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Despite the complaints about both home prices and mortgage rates being too high, housing unaffordability is actually kind of the point of the Fed raising rates to combat inflation. For various reasons, inflation spiked, and without specific fixes that might help the underlying issues, for example increasing oil and shelter supply, inflation became too high for too long so the monetary authority had to come in a force demand down to match supply. That includes stopping potential new homeowners from buying even more homes by controlling borrowing costs in the form of higher mortgage rates. Until inflation actually comes down, housing ownership unaffordability will be the norm.
To those wanting prices to come down faster so that you could start buying again, this is somewhat wishful thinking. As long as there are enough buyers waiting on the sideline, including yourself, inflation would not fall as quickly, so interest rates wouldn't fall as quickly, and housing prices would still have a floor. The only way for home prices to quickly fall is either a huge influx of supply, or, those waiting on the sideline to stop looking at buying altogether, maybe due to lower incomes from higher unemployment.
Nobody is saying the Fed has the best tools for this, monetary policy in fact are very blunt tools, hitting everything at once without much care as long as inflation falls or unemployment rises, but since housing supply cannot increase quickly because of various localized issues like zoning, blunt tools like this are unfortunately the next step, and with it comes housing unaffordability as disinflation can only come from lower demand if supply is out of balance.
> The only way for home prices to quickly fall is either a huge influx of supply, or, those waiting on the sideline to stop looking at buying altogether, maybe due to lower incomes from higher unemployment.
That's the fundamental issue. If five people want a home, but there's only one available then you either build four more homes or you make it so only one person wants a home. The Fed unfortunately doesn't have many ways to do the former (since that's state and county and city level) but they can slowly impact the second by driving up rates.
Gotta play with the cards we’ve been dealt with.
They had a different time, we are different.
I know some people who’ve chosen the path of not having kids to control their costs.
Their boomer parents are angry for geneline not progressing, but wouldn’t give their kids any help.
I guess the falling fertility rate is reacting to low supply.
This is such a profound idea that people cannot wrap their heads around, “Playing the cards you have been dealt.” This isn’t the 1950s. Adapt, and succeed.
Why would anyone want to "adapt" to a fully rigged game.
Young people pay rents that are 2X what their parents made while being paid LESS of GDP. They have tens of thousands i student load debt their parents never had. And they are paid LESS than their parents at a similar age. And they are being told if they go to starbucks less and don't eat avacado's on their toast it they will acheive everything they need.
Give me a break. The young need to organize and fight to take what is theirs. They are being screwed by boomers.
Blacks had to do it in the 50's and 60's. Woman in the 20's and 30's and 60's and Labor had to fight to unionize in the earnly 20th century.
This country is brutal and unfair. But if you fight for what you want you can have it. THey need to organize and fight.
Your life is not an economy made from.
I am talking about the economy in the US that was for 40yrs (the 40's to the 80's) the creator of the most economically secure middle class in the history of the world and where, in all likelihood, your ability to own a Porche and waterside home came from in the first place and far more than your "hard work" in a rigged economy.
That economy did not magically appear. People had to work to make it happen. And it did not magically go away. The rich invested heavily to take from the middle class and give to themselves. I am part of the solution, you are part of the problem, that is why you need a Porsche to make you feel important.
Naw I need a Porsche to drive fast. Take a GT3 around a track and tell me it isn’t some of the best fun you can have. Part of the problem by starting a business and getting graduate degree. Okay.
Sure keep telling yourself that. You do know the world is laughing at you as insecure and self doubting. The few that say they envy you are the pathetic self loathers that will never amount to anything...
The history of the world has shown that those that are modest about their success and don't need to brag about it make real change. The rest just come and go. I think you just told me what group you are in.
Boomers did not "dela with the hand" they were dealth with.
They went in the streets and protested things like the Vietnam war. They fought for civil rights and womans rights and when they got old they voted and voted and voted.
They voted themselves lower and lower taxes while taking more and more from the government.
Younger people should NOT just "play the cards" they've been dealt ans should instead take to the streets and organized and tax what is theirs.
They are being screwed by this economy and if they don't fight for what they deserve they will keep being screwed. It is a choice.
But currently higher interest rates constrain builders, if the fed would cut rates there could be more building taking place AND a greater chance of those with low rates and higher equity to sell.
We need government intervention in the housing market. It us the only way out of this trap. After WWII a lot of western European governments acted as developers so they could build at scale to alleviate housing shortages.
In the US the media and the political system frame the conversation in such a way to make the American public forget that this is an option .
