Seniors lead the charge in household formation: Household formation in 2015 was at the slowest rate since 2008.

You want to know why homebuilders are still reluctant to build even though real estate prices are up? The first reason is the demand in housing is coming for rental properties and building in multi-unit housing is up.  Good assessment on that one builders.  The other reason is that high priced metro areas are seeing Millennials move in with mom and dad.  What is interesting is that the group leading the charge in new household formation is seniors.  Yes, older folks are driving the creation of new households but this may not be what will sustain a long-term healthy market.  After all, it is unlikely that a 75-year old is going to be buying a crap shack with a 30-year mortgage.  What was interesting is that in 2015 net household formation came in at the lowest rate in a generation only behind the epic disaster year of 2008.  So what does this mean for housing overall?

Household formation collapses

We keep hearing that Millennials are entering their procreation years and that somehow this is going to unleash an epic wave of buying.  A wave so big long board surfers will have a smile from ear to ear.  Yet it never happened.  Instead a large portion of Millennials moved back home mired by student debt and incomes that simply do not support manic levels in housing prices.  The slowdown in housing was real and household formation highlights this:

net household formation

Source:  Census

In 2014 household formation hit a nice stride at 2.2 million (but a large part of this was in rentals). For 2015 household formation hit a brick wall coming in at a net 191,000.  If you look at the chart above that is a bad year only rivaling that of 2008 when the market completely collapsed.

This is not how a housing boom looks like.  Builders are not building because the need for McMansions is dropping:

housing

Back in 1940 the typical household had 4 people.  Today it is down to 2.5.  Many of the crap shacks in L.A. County were built in the 1920s, 1930s, and 1940s.  They were built for families and ironically today, many of those that have money are DINKs or hipsters with no kids.  In other words those looking to buy crap shacks are not the majority.

So where is the demand from household formation coming from?  Taco Tuesday baby boomers?  Some of it, yes.  Seniors are leading the way for household formation:

kolko_image_2

The group creating the most households are those 65 to 74 years of age.  Here is the explanation:

“(Terner Center) What explains why household formation is rising among older adults? The overwhelming reason is that U.S. population is aging, and the fastest-growing age group is 65-74 year-olds, both in percentage and absolute terms. In addition, older adults live in smaller households than younger adults, so population growth among older adults adds more households than population growth among younger adults. The rising headship rate among 65-74 year-olds is a relatively minor factor, accounting for roughly one-sixth of that age group’s overall household formation. A possible reason for rising headship among 65-74 year-olds is that the share who are divorced increased in 2015. However, it’s unclear without richer data and further analysis whether that is just a continuation of the longer-term increase in the share of this age group that’s divorced (while the widowed share has fallen) or, possibly, a bounceback after the decline in divorce rates during the recession.”

Some interesting data no doubt.  This is simply more evidence to show that Millennials are not a big factor in creating new households in this market, rentals or buying.  It should also be noted that net household formation in the last decade has been plus 10 million for renting households and virtually neutral for those owning their home.  Households also form for non-owners contrary to house humping logic.  This is why on a block with little sales, most older folks are living in properties they wouldn’t be able to afford today.

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124 Responses to “Seniors lead the charge in household formation: Household formation in 2015 was at the slowest rate since 2008.”

  • Even a broken clock is right twice a day. Eventually you’ll be right about this housing bubble. So far yourabout two years off by my estimate. The illegal immigration coming from the Mexican border is feeding the California housing frenzy. This long term trend sees no end.

    Speculation will continue. A disportionate level of income will continue to flow to rental housing. In the grander scheme of things politicians are adding to this problem because it suits them to have a large dependant voter base in the sanctuary city capital of the world, Los Angeles, CA.

    Unless a massive earthquake hits Los Angeles, or Freddie and Fannie pull out and stop buying mortages, unless Mexico is annexed into the United States or unless technology decentrilizes populations beyond the urban clusterfuck known as Los Angeles I see no end to the bubble formation in Los Angeles, CA.

    • Your assumptions are only true if we maintain the status quo. If Trump is elected you can be sure no more illegal immigrants will be flooding the workforce. Besides are these impoverished people really making a dent in housing demand? I know of many immigrant families with 5-10 people living in 2 bedroom apartments/houses. This is far higher then the 2.5 average. Furthermore, we will only see future demand if the economy continues to grind out this phony recovery. With evidence of a global economic slowdown, we can be sure that future foreign investment will dry out due to a change in sentiment. Preservation of wealth will become the focus and housing speculation will cease. Not to mention the big hedge funds will need to liquidate assets (housing) to cover losses due to over exposure to toxic assets.

      • Alex in San Jose

        Maybe Trump (if he can stay coherent) is the real NPI candidate. NPI is something I came up with years ago: Nationalist, Protectionist, Isolationist.

      • Don’t forget about the AG workforce. I am guessing if Trump gets in Ag companies will probably start creating H1b for just farm workers to bring them in legally..

      • Alex in San Jose

        My guess is that Trump is going to do whateverthefuckinghell he feels like, I.E. whatever is most profitable for himself and his cronies.

        Anyone (white working class) who thinks Trump is on their side has been sniffing far too much model glue.

    • Prince Of Heck

      I don’t recall the Dr. making a timing call on the current bubble’s collapse. Can you share your source?

    • Alex in San Jose

      Tons and tons and tons of Chindian money.

      • That’s what I’d like to see broken out. The 64 to 74 demographic is presented with the expectation that we’ll think of people who were in college in the 1960s. You know, white and Jewish Americans who rode the Baby Boom.

        I’m betting that there are a good chunk of those old people coming in from China and India with money. And I wonder whether Doc–or anyone–can break it out for us. Are records of that sort kept, or would it be racist or something to thusly supply granularity to demographic understanding of economic trends?

