This Reddit Lament Sums Up Wonderfully What Lots of Home Buyers Will Grapple with as Housing Market “Normalizes” and Work from Home Fizzles

Yves here. We warned that some who invested in “remote work” housing would be burned when employers wanted staffers back in the office. Even though plans to get professionals back into Manhattan have been delayed due to Delta, a lot of companies have said they want butts back in chairs, and those that remain in work from home mode will have their pay cut.

It likely won’t be publicized as much, but we suspect a small group of buyers of pretty houses in pretty far away places will wind up selling because they misjudged the community. For instance, the New York Times ran an article on pandemic-fleeing New Yorkers decamping to artsy Camden, Maine.

I sincerely doubt any of them have been in Maine during the winter or “mud season,” as in the spring. The man who runs the wine store near Brunswick that we frequent used to live in Fairbanks, Alaska. He says his Alaska winters were milder, that nothing there compared to the wet and fierce winds in Maine.

By Wolf Richter, editor of Wolf Street. Originally published at Wolf Street

Here is a Reddit lament by a self-admitted FOMO (fear of missing out)-home-buyer in Canada. The couple, mistakenly thinking that working-at-home (WAH) was permanent, had bought for that reason a house “hours away” from Toronto six months ago. But turns out, WAH was transitory for them, and now they need to sell the house.

But in the two weeks that the home has been on the market, they didn’t get offers that would allow them to make a profit or break even, as the market is cooling – a horrifyingly bloodcurdling stupendously surprising situation of having to sell a house without being able to make an instant profit.

And they can’t even rent out the house profitably in their estimates. What kind of horror show is this??

This is the horror show of having bought a house in what has been identified as the #2 Housing Bubble in the world, behind New Zealand, and now this housing bubble is “normalizing,” or “cooling,” or whatever, and suddenly the plans go kaput.

Obviously, the couple can sell the house. But they’ll have to price it to where the market is, and the market isn’t where they thought it would be, or where it was six months ago, and they’ll have to try harder and longer and cut the price, and eventually they’ll be able to sell the house. But the dream of making C$100,000 or whatever in six months on flipping a house “hours away” from Toronto have evaporated.

The post was brought to my attention by Steve Saretsky, a Realtor in Vancouver, whose work, reports, and data have appeared on WOLF STREET. Also note the post’s terse marital nuances that come with a situation like this — “she’s livid about the situation and refuses to live here now,” he says:

Sorry if this is horribly formatted, I’m not a redditor.

My wife and I bought 6 months ago at the height of the housing market it seems now. We bought hours away from work (Toronto) as we both were working from home. We thought WAH would be permanent and we were both afraid of missing out on buying if we didn’t pull the trigger. Wife is being called back to work full time. I’ve been given notice that we’re going back part time come September.

We listed our house a bit over two weeks ago, no offer has come in that we break even on let alone profit. Our realtor has told us the market is cooling and that it would be a surprise if we got what we were asking for. We’ve gotten a couple of offers, none of which are asking price.

We’re at a loss. My wife is looking for work locally but due to the nature of her work she is unlikely to find equivalent in pay or opportunity. She also doesn’t want to leave her employer, she has great upward mobility and seniority there. I don’t personally mind commuting part time but she’s livid about the situation and refuses to live here now.

My friends keep telling me that there is no such thing as a Canadian market cooling and to just wait it out until it sells.

If we listed for rent I think we wouldn’t be making a profit.

Any suggestions would be appreciated”

What’s amazing to someone like me who has been around the block too many times is the naiveté and the surprise displayed in these eloquent words by the perplexed and frustrated potential home seller. What were they thinking when they bought the house?

They weren’t thinking. They were governed by the fear of missing out (FOMO), and the poster admitted it. FOMO stipulates that you stop thinking, and that you act without thinking, and act now before someone else snaps the overpriced house out from under you. A housing bubble operates on that basis. You cannot maintain a housing bubble without FOMO.

The post also lays bare the whole conundrum of buying a nice big house somewhere far away from the city because now you can work at home, both of you, and then the bosses say, both of them, no, you gotta come back to the office. This stuff really sucks. And I suspect that there’s going to be a lot of it.