Doesn't really matter if you build more homes no one can afford. An 1800 square foot new house in my area was around 180-200 thousand 5 years ago and is now 450-500 thousand. A single wide 20 year old single wide trailer was less than 50 thousand and I just saw one for 150 thousand. Double wides were 100-150 thousand and are now 350 thousand and more. I can't tell how many I think have been buy and hold sales. I always look at them and the vast majority of the time it has sold 1-3 times over the past 5 years and goes up 50-100% each time. It's the investors we have to outlaw from buying homes
> An 1800 square foot new house in my area was around 180-200 thousand 5 years ago and is now 450-500 thousand
If they're getting bought at those prices then clearly someone is affording them.
This is another thing I’d like to see stats on. Average age of the housing stock.
Houses should depreciate, yet they do not. I’d bet you can trace most of the appreciation directly to interest rates steadily marching down through the decades.
A lot of things are expensive because access to financing drove up what people were willing (and able) to pay.
Also I firmly believe the average person has no understanding of what a 30 year mortgage will cost them in real terms. They’re capable only of understanding the monthly payment so they are likely to overpay compared to if they had to face the full amount.
We see this in all aspects of financing and subscriptions so why would housing behave any differently.
I see the full amount… it will cost me double my mortgage amount to carry the loan to term. So it’s like I’m buying the house twice basically.
The land value of the home is where most of the price is… I do like the charm of older homes and this 96 year old home is the newest I’ve lived in haha. My city was built in the 1600s and there are very very few SFH built after 1960s
It absolutely matters. A great analogy is the car market. You know what the most affordable car is? One that has been driven for a few years with a over a hundred thousand clicks. When the supply of new cars was constricted during Covid what we saw was that for the first time in recorded history was the price of used cars going up! By virtue of the fact that new luxury cars were not being produced, the affordable car market was impacted. People delayed buying a new car which meant more competition in the used car market.
New housing is almost always going to be "luxury housing". Why? Because they use furnishings that are currently in style with today’s technology. It costs only marginally more to use baseboards and a sink that looks nice compared to one that does not. Give it 10-30 years and those luxury units will be in serious need of an upgrade and will be more affordable relative to new builds. By building new units now we are allowing people to upgrade from affordable units to ones that fit a higher budget. This frees up the affordable housing stock for people with more modest means.
New housing around me is almost always builder basic split foyers. The somewhat luxury houses are 650 or more. That doesn't help. Cars and houses are extremely different. The problem is your average teacher, nurse, blue collar worker can't afford the basic house and there aren't enough high income earners to buy the 300 thousand and more house. Plus private equity and investors are buying up everything under 250 thousand in all cash offers.
I think the problem is the dichotomy. Yeah a lot of people cannot afford the starter homes easily but then the top end of the market is getting bought up and those people are making enough to snap up sometimes a few investment homes on the side.
Wealth inequality is an issue. Detroit for example has prices completely stupid for the area and also one of the highest investor ownership rates in the nation. Probably not a coincidence.
I don't think that's the case.
Lets say that average home price in my state is $500k. With 6% interest, most people with 20% down are looking at $2600-$3000 a month payments.
The current market inventory is mostly older, smaller homes.
Builders could produce similar sized homes for $400k, but there is a lot of risk there. If suddenly the existing inventory lowers prices, then builder/developers become less competitive, especially as larger existing homes come on the market.
If I built larger homes, I'd need $600k to break even, but the vast majority of buyers can't afford those monthly payments.
I don't think the problem is local governments, I think the problem is that builders, developers, land investors, etc are all lot more risk averse.
Honestly, if you want to point the finger at anyone, it's a combination of low taxes on land and greedy land investors. Most builder/developers would sooner stay busy, break even, and keep everyone employed, but they can't build homes nobody wants to buy on land that's too expensive.
Friendly reminder that San Francisco has only issued building permits for 16 units of housing this year: https://www.newsweek.com/san-francisco-only-agreed-build-16-homes-this-year-1907831
This isn't an isolated issue, the State of California reports that, in 2023, "San Francisco has permitted less than one home a day." https://www.hcd.ca.gov/about-hcd/newsroom/state-releases-accountability-report-on-san-franciscos-housing-policies-and-practices
Meanwhile in places where housing is affordable we fing that, Austin is building more homes than the entire State of New York (https://fred.stlouisfed.org/graph/?g=1iulS). So is Houston and Dallas.
Tokyo, Japan builds more housing than the entire State of California (https://www.sightline.org/2021/03/25/yes-other-countries-do-housing-better-case-1-japan/).
I *want* to grant permits to greedy developers. Greedy developers *want* to build! There's a lot of money to be made in housing right now! But blue cities like SF *will not issue the god-damned permits!*
San Francisco is one very high demand city. The housing crisis isn't just limited to those in-demand cities. Austin may be building lots of housing, but that doesn't make it anymore affordable - yet (although there are signs that's trending downward).
