It's sickening that this is always marketed as bad news, even though we've been in a bubble for the past 20 years. The bad news is that we decided that owning a house is a retirement plan instead of giving people proper retirement plans. Somehow every non-homeowner has to be a policy slave to the passive income of some wealthy person. And we defend it by claiming that old people who are worth enough money not to work are not wealthy, as if we care about old people. We only care about old people as model "savers" who can be used to morally justify policies that directly and overwhelmingly benefit the very wealthy to the obscenely wealthy.
And also, there's a problem with revolving credit (i.e. a 2-year mortgage), such as Australia or Britain, or anything that is floating along with some interest rate. But these are a) intentional problems that the people making the loans hope will make them rich, and b) problems with pricing, because people are expected to take decades longer to pay off a house than it would take for them to build it alone with their own hands in their spare time.
> people are expected to take decades longer to pay off a house than it would take for them to build it alone with their own hands in their spare time. Somehow every non-homeowner has to be a policy slave to the passive income of some wealthy person.
I agree that we have made houses too central to net-worth, but most homeowners are not wealthy. They are typically paying a significant amount of "rent" in the form of interest on the borrowed capital used to purchase their houses. I'm not saying it's the same as the non-tax-deductible rent paid by renters, but it's a very different situation than an inherited house in a very expensive area that is owned outright.
> people are expected to take decades longer to pay off a house than it would take for them to build it alone with their own hands in their spare time.
As someone who built significant portions of my house with my own hands in my spare time, I can assure you that individuals artisanally and incrementally building their homes is not a scalable approach to housing. We should instead be building houses like we build modular flat-pack furniture, with major components built in controlled factory settings, and final assembly on site. The way I did it (GC doing the heavy structural work, my doing the finishing work) itself isn't scalable.
Yes it saved me money, but the amount of knowledge I had to build in order to effectively complete it isn't realistic for most people, who very reasonably aren't interested in the understanding all the different ways to do flooring underlayments.
> The bad news is that we decided that owning a house is a retirement plan instead of giving people proper retirement plans.
I've pondered on this a lot. Houses have been treated as "nest-eggs", which is really a fancy term for a fallback plan, for quite some time. The housing market really only got out of control after the 80's which coincides with when mortgage packages started getting sold on the stock market. To me, that, city zoning, corporate SFH buying, and state governments that have economic policies that embrace/grow inflation seem to be the actual problem.
I still think it's worth while to have house equity as a way to securely store money, but the government has to protect the housing market conservatively to make that work. Just like anything else the market is a system of incentives.
- we stop building more houses. That's what happened in 2008, and is one of the major causes of the current crisis
- it discourages turnover. IOW, people who should move for work/personal reasons don't because they're underwater or because selling would mean they lose the really nice rate they're currently locked in to. And without turnover, it becomes hard / expensive for people to buy.
The latter issue is a stupid technical reason. The second issue could be solved by transferrable mortgages.
> And also, there's a problem with revolving credit (i.e. a 2-year mortgage), such as Australia or Britain, or anything that is floating along with some interest rate. But these are a) intentional problems that the people making the loans hope will make them rich, and
The 30 year fixed US mortgage is responsible for a lot of the higher prices in US. Future taxpayers or users of the USD pick up a lot of the interest rate risk on behalf of present day borrowers. Evidently, given the continued resilience of the USD, market participants are very okay with this.
> b) problems with pricing, because people are expected to take decades longer to pay off a house than it would take for them to build it alone with their own hands in their spare time.
This is a highly dubious claim for which I would need to see proof. The actual building of a house in the US is down to 100 days by a well operated tract builder. The outsize portion of the cost is in the land.
I find the bad news angle weird too. If our home were to lose half of it's value it wouldn't really change anything except our ability to move in the near future. That's assuming I keep my job during this time of course.
Does everything in world have to be sickening, or appalling or catastrophic. Is it really so sickening that someone in the world had the audacity to frame something in a way you disagree with? Can't you just say "I disagree with this"?