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  1. Liu Zeyuan

    Why didn’t they just…confirm with their bosses that the situation would be permanent before making such a drastic decision? Just get it in your contract, and if your boss says no that’s too bad but at least you’re not in a situation where you bought a whole-ass house and now suddenly need to sell it only a few months later.

    I am finding it a bit hard to be sympathetic in this particular case, and I hope that the majority of people moving out of the cities would have the common sense to at least get in writing that their WFH situation wouldn’t just be a temporary thing for them.

    1. Yves Smith Post author

      Contract? You must not be American. This is an employment at will country. Only a very few top execs have contracts. And asking your boss to make any special commitments to you is not just a non-starter, but also gets you tainted as a full of himself timewaster who doesn’t understand how things work, and earns you demerits.

      Even though I gather Canadians do have often have employment contracts, an employee has zero leverage in trying to get his employer to make additional commitments midstream, PARTICULARLY in the middle of a pandemic when the company is likely to be in trouble or at best scrambling to cope. An employee demand would be seen as selfish and tone deaf.

      Specifically, employers ONLY told workers to work at home as a Covid safety measure. The idea of relocating was the employee’s bright idea. Why should an employer bear any responsibility for that?

      1. Daniel LaRusso

        If that’s true then they were even more silly.

        I’m dreaming of moving to the lake district or back to Wales for the surfing. I ran it past by current boss and he said he could never see us returning to the office, doesn’t care where I am as long as the job is done etc.

        My sister oftem laments me for being all talk and never following through on stuff. Only last weekend she said how I still haven’t rented my house out. I was just being my normal cautious self, expecially after reading how WFH could be an abberation, Rishi sunak wanting us all back in the office ‘to riff’ off each other and Barclays saying they’ll never abandon city centres. I keep mentioning in meetings how we need to formalise our default position as WFH and justify travel to the office when justified.

        Anyway… my boss is now leaving, I’ve nothing in writing and we’ve no commitment either way from the company. I can only imagine where i’d be mentally if I’d comitted myself to a long way from the office (presently 30 miles, commute *2 per week (pre covid) )

    2. cocomaan

      This seems like a fake post to me. It’s so stupid and free of specifics that it stretches credulity.

      Brand new throwaway reddit account, too.

      Kind of like the Yahoo Finance articles, “My wife and I have rental income of $300k a year and $3 million in 401k, should we be afraid to retire?”

      Maybe this situation exists, maybe it doesn’t. But this is the kind of trolling post that gets people feeling self righteous.

      1. Skip Intro

        You may be right, but its existence as a piece of highly plausible trollery still serves to illustrate the zeitgeist, and maybe even better than a real anecdote would.

  2. Equal > Equitable

    I have zero sympathy for the people in this story. There is such a stupidly simple solution to this issue – If they don’t want to go underwater on their mortage by selling cheap, she needs to find a remote job. It’s not like there are a shortage of them, especially if you’re in US/Canada. Talking about not being able to find good opportunities in her area completely misses the reason they moved out to the sticks – They planned on WAH permanently. It’s entirely possible. Just work for a company that committed to it.

    1. The Historian

      I do have some sympathy for these people. It is easy to second guess what they did now, after the fact, but I’ll bet at the time, it sounded entirely reasonable to them. Most people aren’t long term or strategic thinkers – they make decisions about what is best for them in the present. That is just human nature. If humans were long term or strategic thinkers, do you think we’d be in the mess that we now find ourselves?

      They made a mistake – and now they have to live with it. Sometimes you win – sometimes you lose!

      1. juno mas

        Um, leaving a real estate purchase to chance, or whimsy, is more than foolish. In the US buying/selling real estate involves considerable transaction costs. There are few locations where rapid appreciation overcomes the financial drag. And since rising rents mitigate against quick transitions, a quick “flip” of a home is best left to those with lots of financial staying power and no need to acquire a new place to domicile.

    2. Pelham

      If they expected from the start to flip the house in a few months for a neat profit, then yes, they deserve little sympathy. The wording of the Reddit post is certainly open to different readings, but it sounds to me as if they planned to stay there. In that case, I’ll grant them at least a portion of sympathy. IMO it’s a legitimate ambition to escape from an urban hellhole (and even clean urban environments like Toronto are hellholes to some of us) and find a decent, uncrowded place to live.