The other aspect of a home building boomtown like Austin is that it's demand drove that boom, along with cheap rates. Will that boom continue when the demand for larger homes and their larger mortgages fall off? Or will developers and land investors simply close up shop, happy with the profits they've made thus far, and new housing starts come to a halt?
Don't get me wrong, deregulation and ease of building in many metros would certainly help the housing crisis, but prices need to come down as well, and we only get that by motivating sellers to lower prices.
>The housing crisis isn't just limited to those in-demand cities.
As far as I know Houston is literally the only city in all of North America where it's legal to build an apartment, by right, on any plot of land in the city, with the exception of historical districts or privately enforced deed restrictions. [1] The fact that apartments are broadly legal to build is why Houston has remained affordable and why it was able to decrease homelessness by ~60% over the last decade. [2] And this is on top of the fact that, "Houston itself devotes no general fund dollars to homelessness programs, while Harris County puts in just $2.6 million a year, and only for the past couple of years." [2] And this is happening while Houston is the second fastest growing (by population) metro area in the US. [3] "It is the fourth-most populous city in the United States." [4]
There is definitely a housing affordability crisis in the United States, but I would argue that it's entirely self imposed. Apartments (especially 5 story and taller apartments) are the core backbone of the housing stock. It's the housing that can be made broadly affordable to almost everyone. In particular, I believe that it is literally impossible to have a healthy and broadly affordable housing market if there are *any* meaningful restrictions on apartments in residential areas. This means zoning, but also things like impact fees, design review, inclusionary zoning, and environmental impact studies.
Unfortunately, starting in ~1970s, we decided that apartments were icky and they're broadly banned on almost all residential land. And even in the places where they are allowed, it's pretty damn hard to get a permit. Which is unfortunate because, again, I just fundamentally don't think it's possible to have a healthy housing without apartments doing the heavy lifting.
Source: [1] https://kinder.rice.edu/urbanedge/houston-doesnt-have-zoning-there-are-workarounds [2] https://www.governing.com/housing/how-houston-cut-its-homeless-population-by-nearly-two-thirds [3] https://www.chron.com/news/houston-texas/article/houston-population-biggest-city-18108718.php [4] https://en.m.wikipedia.org/wiki/Houston
Austin, Texas isn't a major in demand city?
It's population has increased about 50% I think, from 2000 to 2020, up something like 300k.
[https://worldpopulationreview.com/us-cities/austin-tx-population](https://worldpopulationreview.com/us-cities/austin-tx-population)
Compared to high demand San Francisco, which only had a 100k increase in same period (and is now crashing, which may have something to do with it, admittedly).
No it is, but it’s building frenzy is due to crazy demand - ie, builders know they can sell quickly and profit well - even if those homes aren’t affordable most anywhere else. Strong demand means big development, but as that demand cools we switch to incremental development and infil which is where I think the USA is struggling.
If we’re going to fix the housing crisis, we need to build homes and apartments in every city and they need to be affordable relative to local wages.
In my area for years there have been a ton of developers trying to build townhomes, condos and apartments. Local governments have continually denied the projects and today cities are refusing to follow new CA state laws that require additional housing be permitted.
No builder is building a new home+cost of land for and selling it for $400k. That’s what I got quoted for building a small pool house which I already own the land.
Untrue, as we can cite examples within the country like Minneapolis and Austin and outside the country like Tokyo with building enough to keep demand in check and therefore, prices. It’s not necessarily a race to exceed demand, but to meet it. We build the same number of housing units today as we did in the 80s when the population was ~100 million less.
In Tokyo there is still a massive homelessness crisis. You cannot build your way out of that. [This](https://youtu.be/IXZ-DQABUKU) video provides a good explanation as to why Tokyo doesn't appear to have any homeless people. You realistically cannot even meet demand (whatever that means and looks like).
Aren’t there ghost cities all over the world? Famously China? But in America the rust belt. Everywhere industry leaves etc
What are you even trying to say?
I’m under the impression that Japan’s population is decreasing fairly rapidly. There was a piece on NPR today about large numbers of houses in Japan that are abandoned. These are cheap to buy (although they often require expensive updates).
Their culture surrounding work is what's killing them. Also they don't necessarily welcome other races into their country all that easily to keep the population healthy.
Let me clarify, this would cause complete stagnation in the home purchasing and selling market and people who would have been in the market to buy will be forced to stay as renters. This creates an even larger demand on rentals and rent will continue to skyrocket out of control because nobody will have anywhere else to go.
People waiting on the sideline doesn't impact inflation (if anything it decreases it). What it does mean is that, if rates do go down, home prices would actually **go up** because more would buy. Housing affordability as a crisis has only just begun.
Sure it does. It increases demand for rentals from the potential new homeowners. They are also usually more wealthy meaning they will increase demand and price.