      • Alex in San Jose

        (white and Jewish) I’ll cop to that…. but going, and trying to complete, college in the 1980s was a total rip-off. Such jobs as boilermaker, steamfitter, sewage treatment etc exist and IF I’D ONLY KNOWN. Tend to be gov’t and Unionized too.

    • It’s not only illegal immigration coming from Mexico, but it’s legal and illegal immigration from around the world that is fueling the housing bubble in the welfare sanctuary city of Los Angeles and the entire state of California. Donald Trump is the only candidate who has suggested that legal and illegal immigration be slowed down to assimilate the millions who’ve already entered the country and he is being savagely attacked by both Democrats and Republicans for even bring suggesting it.

      • Alex in San Jose

        As I’ve said, until we ban property ownership by foreigners, and impound all foreign-owned property, to be redistributed for the good of 2nd-generation American citizens, the beatings will continue.

      • First, Trump doesnt have a chance if he gets the nomination. Second, most of the talk he seems to make about immigration is just that, talk. He is very media savey and he knows how to talk to the simpleton who believe immigration is black and white. Everyone needs to go home crowds love him. I think the funniest thing is watching these same color individuals say go home from where you came from, but don’t work. Then blame not working on immigrants. Then you pass by the corners of every street and see the same color people begging for change and pass a home depot and see a line of illegals waiting for work. I never see illegals begging for change in the streets. Ever. And as far as illegal work, how about h1b visa work? Thats not immigrants fault. Thats white color crime trying to save a buck for joe 1 percent to get an increase in his stock options.

      • Alex in San Jose

        disgman – Homeless where I am cover the full spectrum of race/color. Tons of whites but Hello, the US has a ton of white ppl in it. There are Hispanics, blacks, Asians, you name it. According to HUD I’m homeless myself.

        What I advise to non-mentally-ill homeless folks is: Follow the hobo code. Make yourself useful. Become the shoe-shiner, the remover of dog poops from yards, the window-cleaner, the floor-mopper. Be useful. Make it so people are glad to see you coming. Yes, the highest-paying job I’ve ever had was panhandling but although I could be out there “handling the pan” this afternoon, notice I’m here typing away. And about to do some Ebay work for my employer. Make yourself useful!

        As for those unable to do this, I feel you have not only a right but an obligation to cost the system as much money as possible. Make ’em pay! Go to the ER for every sniffle, call the cops the next time, and every time, the Martians have made your bike-lock keys disappear. Make ’em pay! Sooner or later, even the most solid-bone-headed Republicans will realize it’s cheaper to put you into some kind of basic housing.

    • Hotel California

      Too bad this issue is far more complicated than a clock or we’d have it fixed by now.

    • You must be kidding me, no wonder you are voting for Trump. You really think you are competing for housing with illegal immigrants? What neighborhood do you live in, you have internet access so assume you are not homeless? The reason why most educated people in this country are scratching their heads about those who support Trump is not because we don’t realize that there are a lot of struggling white working-class people (I’m guessing that you’re white) out there who are frustrated and angry, it’s that we’re baffled that you guys target illegal immigration and Muslims for those problems. I assure you, that illegal immigrants and Muslims did not cause the Great Recessions, did not siphon off billions of dollars to the 1% and the financial class from multiple financial bail outs, did not hollow out manufacturing and send those jobs overseas and did not create a tax code that results in billionaire hedge fund managers paying lower marginal tax rates than working class people. Do you know who advocated each of those policies? The Republican Party! What do any of those economic policies have to do with immigrants or Muslims?!?

      • The Democrats are every bit as guilty as the Republicans for all of the schemes Dean referenced. They are two sides of the same coin. Don’t fool yourself into thinking one side has your best interests in mind while the other is evil. With respect to illegal immigration, I tend to think of it like this: Republicans want illegal immigration for cheap labor; Democrats want illegal immigration for votes. I think it really is that simple. Although the rationale behind wanting illegal immigration is different for either side, the (negative) net result to legal residents is the same.

        Illegal immigration has absolutely had an adverse impact on jobs here. Take construction, for instance. Being a construction worker used to pay halfway decently, and although there were slow periods, you could earn a living wage. That is generally not the case anymore, predominantly due to illegal workers. Similar situation with manufacturing here (what’s left of it).

        Obviously, illegal immigration has also had an adverse impact on housing. These people have to live somewhere- they’re (generally) not living on the street. Therefore, unless you’re rich, you’re going to be competing with them for housing directly or indirectly. An indirect example might be a formerly middle-class neighborhood that is now largely inhabited by illegal immigrants. Most middle-class people likely wouldn’t want to live there. Therefore, you have to move up to the next income bracket to be able to live somewhere you want. This trickles down to schools, medical care, etc. Where there are large illegal immigrant populations, the schools generally have terrible Great Schools ratings. And have you been to an emergency or urgent care medical facility any time recently? The wait is abysmal due primarily to illegal immigrants, since that is where they are able to get free medical care.

        Sorry, I just don’t see the upside of illegal immigration for the existing legal resident population.

        Although the corrupt government machine probably has a larger negative impact to our lives than illegal immigration, illegal immigration is still nonetheless a significant problem and is a detriment to our daily lives.

      • Dean,

        You did not get it. Most people don’t like Trump. I would probably venture to say that they hate him. They vote for him because he is the “punch in the face” to the establishment of the republican party who no longer represent their electorate. I would say the same reaction we see on the left with Bernie. Why would a normal person vote for a Bolshevick? I would also want to say that both Trump and Bernie phenomena is a reaction to the unrepresentative government we have today – FED and chronies manipulation of the 0.0001%.

        The vast majority of people feel helpless when unrepresentative people do whatever they want and the politicians do nothing to restrain those forces of the deep state.

