but it means prices are increasingly out of sync with the fundamentals underpinning the market. How'd we get here? In part, FOMO. - Buyers may now expect prices to keep climbing and fear they will get stuck paying more for a home later, economists at the Dallas Fed wrote.
- That's classic inflationary psychology, and it can become a dangerous self-fulfilling prophecy.
- The result? Overpriced homes, obviously. But also investments based on distorted expectations of returns and reduced economic growth.
The solution to a housing bubble ain't pretty. Policy makers would need to intervene to stanch the flow of money into housing – potentially causing a market correction or even a bust, according to the Dallas Fed.
Another big factor inflating the housing market: Friggin' Wall Street.
- Investors now buy 33% of the homes in the US, which is a 5% larger share than the average over the past decade, according to John Burns Real Estate Consulting.
- The business of "iBuying," in which a company like Zillow or Opendoor buys a home for cash to flip it, was only 1.7% of the national housing market in the last quarter of 2021, according to Zillow. But in some cities, the share of homes going to ibuyers is as high as 11%.
- Two out of 10 homes flipped by the those iBuyers last year wound up with investors and other entities, often without the properties ever being listed, according to Bloomberg.
My colleague Anna Bahney has more. RELATED: The Russia-Ukraine conflict is hitting commodities such as oil and metals, leaving US homebuilders to brace for cost hikes and delays, putting the squeeze on already tight housing inventory and affordability. |
|
|
The stock market surged in March, but it's been a rough start to the year. In fact, the first three months of 2022 marked the worst quarterly performance since stocks tanked in the spring of 2020. The Dow and and S&P 500 are both down nearly 5% through the first quarter, while the Nasdaq plummeted nearly 9%. Relief may be a ways off. Investors remain nervous about Russia's invasion of Ukraine, surging oil prices, stubbornly high inflation, the Fed's tightening of monetary policy and the lingering pandemic. |
|
|
Millennials in 2019: I'm so tired of weddings. Millennials in 2022 pounding shots at the open bar while the DJ plays yet another 12-year-old Black Eyed Peas hit: God, I really missed weddings! After two years of postponements and cancellations, weddings are back. With a vengeance. This year's wedding calendar is packed, according to a new report The Knot. The site anticipates as many as 2.6 million weddings in 2022, up from 2.2 million in 2019, before the pandemic. And the big day is getting even bigger. Both in scale and in cost. Key quote: "We are seeing two years' worth of weddings happening in one year," said Ranu Coleman, chief marketing officer of Azazie, an online seller of dresses and accessories. Coleman said the site has seen a 200% growth in sales already this year. The average reception guest count is expected to hit 129, up from 110 in 2021. That's about 80% of 2019 levels.
Then there's the bill. On average, couples in 2021 spent $34,000 on their wedding, including the ceremony, reception, engagement and wedding rings, The Knot report said. It expects 2022 will be "at least 2021 levels."
Blame the bigger bills largely on that one annoying guest you couldn't get out of inviting, like a wayward cousin who never says no to an open bar: inflation. My colleague Parija Kavilanz has more. |
|
| A lot of these issues are not necessarily political. It's about right and wrong. |
Bob Iger, the former Disney CEO, is saying what his successor should have said about Florida's "Don't Say Gay" law. In an interview with CNN+ host Chris Wallace, Iger said the issue wasn't about politics — "it just seemed wrong." Iger's successor, Bob Chapek, whose company employs some 75,000 people in Florida, had stayed quiet on the bill until a few days before it became law. And when he finally did issue a statement, his failure to denounce the legislation — which bans teachers from discussing sexual orientation and gender identity in schools — sparked a backlash. He later apologized. |
|
| That feeling when the boss slacks you at 4pm on Friday... |
|
| |