I say this as someone who thinks it is very much a good thing that house prices are coming down, and the more the better.
> even though we've been in a bubble for the past 20 years
what is a "bubble", to you? the last 20 years includes one of the greatest housing crashes of all time, and a period of some of the cheapest housing costs we've ever seen.
Well you want prices to go down because supply is going up. If the supply is the same and prices go down it doesnt mean it is more affordable - it is precisely because it is LESS affordable!
In the US, there is Social Security which one could argue could be higher but it's there.
And lot of people were happy with the shift away from defined benefit pension plans that were essentially a transparent way to get a retirement supplement for having worked for GM for 30 years. A lot of people wanted to have greater control of their retirement savings in a way that wasn't tied to long tenure with an employer.
> because people are expected to take decades longer to pay off a house than it would take for them to build it alone with their own hands in their spare time.
The problem isn't the building costs - it's the land costs.
Construction workers are relatively low paid, and profits on home building aren't outrageous.
DIY housing doesn't really solve any problems - and is a ridiculous proposal to the average person.
I am just not sure about this. There are more Millennials than Gen X, and Millennials are in their prime family-building and house-buying years. At the same time, in the aftermath of the Great Recession, not much new housing was built. The intersection of those two trends might mean demand exceeds supply purely mathematically. Especially if people who locked in mortgages at lower rates are reluctant to sell as a result, furthering lowering supply.
Certainly prices may come down in some locations as interest rates go up if there aren't enough cash buyers, but will it be enough to counteract the imbalance of demand and supply? I think it's an open question.
Hopefully this discourages investment firms from buying up housing stock[1]. To me the long-term danger for housing affordability seems to be that individuals will be priced out by institutional money.
One thing we always collectively fail at addressing is how to classify housing in a special category of goods, where simple free-market rules don't apply. Things like rent-control are in this direction, yet we never articulate what the goals are and the compromises we're willing to make.
Allowing the next generations a good start in life means that everyone that wanted houses to be a great investment need to take a loss, there's simply no way around this and we should collectively accept this.
I'd also be for completely different taxation levels depending on if this is your first, second or third home (properly handling even if first buying before selling within x months, so you only have a single home), if you're a company, if you're a foreign citizen that merely wants to snatch some random safe property.
Some problems really need a complex, evolving and carefully weighed solution, and housing really has been shamefully abused so that the haves screw other the not-yet-haves.
Taking a bath on a home sale isn't the only solution. Make it easier for people to build houses. The majority of old houses were built by the first owner. They bought land and built a house the way they wanted not following thousands of regulations dictating how a home must be built. If you build a shitty house, well, good luck selling it. If it falls down thats your own damn fault. All of the ways we have learned over time that houses can be built better should just be shared knowledge and recommendations for somebody wanting to build a house. Every requirement a builder must follow means it costs more to build and less people are capable of following all the rules. Where I live if you build something that doesn't follow code you get fined for every infraction. That's a disincentive for people to build.
Remove costly regulations and you get more houses.
"House-Price" is a terrible metric that only house sellers really care about. Everyone else is more concerned with monthly total housing costs. If house prices stayed the same and interest rates increased 2-3x that means monthly payments for new mortgages also increase. Buyers are unable or unwilling to pay the higher monthly cost so they bid less and the price comes down but their total monthly payment does not decrease.
In some sense this is a transfer of wealth from home owners/sellers to banks/lenders and hopeful and prospective first time buyers see no benefit, aside from maybe smaller down payments.
Bring it on. As a first time buyer, I don't even care about prices going down as much as I care about being able to actually buy a home that I want without feeling like it's a blind gamble.
I want to be able to look at a listing, talk to the realtor, have a scheduled showing, and put in an offer at list price with inspection/appraisal contingencies. You know, like how normal life was forever until the last 5 years.