        I agree with you that what you see is an emotional reaction which does not have anything to do with reason. But anger is also an emotional reaction. What you see is the anger of everyone in the electorate towards the 0.0001% “elite” who don’t know how to govern. Those are either complete idiots or complete evil. Their greed blinds them completely. Therefore the mobs are also blinded by anger and rage. It is an action and reaction. Trump and Bernie are a reaction and they are the creation of the 0.0001% who lead without the approval of their constituents.

        That is what you see. I am not saying that it is good or bad. I am just observing what is happening.

        Disclaimer: I don’t like Trump or Bernie. I like Ron Paul who is not in the race this time.

      • Alex in San Jose

        90% of Americans *are* in competition with illegals etc for housing, most of us are quite poor. And indeed, while illegals, Muslims etc didn’t directly cause the Great Recession, they’re merely the anvil against which the hammer of the big bankers crushes us.

        No, I will not vote for Trump, but if you don’t understand why so many people will vote for him, you are part of the problem.

  • With California real estate prices, it is not surprising millennials are not driving household formation. The average incomes don’t support a meaningful number of millennials being able to afford to new houses.

    Add this to the growing culture of city living, and the slow death of suburban living (which is far less sustainable). Suburban living was always about owning a home in the suburbs, millennials cannot afford to purchase. There are not enough rental homes in the suburbs, as the rents don’t make the houses good value to purchase as investments.

    Inner city millennials also tend to delay marriage to later in life. The oldest millennials are only turning 35 this year. Give it another 10 years and many inner city millennials will begin household formation, however it may be in city apartments rather than million dollar crap-shacks in the suburbs.

    • Alex in San Jose

      The idea is to use people up and wear ’em out.

      This was observed about London in the 1800s; that London “ate” people. The London proletariat were not paid/fed enough to procreate, and within 2-3 generations families went extinct. It didn’t matter, because more poor and desperate were coming in from the country, to be used up in turn.

      It’s more efficient to pay young Americans just enough to live and work, but not enough to have children, and when they hit their 40s or 50s, hopefully they drink or drug themselves to death, ideally right after training their Indian/Chinese/Mexican 20-something replacements.

      • You are right alex california will be invaded by immigrant specially from asia legal or illegal they will drive the rent and house prices to the roof whcih is not good for the locals

      • Alex in San Jose

        Fatima except this is happening everywhere there is capitalism. London, Paris, all world-class cities are magnets for the desperate, who hope to make a living and live, and end up just getting used up and can’t afford kids.

      • Remember what Henry Ford said about only wanting workers’ hands?

    • How is city living more sustainable in a city like Los Angeles where water, food, and energy must be brought in from hundreds of miles away to support millions of people living in a parched basin where people are crammed together like sardines?

      • I think LuckyOz was stating that increased city living is not sustainable.

      • Alex in San Jose

        Seismic – Except I’ve done the “sustainable” thing. I put in a few years living on a 5-acre survivalist place, and I’d much rather take my chances in the city; I feel they’re much better. People in Survivalville will be shooting each other over a poorly-stored corpsey-tasting can of Spam before things get slightly uncomfortable in the city.

      • Sounds like Alex didn’t bond well with the neighbors he thought he was going to exploit in a time of doom.

        Takes time, you know. People in rural areas don’t bond like city people do. And they SHOULD shoot your a$$ for a can of spam if you come charging in with city money, expecting to leapfrog ahead of them in the struggle for survival.

      • Alex in San Jose

        Compass Rose – Oh how wrong you are. I did the majority of the work on the place because I actually felt it was my “job” to learn how to produce crops, and to learn permiculture. I got on great with the neighbors, taking a chicken-killing dog back to one neighbor’s place multiple times, helping another with the sheep, trying to reconcile the “neat freak” neighbors up Henzi Lane with the inherent (it seemed) characteristics of the “doomstead” I was living on. I had many friends in town, as I was a “picker” for the local antique stores, living as I was, mandated to live pre-internet. I’d get called up on the phone to earn $20 helping load and unload a truck, and hop on my bike to jump at the chance.

        I fixed gates, weeded gardens, built chicken houses, defended the geese against coyotes, and slaved over a hot gas chromatograph. I did all I could to pitch in.

        One fine day in 2012 I realized that not only did I not have the flying car “the future” promised me, but THERE WERE NO ZOMBIES.

        Where were the goddamned zombies?

        Instead, here I was on a group-illusion work-farm like Zendik Farm (read up on it) and frankly, being homeless in Sunnyvale or Palo Alto had become something I daydreamed about.

        So I got out.

        Right now the survivalist place is in all kinds of trouble with every level of government below federal, and you/I/we may hear about ’em on the news one fine day.

      • Alex in San Jose

        Compass Rose – an addendum: You are correct, in that people who have lived in the country for decades do not “cotton” to city-folk moving in and expecting big favors. But, Gilroy is what’s called a “bedroom community” now and there are hardly any local folks left. Those who are local, are Hispanic and you’d better speak Spanish, which none of the white survivalists I was around will condescend to do.

        Everything must be store-bought. No way in utter Hell will a (Bible-believing or not) white survivalist go out into the year, slice off some nopales, kill a chicken, and call it dinner. The people I was around would starve if it weren’t for CostCo.

        The survivalist types were 99% kooky-religious, too. The “Rapture” is coming, etc.

        And I am disgusted with the survivalist tallying-up of which neighbors to shoot right away, and which to shoot later.

        I do not want to live in the world the survivalists envision.

      • Alex: As a fellow 53 year old, I’ve been trying to figure out why you have such a bizarre outlook on things and why you only earn $10,000 per year. Spending five years in a survivalist commune offers a partial explanation. That’s five years during which you were effectively out of the mainstream job market. “Big business” and “unions” and “foreigners” didn’t make that decision; you did.