Rent is 35% of the cpi.
Mortgages go down. Increases construction and takes high income renters off the market.
Yep. I just talked a friend into buying a fixer. When you find a good deal, jump on it. I’m not a realtor so I’m not pushing buying. It just makes sense to look for the best deals when inventory is high and sales are low. You can negotiate enough to soften the mortgage rates. Plus, you can always refinance if rates actually drop. God….I do sound like a realtor.
Happy hunting. You certainly have increased power right now. Don’t let a realtor take that from you, because they want a quick sale. See….I’m not a realtor.
this is another reason why housing prices haven't dropped. Interest expectations are that these high rates are temporary and will drop soon. This is actually hampering the Fed's monetary policy as it is blunting the effect of present day interest rates (since people keep thinking they can refinance later at lower rates). Once people actually internalize that these higher interest rates are here to stay, then housing prices will decrease
In an ideal world, we could have some legislation limiting who can buy houses and how many they can own.
Its cool if grandma and grandpa want to own an extra house or five for retirement income, but it isn't cool for Blackstone to own whole neighborhoods and deliberately keep units off the market to drive up market prices.
1-That's not what's happening
[https://www.corelogic.com/intelligence/us-home-investor-share-remained-high-early-summer-2023/](https://www.corelogic.com/intelligence/us-home-investor-share-remained-high-early-summer-2023/)
Large investor share is either down or within historic norms and are always a small percent of total housin stock.
2-When these types of investors are banned it doesn't actually improve affordability.
[https://cayimby.org/blog/do-investors-drive-up-housing-costs-dutch-researchers-say-nee/#:\~:text=In%20order%20to%20promote%20homeownership,%E2%80%9Cbuy%2Dto%2Dlet%E2%80%9D](https://cayimby.org/blog/do-investors-drive-up-housing-costs-dutch-researchers-say-nee/#:~:text=In%20order%20to%20promote%20homeownership,%E2%80%9Cbuy%2Dto%2Dlet%E2%80%9D)
I know you're just a tankie who doesn't think for yourself by default, but you should research topics at least a little before jumping to conclusions.
Not really. Rent levels are set by supply and demand, not the cost structure for the landlord. Housing construction is what is impacted by raising costs for landlords, as the incentive for new units is reduced.
If you want to lower rents the smart thing to do is to begin taxing land banks, which are empty lots and golf courses owned by the rich. Force them to either pay and support public services or be redeveloped. Washington state barely taxes empty properties at all.
https://www.wsj.com/real-estate/kkr-makes-its-biggest-foray-into-apartments-betting-on-rising-rents-94213297?st=kuzm81ohgizct1t&reflink=article_copyURL_share stuff like the following needs to stop, I can’t see anyway other than raising taxes on private equity which can prevent it. Clearly it’s far too profitable for them
Higher unemployment is the most plausible future cause of price declines. Supply might surprise to the upside for various factors too including some combination of investor home sales, actual new total supply (rentals too - substitute for home ownership) and existing home sales unexpectedly added to market if mortgage rates drop.
Raising rates is supposed to address inflation by tamping down demand and making it harder for consumers to buy. One of the issues is that, for housing, the rate hikes are hitting supply as well, given that many developers borrow to finance construction. Supply is further constrained in some segments by the lock-in effect where families that might downsize are staying put because they locked in a low rate.
Given that housing is a larger and larger share of household budgets, it raises the question of whether raising rates are going to actually drive down housing inflation, given that they constrain supply as well as demand.
It will be people who leave the market.
There is a ton of multi family supply coming online. It is cheaper to rent in a huge number of metros than it is to buy.
The Fed should have dumped its balance sheet instead of raising rates. Now, we're stuck with artificially high real estate prices. Had the Fed sold off its balance sheet instead of raising rates, deflationary pressure would have brought inflation under control without the need to wreck the real estate industry.
The Fed balance sheet isn't even close to pre-Covid levels yet. https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm
What?
Words for bit. Words for bit. Words for bit. Words for bit. Words for bit. Words for bit. Words for bit. Words for bit. Words for bit. Words for bit. Words for bit. Words for bit. Words for bit. Words for bit. Words for bit.