    3. ArvidMartensen

      Gee, perhaps they were just young and naive.
      As someone who has been naive a few times, and whacked a few times by lying employers, and got cagier of situations and smarter as I got older, I can see how a younger person who hasn’t had a few hard knocks in life could be naive.
      Also, as a parent of younger people in the workforce, I can see how young adults who have had parents looking out for them and who had gone to child-centred schools could be a bit naive about how everything doesn’t always works out for the best.
      Just the other day, one of my kids asked if they should tell their current employer they were wanting a reference for a new job. The emphatic collective answer around the dinner table was no, no, no, don’t mention it, no. So young adults have to learn the reality of the real world, it’s not like school.
      And you can’t trust things to work out. And like everyone’s mother always said, if your friends jumped over a cliff wuld you jump too?

  3. griffen

    I think the return to work vs retaining WFH still needs to play itself out. I also think the above example is perhaps, quite literally, from the playbook of what not to do while a pandemic is ongoing. Just an opinion, of course.

    My local South Carolina markets, including Greenville / Spartanburg / Anderson seems to be on solid footing still. But I’m hoping it cools a little by early 2022.

  4. Louis Fyne

    Some good things about Reddit….some bad things about Reddit—and “anecdote, not data” is one of them.

    Reddit is the closest thing the internet has of “when you have infinite monkeys in a room, one eventually types out Shakespeare.

  5. Eustachedesaintpierre

    There has also been something of an exodus from the big smoke, with Londoners buying around 75,000 houses, My stepson did it at a much better time 10 years ago & works part time from home as a novelist & screenwriter with 3 days a week of commuting to London to teach creative writing at Brunel university. He is hoping to eventually give up the latter gig due to the commute that he describes as pure hell that just keeps getting worse. I once temporarily commuted by train for 3 days from Birmingham to the NEC exhibition centre which was more than enough for me – I kept thinking, how can people live like this ?

    1. PlutoniumKun

      Something similar is happening in Ireland, but its not being reflected in sales, more rentals. Even long term rents have gone sky high in places like Kerry, as people have taken up holiday cottages for a year, and sub let their urban homes. I don’t think though that people are willing yet to buy beyond the normal commuter belt.

      This is very viable right now as there is a major influx of people into Dublin from abroad. Even a year ago, there was a very clear pattern developing of Dubliners leaving the city, and being replaced rapidly with non-Irish, many of them direct or indirect Brexit refugees.

  6. Watt4Bob

    I have a hard time understanding how people fail to recognize the danger of buying real estate at the top of the market?

    My guess at this moment is that high income earners somehow do not experience fear in the same way that us folks at the bottom do.

    I’m also guessing that their situation amounts to facing ‘sadness’, not catastrophe.

    The behavior being discussed is obviously foolish, and terribly wasteful from where I stand.

    And only people with too much money can afford to be so careless.

    1. Oh

      I’ll bet you that greed of making money on the house had something to do with it. Don’t you think that it’s hard to tell if the market has topped until after it starts to go down? Now they know. I’m waiting for the FOMOs who have been buying stocks to find out that they’re holding the bag.

      1. Jeremy Grimm

        I suspect that anyone who could tell when a market reached its top, would have equal ability to identify when it had reached its bottom. Such people would not be working at a job with or without WAH [working-at-home]. I believe those who have such abilities to read markets have consider help from inside information and control direct manipulations of the ‘market’.

    2. Topper

      Real estate prices have gone up practically forever, with some disruptions during recessions and wars. How would anyone know when the top of the market is? Pessimists always say this is the top, real estate agents always say prices will continue to rise until the sun goes supernova. There is no way to know you’re at the top of the market, only in hindsight.

    3. Pelham

      But isn’t it the eternal and immutable nature of markets that the herd chases after the so-called smart money, so the vast majority of people venturing into markets always, always end up getting screwed? To my mind, ridiculing a few examples culled out of the herd is counterproductive. Why not acknowledge market history and get rid of the damned things instead of blaming people for being human?