      • Alex in San Jose

        Mofo – the big oopsie is betting on hi-tech. I bet and lost. I’d have literally been better off studying basket weaving.

        I can try to rebuild my life, at age 53, learning to make shoes, or draw portraits, or paint signs. Start from ground zero.

        DO WHAT YOU LIKE AND ASSUME YOU’LL GET PAID DONKEY SHIT, then if you get paid decently, it’s a nice surprise.

        DON’T BE LIKE ME AND GO “WHERE THE MONEY IS” BECAUSE IT’S CERTAINLY WHERE THE MONEY ISN’T.

      • That’s a shame. What I loved was physics and math, and it turned out that I did not like the academic side, so I drifted into engineering, which paid fairly well, at least relative to my upbringing. I consider engineering to be an incredibly creative field. I get to make things that didn’t exist until I made them, which I view as a fairly noble endeavor. Of course, 80% of my time is spent making TPS reports, but there’s enough interesting work to justify it.

        On the other hand, some people I work with became engineers because of the steady paycheck, and just go through the motions; they’re pretty unhappy.

        Good luck finding your next phase; I’m retiring in less than a year and am trying to figure out what I’d like to do next.

      • Alex in San Jose

        Mofa – How in hell does someone “drift” into engineering? In my universe, getting a hi tech job is like winning the lottery. The average person is better off, the highly intelligent person is better off, going into grifting or metals recycling.

    • cynthia curran

      Well, it depends upon interest rates. Too many of the European countries and Japan play negative interest rates which caused housing to go up and up. London makes La looked stagnant in price increases. Also, La is losing out to Portland, Denver, Austin, Salt Lake and so forth in the tech industry and even foreign investors are going somewhere else

      • Alex in San Jose

        I live in a city known for tech and tech is still quite a bit less than 10% of the economy, I think it’s something like 5%.

        There are no jobs in it, the real money’s in working for something that’s government and unionized, and not well-known or glamorous.

    • Hotel California

      Nobody has a crystal ball to know how things are going to be in ten years. The cities could potentially move out of favor and technology reinvigorates the desire and capability for suburban or even rural living.

      • Alex in San Jose

        I like the idea of living rural with non-crazy people. Keep some chickens a garden, maybe a pond to raise some carp. During WWII we had ” victory gardens” why are those outlawed in so many places now? Which side won, can someone remind me?

  • I’m getting excited for the big drop. Housing to Tank Hard Soon@!

  • son of a landlord

    This $700,000 crapshack in Woodland Hills went pending pretty fast. A nice interior, but a crappy looking lot: https://www.redfin.com/CA/Los-Angeles/4733-Don-Pio-Dr-91364/home/4206153

    • Alex in San Jose

      Interior looks nice, exterior very Meh. No wonder you have to click a different link to get a look at the outside.

  • Feel good living in LA

    Good observation. I have lived in Los Angeles my entire life. I pay $1268 a month for day care. We have delayed having a second child because of the costs. People who come out of state or outside the U.S. to Southen California fail to see all the hidden costs. And not all the costs are financial. Time spent on freeways due to traffic congestion. The main reason that I have not moved out of the state is because my entire family lived in Los Angeles COunty. If you don’t have family or support and loose your job you could end up homeless. http://www.latimes.com/local/california/la-me-homeless-national-numbers-20151120-story.html A lot of people don’t care. That’s fine. Your subject to your opinion. But when you see someone shooting up at 1230 pm during the day or begging for money or food in your area. Seems like something is wrong with this picture. I live in CUlver City area so it’s obviously not a poor area.

    • Alex in San Jose

      My town is a notoriously “rich” and “successful” one, but we have homeless people out the ying-yang. I’ve made it a point to talk with ’em and most (a) were born here or lived here for many decades, and (b) come from a tech background.

      Basically, the richer the area, the more people it’s going to put through the grinder and shit out. I don’t know what’s going to change this other than a revolution.

      • Didn’t you get the memo? We’re in a revolution.

        It’s the globalistas against the world.

      • Alex in San Jose

        I agree with you Compass Rose. Something like “enclosure” where the peasants were kicked off of the land to become the urban proletariat is happening.

        I once lived on $350 a month. On that I could rent a room in a rooming house for $150 and live and eat OK. It was pretty much agreed upon that if you worked at all, you could sleep on a bed, under a roof.

        Now that is no longer the case, and a good part of the thousands of homeless people in my city actually work at jobs, but don’t get to sleep under a roof.

        And like in Weimar Germany, these are not all losers; probably half of them have college degrees and skills. I know; I make it a point to talk to them.

    • cynthia curran

      Actually, LA is losing people to other states more than gaining them. International immigration from Mexico has dropped so much compared to 20 years ago at least for the LA area that many of them illegal in LA are middle age. Seniors brought houses when they were a lot cheaper and the price gives up they cash in. LA is aging which is good in the long term. Young people from other states don’t stay as long as they do in places like Austin Texas.

      • A study by the University of Southern California’s Center for the Study of Immigrant Integration estimated that about 7 percent of California residents – or more than 2.6 million people – are in the country illegally. In Los Angeles County – the nation’s most populous – 1 in 10 residents is illegal. Sixty-three percent of those undocumented residents in Los Angeles are Mexican, 22 percent are from Central America and 8 percent are from the Philippines, China, or Korea.

    • Hotel California

      I’ve noticed a creeping increase in the amount of graffiti and panhandling from Santa Monica to Manhattan Beach over the past year alone. Just the other day I couldn’t believe the number of homeless encampments that popped up along the 710 going into Long Beach. The signs are there, but I suppose most people choose to ignore them.