I don't even see a reason for a recession yet. We are forcing this slump on ourselves for no reason. If some aspect of the economy is fundamentally rotten then of course a recession is imminent. However, there is nothing like that now. Very low unemployment, a genuine reason for inflation (supply chain issues), low supply coupled with a very sudden need for more space causing housing price jumps. The only issue is excess cash in the market because of government stimulus. That could have contributed to the excess jump in stock market which also led to the home price increases. However this doesn't mean we should be in a recession.
Ok, now the interest rates are going up to counter the inflation. I am not convinced it will dent anything other than home and car prices. In this scenario, is a full blown recession actually going to happen if so why?
> I am not convinced it will dent anything other than home and car prices.
It will. All corporations will see their debt servicing cost go up. A lot. They'll start the layoffs. How many posts on HN are about layoffs at this and that well-known tech company?
Once people fear for their job, they'll start being more cautious with their spending. Less demand means prices will go down.
At least that's how the Fed thinks. They are trying to destroy demand. They know they can't increase supply (obviously), so they are going after the demand. If 3.75% is not enough (spoiler alert, it won't be enough), they'll go to 4.5%. And then to 5%. If it's still not enough (spoiler alert, ... it won't be enough), they'll go higher.
You may not be convinced, and it looks like a lot of people are unconvinced, but the Fed means business. All the members of the Fed know history, and know that in the '70s the Fed lacked the backbone to keep the rates high enough long enough to beat the inflation. They were trying to have both low inflation and some semblance of growth. They got neither. Stagflation for a whole decade.
People who forget history repeat it. Powell will not let history repeat on his watch.
From a totally armchair perspective, the large of quantitative easing to cover various covid-related situations in combination with the supply chain issues also caused by covid have resulted in The inflation figures we've been seeing the last three quarters.
This level of inflation isn't sustainable, therefore interest rates are increased to reduce average Joe's disposable income so they're not buying as much stuff and / or being more careful with their spending and / or just can't afford as much alongside their mortgage or rent increases, which, in theory, should lead to inflation dropping.
The scale and chosen areas of belt tightening by the proletariat, will cause an equivalent scale of business insolvency and employee shedding in those areas, which will add momentum to the already running scenario.
By most indicators the US is already in a recession, and the Fed is (controversially to some) still talking an aggressive game when it comes to rate hikes, so I'd confirm the inevitability of a recession.
I think it's possible that those who wield the power would like a recession because it can allow further concentration of power by increasing the wealth gap; provide an opportunity for those like Black Rock to increase their portfolio of real estate once mortgages start defaulting. It's also a reminder to the covid quitters to "get the fuck back to work" (ironic for when jobs are being shed rather than created, but creates that thirst for becoming employed, which has its own societal momentum, and serves business owners well).
Also, the way debt works, and the way stock market valuations work, and the level of debt that seems to be in the system, a little bit of fear goes a long recession.
According to my Dad, younger generations have never experienced a housing environment where your home value goes sideways for a decade. With rates this high and going higher. We may experience our first example of buying a house and selling the houses 10 years later for about the same price.
Millennials have never known different until very recently. To them, housing wasn't something that appreciated at all. In fact, it's so common for millennials to say things like, "just waiting on another housing bust." It's like they think 2008 was come cyclical event that you just need to wait another year for.
I held a similar attitude towards housing and rented throughout my 20s because every single homeowner I knew bitched about how buying a house was a loss for them. People didn't make money on houses outside of rich coastal cities. Heck, I'm trying to unload a parent's home and they are disappointed that the house they lived in for 16 years has only appreciated by maybe $10k.
Covid was the when young people outside of NYC and Cali learned that it is smart to get into the housing market earlier, rather than later.
Happened to us and our neighbors - bought end of 2005. 2015... house estimated for... about the same as we paid for it. It wasn't "steady sideways"... it was 'crash and recover'. But it's certainly happened to many folks - buy then sell years later at roughly same price.