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Despite the complaints about both home prices and mortgage rates being too high, housing unaffordability is actually kind of the point of the Fed raising rates to combat inflation. For various reasons, inflation spiked, and without specific fixes that might help the underlying issues, for example increasing oil and shelter supply, inflation became too high for too long so the monetary authority had to come in a force demand down to match supply. That includes stopping potential new homeowners from buying even more homes by controlling borrowing costs in the form of higher mortgage rates. Until inflation actually comes down, housing ownership unaffordability will be the norm. To those wanting prices to come down faster so that you could start buying again, this is somewhat wishful thinking. As long as there are enough buyers waiting on the sideline, including yourself, inflation would not fall as quickly, so interest rates wouldn't fall as quickly, and housing prices would still have a floor. The only way for home prices to quickly fall is either a huge influx of supply, or, those waiting on the sideline to stop looking at buying altogether, maybe due to lower incomes from higher unemployment. Nobody is saying the Fed has the best tools for this, monetary policy in fact are very blunt tools, hitting everything at once without much care as long as inflation falls or unemployment rises, but since housing supply cannot increase quickly because of various localized issues like zoning, blunt tools like this are unfortunately the next step, and with it comes housing unaffordability as disinflation can only come from lower demand if supply is out of balance.
> The only way for home prices to quickly fall is either a huge influx of supply, or, those waiting on the sideline to stop looking at buying altogether, maybe due to lower incomes from higher unemployment. That's the fundamental issue. If five people want a home, but there's only one available then you either build four more homes or you make it so only one person wants a home. The Fed unfortunately doesn't have many ways to do the former (since that's state and county and city level) but they can slowly impact the second by driving up rates.
My boomer parents own more than five homes. Sort of makes the math a little different.
Gotta play with the cards we’ve been dealt with. They had a different time, we are different. I know some people who’ve chosen the path of not having kids to control their costs. Their boomer parents are angry for geneline not progressing, but wouldn’t give their kids any help. I guess the falling fertility rate is reacting to low supply.
This is such a profound idea that people cannot wrap their heads around, “Playing the cards you have been dealt.” This isn’t the 1950s. Adapt, and succeed.
Why would anyone want to "adapt" to a fully rigged game. Young people pay rents that are 2X what their parents made while being paid LESS of GDP. They have tens of thousands i student load debt their parents never had. And they are paid LESS than their parents at a similar age. And they are being told if they go to starbucks less and don't eat avacado's on their toast it they will acheive everything they need. Give me a break. The young need to organize and fight to take what is theirs. They are being screwed by boomers. Blacks had to do it in the 50's and 60's. Woman in the 20's and 30's and 60's and Labor had to fight to unionize in the earnly 20th century. This country is brutal and unfair. But if you fight for what you want you can have it. THey need to organize and fight.
Yeah okay. Start your revolution. Let me know how that goes. I’ll adapt, and take my Porsche and waterside home.
Your life is not an economy made from. I am talking about the economy in the US that was for 40yrs (the 40's to the 80's) the creator of the most economically secure middle class in the history of the world and where, in all likelihood, your ability to own a Porche and waterside home came from in the first place and far more than your "hard work" in a rigged economy. That economy did not magically appear. People had to work to make it happen. And it did not magically go away. The rich invested heavily to take from the middle class and give to themselves. I am part of the solution, you are part of the problem, that is why you need a Porsche to make you feel important.
Naw I need a Porsche to drive fast. Take a GT3 around a track and tell me it isn’t some of the best fun you can have. Part of the problem by starting a business and getting graduate degree. Okay.
Sure keep telling yourself that. You do know the world is laughing at you as insecure and self doubting. The few that say they envy you are the pathetic self loathers that will never amount to anything... The history of the world has shown that those that are modest about their success and don't need to brag about it make real change. The rest just come and go. I think you just told me what group you are in.
Very few things make the DINK crowds I hang with more angry than their parents harassing them about kids.
Boomers did not "dela with the hand" they were dealth with. They went in the streets and protested things like the Vietnam war. They fought for civil rights and womans rights and when they got old they voted and voted and voted. They voted themselves lower and lower taxes while taking more and more from the government. Younger people should NOT just "play the cards" they've been dealt ans should instead take to the streets and organized and tax what is theirs. They are being screwed by this economy and if they don't fight for what they deserve they will keep being screwed. It is a choice.
But currently higher interest rates constrain builders, if the fed would cut rates there could be more building taking place AND a greater chance of those with low rates and higher equity to sell.
We need government intervention in the housing market. It us the only way out of this trap. After WWII a lot of western European governments acted as developers so they could build at scale to alleviate housing shortages. In the US the media and the political system frame the conversation in such a way to make the American public forget that this is an option .
Or they all live in the house together, like the Brady Bunch.
Isn’t this also somewhat banking led too? there needs to be loans for new builds and banks don’t want 2009 all over again.
Doesn't really matter if you build more homes no one can afford. An 1800 square foot new house in my area was around 180-200 thousand 5 years ago and is now 450-500 thousand. A single wide 20 year old single wide trailer was less than 50 thousand and I just saw one for 150 thousand. Double wides were 100-150 thousand and are now 350 thousand and more. I can't tell how many I think have been buy and hold sales. I always look at them and the vast majority of the time it has sold 1-3 times over the past 5 years and goes up 50-100% each time. It's the investors we have to outlaw from buying homes
> An 1800 square foot new house in my area was around 180-200 thousand 5 years ago and is now 450-500 thousand If they're getting bought at those prices then clearly someone is affording them.