      • Alex in San Jose

        I’ve been outside California though and it was relief to get back to the relatively polite beggars here. In Prescott, Arizona, there’s a beggar every 10 yards and they are *not* polite. Grocery stores routinely have a big, burly “bag boy” on hand to walk you to your car, so you can avoid a fist fight or worse with beggars.

        Here in San Jose, due to tech being so wonderful, we’ve got homeless and beggars galore, but I generally give ’em money before they get around to asking me. As with the rest of the US, restaurant servings are huge so my rule is, “one eats, two eats”.

  • Don’t expect household formation from the young to really take off for a few more years. I have showed data line charts, those that Jed K ( the chart above used in the article) to show that the

    Young And The Renting …. theme… still has legs since we have the highest population % of age 25-34 in this cycle still living at home

    6. Housing Starts

    I may sound like a broken record, as I have said the same thing about housing starts for years now. I expect a slow and steady rise in housing starts. Renting demand is booming and this gives legs to housing starts, off-setting a very soft trend upward for single-family home starts. The financial networks have been promoting the thesis of pent of demand for years now. We did have massive pent up demand, but it was for rental housing not single-family homes. I predict the demand for ownership won’t improve significantly until the years 2020-2024. Until then, expect a slow and steady rise for starts and permits. We need the young to rent, hook up, date, find a steady relationship, pop the question, and have kids before we have any major boom in single-family home sales. Even in 2015, the number of 25-34 year old Americans living with their parents is rising.

    Charts are here #6

    http://loganmohtashami.com/2015/12/28/2016-housing-economic-predictions/

  • Another interesting aspect is most young people who have bought in the last few years did so because of a gift of money or inheritance from their aging parents and grandparents. This blog talks often of a suspected pent up demand in home buyers who are waiting for a market correction, but also seniors who are not leaving their paid off homes in old age. When the boomer generation starts kicking the bucket and leaving homes and properties to their kids will they hold into their newly acquired homes that neither they, their parents, or grandparents could afford in this market….thus further stagnating the market? Or will will they sell and move up? The generational hand off will have an interesting effect on this bubble and perhaps future bubbles.

    • If history is any guide, when the adult child inherits the home, she lives in it for her retirement years as well. Isn’t it so European to pass down the family home from one generation to another?
      There is hope, if we have a very big earthquake, that may reduce some of the older inventory, so we can build multi family housing in the blocks where the old SFR got burned down, like 1906 San Francisco, where the govt burned fire breaks in the city(by the way, check your homeowners insurance, it does not cover acts of govt such is this.)

      • Alex in San Jose

        Ira – that is how the US is becoming. Social mobility is nearly zero, and you will have a house if your grandparents had one. It’s become not even a class system but a caste system.

    • Prince Of Heck

      Depends on whether these seniors will have enough to equity to leave to their heirs. An increasing number of homeowners are resorting to reverse mortgages and home equity loans to make ends meet in these tough economic times. The value of those loans could exceed the value of the property itself.

      • THIS! My wife’s mom and aunts all live in SoCal in homes worth $600-700K each, and they’ve all been taking out loans on the homes to get by.

    • The reality of those seniors staying in their homes and the kids who inherit them, who live at home already, is a run down dwelling that needs lots of work. I can imagine a landscape of homes where the paint is peeling, the stucco is cracked, the paint faded, water stains from leaking pipes, backed up sewers … oh, forgot, that is already the case in large swaths of L.A. Everyone forgets that homes require ongoing maintenance and more repairs and updates as they get older! Where do all these homeowners get that cash … the kids already live at home because they can’t support themselves, while Mom and Dad, have most of their wealth tied up in their home? A reverse mortgage maybe, but then the home will have to be sold to pay off the debt!

      • Alex in San Jose

        Oh yes, the delayed maintenance …. my employer’s place is literally falling apart.

  • Southern California real estate price will explode this year, double digit gain. It will be all over the news by the Fall. We already got confirmation in January. Tons of buyers flooding the market, competing for a tiny amount of available inventory. In 2008, we have the highest number of bank-owned inventory and it’s completely opposite in 2016 with the lowest REOs. Supply and demand dictate home price. It has little to do with economy, unemployment or interest rate. We can have increased unemployment and increased interest rate, and home price will continue to rise similar to 1970 – 1980 period in which home price tripled while unemployment and interest rate were both increased substantially.

    • “1970 – 1980 period in which home price tripled while unemployment and interest rate were both increased substantially”

      a guy i worked with bought in the late 70’s and had to sell in the early 80’s…..he lost money on that sale. Sometimes i wonder if you guys are just trolling

      • Alex in San Jose

        I have seen far more failure than success in the real estate racket. If you are VERY VERY lucky, you’ll “make” on your house what you’d have made on a passbook savings account, and keep it long enough to die in.

    • Your Simple Math is below first grade level. You say that “unemployment, interest and economy does not mater, what matters is the demand”.

      That is total illogical non sense. Demand is influenced by the interest, unemployment and economy. The prices for houses tripled for two reasons: interest coming down from the 18% during Volker years and increased women participation in the work force (double income households created higher demand) – Simple Math if you have a brain to process.

      Try again to say something which makes sense.

      • Flyover, on a basic level it does really boil to supply and demand. A increase in supply due to a lack of demand will bring RE market prices down. The catalyst which causes that increase of supply is another question, whether that be recession, war, stock market crash, increase in mortgage rates, mass domestic migration, earthquake, who knows?

    • Inflation and wage gains could drive such a scenario and did then. Is this what you are predicting and if so what will be the mechanism?

      • central bankers and 15 trillion of money spent to force hard assets and inflation rise are the end goal..so far they have done what they want with little inflation showing…expect it to happen this year…

        heck, they are buying commodities now to push up oil.

