Erdmann Housing Tracker

Erdmann Housing Tracker explores the multifaceted reasons behind escalating housing costs, including the impacts of urban regulation, economic models, homeownership trends, and monetary policy. The Substack provides data-driven analyses on inflation, housing supply shortages, regulatory effects, and proposes solutions for improving housing affordability and stability.

Housing Market Trends Urban Planning and Regulation Economic Policy and Inflation Homeownership and Renting Dynamics Monetary Policy Supply and Demand in Housing Global Financial Crisis Demographic Impacts on Housing Construction and Housing Supply Gentrification and Displacement Affordable Housing Strategies

The hottest Substack posts of Erdmann Housing Tracker

And their main takeaways

Accidentally testing NGDP level targeting

126 implied HN points • 06 Feb 24
💰 Finance Monetary Policy Inflation Fiscal policy
  1. Accidentally testing market monetarism, particularly nominal GDP targeting, yielded successful results during economic shocks.
  2. Nominal GDP targeting can help stabilize the business cycle by allowing for counter-cyclical inflation and smoothing disruptions in nominal incomes.
  3. Adopting nominal GDP level targeting could lead to improved productivity and reduced reliance on interest rates in monetary policy discussions.

Another Follow-Up Against Agglomeration

105 implied HN points • 14 Mar 24
💰 Finance Economics Housing Income Construction Mortgage
  1. The mortgage crackdown post-2008 led to a housing shortage, impacting construction of single-family homes in different cities.
  2. There is a correlation between the drop in construction activity after 2008 and metro area incomes, where lower income areas experienced a greater decline.
  3. Trends suggest housing constraints may lead to higher incomes, impacting new single-family home construction and mortgage lending standards across different cities.

More color on the inevitable rent boom of the 2010s.

105 implied HN points • 12 Mar 24
💰 Finance Real Estate Home Prices
  1. The clampdown on mortgage lending in 2008 led to unprecedented rent inflation, reinforcing the relationship between home prices, rent ratios, and access to credit.
  2. The natural experiment since 2008 confirmed that cutting off mortgage access lowered price/rent ratios substantially, leading to collapse in construction and significant rent increases. This situation may have reached a point where new homes could be constructed again on a larger scale.
  3. A regressive rise in home prices occurred post-2008 due to a credit shock affecting existing home values and necessitating a rise in land rents to induce new construction. This situation highlights the impact of housing shortages on rent inflation and home values.

January 2024 Residential Construction and New Home Sales

105 implied HN points • 28 Feb 24
💰 Finance Housing Market Home Prices Construction Cost Analysis
  1. The divergence between the average price of new homes and existing homes signals obstructed supply in the housing market.
  2. Changes in mortgage rates and market conditions can influence the size and types of new homes being built and sold.
  3. Reforms allowing for more new homes to be built could lower costs and reduce the price of existing homes.
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Follow-Up Against Agglomeration Economies

84 implied HN points • 14 Mar 24
💼 Business Economics Housing Market Urban planning
  1. Cities with blocked growth experience a process of migration due to housing costs rising, impacting residents' average incomes.
  2. Affordability in cities like Boston, NYC, and LA could have been maintained if they grew at rates similar to other cities like Oklahoma City or Salt Lake City.
  3. Limited growth approval in certain cities contributes to housing deprivation and lack of affordability, not an overflow of demand.

Why is Debt-to-Income high?

84 implied HN points • 09 Mar 24
💰 Finance Mortgages Debt Housing Market
  1. The debt-to-income (DTI) ratio for households has generally declined since 2007, focusing more on new mortgage borrowers than all families.
  2. Debt payments have increased for older families since lending standards tightened in 2008, delaying when families take on mortgage debt.
  3. Higher rent inflation due to a lack of construction has pushed up mortgage costs in the early years, contributing to high DTIs.

San Francisco and Miami. Hot or not?

84 implied HN points • 20 Feb 24
💼 Business Real Estate Economics Housing Market Urban Development
  1. The Case-Shiller home price index shows Miami hitting new highs while San Francisco has been declining.
  2. Both San Francisco and Miami have low housing production, with Miami consistently slightly higher in construction than San Francisco.
  3. San Francisco's construction activity seems to be waning, despite expectations for increased housing due to YIMBY wins and new state laws.

November 2023 Erdmann Housing Tracker Update

105 implied HN points • 15 Dec 23
💰 Finance Housing Market Inflation Real Estate
  1. Data shows that rent inflation has decreased to about 2%, hitting the Fed's 2% inflation target.
  2. There is a hope for rents to gradually decrease towards a reasonable level as construction capacity increases in 2024 and beyond.
  3. Housing prices are settling in a low single-digit trend, making the housing market stable for now.

Does Density Increase Local Prices?