  7. David

    I wonder if this has something to do with the very modern human tendency to mistake short-term changes for long-term ones, and vice versa. Given modern attention spans, the fear of missing out on the latest trend, the greed for making money off the latest trend and the power of fashion and internet-driven consensus, it’s not surprising such things happen. How many books and TED talks have you seen that proclaim “this changes everything!” and how many have actually turned out to be right? This was certainly the case with Covid, although, as always, people got the short and the long term mixed up. There were plenty of people dumb enough to argue that WFH was here to stay, and plenty of others, as we see, dumb enough to believe them.

    1. PlutoniumKun

      I think its kind of natural when you are fairly young to think that the last big swing you lived through was ‘the big one’ and now things are set. My first job was in the early 1990’s when the UK was pretty much at the base of the collapse of the 80’s boom. Some of my new colleagues were in a pretty bad situation with what seemed like lunatic mortgages on glorified bedsits in the outer West Midlands suburbs with no possibility of selling them. i seriously thought that ‘well, that could never happen again’. How stupid I was.

      You may be right though that the cycles are getting tighter and people are losing longer term perspective. It is very hard to see how anyone could seriously think that working from home would be permanent post Covid without a very firm indication from their employer (such as, they’ve released their lease on their HQ building). I think that we are raising a generation who think that if they lose even the smallest opportunity to get a step up, they are screwed for life. The thing is, they might be right.

      1. Pelham

        Is it just possible that another factor is at work here? Covid is highly contagious, and living in a multi-unit building with dicey ventilation in an urban environment may pose a distinct risk. In the last condo I lived in I was two units away from a smoker and the stench regularly infiltrated my place. And I’d had similar experiences before that. Several years ago I moved into a very modest suburban home and swore I’d never go back to living in a packed stack of strangers.

    2. vlade

      I don’t know. WFH is here to stay for many companies that I can see. Most non-american banks in London increased WFH for many staff in support (where support is broadly defined, including pretty much most of IT), as they see it as two birds with one stone (higher staff satisfaction, less rent).

      Will it be pure WFH for everyone? No, and I for one never expected that. Will it be much more WFH than before? Yes it will (because the US is not the world).

      1. PlutoniumKun

        A few weeks ago I was talking about this to two friends who work here in major international banks (one US, one Japanese). They’ve been told that WFH is here indefinitely (but no written commitments), but they are very strict about leaving the country – i.e. no working from a surf spot in Portugal, or even from their home country (one friend has been waiting nearly a year for permission to visit her parents in a non-EU country and work from their house for a few weeks). A lot of Germans, Italians, etc., who went home for Covid have been told they must relocate to Dublin, even if working from home. Its primarily about tax, but there may well be other reasons.

        1. R

          We just received an email (UK tentacle of a multi-bn mkt cap listed global IT consultant) that remote working contracts for employees in a FOREIGN country must not be agreed without HR involvement to address legal, tax compliance. Otherwise, anything goes. I suspect expatriation is also possible provided HQ can figure out how the UK office can hire you locally abroad, as it were.

          Working from home in halfway sensible service industries is here to stay. The bosses who say otherwise are shutting the cubicle door after the serfs have bolted.

          Then again, we did have a colleague who commuted weekly from Milan by Ryanair (!) for five years so maybe we are an outlier. :-)

      2. David

        This reminds me horribly of other recent management fads (which is what it is) like the move to open-plan offices, where lots of organisations would like to go back to the old ways but can’t because they’ve sold off buildings. It’s another one of those fads where introducing it is a lot easier than going into reverse is going to be.

  8. ChrisFromGeorgia

    I don’t think WFH, or WAH, whichever acronym you prefer, will fizzle out. It was a trend even before COVID. In this particular case, it just seems that this couple made a very bad judgement.

    Granted I work in tech, which is the most WFH friendly of all industries, but I see lots of folks including myself getting jobs that specifically are categorized as remote, with no home office.

    Of course that is subject to change at the whim of management. My plan B as always is … find another job. Or retire as I am getting closer to that point.

    1. Chris

      Same, in tech.

      People are quitting jobs left and right that are even hinting at making people go back to the office.

      Looks like capital is responding by lowering salaries for those not living in the office city (Google now, GitHub before), but they’re not going to be paupers, just not mega rich in Iowa.