Every millennial lived trough 2008, plus also 9/11, also a global pandemy and now +10% inflation. Everything with real wages being stagnated since the 70's
I think we could give those "young latte-sipping kids" a break..
We have a ways to go to get back to "normal" whatever you define that as.
Locally and anecdotally, I've noticed houses are sitting on the market much longer, and I'm starting to see "price lowered" emails from Zillow. We've definitely entered a cooling off and people are moving less.
I doubt this. The super rich have too much money and need this converted to assets. In the UK at least you're not just competing against would be first time buyers but multi-national companies wanting to expand their portfolio and the super/ultra rich.
We need to tax the rich to redistribute the wealth. Own more than 3 homes as a single entity? Mega taxes etc.
Tax the rich doesn’t work like the utopic stories tell.
Typically what happens is the rich leave to a place with less taxes or where they’re not seen as the mortal enemy of X local government. Then all that tax money they otherwise were paying goes somewhere else, and the state is left with a net-negative tax inflow.
A price-slump in emerging markets with a ton of startup money is practically guaranteed. Bangalore's real estate has been propped up by speculative investor money leading to overpaid employees for a decade, and I can see it collapsing soon. Canada is probably in a similar situation.
US cities' housing value is entirely captured within the local committees' ability to block any and all construction nearby. If zoning limitations are eased then the American housing market will crash irrespective of the nature of the economy around it.
While local effects like startup money or industry can definitely not be ignored locally, everyone is lifted by the tide of fed money printing, modulated by their exposure to the US markets.
Minus some really out of the way places (Iran? Central Africa?h that’s pretty much everywhere.
As money starts to tighten up again, expect a LOT of house pricing headwinds.
If you analyze the house prices in "fast-moving" economies (bay area, nyc, etc.) you will see prices have corrected rapidly. However relative to the interest rate, these asset prices are still somewhat inflated. However due to the cash-heavy nature of buyers in these specific markets, you can expect less correction relative to interest rates as cost of borrowing is less of a concern.
Now move out to more desirable places to live (say, San Diego with it's great sunshine) and you will see asset prices are blown way out of proportion. This is a very geo-specific asset class, so you will have to look relative to the geo.
Unfortunately or fortunately, it has a lot to do with the interest rates and inflation. What you will see is with the layoffs and for folks who have taken out ARMs to optimize the cost of borrowing, a lot of folks are in for a big wake up call.
Could be wrong but the Economist doesn't usually make predictions like this? This article doesn't have the same depth they usually write to. The reasoning behind their predicted price slump is that interst rates are going higher, making homes less affordable. But I think they stop there without looking at any other factors. Such as, the tempering effect of rising commodity and labor costs of new builds. The other half of the article is about knock-on effects of higher interest rates and the predicted price slump.
I guess I'm not saying their predictions will or will not come true, just that they don't support them.
The article is in the Leaders section, which is a section with 4 or 5 short summaries of important weekly news. They do special reports on all sorts of topics although unhelpfully in this case their last one on housing was back in 2020 (https://www.economist.com/special-report/2020-01-18). Probably due another one soon.
> Such as, the tempering effect of rising commodity and labor costs of new builds.
Understated from my experience. I recently had a relative going through the process of having a new build and the builder had very many excuses and delays due to scarcity of materials and costs. I was pretty sure the relative was getting scammed, or that the builder simply wouldn't be able to deliver.
They did finish that home eventually, and made a lot of progress on the development of that neighborhood. And all their issues were corroborated by what's seen in commodities circles and general supply chain issues. I think they could have gotten the resources they needed at a higher bid but they had to operate within the budget as they had collected money and credit in advance of the supply chain constriction, which would be passed down to the forecast of what the home would have cost.
I'm very skeptical that there's going to be a prolonged slump. What happens when the next economic recession/crisis comes, and the Fed starts lowering interest rates again? Couple that with how wages are adjusting for inflation, and you're going to have a floor on prices that'll probably be higher than most people think.
