On the menu today: You may have heard people saying that there’s a housing bubble about ready to burst, but you may not have known that the spike in prices over the past two years is rising faster than it did during the run-up to the 2008 bursting of the housing bubble — the national average sales price of a home has increased by 35 percent in less than two years! Elsewhere, the New York Times asks surprisingly tough questions about John Fetterman’s health; and a key point to keep in mind as coverage of the monkeypox outbreak continues.
Abnormal: Watching Average Sold-Home Prices Increase 35 Percent in Under Two Years
Yesterday, our Kevin Hassett asked whether the housing bubble is about to burst, and he concluded that, “For the recession we are probably entering, the most likely outcome is that home prices decline somewhere between the 1982 rate and the rate from 2008. After a 19.8 percent increase over the past year, the odds are that most American homeowners will end the recession playing with house money.”
I do wonder if homeowners are really happy with a near-20 percent increase in prices from one year to the next. Sure, if you’re selling a house, you’re making much more money than you expected — but you likely must pay a lot more to move into your new home as well. Unless you’re moving from a neighborhood with high home prices to one that has lower home prices, it’s likely a wash. If you’re a first-time buyer, you’re really up a creek without a paddle. And runaway inflation is making it harder to accumulate savings for a down payment.
On the chart of average sales price of houses sold in the U.S., the line is going up at a steep angle — considerably steeper than during the Bush years that led to the 2008 housing bubble. In the second quarter of 2020, the average sales price was $374,500. (Keep in mind, this is the national average; yes, I know that that sum of money would barely buy a tool shed in your neighborhood.) In the first quarter of 2022, the average sales price was $507,800. That’s a 35 percent increase in less than two years!
Back on March 22, researchers at the Federal Reserve Bank of Dallas did a deep dive into the data for home sales, and concluded that:
Our evidence points to abnormal U.S. housing market behavior for the first time since the boom of the early 2000s. Reasons for concern are clear in certain economic indicators — the price-to-rent ratio, in particular, and the price-to-income ratio — which show signs that 2021 house prices appear increasingly out of step with fundamentals. While historically low interest rates are a factor, they do not fully explain housing market developments. Other drivers have played a role, including pandemic-related U.S. fiscal stimulus programs and COVID-19-related supply-chain disruptions and associated policy responses. The resulting fundamental-driven higher house prices may have fueled a fear-of-missing-out wave of exuberance involving new investors and more aggressive speculation among existing investors.
Ah yes, “pandemic-related U.S. fiscal stimulus programs,” the gifts that keeps on giving us . . . more and more inflation and related economic problems.
The Fed analysts weren’t hitting the panic button yet, concluding that, “Based on present evidence, there is no expectation that fallout from a housing correction would be comparable to the 2007–09 Global Financial Crisis in terms of magnitude or macroeconomic gravity. Among other things, household balance sheets appear in better shape, and excessive borrowing doesn’t appear to be fueling the housing market boom.”
Then again, “not as bad as the Great Recession’s housing crash” is a really, really low bar to clear.
But I would note that during the 2007–2009 mess, inflation peaked at 5.6 percent in July 2008, and mostly stayed between 2 and 4 percent otherwise. Gas prices spiked badly, to a national average of $4.11 per gallon in summer 2008 — they had crept up above $3 dollars per gallon in February — but by October, after Wall Street started melting down, the national average was back down to $3.15.
We must wonder if, on the horizon, the U.S. is facing runaway inflation, unprecedentedly high energy prices, a recession, a labor shortage, a crashing stock market, lingering supply-chain problems, and the bursting of a housing bubble simultaneously.
The one group that will likely be smiling despite all this bad news is local governments is state, local, and tribal governments, which received $150 billion in direct, flexible funding from the federal Coronavirus Relief Fund, and then another $350 billion in American Rescue Plan Coronavirus. Because on top of all of that federal assistance, these localities are also awash in tidal waves of property-tax revenue.
When the price of sold houses jumps dramatically, then the property-tax assessment of houses jumps dramatically as well, and that means property taxes skyrocket. One study concluded that the average property-tax payment has increased 18 percent over the past five years — about $225. But 301 counties across the U.S., almost 10 percent, saw an increase of $500 or more, and eleven counties more than doubled in a five-year period. (That may not seem like much, but envision every house in your community sending in an extra $500 to the government at once.) Counties in New York, New Jersey, Illinois, and New Hampshire had the highest effective rates.