    2. TimH

      The big semiconductor firm I work for is talking hybrid, so expects a couple of days a week in the office even for those that don’t need to be there. So not impossible to have a 3 hour drive, stay one night in a motel, 3 hour drive again.

    3. Bill Smith

      The more or less tech company that I work for has already closed one office. They have already hired people who live far away from any office and have told them tell don’t have to move.

      Things may change but I doubt it will go back as far as it was.

      Unless you have really crappy internet, that should be no problem. I have internet via cable and have no problem.

      They did give everyone a few hundred to do whatever the employee wanted to help themselves WFH.

      It is fairly easy to see on video calls who the people are who are less likely to want to continue to WFH.

  9. The Historian

    It’s kind of an interesting dynamic to see whether WAH or Work in the Office will win out. One of my children works for a micromanager and she wants everyone back into the office ASAP. Another one of my children works for a company that has decided that WAH worked so well that they are selling their offices and telling their employees that WAH will be permanent.

    One of the things that kind of bothers me about WAH is that now more of the infrastructure of work is being placed onto the employees v. on the company where it belongs. Although my children got some money from their companies for internet, office equipment, etc., it was not nearly enough to cover their costs for working from home, even when you include the transportation savings.

    1. Duke of Prunes

      Just curious but what are your kids WFH expenses that are more than the cost of commuting?

      As a WFH pioneer (been doing this for ~25 years), I save on commuting (no train/bus/parking fare, downsized my car), clothes (don’t need as many nice clothes to look snappy in the office every day) and meals (way easier to make yourself lunch vs going out). I pay more for Internet (not much more because I would have some type of internet regardless, and many companies allow this to be expensed) and possibly heating and cooling since I am home all day. For me, the costs are nowhere near the savings. Add the extra time and flexibly I get from no office or commute, and it is a huge win for me.

      1. The Historian

        I guess it depends on the kind of work you do and how far from work you are. One child had to pay for an orthopedic chair (she had one through ADA for her back and her boss said she could take it home but it wouldn’t fit in her car and she was told she had to bring it back every time she went into the office – once every couple of weeks at a minimum), a phone line for faxes and a new professional quality printer – her boss wouldn’t pay for that – she could take one of the office printer/copiers home, but again, they were floor models and woldn’t fit in her car, enhanced internet because her cheap internet wasn’t good enough, a desk because it hurt her back too much to work at the dining room table, and various other office things. She still had to wear professional clothing because at least half of her time was spent on Zoom meetings. She already made her own lunches to take to work so even that wasn’t a savings. Oh, and a goofy one! She had to take her dog to doggy day care because while the dog was OK staying home alone during the day, it didn’t understand that she couldn’t play with it all day since she was home and it was causing a ruckus trying to get her attention!

    2. Daniel LaRusso

      We were lucky the company let us take chairs, docking stations and big screens if we wanted. I work for a telco so I always got free internet anyway.

      My sister is having ot upgrade her internet to fibre for the luxury of MS teams, no help from her employer.

  10. Wukchumni

    In any real estate market, be it city or rural, there are always the dregs, practically unsalable homes for a variety of reasons, none of them good.

    In the past year i’ve watched homes that have been for sale for a decade, finally find a sucker.

    1. PlutoniumKun

      In my local area, what I look out for is homes that can’t sell for a legal reason (for example, an ongoing regulatory issue) – so the banks won’t give a mortgage. Those only sell to cash buyers who don’t know or care about the issue. Anecdotally, some of these seem to have sold, including ones that have been on the market on and off for years. The housing market here is going utterly lunatic – mostly incoming cash.

    2. kareninca

      I am very happy to see this happening in the area where I grew up in small-town New England. It means that very, very old houses of great beauty are being bought and refurbished, rather than being allowed to literally rot into the ground. It is saving them for one more generation.

  11. Ram

    Mid level management is filled with micro managers whose sole reason is to conduct wasteful meetings and send inane mails. IMHO this bunch will fight tooth and nail to stop WAH a standard practice. Economics of WAH look pretty good for many IT companies

    1. Harrold

      I think its more the top echelon. Once you’ve reached that corner office, its hard to go back. At home, they probably need to buy their own coffee and make it themselves, and might not even be able to expense lunch.