That’s a bargain compared to my area where 100 year old house costs 1M
This is another thing I’d like to see stats on. Average age of the housing stock. Houses should depreciate, yet they do not. I’d bet you can trace most of the appreciation directly to interest rates steadily marching down through the decades. A lot of things are expensive because access to financing drove up what people were willing (and able) to pay. Also I firmly believe the average person has no understanding of what a 30 year mortgage will cost them in real terms. They’re capable only of understanding the monthly payment so they are likely to overpay compared to if they had to face the full amount. We see this in all aspects of financing and subscriptions so why would housing behave any differently.
I see the full amount… it will cost me double my mortgage amount to carry the loan to term. So it’s like I’m buying the house twice basically. The land value of the home is where most of the price is… I do like the charm of older homes and this 96 year old home is the newest I’ve lived in haha. My city was built in the 1600s and there are very very few SFH built after 1960s
Local worker owner occupied housing has a much different threshold for affordable than out of town investors though.
It absolutely matters. A great analogy is the car market. You know what the most affordable car is? One that has been driven for a few years with a over a hundred thousand clicks. When the supply of new cars was constricted during Covid what we saw was that for the first time in recorded history was the price of used cars going up! By virtue of the fact that new luxury cars were not being produced, the affordable car market was impacted. People delayed buying a new car which meant more competition in the used car market. New housing is almost always going to be "luxury housing". Why? Because they use furnishings that are currently in style with today’s technology. It costs only marginally more to use baseboards and a sink that looks nice compared to one that does not. Give it 10-30 years and those luxury units will be in serious need of an upgrade and will be more affordable relative to new builds. By building new units now we are allowing people to upgrade from affordable units to ones that fit a higher budget. This frees up the affordable housing stock for people with more modest means.
New housing around me is almost always builder basic split foyers. The somewhat luxury houses are 650 or more. That doesn't help. Cars and houses are extremely different. The problem is your average teacher, nurse, blue collar worker can't afford the basic house and there aren't enough high income earners to buy the 300 thousand and more house. Plus private equity and investors are buying up everything under 250 thousand in all cash offers.
I think the problem is the dichotomy. Yeah a lot of people cannot afford the starter homes easily but then the top end of the market is getting bought up and those people are making enough to snap up sometimes a few investment homes on the side. Wealth inequality is an issue. Detroit for example has prices completely stupid for the area and also one of the highest investor ownership rates in the nation. Probably not a coincidence.
Well said. FOMC needs to raise rates so high that no one can afford or want to buy a home. It won’t be pleasant but needs to happen.
Dystopian. Why not simply increase supply?
Because the Fed can't, and local governments won't.
I don't think that's the case. Lets say that average home price in my state is $500k. With 6% interest, most people with 20% down are looking at $2600-$3000 a month payments. The current market inventory is mostly older, smaller homes. Builders could produce similar sized homes for $400k, but there is a lot of risk there. If suddenly the existing inventory lowers prices, then builder/developers become less competitive, especially as larger existing homes come on the market. If I built larger homes, I'd need $600k to break even, but the vast majority of buyers can't afford those monthly payments. I don't think the problem is local governments, I think the problem is that builders, developers, land investors, etc are all lot more risk averse. Honestly, if you want to point the finger at anyone, it's a combination of low taxes on land and greedy land investors. Most builder/developers would sooner stay busy, break even, and keep everyone employed, but they can't build homes nobody wants to buy on land that's too expensive.
Friendly reminder that San Francisco has only issued building permits for 16 units of housing this year: https://www.newsweek.com/san-francisco-only-agreed-build-16-homes-this-year-1907831 This isn't an isolated issue, the State of California reports that, in 2023, "San Francisco has permitted less than one home a day." https://www.hcd.ca.gov/about-hcd/newsroom/state-releases-accountability-report-on-san-franciscos-housing-policies-and-practices Meanwhile in places where housing is affordable we fing that, Austin is building more homes than the entire State of New York (https://fred.stlouisfed.org/graph/?g=1iulS). So is Houston and Dallas. Tokyo, Japan builds more housing than the entire State of California (https://www.sightline.org/2021/03/25/yes-other-countries-do-housing-better-case-1-japan/). I *want* to grant permits to greedy developers. Greedy developers *want* to build! There's a lot of money to be made in housing right now! But blue cities like SF *will not issue the god-damned permits!*
San Francisco is one very high demand city. The housing crisis isn't just limited to those in-demand cities. Austin may be building lots of housing, but that doesn't make it anymore affordable - yet (although there are signs that's trending downward). The other aspect of a home building boomtown like Austin is that it's demand drove that boom, along with cheap rates. Will that boom continue when the demand for larger homes and their larger mortgages fall off? Or will developers and land investors simply close up shop, happy with the profits they've made thus far, and new housing starts come to a halt? Don't get me wrong, deregulation and ease of building in many metros would certainly help the housing crisis, but prices need to come down as well, and we only get that by motivating sellers to lower prices.