If a homeowner’s home goes up in value, he only sees the money if he sells his house or if he takes out a home-equity loan. But localities get the benefits of rising house prices every year in the form of higher property-tax revenue.
Is John Fetterman Healthy Enough to Run for Senate?
Before we go any further, may John Fetterman live to be 100. The Pennsylvania Senate candidate was released from the hospital Sunday after doctors determined he’d suffered a stroke and he underwent surgery to implant a defibrillator.
Campaign watchers may raise an eyebrow at the New York Times this morning, as the paper offers up a surprisingly in-depth report on Fetterman’s health and surgery, and strikes a skeptical tone at the campaign’s assurances that he is fine: “Despite repeated requests, his campaign did not make him or his doctors available to discuss his stroke and his medical treatment. And specialists in stroke, heart disease and electrophysiology said that some of the campaign’s public statements do not offer a sufficient explanation for Mr. Fetterman’s described diagnosis or the treatment they say he has received.”
The short version is that medical specialists say Fetterman’s treatment with a defibrillator — a device that sends an electric pulse or shock to the heart to restore a normal heartbeat — would make sense only if he has a different condition that puts him at risk of sudden death, like cardiomyopathy, a weakened heart muscle.
The procedure Fetterman’s campaign has described sounds more like a surgical thrombectomy, in which a surgeon makes an incision into a blood vessel, removes a clot, and then repairs the vessel. This restores blood flow, and in some cases, a balloon or other device may be put in the blood vessel to help keep it open.
Dr. Lee Schwamm, a stroke specialist at Massachusetts General Hospital and professor of neurology at Harvard Medical School, told the Times that doctors do a thrombectomy only when a large artery in the brain is blocked.
The article ends with a chilling quote from Dr. Elaine Wan, an associate professor of medicine in cardiology and cardiac electrophysiology at Columbia University Medical Center: “He is at risk for sudden cardiac death. For someone on the campaign trail that might raise concerns.”
For what it is worth, Fetterman’s wife released a short video of the candidate walking out of the hospital under his own power, giving a thumbs up, and smiling. An earlier short video in the hospital showed Fetterman speaking normally.
I was surprised to learn that, as recently as 2017, Fetterman tipped the scales at 418 pounds (!), and a combination of diet and exercise helped him shed 148 pounds — good for him. But obesity puts a lot of stress on the heart and leads to higher risks from high cholesterol, high blood pressure, and diabetes. Fetterman’s health should come first and foremost, and so far, every indication is that Fetterman, his family, and his campaign are prioritizing that. The question is whether the typical schedule of a Senate candidate — long hours, with lots of traveling around the state — is compatible with Fetterman’s ideal recovery.
ADDENDUM: During the AIDS crisis of the 1980s, a lot of Americans had to learn or realize that, whatever you felt morally about a homosexual’s behavior in the bedroom, no one deserved to die a painful death because of those actions. AIDS was not God’s judgment on gay people; a loving God doesn’t sit around thinking up new ways to inflict pain upon His creations, even for violating His commandments. We had to separate our views of particular actions and their morality from the need to help the suffering.
And then Covid-19 came along, and it became really socially acceptable pass moral judgment on those who contracted a dangerous contagious disease. Some of us argued against this, over and over again, but there were plenty of finger-wagging, self-righteous social-media scolds who insisted that those who had caught Covid-19 must have failed to wear a mask, or failed to social distance, or had somehow failed to follow the rules. Until hyper-contagious Omicron came along, that is, and then all kinds of people — including those who perceived themselves as the good, righteous, and rule-following people — caught it and spent a week or so home sick.
I mention all this because there’s a good chance that the recent monkeypox outbreak is, er, connected to certain behaviors and actions: “A leading adviser to the World Health Organization described the unprecedented outbreak of monkeypox in developed countries as ‘a random event’ that appears to have been caused by sexual activity at two recent raves in Europe.” A separate report noted that, “Almost all of the case clusters include men aged 20–50, many of whom are men who have sex with men (MSM).”
Another important point which ought to be high up in the sometimes-alarming-sounding stories: “The monkeypox cases so far have been mild, with no deaths reported.”