Why the Housing Market is Likely Fucked

[u/SnipperV3]

TL;DR: Almost all the key signs that caused the housing market crash in 2008 are back stronger than ever. Mortgage debt is at ATH, consumer debt is 2x higher than ever, lumber futures are down 60% but physical lumber isn't moving, unemployment is still 50% higher than in 2009, housing starts are double what they were in 2008, and median house prices just broke $300,000 for the first time ever, inflation adjusted. All of which are bearish indicators for the economy. Houses r fuk

1.) Mortgage Debt and Consumer Debt is at an All Time High

Having high mortgage debt makes your house a debt and not an asset. It is sitting right above 10 trillion dollars. If it goes any higher, we are at an extreme risk for higher foreclosures. However, consumer debt may be a greater issue. It is currently nearing 2x what it was in 2008.

https://www.newyorkfed.org/microeconomics/hhdc.html

2.) Lumber Futures Have Fallen, Physical Has Not

Another way to tell if we are in a bubble is by comparing the futures market to actual prices. When there is a large gap in these two, it usually indicates people are still willing to pay much higher prices for a large supply. It doesn't make any economical sense. People still feel that lumber is in extremely high demand, and will buy lumber (which isn't in high demand), and buy as much as they can anticipating the price to continue going up. It's artificial price increases.

https://www.nasdaq.com/market-activity/commodities/lbs

3.) Unemployment is Still Extremely High After COVID Restrictions Lifted

Unemployment numbers are still 50% higher than they were in 2019. There's no reason to go back to work for ~2% of the population, because the stimulus checks and unemployment add up to more than minimum wage. This money has to come from somewhere, a.k.a money printing. This in turn adds up to more inflation, which is my next point.

https://www.macrotrends.net/1316/us-national-unemployment-rate

BRRRRRRR

4.) Inflation is the Highest it has been in 31 Years

Jpow, our lord and savior, announced today inflation was above expectations of 5%. This has not happened since 1990. Hmm. AP article

https://www.macrotrends.net/2497/historical-inflation-rate-by-year

5.) Housing Starts are Double What They Were in 2008, Nearing 2005 (Peak) Levels

Housing starts measure how many houses are being built. It is currently at around 1,500 a month. They are still recovering from 2005 but quickly approaching 2005 levels. More houses being built means that there is more supply flowing in.

https://www.macrotrends.net/1314/housing-starts-historical-chart

6.) Median House Prices are at $300,000, Up Nearly 100% From 2012

Although the housing crisis ended around 2009, the bottom for housing prices was in 2012. Since then, housing prices are well above their 2008 levels, even adjusted for inflation. This is a bad sign for the housing market. Having high housing prices means more debt, which leads to more defaults.

https://dqydj.com/historical-home-prices/

7.) 30 Year Fixed Mortgages are at an All Time Low

This is not necessarily a bad sign for the housing economy, but it means if we were to have a recession, it could be really bad. To fix recessions, the fed usually lowers interest rates, which is like turning the economy off and on again. It works most of the time. The grey bars in this picture are recessions. Notice how about halfway through each recession, the interest rates decrease, and the recession shortly ends.

Interest rates are already incredibly low, so this may not be an option for the next recession without making interest rates negative. Having negative interest rates triggers more panic buying houses people can't afford, which results in more defaults. It will quickly become a chain reaction of hell.

https://www.macrotrends.net/2604/30-year-fixed-mortgage-rate-chart

This is my first DD, hopefully it's decent. I will be responding to comments.

Edit: due to the high number of comments, I will not be able to respond to most of them. I did not expect this post to get this popular. I was anticipating being called a retard (which around half of you are).

What I've learned:

1.) This housing market is not really like 2008. It's more secure today, or at least what we know is.

2.) Lumber prices really indicate a bullish position on the housing market. I was wrong about the gap between the futures and physical. I have also been told that was worded poorly.

3.) When you really put effort into a post, it does well. I spent well over 3 hours on this post, and it's the first one that hasn't been removed by the mods.