There's nothing guaranteeing the Fed will try to juice the market the same way they've done in the past; for example the government could decide to try to counter unemployment with direct employment instead of lowering rates, or sudden reductions in immigration (for whatever reason) could cause unemployment to remain low even as rates skyrocket.
The main floor on prices is the cost of new building, if that starts to drop than house prices will drop with it in the areas where building is occurring, which helps slow down the rise everywhere.
Underwriters are much more strict after the 2008 crash and it’s become more difficult to qualify for a conventional mortgage. New home builders were building less overall and focused mostly on building expensive ($500K+) rather than affordable homes. In addition, cash buyers still make up over a 3rd of US home purchases which include many investors. A healthy drop in prices might happen in the near term but any kind of doomsday scenario is unlikely to play out IMO.
It would be astonishing if they didn't. 30-year rates have gone from <3% to 8% in the past 2 years, and will rise further. If they go to 10%, that means a monthly payment more than twice what you would have had 2 years ago.
Home prices can only go as high as the top bidder can afford. How many people are ready to buy the same house at the same price for twice the monthly payment?
Maybe globally true but if you live in a strong developed country I disagree. Looking back at a +-150% value increase in 20 years I'll take a slump but every other indicator like more pop and less being built works against this theory. Ofcourse I can see this in less desirable areas of the world being true or regions like china with massively bloated housing sectors.
>First, because gummed-up property markets are a drag on the jobs market. [...] the uncertainty makes people hesitant about moving
It could also mean that a huge supply of real estate makes it easy to move for everybody who doesn't own a house
>Lower house prices also hurt growth in a second way: they make already-gloomy consumers even more miserable.
Or it frees huge amounts of capital for those who buy a house when prices are low.
This is all insignificant to a coming disruptive change. China and India are incentivized to develop more efficient modes of housing. The west is cut off from that development by insisting on maintaining the status quo with zoning laws.
Even if western citizens remain in their countries, the west will lose the migrant science workers when they move to where housing doesn't take half of your income.
As a consequence, the housing market can collapse even more.
[+] [-] enahs-sf|3 years ago|reply
[+] [-] pessimizer|3 years ago|reply
And also, there's a problem with revolving credit (i.e. a 2-year mortgage), such as Australia or Britain, or anything that is floating along with some interest rate. But these are a) intentional problems that the people making the loans hope will make them rich, and b) problems with pricing, because people are expected to take decades longer to pay off a house than it would take for them to build it alone with their own hands in their spare time.
[+] [-] danans|3 years ago|reply
I agree that we have made houses too central to net-worth, but most homeowners are not wealthy. They are typically paying a significant amount of "rent" in the form of interest on the borrowed capital used to purchase their houses. I'm not saying it's the same as the non-tax-deductible rent paid by renters, but it's a very different situation than an inherited house in a very expensive area that is owned outright.
> people are expected to take decades longer to pay off a house than it would take for them to build it alone with their own hands in their spare time.
As someone who built significant portions of my house with my own hands in my spare time, I can assure you that individuals artisanally and incrementally building their homes is not a scalable approach to housing. We should instead be building houses like we build modular flat-pack furniture, with major components built in controlled factory settings, and final assembly on site. The way I did it (GC doing the heavy structural work, my doing the finishing work) itself isn't scalable.
Yes it saved me money, but the amount of knowledge I had to build in order to effectively complete it isn't realistic for most people, who very reasonably aren't interested in the understanding all the different ways to do flooring underlayments.
[+] [-] kodah|3 years ago|reply
I've pondered on this a lot. Houses have been treated as "nest-eggs", which is really a fancy term for a fallback plan, for quite some time. The housing market really only got out of control after the 80's which coincides with when mortgage packages started getting sold on the stock market. To me, that, city zoning, corporate SFH buying, and state governments that have economic policies that embrace/grow inflation seem to be the actual problem.
I still think it's worth while to have house equity as a way to securely store money, but the government has to protect the housing market conservatively to make that work. Just like anything else the market is a system of incentives.