210 implied HN points • 05 May 23
💰 Finance Income disparities
  1. The denser an area, the higher its house prices.
  2. Building more houses everywhere would lower prices nationwide, but building in one city might not lower prices there.
  3. High demand and supply constraints raise costs for poor residents, while agglomeration value might raise costs for rich residents.

Mortgage affordability and excess rents

63 implied HN points • 06 Mar 24
💰 Finance Housing Market Affordability Home Prices Market Analysis
  1. Mortgage affordability is affected by prevailing mortgage rates, which can impact transaction volume and buyer costs.
  2. The measure of mortgage affordability must be used with caution as inflation and buyer behavior play significant roles in housing market dynamics.
  3. The rental value of structures versus inflated land value over time can affect the dynamics of home prices and construction, highlighting the complexity of the housing market.

Note on Monetary Policy and Jackson Hole

126 implied HN points • 25 Aug 23
💰 Finance Monetary Policy Inflation Interest Rates Housing Market Economic Analysis
  1. Powell's approach to monetary policy is based on conventional models, which may not fully address current economic issues.
  2. There is a concern that inflation is settling above the 2% target due to trends in goods and services.
  3. Housing supply issues contribute to 'inflation' and can be misleading when analyzing monetary policy impacts.

January 2024 Erdmann Housing Tracker Update

63 implied HN points • 18 Feb 24
💰 Finance Housing Market Economic Trends Supply and Demand Inflation
  1. Rising rents are causing rising home prices in the US housing market, with a greater than 1:1 pace.
  2. Density of housing is crucial in impacting housing prices, especially in cities like New York City, where dense neighborhoods are affected by supply shortages and migration trends.
  3. The impact of COVID-19 on housing trends varies across cities, with some areas experiencing temporary relief in housing costs for dense neighborhoods while other cities like New York face complexities in supply conditions.

January 2024 CPI Update

63 implied HN points • 14 Feb 24
💰 Finance Economic Analysis Monetary Policy Inflation Federal Reserve
  1. Reaction to monthly CPI updates often fails to consider the lag affecting the shelter component, leading to surprises in news interpretation.
  2. Market expectations of a Fed rate cut were influenced by the latest report, shifting them further in the future.
  3. Monetary measures like currency in circulation and M2 trended down post-Covid scare, while the Fed's balance sheet shrinks without obvious disruption.

No, I don't think the Fed drives future yields

105 implied HN points • 05 Oct 23
💰 Finance Monetary Policy Interest Rates Quantitative Easing Market Trends
  1. Forward interest rates are mainly driven by changing economic productivity and sentiment, with the Fed playing a secondary role.
  2. Market sentiment about real future economic activity has a significant impact on interest rates.
  3. Most of the changes in long-term bond yields since 1989 have occurred during Federal Open Market Committee meetings.

Hovnanian 2023 Earnings

63 implied HN points • 06 Dec 23
💰 Finance Real Estate Earnings
  1. Hovnanian and Toll Brothers both reported positive earnings for the quarter.
  2. The rhetoric from the companies shifted to focus on excellent results during peak interest rates.
  3. Homebuilders are setting prices based on completion speed rather than speculation.

The Housing Bust Was Not A Cyclical Event

84 implied HN points • 26 Jul 23
💼 Business Housing Policy Market Construction
  1. Overly-cyclical housing markets are not the main problem - zoning regulations are.
  2. Errors about private construction industry being pro-cyclical lead to misconceptions about the housing crisis causes.
  3. Impact of post-recession mortgage suppression on single-family construction and working class homeowners has been overlooked.

More on the Fed and Long-Term Interest Rates

63 implied HN points • 17 Oct 23
💰 Finance Interest Rates Federal Reserve Market Analysis
  1. The Fed's impact on interest rates may not be as significant as perceived, with most rate changes occurring outside of Fed meetings.
  2. Changes in long-term interest rates are likely not correlated with new information from Fed meetings.
  3. Interest rate changes during Fed meetings appear independent of changes outside of meetings, indicating that market expectations are already adjusted before meetings.

"We need 'affordable' housing, not market rate housing" is much worse than it seems.

105 implied HN points • 03 May 23
💼 Business Housing Affordability Displacement Urban Development
  1. The cost of housing in a city with ample supply is determined by resident incomes and allows for comfortable spending.
  2. In cities with housing shortages, the cost of housing is determined by other residents' incomes, leading to displacement and competition.
  3. Constructing new market rate housing can help flatten the cost of housing for all income levels and break the chain of displacement.

Is gentrification a cause?

105 implied HN points • 24 Apr 23
  1. Gentrification may not directly cause displacement in all cases.
  2. Treating gentrification as a causal process might not be the most accurate approach.
  3. Building more public housing could be a way to mitigate the effects of gentrification.