      Then there is the story of Goldman CEO David Solomon becoming incensed when he was greeted by employee eating lunch at the VERY SAME restaurant in the Hamptons.

      1. Wellstone's Ghost

        Not to mention pursue romantic endeavors that would be frowned upon in a work at home setting.

  12. Questa Nota

    There are articles about employers dictating that the work-from-home pay will have a haircut of up to 25%. That is due to the convenience of said work, lack of commute, Zoom opportunities in jammies, or whatever reasons might seem remotely plausible and self-extinguishing in the 72 hour news cycle.

    In other news, employee loyalty plummets but there is still room to maneuver and extract further cost savings so all is not lost for that quarterly earnings call. If you listen closely to the spokesholes, there is almost an echo of that old Vietnam era saying: We had do destroy the village workforce to save it. /s

    1. Questa Nota

      Forbes article shows that companies are taking up the challenge of further employee alienation. Look at that paycheck addendum for news about your next payroll deduction.

  13. Michael

    But, but, but the Brokers!
    Selling comm Seller \/.
    Selling comm this buyer \/.

    Selling comm this seller?

    Did they own a home they sold first? Another commish…

    How much did they put down on new one? May get eaten up by the selling commish if it was minimal.

  14. Jeremy Grimm

    Anyone who is WAH [working-at-home] must very honestly evaluate their skills and how unique those skills really are before believing WAH is a blessing. Many programmers and software engineers have already discovered that unhappy truth. I knew when my workgroup started WAH that the end of my employment was nearing. I was very lucky to have reached the age of 63 before it became more profitable for the firm to use new hires and the newly hired to pump up the Corporate margins. As an employee holding a clearance, I had been ‘protected’ from many of the dangers facing my kind.

    Buying a house — remote from work — seems unwise regardless of the housing market, but especially unwise in a housing market spiking upward as rapidly as this market did early Summer. This post did not discuss the downward pressure the uncertain end to the moratorium on foreclosures and rents might have on the housing markets. And longer term, the upward pressures of the fat coffers of Big Money real estate buyers remain in play. This is a most murky market in which to buy or sell real estate.

    1. Carna

      Yeah, there is now a push to hire ‘global talent’ to avoid having to support silly gooses who have made a life in a geographic locale of high pay opportunity (they cost so darn much).

      There’s a *reasonable* aspect of having work continue to happen as the earth spins around through the time zones, but yeah, now you might be competing with Low Rent Jimmy for your spot.

      Buuut there is probably a countervailing dynamic where people at places with a real office will be prioritized, since there is a legitimate physical collaboration effect (in some cases)

      1. Jeremy Grimm

        You speculate about a “a legitimate physical collaboration effect”. My experience has been that any such physical collaboration effects are short-lived and shortly experienced. Other effects rapidly swamp them, with relative costs or ties to destroying Labor organization leading in their adoption.

    2. Daniel LaRusso

      I’ve been saying that from the start, and I’ve read other people agree with me. That WFH will have a real sting in the tail, might be reduced pay and loss of office status … or more importantly outsourcing. Once companies realise a job can be done away from the office but the same country, some bright spark will want to know why it can’t be done abroad.

      1. Blue Duck

        The big accounting firms have been doing this for over a decade now with a lot of success. Deloitte et al have huge campuses in India to whom they outsource almost all of their compliance. I agree, I won’t be surprised to see many of the new WAH firms head in this direction.

    3. fajensen

      I knew when my workgroup started WAH that the end of my employment was nearing.

      My TBTF built brand new office buildings sized for 30% less than the current staff. They wanted us to “hot-desk” – book a desk, place workstation on desk, keep all ones shit in a box with wheels. To enhance “Collaboration” (and the spread of germs via various under-desk “treasures” and skidmarked office chairs. People are swine!). I think they were hoping for natural attrition bringing the office space into line with The Planning.

      Covid-19 put a plug in that – for now – but my tea leaves says that there will be a reduction in on-site staff levels to match the capacity of the office buildings eventually. I think “eventually” will finally come to pass this financial year. I already bought a WFH-home that is cheap enough to own on a single salary, in case.