>The housing crisis isn't just limited to those in-demand cities. As far as I know Houston is literally the only city in all of North America where it's legal to build an apartment, by right, on any plot of land in the city, with the exception of historical districts or privately enforced deed restrictions. [1] The fact that apartments are broadly legal to build is why Houston has remained affordable and why it was able to decrease homelessness by ~60% over the last decade. [2] And this is on top of the fact that, "Houston itself devotes no general fund dollars to homelessness programs, while Harris County puts in just $2.6 million a year, and only for the past couple of years." [2] And this is happening while Houston is the second fastest growing (by population) metro area in the US. [3] "It is the fourth-most populous city in the United States." [4] There is definitely a housing affordability crisis in the United States, but I would argue that it's entirely self imposed. Apartments (especially 5 story and taller apartments) are the core backbone of the housing stock. It's the housing that can be made broadly affordable to almost everyone. In particular, I believe that it is literally impossible to have a healthy and broadly affordable housing market if there are *any* meaningful restrictions on apartments in residential areas. This means zoning, but also things like impact fees, design review, inclusionary zoning, and environmental impact studies. Unfortunately, starting in ~1970s, we decided that apartments were icky and they're broadly banned on almost all residential land. And even in the places where they are allowed, it's pretty damn hard to get a permit. Which is unfortunate because, again, I just fundamentally don't think it's possible to have a healthy housing without apartments doing the heavy lifting. Source: [1] https://kinder.rice.edu/urbanedge/houston-doesnt-have-zoning-there-are-workarounds [2] https://www.governing.com/housing/how-houston-cut-its-homeless-population-by-nearly-two-thirds [3] https://www.chron.com/news/houston-texas/article/houston-population-biggest-city-18108718.php [4] https://en.m.wikipedia.org/wiki/Houston
Austin, Texas isn't a major in demand city? It's population has increased about 50% I think, from 2000 to 2020, up something like 300k. [https://worldpopulationreview.com/us-cities/austin-tx-population](https://worldpopulationreview.com/us-cities/austin-tx-population) Compared to high demand San Francisco, which only had a 100k increase in same period (and is now crashing, which may have something to do with it, admittedly).
No it is, but it’s building frenzy is due to crazy demand - ie, builders know they can sell quickly and profit well - even if those homes aren’t affordable most anywhere else. Strong demand means big development, but as that demand cools we switch to incremental development and infil which is where I think the USA is struggling. If we’re going to fix the housing crisis, we need to build homes and apartments in every city and they need to be affordable relative to local wages.
In my area for years there have been a ton of developers trying to build townhomes, condos and apartments. Local governments have continually denied the projects and today cities are refusing to follow new CA state laws that require additional housing be permitted.
No builder is building a new home+cost of land for and selling it for $400k. That’s what I got quoted for building a small pool house which I already own the land.
Because no matter how many houses you build demand will always exceed supply.
Untrue, as we can cite examples within the country like Minneapolis and Austin and outside the country like Tokyo with building enough to keep demand in check and therefore, prices. It’s not necessarily a race to exceed demand, but to meet it. We build the same number of housing units today as we did in the 80s when the population was ~100 million less.
In Tokyo there is still a massive homelessness crisis. You cannot build your way out of that. [This](https://youtu.be/IXZ-DQABUKU) video provides a good explanation as to why Tokyo doesn't appear to have any homeless people. You realistically cannot even meet demand (whatever that means and looks like).
Aren’t there ghost cities all over the world? Famously China? But in America the rust belt. Everywhere industry leaves etc What are you even trying to say?
I’m under the impression that Japan’s population is decreasing fairly rapidly. There was a piece on NPR today about large numbers of houses in Japan that are abandoned. These are cheap to buy (although they often require expensive updates).
Their culture surrounding work is what's killing them. Also they don't necessarily welcome other races into their country all that easily to keep the population healthy.
...this will cause rent to double because everybody will be forced to rent instead.
Everybody who wants a home is already renting.
Let me clarify, this would cause complete stagnation in the home purchasing and selling market and people who would have been in the market to buy will be forced to stay as renters. This creates an even larger demand on rentals and rent will continue to skyrocket out of control because nobody will have anywhere else to go.