[+] [-] bryanlarsen|3 years ago|reply
- we stop building more houses. That's what happened in 2008, and is one of the major causes of the current crisis
- it discourages turnover. IOW, people who should move for work/personal reasons don't because they're underwater or because selling would mean they lose the really nice rate they're currently locked in to. And without turnover, it becomes hard / expensive for people to buy.
The latter issue is a stupid technical reason. The second issue could be solved by transferrable mortgages.
[+] [-] paulpauper|3 years ago|reply
It's good news for people who want to buy a home and have been waiting for prices to fall.
People who read the Economist probably fall in the former category by demographics.
[+] [-] lotsofpulp|3 years ago|reply
The 30 year fixed US mortgage is responsible for a lot of the higher prices in US. Future taxpayers or users of the USD pick up a lot of the interest rate risk on behalf of present day borrowers. Evidently, given the continued resilience of the USD, market participants are very okay with this.
> b) problems with pricing, because people are expected to take decades longer to pay off a house than it would take for them to build it alone with their own hands in their spare time.
This is a highly dubious claim for which I would need to see proof. The actual building of a house in the US is down to 100 days by a well operated tract builder. The outsize portion of the cost is in the land.
[+] [-] sosodev|3 years ago|reply
[+] [-] anm89|3 years ago|reply
I say this as someone who thinks it is very much a good thing that house prices are coming down, and the more the better.
[+] [-] rco8786|3 years ago|reply
> even though we've been in a bubble for the past 20 years
what is a "bubble", to you? the last 20 years includes one of the greatest housing crashes of all time, and a period of some of the cheapest housing costs we've ever seen.
[+] [-] WalterBright|3 years ago|reply
1. social security
2. 401ks
3. IRAs of various types
4. simply buy & hold stocks
These are already in place.
[+] [-] conanbatt|3 years ago|reply
[+] [-] unknown|3 years ago|reply
[deleted]
[+] [-] ghaff|3 years ago|reply
In the US, there is Social Security which one could argue could be higher but it's there.
And lot of people were happy with the shift away from defined benefit pension plans that were essentially a transparent way to get a retirement supplement for having worked for GM for 30 years. A lot of people wanted to have greater control of their retirement savings in a way that wasn't tied to long tenure with an employer.
[+] [-] negamax|3 years ago|reply
[+] [-] onlyrealcuzzo|3 years ago|reply
The problem isn't the building costs - it's the land costs.
Construction workers are relatively low paid, and profits on home building aren't outrageous.
DIY housing doesn't really solve any problems - and is a ridiculous proposal to the average person.
[+] [-] Ptchd|3 years ago|reply
[deleted]
[+] [-] codexjourneys|3 years ago|reply
Certainly prices may come down in some locations as interest rates go up if there aren't enough cash buyers, but will it be enough to counteract the imbalance of demand and supply? I think it's an open question.
[+] [-] AlexandrB|3 years ago|reply
[1] https://www.wsj.com/articles/blackstone-bets-6-billion-on-bu...
[+] [-] mihaic|3 years ago|reply
Allowing the next generations a good start in life means that everyone that wanted houses to be a great investment need to take a loss, there's simply no way around this and we should collectively accept this.
I'd also be for completely different taxation levels depending on if this is your first, second or third home (properly handling even if first buying before selling within x months, so you only have a single home), if you're a company, if you're a foreign citizen that merely wants to snatch some random safe property.
Some problems really need a complex, evolving and carefully weighed solution, and housing really has been shamefully abused so that the haves screw other the not-yet-haves.
[+] [-] tastyfreeze|3 years ago|reply
Remove costly regulations and you get more houses.
[+] [-] jlhawn|3 years ago|reply
In some sense this is a transfer of wealth from home owners/sellers to banks/lenders and hopeful and prospective first time buyers see no benefit, aside from maybe smaller down payments.
