>do you expect the 40% price hike during Covid to become permanent?

Definitely. US real estate is literally the best investment real estate in the entire world, and it's availabile to the entire world. Prices definitely won't be going down.

Edit: This comment has nothing to do with whether or not the US is a desirable place to live. The value of US real estate is tremendous simply because the US dollar is the hegemonic international currency and the US holds the only meaningful military power in the west. And finally, one does not have to live in a property to invest in it.

> US real estate is literally the best investment real estate in the entire world, and it's availabile to the entire world.

Apparently, we haven't learned shit from the Great Financial Crisis on what happens when we take a basic living essential, and rather than shepherd it as a vehicle for responsible capital preservation, the market instead shills it as growth investment.

No doubt in my mind that real estate speculation will go down as this century's most epic tragedy of the commons.

The defining characteristic of capitalism is the opportunity to exercise capital to accumulate more capital.

Indeed, an apt agentless response in defense of parasitic excess that so readily cannibalizes its host for a quick buck just before collapse...which is doubly curious given the Fed has been telling us for well over a year now that not exercising capital to accumulate more capital is the name of the game.

You may misunderstand how the "entire world" thinks about it.

I'm French and live in Hong Kong so I'm exposed to a lot of European and Asian real estate experience, have friends with everything from a villa in Vietnam to a flat in Berlin etc.

So the way we see the US is:

  - it's risky to live there, for many reasons (high crime, gun ownership, children mass murders, rampant untreated schizophrenia, drug abuse issues)

  - it's optimized for gasoline consumption, you can't really live near your work as much as elsewhere, the city center isn't as interesting as in Asia/Europe and suburbs are very low-density, copy-pasted houses, so the "value" of a property is more flimsy than other places.

  - it's expensive with low speculative upside: it's a very mature market, it might conserve some value but it won't like double like in Saigon, Bangkok or Lisbon, and it won't "last forever" like Paris or Hong Kong who have structural reasons to be expensive (Paris as capital of a European geographical center between 6 rich countries, Hong Kong as a gateway in and out of China). To give you a random example: Seattle is quite "new" and particularly useless / unknown to, say, a successful Tokyo upstart. It's considerably more expensive than what it should be from an Asian point of view.

  - Visas are annoyingly complex vs very open economies (in term of real estate investment) and the US is far down the ranking of countries you trust to access your property easily. I'd rather have a small thing in Singapore that I know I'll always be welcome to visit, than something huge in Ohio which will make me feel like shit each time I have to fill paperwork to see.

  - Political instability seems to have taken hold and we never know if foreigners will be barred from the US on a whim because of some flu. It doesn't feel that much better than China, which is considered one of the worst market to invest in around me (basically you have random chances to simply see your house unreachable for years there, or disappear).

I feel "the rest of the world" considers the US as average, not too dangerous but not too profitable to invest in. Most of my friends are very wary of investing there. I would never myself. All these may be factually wrong btw, this is just how I hear the market talks around me, in the rest of the world: the US "brand" is not very popular, is all.

I didn't say anything about living here. See "investment real estate"

Same, but why would others live there ? When you invest in real estate, you expect, I hope, to rent. Sure you can just wait it out and lose in estate taxes, but normally: you expect people to live there.

Sadly, since living conditions in the US are deteriorating, dangerous, and unattractive, your investment... is the same: people won't pay a fortune in rent for the privilege of being mugged in their sleep (exaggerating for effect).

And again I'm not even saying that it's actually like that there, but that's how we seem to perceive the US from abroad: we're not jumping on it, it's scary and strange, and it doesn't bring as much yield as safer, less unstable countries. I'd rather buy a losing property in Japan, making up for the value loss (automatic there due to earthquake damages) in stable unchanging rent, with an asset I can safely visit when needed, or at least just access when needing to sell.

If you just want real estate exposure you make a REIT mix and pray the Gods you won't be scammed, from a few click in your broker's app. When you buy a real thing, you don't touch the US.

>Same, but why would others live there ?

Because has more theoretical opportunity than where they live and they can't move to Europe. This is not complicated.

If risk isn’t proportional to reward,… well it is almost always.

Emerging markets are riskier and more rewarding (when the risk isn’t active), mature markets are less risky and less rewarding (unless comparative emerging markets craters).

I personally don’t think the term of loans or the maturity of the US market has much to do with the low volume of home sales. Rather, it’s a combination of loss aversion (as others have pointed out) and general uncertainty.

They will go down if we adopt California-style zoning reform, or enact other policies that allow the supply of housing to increase.

Not a chance, which is why housing prices aren't going down in any parts of the US, including the vast majority of the US that has none of the "California-style" laws that insufferable developers like you despise.

Except housing prices _did_ go down in areas that adopted zoning reform that allows for more apartments to be built at lower prices.

People with 3% mortgages aren't going to sell unless they lose their job and can't make the monthly payment. I mean do you expect a large recession in the next year ? I don't.

Your chart shows that during the time where there's no recession, unemployment generally gradually declines, and then when a recession hits unemployment spikes very quickly, irrespective of what level it was at prior to the recession (this seems fairly obvious: the definition of recession is "significant decline in economic activity", which predictably correlates closely with reduced employment). Why do you think this should mean there will be an "imminent" recession? Just because unemployment is currently low?

Employment is a lagging indicator. In the past, every time unemployment hit rock bottom, a recession followed.

That’s tautological though. Rock bottom will always be right before it goes up because that’s what rock bottom means. That doesn’t mean we know when it will go up.

Can you look at it and explain why you think employment leads to recessions?

It's not that employment itself leads to a recession, but that low unemployment has been a 100% accurate lagging indicator for recessions.

There's no limit to how long we can have low unemployment, and no rule that recessions have any particular temporal spacing or severity. All we can see from your chart is that occasionally there is a recession, that these are spaced unpredictably in time but usually no longer than 2 decades apart (but sometimes only a few years apart, and plausibly it could be longer), and then unemployment rises from wherever it happens to be. But that doesn't mean the recession is caused by either low unemployment directly or by the causes of low unemployment, or that the recession is at all predictable from unemployment data.

I mean yes, it’s not a causation. But it’s pretty difficult to argue that an extremely strong correlation doesn’t exist.

I do. I grew up in Australia and there has been basically uninterrupted crazy property price growth for 25 years. Always a reason why it would or should go down, but it never has. Canada is the same as far as I know.

You might be very disappointed if you’re waiting for a crash

> I mean do you expect the 40% price hike during Covid to become permanent? I don't.

The 08 crisis had a large impact because of inflated home values but it wasn't triggered by inflated home values. What triggered the drop in home values is all of the foreclosures that flooded the market - which was triggered by people with inadequate income/asset verification, multiple homes, ARMs, etc. The Dodd-Frank Act largely fixed all of these issues and made it so that banks had to verify you could actually afford a loan before you can get one, leading to all of the security that exists for home sales in the current day.

>I mean do you expect the 40% price hike during Covid to become permanent? I don't.

Don’t hold your breath for a pullback without a major economic crash.

I don't think there's any case in which I see it pull back anywhere remotely close to 40%, short of societal collapse. Way too many factors that keep demand high and supply low.

Positive price growth means prices rising, not falling "back to normal".