Good post. It's tough to tell how to approach it for sentiment POV - someone locked in without any interest in selling? Someone who'd like to move but doesn't want to give up their mortgage? First-time buyers? Obviously a lot of housing wealth was created, but those people still need to live somewhere if they sell....
Yeah I tried to characterize the mixed population affected in the "this big cost increase applies to" paragraph, but I can't think how to quantify the number of ppl affected or the monetary (much less utility) impact... I did link to the Zillow data series in the footnote, which I think could be straightforwardly added to Morris's regresion?
I find the rise in median house sale prices and mortgages over the past 6 years especially concerning given the rise in WFH jobs that started right around these price jumps. The urban housing premium should be decreasing given that there is much less of a need to be close to your office on average these days.
I think it's because of the increased home size that WFH all but requires. Previously, a young couple might only require a 2-bedroom unit because they were going in to the office all or most workdays. Now, with WFH on all or most days, a 3-bedroom unit kind of becomes the bare minimum. 3-bedroom apartments are not common in recent or new construction, so that forces people into renting or buying townhomes or SFHs. You can clearly see this effect in the DC area, as an example, especially during 2020-2021 where apartment rents in DC and close-in suburbs stayed flat or went down while the price of townhomes and SFHs went through the roof. That dynamic has slowed down but it's still there; we have friends who rent in Arlington and their rent stayed relatively flat this year while the house prices we were seeing while househunting (for sub-600K prices, lower end of the market with monthly payments comparable to rent prices) were going up 5-10% year over year. The house price increase was corroborated by realtor data at around 5% for the entire market, but the lower end (where people tend to enter) was going up much faster. The ladder is being pulled up and the ladder is shrinking at the same time.
Yeah I can see this making up for some of the effect but not all. Especially when the mechanism I’m describing is migration OUT of urbanized areas where the 3-bedroom apartments you’re describing are low in supply. Most SFH can surely accommodate the WFH demand. Maybe the rise in demand for SFH is driving most of this price increase, which would fall in line with your hypothesis, and that totally makes sense. I would like to see the housing market price changes broken down by MSA over time or something along those lines.
Thank you so much for this! I also think it's why Krugman, Bernstein, and others have been missing what seems obvious to some of us - but you put it into better terms that they may be able to understand, better than us economics laypeople (even if we have a decent grasp of the concepts, the language isn't always with us).
I'm looking forward to your housing post. Housing data has been an interest of mine for 20 years, and I've worked in housing my entire career. While I don't think housing is everything, it's a good enough proxy. I think the vibecession can be basically explained by the degree zero problem as it relates to the lower 30-40% of the income distribution and the costs of housing, health care/child care, food, and maybe higher education. Essentially, the essentials or necessities of life.
The housing situation is worse than bad, I'm afraid. I think it's really bad. This chart gives me the willies (because I was taught to think in integrals), and I'm not even a "more supply will fix everything, just upzone and that'll fix it" zealot: https://fred.stlouisfed.org/series/HOUST
Hi Mike. On your housing-is-everything bias, wondering if this seems pertinent: https://wealtheconomics.substack.com/p/mortgage-payments-and-the-vibecession Thanks.
Good post. It's tough to tell how to approach it for sentiment POV - someone locked in without any interest in selling? Someone who'd like to move but doesn't want to give up their mortgage? First-time buyers? Obviously a lot of housing wealth was created, but those people still need to live somewhere if they sell....
Yeah I tried to characterize the mixed population affected in the "this big cost increase applies to" paragraph, but I can't think how to quantify the number of ppl affected or the monetary (much less utility) impact... I did link to the Zillow data series in the footnote, which I think could be straightforwardly added to Morris's regresion?
I find the rise in median house sale prices and mortgages over the past 6 years especially concerning given the rise in WFH jobs that started right around these price jumps. The urban housing premium should be decreasing given that there is much less of a need to be close to your office on average these days.
Just a random thought…
I think it's because of the increased home size that WFH all but requires. Previously, a young couple might only require a 2-bedroom unit because they were going in to the office all or most workdays. Now, with WFH on all or most days, a 3-bedroom unit kind of becomes the bare minimum. 3-bedroom apartments are not common in recent or new construction, so that forces people into renting or buying townhomes or SFHs. You can clearly see this effect in the DC area, as an example, especially during 2020-2021 where apartment rents in DC and close-in suburbs stayed flat or went down while the price of townhomes and SFHs went through the roof. That dynamic has slowed down but it's still there; we have friends who rent in Arlington and their rent stayed relatively flat this year while the house prices we were seeing while househunting (for sub-600K prices, lower end of the market with monthly payments comparable to rent prices) were going up 5-10% year over year. The house price increase was corroborated by realtor data at around 5% for the entire market, but the lower end (where people tend to enter) was going up much faster. The ladder is being pulled up and the ladder is shrinking at the same time.
Yeah I can see this making up for some of the effect but not all. Especially when the mechanism I’m describing is migration OUT of urbanized areas where the 3-bedroom apartments you’re describing are low in supply. Most SFH can surely accommodate the WFH demand. Maybe the rise in demand for SFH is driving most of this price increase, which would fall in line with your hypothesis, and that totally makes sense. I would like to see the housing market price changes broken down by MSA over time or something along those lines.
Love the Datawrapper. Keep it up!
Thank you! I think it looks cool!
Thank you so much for this! I also think it's why Krugman, Bernstein, and others have been missing what seems obvious to some of us - but you put it into better terms that they may be able to understand, better than us economics laypeople (even if we have a decent grasp of the concepts, the language isn't always with us).
I'm looking forward to your housing post. Housing data has been an interest of mine for 20 years, and I've worked in housing my entire career. While I don't think housing is everything, it's a good enough proxy. I think the vibecession can be basically explained by the degree zero problem as it relates to the lower 30-40% of the income distribution and the costs of housing, health care/child care, food, and maybe higher education. Essentially, the essentials or necessities of life.
The housing situation is worse than bad, I'm afraid. I think it's really bad. This chart gives me the willies (because I was taught to think in integrals), and I'm not even a "more supply will fix everything, just upzone and that'll fix it" zealot: https://fred.stlouisfed.org/series/HOUST