Happy National Fair Housing Month (“A Fundamental Right, Year-Round”; for Americans dumb enough to work: the “fundamental right” is to pay taxes so that others can relax in public housing) to those who celebrate.
Recent message from a friend who was smart enough to sell everything in Maskachusetts and buy in Texas in early 2009:
My contrarian view: Real Estate prices are at an all time low….. if measured in gold
Given that peasants can’t afford to buy at current prices/mortgage rates, my first reaction was “this is dumb”. On the other hand, I think my friend is closing in on billionaire status due to his previous real estate investments so maybe it is me who is dumb.
There is some support for his theory from this chart (source):
Does this make sense, though? Gold can be purchased by anyone in the world as an investment or for decoration. It is easy to transport. Residential real estate is impossible to transport and most of it has to be purchased by or rented by someone who lives where the real estate is. Rich people in Switzerland, India, San Francisco, Miami, and Singapore might buy up all of the world’s gold, but they’re not going to pay anything for a house in Detroit.
We’re now at a point where it takes 40-45% of a median household income to pay the mortgage on a median-priced house (source), i.e., back to the situation circa 2006 at the peak of the real estate bubble that burst in 2008:
This reflects the prevalance of two-income households since it looks at median household income. In the old days, the man worked and the woman stayed home (those days were so old we could tell the difference between a man and a woman!). Now everyone is in the workforce, except those smart enough to live in public housing, and the monetary fruits of all that extra toil are scooped up by real property owners. Median household income is a mixture of single-income and dual-income households. Houses are priced right now to be a stretch for the median household, which I guess means that they’re affordable for median two-income households and entirely unaffordable for a median one-income household. I asked ChatGPT “What’s the difference in median household income for one-income vs. two-income households?” and it came back with $70,137 for one-earner “family” and $127,256 for two-earner families from Census ACS data, cautioning that “Family is narrower than household. A household can be one person, roommates, an unmarried couple, etc., while a family is related people living together.” It added “For context, the overall 2024 median household income was $83,730.”
So… I’m pretty sure that my friend is wrong, which makes me+Google+ChatGPT smarter than a billionaire! There’s a first time for everything.
Also from my friend, bad news for people who love open borders and/or high birthrates, both of which necessitate new housing construction:
on the construction side, prices went crazy during [coronapanic] and never came down. It is now about 50% more expensive to build anything as compared to 2019.
Philip, did you convert this blog to LLM? Why does this post references 2006 graphics from Atlanta Fed which say that home median price is $231,663 ? Hope it is not a time machine malfunctioning.
perplexed. I’m sorry that you weren’t able to follow the link cited in the original post: https://www.atlantafed.org/research-and-data/data/home-ownership-affordability-monitor
If you are able to view the link, you’ll see that the cited chart covers Feb 2005 through Feb 2026.
I highlighted a 2006 date because that’s the last time median households had to pay up to the extent that they are now.
Point taken. This blog is not a light reading and I ought to read it thoroughly. Some median home prices can be explained by wealthier Americans escaping pricey blue states to neighboring freer and remote free states and wealthy foreigners moving into blue caliphates. Bubble of 2008 was driven by an easy credit for unqualified households. I think that the credit is tighter now; it may become more available soon and your point will become more pronounced.
Current home prices are not indicative of the whole real estate situation as large majority of homes are not on the market.
“Buy land, they’re not making it anymore” — M. Twain or W. Rogers depending on which AI you ask.
I don’t understand where all the capital is coming from to give people mortgages (never had one myself, I’d almost rather pay taxes to the government than some bank). Have they, in the style of 1984, redefined “subprime” and “jumbo”? Follow the money.
I recently saw a 4X flip in Richmond, VA from $250K to $1M in one year of busy flipping. Took over 30 days but it sold. People claim this isn’t a bubble, it is 40 year old Millennials so anxious to fledge the nest they lose all reason and overspend while waiving inspections. My opinion, worth $0.00 due to the elimination of the penny, that is a bubble, maybe different conditions than ’08. It will be interesting to see what breaks it.
Of course tariffs and threats against our best neighbor and major supplier of lumber had no affect on new housing or flipping costs
It seems like you ignore the BMI at the Dr.’s office, and define “obese” intuitively like me. [Details of joke supplied on request.]
“I’m not fat, I’m big boned.” — Cartman, South Park
Anon please provide joke details. Thank you!
Silicon valley is quite attainable for the power couple of fiction. In reality, the wife is either making 1/10 as an influencer/teacher/secretary or the husband is paying for everything in the divorce. It’s all on the husband. Don’t forget to vote liberal.
> a friend who was smart enough to sell everything in Maskachusetts and buy in Texas in early 2009
Hopefully rich enough to summer in Jackson Hole, or should have kept a house on Cape Cod.
Housing Investment (Source: St. Louis Fed)
All-Transactions House Price Index
MA: Q1 2009 639
MA: Q4 2025 1304
Increase*: 104%
TX: Q1 2009 227
TX: Q4 2025 528
Increase: 133%
—–
Stock Investment (Source: WSJ)
DJIA
Close Q1 2009 7609
Close Q4 2025 48603
Increase: 539%
* Increase = 100 × (final value – initial_value) / initial_value)
OAG: I don’t think he likes billionaire douches enough to want to hang out with them in Jackson, though certainly his jet fuel budget wouldn’t be impaired if he spent $20 million on a starter home in Jackson. He often does spend part of the summer in Maine and/or Europe, He’s never complained about the Texas heat, maybe because he’s very fit.
> closing in on billionaire status
Pardon my ignorance, I thought this technically disqualified him from J.H. Laramie has less d-bags, however like entropy, even there the increase of d-bags moves forward in time. We moved after the “buy a house for my college kid with free tuition at UW” rich started ingressing.
Despite, according to Laramie’s supporting patrons “There Is No Climate Change”, A/C is almost becoming a requirement at times in the summer there. Our hovel wasn’t equipped with one, and we walked to K-Mart (now closed) during hot days and walked around the store’s A/C to disco music. (Your friend’s bizjet is probably larger than our condo.) I wish I would have listened to my old man and become a finbro during those times, instead of stubbornly insisting on becoming an engineer and trying to make the world a better place.
Speaking of RE, a 200 year old four-plex across the street just sold at $1.2 million. Two units resold immediately as condos for 6 and change, covering the purchase price. Two remaining for rent, zero down, nothing per month. Nice play if you can make it.
Gold has no intrinsic value and is valued as a collectable, like art, rare coins, first edition books, carpets, Greek vases, rare maps, stamp collections, whatever -i.e.., what people are willing to pay. So the meaning of the ratio of the current price of gold to whatever is unclear. The price of gold bounces around sometimes in synch with inflation and sometimes not. That your friend is close to a billionaire because he invested in Texas property 20 years ago, someone has to win the lottery, right? Or do you think there is more to it & if so why?