[+] [-] ramesh31|3 years ago|reply
I want to be able to look at a listing, talk to the realtor, have a scheduled showing, and put in an offer at list price with inspection/appraisal contingencies. You know, like how normal life was forever until the last 5 years.
[+] [-] yalogin|3 years ago|reply
Ok, now the interest rates are going up to counter the inflation. I am not convinced it will dent anything other than home and car prices. In this scenario, is a full blown recession actually going to happen if so why?
[+] [-] credit_guy|3 years ago|reply
It will. All corporations will see their debt servicing cost go up. A lot. They'll start the layoffs. How many posts on HN are about layoffs at this and that well-known tech company?
Once people fear for their job, they'll start being more cautious with their spending. Less demand means prices will go down.
At least that's how the Fed thinks. They are trying to destroy demand. They know they can't increase supply (obviously), so they are going after the demand. If 3.75% is not enough (spoiler alert, it won't be enough), they'll go to 4.5%. And then to 5%. If it's still not enough (spoiler alert, ... it won't be enough), they'll go higher.
You may not be convinced, and it looks like a lot of people are unconvinced, but the Fed means business. All the members of the Fed know history, and know that in the '70s the Fed lacked the backbone to keep the rates high enough long enough to beat the inflation. They were trying to have both low inflation and some semblance of growth. They got neither. Stagflation for a whole decade.
People who forget history repeat it. Powell will not let history repeat on his watch.
[+] [-] BLKNSLVR|3 years ago|reply
This level of inflation isn't sustainable, therefore interest rates are increased to reduce average Joe's disposable income so they're not buying as much stuff and / or being more careful with their spending and / or just can't afford as much alongside their mortgage or rent increases, which, in theory, should lead to inflation dropping.
The scale and chosen areas of belt tightening by the proletariat, will cause an equivalent scale of business insolvency and employee shedding in those areas, which will add momentum to the already running scenario.
By most indicators the US is already in a recession, and the Fed is (controversially to some) still talking an aggressive game when it comes to rate hikes, so I'd confirm the inevitability of a recession.
I think it's possible that those who wield the power would like a recession because it can allow further concentration of power by increasing the wealth gap; provide an opportunity for those like Black Rock to increase their portfolio of real estate once mortgages start defaulting. It's also a reminder to the covid quitters to "get the fuck back to work" (ironic for when jobs are being shed rather than created, but creates that thirst for becoming employed, which has its own societal momentum, and serves business owners well).
Also, the way debt works, and the way stock market valuations work, and the level of debt that seems to be in the system, a little bit of fear goes a long recession.
[+] [-] Flatcircle|3 years ago|reply
[+] [-] mywittyname|3 years ago|reply
Millennials have never known different until very recently. To them, housing wasn't something that appreciated at all. In fact, it's so common for millennials to say things like, "just waiting on another housing bust." It's like they think 2008 was come cyclical event that you just need to wait another year for.
I held a similar attitude towards housing and rented throughout my 20s because every single homeowner I knew bitched about how buying a house was a loss for them. People didn't make money on houses outside of rich coastal cities. Heck, I'm trying to unload a parent's home and they are disappointed that the house they lived in for 16 years has only appreciated by maybe $10k.
Covid was the when young people outside of NYC and Cali learned that it is smart to get into the housing market earlier, rather than later.
[+] [-] mgkimsal|3 years ago|reply
Happened to us and our neighbors - bought end of 2005. 2015... house estimated for... about the same as we paid for it. It wasn't "steady sideways"... it was 'crash and recover'. But it's certainly happened to many folks - buy then sell years later at roughly same price.
[+] [-] PedroBatista|3 years ago|reply
I think we could give those "young latte-sipping kids" a break..
[+] [-] rdtwo|3 years ago|reply
[+] [-] JumpCrisscross|3 years ago|reply
Which, in practical terms, means losing money.
[+] [-] bombcar|3 years ago|reply
We have a ways to go to get back to "normal" whatever you define that as.