    • “Southern California real estate price will explode this year, double digit gain.”

      So, how many properties are you buying?

    • Hotel California

      Simple math = buy now or be priced out forever. Too bad the world is not simple.

  • son of a landlord

    I went to Open Houses in Woodland Hills and Pasadena today. LOTS of house horny couples and families. I don’t see a tank this spring. Probably no tank throughout 2016.

    • Jim taylor said house will tank hard soon

    • Prince Of Heck

      Retail investors and buyers are usually the last participants in a mania. The original investors who got in first in this reflated bubble scaled back on their purchases a long time ago.

      • Alex in San Jose

        This reminds me of the “phen-fen” diet craze; right when it was being debunked there were still ads on the radio extolling it. All you had to do was travel 20 miles in from the coast to travel 20 years into the past.

  • They did not build crap shacks in the roaring 20’s when people were making good money in the stock market. In the roaring 20’s houses were built with character and had real oak wood lath and plaster, and a 1″ Redwood plank on the outside with chicken wire and thick stucco. This wall will stop a 9mm, unlike the modern homes of cheap Chinese plaster board than the slow release fumes will make you sick. The homes of the 20’s have redwood framing, so they do not get termites like the newer homes that are built out of Doug fir.
    The 30’s were depression years and the homes were built cheap, same goes for the war rationing years , and of course , the super cheap homes built for the returning GI’s in the late 40′ and 50’s.
    So we see that everything went downhill after the roaring 20’s.

    • Alex in San Jose

      Yes I’ve seen this. Where I grew up the building boom was in the 1920s, of course we were poor so we lived in plantation worker houses that had been moved onto a lot, probably built late 1800s. But the really solid buildings, houses, etc were made in the 1920s.

    • Bullcrap.

      I’ve heard this all my life how them 100 year old homes are better. They ain’t. They are piles of funky old junk. That old crap wastes energy and the old atmospheric combustion furnaces have killed scores of Americans.

      We know more about structural and mechanical today than we knew even just 30 years ago. The advances in safety and comfort are light years ahead of that old crap.

      Structurally the modern wood frame is superior to the old frame. The invention of engineered trusses. The invention of 4X8 plywood. The ground fault circuit interrupter is saving lives. The direct vent combustion furnace saving lives from the pleasant experience of being affixiated Hurricane and earthquake strapping, foundation and hold down improvements saving lives every time the ground shakes.

      100 year old homes look great with all that wood work and stained glass is romantic but when your paying for the heating and cooling, having no insulation in your walls or your ceiling realy sucks. And maybe there would not be so much rot and mold in the home if they would of only had some 6 mill plastic to vapor barrier the crawl space and keep the ground moisture out of the home.

      Hell a hundred years ago I think having a toilet in the home was just coming into fashion. If you were wealthy,

  • Alex in San Jose

    https://www.youtube.com/watch?v=GFja5II433w

    This is what we have coming folks, it’s already here for millions of people.

    • In my opinion the WORD won’t be said until we are already in it. If you are not in it now be fortunate. All we can do is try to make due with what we have, save and invest for an unknown future. In addition, we hope for everyone’s sake they are doing the same.

      • Alex in San Jose

        Be useful! Be useful! I learned I never needed to buy pens/pencils in high school if I looked down, enough were dropped by more fortunate students (pretty much all of them) to keep me in ’em. I learned to eat sweet potato leaves, and the center stems of grass, and to fish, for fish no-one else even thought were there, and eat OK. I was the kid you could hire for cheaper than anyone … being white, most people would not hire me on general principles, but there were always the fellow poor, the desperate, who would hire me at $1 an hour because I was smarter/more skilled/more diligent than anyone “good” (non-white) they could hire for 5X as much.

        Oh, and work for the revolution!

  • The crash will be epic. Can’t wait for it!

  • I always find it interesting how numerous people here lobby for a crash that will most likely cause millions of people to lose their homes and destitute some, just so they can pick up their very own crapshack at a discount and start the cycle over again this time on the other side of the fence.

    • Don’t make us all look evil. People just want prices to be normal. And sadly it will take a crash for prices to be back to normal. I don’t personally want the cycle to start over again. I’d be fine if real estate prices rose in tandem with wages/real inflation.

      • True. There is no joy in watching people lose their jobs & homes but people can hardly afford rent let alone a down payment on a house. I’m lucky I have rent control but most of my neighbors moved in late & are paying double or more. Most of my coworkers like myself are still not making the kind salaries they made before the crash so what’s the alternative? A crash is most likely, how bad it’ll be…who knows?

    • Hotel California

      A major housing price reset doesn’t cause prudent non-speculators to lose their homes and become destitute.

    • Prince Of Heck

      Notable observations based on your post:

      – You either believe that blog readers have more influence than the laws of economics on the RE market.
      – You don’t really believe that the government and central bankers are omnipotent in keeping the current bubble inflated.
      – Considering how low and falling the home ownership rate is, the people with the most to lose are the speculators and investors in the current cycle.
      – You believe that falling prices in line with incomes represents greed. This suggests that you’d rather keep the home ownership rate low (in the hands of the few) and keep housing costs high. Oh the irony.

    • Be it groceries, clothes, toys, cars, or a house, I can’t really think of any goods that I wish to purchase that I don’t hope will go on “sale.” Maybe I could be a better person, but I’m not sure I’ve ever thought, “I’m in the market to buy a car, and I hope the prices go up this year, so the car company employees get paid more and the economy remains healthy.”

      Do you really hope and wait for things to get more expensive before you buy? I think many of us in this blog have been laying the foundation for the last several years to buy a house when the time is right, and we’re just waiting for that time.

      • Alex in San Jose

        In the 70s when I was a kid we were given cars. It’s because a car cost money to keep registered, something like $35 a year. Big money.