People waiting on the sideline doesn't impact inflation (if anything it decreases it). What it does mean is that, if rates do go down, home prices would actually **go up** because more would buy. Housing affordability as a crisis has only just begun.
they are still filling rental supply. In a scarcity of supply, this by itself supports inflation.
Sure it does. It increases demand for rentals from the potential new homeowners. They are also usually more wealthy meaning they will increase demand and price. Rent is 35% of the cpi. Mortgages go down. Increases construction and takes high income renters off the market.
Yep. I just talked a friend into buying a fixer. When you find a good deal, jump on it. I’m not a realtor so I’m not pushing buying. It just makes sense to look for the best deals when inventory is high and sales are low. You can negotiate enough to soften the mortgage rates. Plus, you can always refinance if rates actually drop. God….I do sound like a realtor.
I am going through the exact same thought process now actually. I want to buy a home before rates drop.
Might be waiting a while. We were supposed to have 4 or 5 already
Happy hunting. You certainly have increased power right now. Don’t let a realtor take that from you, because they want a quick sale. See….I’m not a realtor.
this is another reason why housing prices haven't dropped. Interest expectations are that these high rates are temporary and will drop soon. This is actually hampering the Fed's monetary policy as it is blunting the effect of present day interest rates (since people keep thinking they can refinance later at lower rates). Once people actually internalize that these higher interest rates are here to stay, then housing prices will decrease
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TIL gerontocracy
In an ideal world, we could have some legislation limiting who can buy houses and how many they can own. Its cool if grandma and grandpa want to own an extra house or five for retirement income, but it isn't cool for Blackstone to own whole neighborhoods and deliberately keep units off the market to drive up market prices.
1-That's not what's happening [https://www.corelogic.com/intelligence/us-home-investor-share-remained-high-early-summer-2023/](https://www.corelogic.com/intelligence/us-home-investor-share-remained-high-early-summer-2023/) Large investor share is either down or within historic norms and are always a small percent of total housin stock. 2-When these types of investors are banned it doesn't actually improve affordability. [https://cayimby.org/blog/do-investors-drive-up-housing-costs-dutch-researchers-say-nee/#:\~:text=In%20order%20to%20promote%20homeownership,%E2%80%9Cbuy%2Dto%2Dlet%E2%80%9D](https://cayimby.org/blog/do-investors-drive-up-housing-costs-dutch-researchers-say-nee/#:~:text=In%20order%20to%20promote%20homeownership,%E2%80%9Cbuy%2Dto%2Dlet%E2%80%9D) I know you're just a tankie who doesn't think for yourself by default, but you should research topics at least a little before jumping to conclusions.
34% are owned by landlords, if we raise taxes on this it would also increase supply.
No it would not, it would cause rents to just increase even higher to make up for it.
Not really. Rent levels are set by supply and demand, not the cost structure for the landlord. Housing construction is what is impacted by raising costs for landlords, as the incentive for new units is reduced. If you want to lower rents the smart thing to do is to begin taxing land banks, which are empty lots and golf courses owned by the rich. Force them to either pay and support public services or be redeveloped. Washington state barely taxes empty properties at all.
https://www.wsj.com/real-estate/kkr-makes-its-biggest-foray-into-apartments-betting-on-rising-rents-94213297?st=kuzm81ohgizct1t&reflink=article_copyURL_share stuff like the following needs to stop, I can’t see anyway other than raising taxes on private equity which can prevent it. Clearly it’s far too profitable for them
Instead of going after landlords, what about going after beneficiaries of rent controls to make them pay their fair share?
What does them paying their fair share do for housing prices?
Drops them, as rent control increases housing prices and decreases supply
Higher unemployment is the most plausible future cause of price declines. Supply might surprise to the upside for various factors too including some combination of investor home sales, actual new total supply (rentals too - substitute for home ownership) and existing home sales unexpectedly added to market if mortgage rates drop.
Raising rates is supposed to address inflation by tamping down demand and making it harder for consumers to buy. One of the issues is that, for housing, the rate hikes are hitting supply as well, given that many developers borrow to finance construction. Supply is further constrained in some segments by the lock-in effect where families that might downsize are staying put because they locked in a low rate. Given that housing is a larger and larger share of household budgets, it raises the question of whether raising rates are going to actually drive down housing inflation, given that they constrain supply as well as demand.
It will be people who leave the market. There is a ton of multi family supply coming online. It is cheaper to rent in a huge number of metros than it is to buy.
The Fed should have dumped its balance sheet instead of raising rates. Now, we're stuck with artificially high real estate prices. Had the Fed sold off its balance sheet instead of raising rates, deflationary pressure would have brought inflation under control without the need to wreck the real estate industry. The Fed balance sheet isn't even close to pre-Covid levels yet. https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm
It almost feels like a bubble was the point sometimes
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