Locally and anecdotally, I've noticed houses are sitting on the market much longer, and I'm starting to see "price lowered" emails from Zillow. We've definitely entered a cooling off and people are moving less.
[+] [-] CommanderData|3 years ago|reply
We need to tax the rich to redistribute the wealth. Own more than 3 homes as a single entity? Mega taxes etc.
[+] [-] spacephysics|3 years ago|reply
Typically what happens is the rich leave to a place with less taxes or where they’re not seen as the mortal enemy of X local government. Then all that tax money they otherwise were paying goes somewhere else, and the state is left with a net-negative tax inflow.
The top 1% pays over 25% of all taxes, and the top 50% pay 97% of all taxes: https://taxfoundation.org/publications/latest-federal-income...
I agree we have a problem with wealth inequality, but taxing the rich is a simple, poor solution to a complex problem.
[+] [-] screye|3 years ago|reply
US cities' housing value is entirely captured within the local committees' ability to block any and all construction nearby. If zoning limitations are eased then the American housing market will crash irrespective of the nature of the economy around it.
[+] [-] nikanj|3 years ago|reply
[+] [-] lazide|3 years ago|reply
Minus some really out of the way places (Iran? Central Africa?h that’s pretty much everywhere.
As money starts to tighten up again, expect a LOT of house pricing headwinds.
[+] [-] uptownfunk|3 years ago|reply
Now move out to more desirable places to live (say, San Diego with it's great sunshine) and you will see asset prices are blown way out of proportion. This is a very geo-specific asset class, so you will have to look relative to the geo.
Unfortunately or fortunately, it has a lot to do with the interest rates and inflation. What you will see is with the layoffs and for folks who have taken out ARMs to optimize the cost of borrowing, a lot of folks are in for a big wake up call.
[+] [-] throwthere|3 years ago|reply
I guess I'm not saying their predictions will or will not come true, just that they don't support them.
[+] [-] rwmj|3 years ago|reply
[+] [-] yieldcrv|3 years ago|reply
Understated from my experience. I recently had a relative going through the process of having a new build and the builder had very many excuses and delays due to scarcity of materials and costs. I was pretty sure the relative was getting scammed, or that the builder simply wouldn't be able to deliver.
They did finish that home eventually, and made a lot of progress on the development of that neighborhood. And all their issues were corroborated by what's seen in commodities circles and general supply chain issues. I think they could have gotten the resources they needed at a higher bid but they had to operate within the budget as they had collected money and credit in advance of the supply chain constriction, which would be passed down to the forecast of what the home would have cost.
[+] [-] esja|3 years ago|reply
https://www.economist.com/leaders/2005/06/16/after-the-fall
[+] [-] jdhn|3 years ago|reply
[+] [-] bombcar|3 years ago|reply
The main floor on prices is the cost of new building, if that starts to drop than house prices will drop with it in the areas where building is occurring, which helps slow down the rise everywhere.
[+] [-] ethotool|3 years ago|reply
[+] [-] civilized|3 years ago|reply
Home prices can only go as high as the top bidder can afford. How many people are ready to buy the same house at the same price for twice the monthly payment?
[+] [-] devX3|3 years ago|reply
[+] [-] tkk23|3 years ago|reply
>First, because gummed-up property markets are a drag on the jobs market. [...] the uncertainty makes people hesitant about moving
It could also mean that a huge supply of real estate makes it easy to move for everybody who doesn't own a house
>Lower house prices also hurt growth in a second way: they make already-gloomy consumers even more miserable.
Or it frees huge amounts of capital for those who buy a house when prices are low.
This is all insignificant to a coming disruptive change. China and India are incentivized to develop more efficient modes of housing. The west is cut off from that development by insisting on maintaining the status quo with zoning laws.
Even if western citizens remain in their countries, the west will lose the migrant science workers when they move to where housing doesn't take half of your income.
As a consequence, the housing market can collapse even more.
[+] [-] wonder_er|3 years ago|reply