  15. Sound of the Suburbs

    What is wealth creation?
    Isn’t it rising asset prices?
    Everyone always thinks that with neoclassical economics.

    At the end of the 1920s, the US was a ponzi scheme of inflated asset prices.
    The use of neoclassical economics, and the belief in free markets, made them think that inflated asset prices represented real wealth.
    1929 – Wakey, wakey time

    The use of neoclassical economics, and the belief in free markets, made them think that inflated asset prices represented real wealth, but it didn’t.
    It didn’t then, and it doesn’t now.

    It took them a long time to disentangle the hopelessly confused thinking of neoclassical economics in the 1930s.
    This is the second time around and it has already been done.
    The real wealth creation in the economy is measured by GDP.
    Real wealth creation involves real work, producing new goods and services in the economy.
    That’s where the real wealth in the economy lies.

    They used to think rising asset prices were creating wealth, but after 1929 they realised this was not the case.
    They needed to find out where real wealth was created in the economy and they invented GDP.

    Real estate – the wealth is there and then it’s gone.
    1990s – UK, US (S&L), Canada (Toronto), Scandinavia, Japan, Philippines, Thailand
    2000s – Iceland, Dubai, US (2008), Vietnam
    2010s – Ireland, Spain, Greece, India
    Get ready to put Australia, Canada, Norway, Sweden and Hong Kong on the list.
    It wasn’t real wealth, just a ponzi scheme of inflated asset prices.

  16. ChrisPacific

    …the #2 Housing Bubble in the world, behind New Zealand…

    Greetings from number 1.

    There are certainly elements of bubble to the situation here but I think it’s first and foremost a supply crunch due to a number of factors. There has been a developing issue for decades now around shortage of quality housing, not helped by a series of lassez-faire governments that thought it was all just the market doing its work. The implementation of emergency housing for the homeless in the interests of effective Covid control, which has continued, has soaked up most of the short-term and temporary accommodation (try searching AirBnB for pretty much anywhere in New Zealand and you’ll see what I mean). International tourism is way down but domestic tourism is booming due to suppressed demand, so that’s probably a wash. The WFH movement, which has diminished a lot with the successful elimination of Covid but is definitely not dead, has probably driven more demand for usable space at home. Finally, the massive Covid stimulus in the form of the employment subsidy during lockdown, coupled with better-than-expected economic performance and the lack of measures to offset all that new liquidity, have fueled an asset bubble – and in New Zealand, ‘asset’ typically means ‘property,’ usually residential property.

    All of which is to say that even though prices are ridiculous, I don’t see them going down any time soon. I would gladly take the situation described in this post in exchange. While I’m sympathetic to the plight of the redditor, it’s the risk you take when you buy a house in a hot market, and buyers should know that. Given the social costs of the alternative (as we’re experiencing now) it’s not much of an argument.

  17. Mikel

    FOMO and keeping up with the Jones’ got them into this and now they are panicking because they are following over-hyped headlines.
    Has it EVER been the norm to sell a house in 2 weeks? That’s usually a temp condition of a an over-heated market, no?
    They panic now because they aren’t paying enough attention to their own situation and looking at what everyone else seems to have.

    Two weeks and the sky is falling. But the lack of ability to delay gratification got them into the situation.

  18. Starry Gordon

    In contemplating WFH, I think one might want to consider the medium- and long-term future of the ”W” part. Anecdata: two of my friends used to manage technical writing departments. Over the last several years, those departments shrank to staffs one (the aforesaid managers) plus various people contracted in from India or suchlike places for specific jobs, and then are expected to disappear. There isn’t that much work to do anyway: if you look around on the Net, at web pages devoted to product use, you’ll generally see that the companies that make consumer stuff have offloaded a lot of the work onto their customers, who are glad to contribute to their ”knowledge bases” for free. Many of the apps/programs/systems have risen to the level of their incompetence, and when development takes place at all, it’s to make them more visually attractive and intellectually stupid, than to increase their functionality. I suspect this kind of minimal thing can easily disappear. Fortunately my friends are pessimists and thus have saved their money and bought their real estate long ago, before large amounts of funny money entered the picture for prole real estate.

    The H is also problematical, but at least some if it exists physically and can mostly be lived in.

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