    • @Hunan, recessions and housing price crashes in Southern California go hand-in-hand.

      Recessions happen every 3 to 8 years and are supposed to clear out mal-investment. The current level of mal-investment in SoCal real estate is terrifying.

  • Looking in the Valley

    Patience is a virtue.

    Why would I feel bad for someone that has access to the same housing information I have and they choose to buy and I don’t? No one needs to buy a home, they can rent. History tells me this bubble will pop, so I’m betting it will again. I may be wrong since God knows what the government will do to intervene this time, but if I’m wrong I will pay for it. If they are wrong, they will pay for it.

  • 2020 Crash coming

  • “When we get piled upon one another in large cities, as in
    Europe, we shall become as corrupt as Europe.” —

    Thomas Jefferson

    • Just to avoid confusion, the longer version of this:

      “I think our governments will remain virtuous for many centuries; as long as they are chiefly agricultural; and this will be as long as there shall be vacant lands in any part of America. When they get piled upon one another in large cities, as in Europe, they will become corrupt as in Europe.”

      • Agriculture is really the cornerstone that has given us freedom to do what we want. Without cooperation from everyone to manage food we may not be discussing homes right now.

  • Here is my prediction.

    First, negative interest rates and excessive central bank printing causes homes to skyrocket.

    After that, the currency market starts to shake because of inflation.

    Finally, economic crash where real estate drops.

    So, the trick question is after the skyrocket and following drop, will real estate be higher or lower than it is now? I think it will be higher. But, no more than 25% above current levels.

    • Maybe when you look at the nation as a whole, but I don’t think it will end up higher than current West Coast cities.

    • son of a landlord

      the trick question is after the skyrocket and following drop, will real estate be higher or lower than it is now?

      No, that is NOT a trick question.

      You meant to say that “the big question” is, etc.

      A trick question is a ruse (hence, it’s a “trick”), in that it looks like an honest question, with an obvious (but often false) answer. But in reality, the “question” itself is a distraction, meant to mislead you (i.e., “trick” you) into an erroneous answer, or to “trick” you into revealing some personal or secret information.

      You meant to say the Big Question, not the Trick Question.

    • Will wages also skyrocket? If not, then how will house prices skyrocket? 100 percent foreign/cash buyers and investors?

      Also, the Fed has been printing money excessively for years, and interest rates have been near zero (admittedly not negative, but close enough relative to historical rates). And the current housing market is about the worst it’s gotten so far. So I really don’t see the mechanism through which house prices will skyrocket anytime soon. I sort of doubt negative interest rates would do it; maybe prices would increase slightly, but probably not “skyrocket”.

  • Why shouldn’t we hope for a crash? We can’t expect to ever buy a home at the current levels. Are you saying we serfs should be cheering on the Federal Reserve for making housing so expensive that we are not able to buy it? We’re not celebrating these absurd housing prices. Instead, we look forward to this cycle of housing inflation ending. It is not creating wealth but is instead creating poverty.

  • The Market Oracle has correctly predicted the embryonic bull market in stocks and housing for 4 years – his latest news is here and he predicts housing to remain in good footing for the remainder of 2016….

    http://www.marketoracle.co.uk/Article54414.html

    2 years ago when I posted his predictions on US housing, responders here laughed at him of as some nut from the UK who doesn’t know the US market……

    • According to the “oracle”, “many people sat on the sidelines….in increasing numbers will feel no choice but to jump onboard the housing bull market as a they see the houses they have been viewing sold and asking prices trending ever higher.”

      Really? To paraphrase the “oracle”, the perma bulls have desperately been towing this company line for the last 6 years. Yet, the home ownership rate continues to sink. If homeowners are really happy to spend due to their newfound equity wealth, why is the Fed so scared of deflation?

      Strange that the “oracle” cites organic buyers as the fuel for continuing the current price run-up. Yet he ignores the fact that the recovery has mostly been investor driven through cheap credit.

  • Alex in San Jose

    Conspiracy Theory O’The day:

    Zika virus will save the world. Anyone else notice the similarity between Zika(tm) and Zima(tm)? One was a disgusting drink and the other’s a virus that doesn’t seem to slow adults down much, but cuts birthrate ‘way down.

    I’m just coming off of a cough-y sniffly cold thing, and so’s my boss. Is it Zika? I dunno, don’t care really, ‘cos I’m not reproducing. But given that screen doors are not a thing in 3rd-world San Jose and the mosquitoes make their usual rounds, I might be doing my part – and my boss too.

    So, is Zika a New World Order or Bildersbergers genetically engineered thing? We can only hope!

    • Former survivalist camp resident AND conspiracy theorist? How do you keep the ladies away? 😉

      • Alex in San Jose

        Same way I keep Grand Prix race cars and thoroughblood horses away; lack of money, it works great.

    • I’m terrified for my sister. She just got back from Panama a couple of weeks before Zika became national news, and she was in her first trimester while visiting. Hoping for a healthy baby.

      • Alex in San Jose

        I’m hoping you have a healthy baby too!!

        I assume you are white; whites are an endangered species. Our backs are to the wall. I wish white Americans could realize how much danger they are in. They’d have to have the childhood/adulthood experience I’ve had, and I’d not wish that on anyone.

        But, healthy white babies for the win!!

  • It is interesting browsing homes sales and you notice as you look through the history on zillow that you find homes sold in 01-02 and then sell in 15-16. Well by diving into the parcel number do you find the missing time. Plenty of foreclosures, REO’s still going on. Seems amazing that who ever is playing with the sell history sure likes to keep the details out when someone is looking to buy.

    • I notice this a lot too. Though I never figured out how to find the info on the missing years. Could you elaborate please on how you are doing it? Get parcel number where? And once you have the parcel number, what do you do with it? Thanks!

      • In zillow if you expand details on the first section of the property
        you may find the parcel number. Sometimes I find it missing.
        Take that number and go to your county/cities recorder services website
        To look up parcel history. Hope that helps.

  • Hilarious, as if home prices have not gone up for the past 8 years. As if the money machine has not been printing for the last 8 years. As if the boom in car prices has not happened in the past 8 years. And that industry for sure is just about to drop fast. All time high leased cars will start coming back. Deflation in the car industry is just about to hit. The housing market will not be left untouched. The world is experiencing the Sovereign Debt Crisis. This will not end well. The biggest demographic in US history is now retiring everyday. The Baby Boomers. ………………Not good.

  • Alex in San Jose

    Icey – little old moi, is not buying a car since when you make 10 grand a year cars are not a thing. I am not buying a house, since I’d literally have to have 100X my yearly income on tap.

    The Baby Boomers I work for are saving soap shavings and recycling bags; they have their $1+ million house but it’s only standing because the termites are holding hands, and when they’re gone their kids are going to be like me – living in rented or “squatted” quarters.

    I have no idea who it is who’s owning and operating a car, or a house, these days. I know they exist because there are still cars on the roads and houses that are not 4 to a room rooming houses with bunk beds and a large bike rack in front. But I never-ever cross paths with those people. The San Jose I live in is populated by the homeless, palateria-peddlers who push a damn heavy cart for many miles a day, panhandlers, street musicians, all varieties of down-and-out. I’m pretty sure this is the future.

  • I wonder how much it costs to erase towns and cities?

    Why do others and city planners complain about removing a developed area that serves no purpose to society? We always tend to build where there is potential growth or prosperity and purpose. However, when people leave an area so does the money. I am bit ashamed at this life. Why we don’t clean up after each other when things don’t go our way. If you build homes that don’t sell and try to dump it on someone else anyway you can seems that the irony with homes is to never to stop expanding until every square foot of land is covered with crap shacks or deluxe shacks. Is that the ultimate end to this prosperity?

    I think the business model that should be included in all city planning is leveling areas to eliminate underperforming settlements. This should reduce infrastructure costs since you are clearing out the old technology and inviting new ideas. Infrastructure HAS to change with society and the only way to do it is to get rid of the excesses. Obviously by doing this every investor would probably buy up blocks of homes in order to justify keeping the status quo. I think this alone is where this issue needs to be leveled. It again is the problem for why cities stagnate and can’t improve their infrastructure nor reinvent how people should get from town to town.

    Until society changes from just thinking about suburbia it should be carefully thinking of how to make people mobile on foot or more public modes of travel.

    • son of a landlord

      Homerun: “the business model that should be included in all city planning is leveling areas to eliminate underperforming settlements.”

      You’re advocating the Soviet Model. Idiotic, this notion that “city planners” should make such decisions rather than the market. Even a broken market is better than attempts at “master planning.”

      Romanian Communist dictator Nicolae Ceausescu engaged in “eliminating underperforming villages.” Didn’t work out too well: http://articles.latimes.com/1990-03-04/news/mn-2534_1_small-villages

      • Alex in San Jose

        Sounds like creeping capitalism to me.

        If this happens, and you are going to die anyway, take a few capitalists with you!

  • As long as the feds keep delaying interest rate increases, housing and the stock market will continue to climb.

  • I can’t understand why people pick on capitalists when capitalists are not the problem.

    Thieves are the problem.

    • I don’t think people have a much of a problem with organic capitalism, within reason (such as fair and reasonable working conditions, taking care of the disabled, etc). I think most people are more up upset about crony capitalism, policy dictated by special interests (i.e. policy dictated by the rich), and other less desirable aspects of “capitalism”.

    • American capitalism for the elite .0001%: capitalize profits but socialize losses.

      It’s been going on like that since the days of the Revolution. Rich American colonists benefited from a territorial war against France but didn’t want to pay for it in the form of taxes to the British government. So they convinced other colonists from lower classes to fight for them over the issue of taxation without representation.
      10 years latter when the federal government was established, those rich colonists began taxing the lower classes without giving them direct representation (vote).

  • At Hotel California, you can check out, but you can not leave.

  • Let’s look back at 2008. People lost their jobs back then, so so many people were just sitting at home (if they still had home). I remember even streets were empty, no rush to go to work. I lived in Marin County back then. My general contractor friend had to deliver pizza to make living, well…not too many people were ordering pizza delivery ether in order to save.

    Let’s look at today: do you see any way for jobs to slow down? Wages are low for regular working people. For example if someone works as a cashier at the store and makes $17 per hour, pays taxes on top of that and end up with $80 clean cash a day. So its around $1600 a month. Rent is $1600 for just one bedroom in San Jose. It means that this person can not afford gas, food, clothes etc. But on another side….there are a lot of work! A lot of work for $17 an hour!! Check craigslist out….someone always looking for labor, employees. Unless work stops, no housing crash will come. And those people with $17/per hour currently living like sardines with 6 people in one bedroom apartment. That is why I can’t park my car any more! I have to walk two blocks away to find parking.

  • son of a landlord

    I’m going to use the G word again — Greed.

    This Pasadena house sold for $503k in June, now listed at $898k — https://www.redfin.com/CA/Pasadena/1588-Corson-St-91106/home/7197822

    I know it’s in Pasadena, but it’s FREEWAY ADJACENT.

    I also like how the house is listed at $898k instead of $900k. I guess that sounds cheaper.

    A nearly $400k markup, from $500k to $900K, when you round off. A nearly 80% price increase in less than a year.

    The flips are becoming ever more outrageous. Ever crappier houses, for every higher markups. These must be tail-end flippers who arrived too late to the party.

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