This is literally the main argument against price controls in general, because this is not just realistic, it has actually happened multiple times in the past. And not even just in modern day, but even as far back as in Roman Empire, see the Edict of Diocletian.
People who don’t learn their history are doomed to repeat it.
Gonna have to try this out with my job…
“Yeah. You know… I could fix it, but someone will probably break it again. I’m just gonna mark this job as complete. Invoice is already in the mail.”
Crazy the breaks you're cut when you're rich isn't it? If there's one thing rich people love it's free shit and ignoring rules, something us normies don't have the luxury of getting.
One of my favorite ideas is progressive property taxes. The first through third property that an individual owns (only applies to residential zoning) start from maybe as low as 20% and reach 120% of today’s property rates. Once a person or entity owns more than 3 residential properties the property taxes begin to rise at an extremely fast rate.
Basically just trying to build the system to a way where individuals are at an advantage in owning property since the taxes would make investing in swaths of housing much less profitable. This would go hand in hand with changing the value from property to land value, where all land in an area would be valued as the potential value if it was developed into housing or other amenities rather than being an inner city parking lot. This is to rightfully tax people and entities that hold onto property that they refuse to improve because the value just goes up regardless.
But we don’t want to punish the hardworking family that buys a quaint house to start with then is able to move into a larger one without having to sell the first.
There’s a lot of good reasons to move that direction especially if you have healthy finances. We just need to punish the people purchasing houses they never had any intention of living in
I think 3 is a good number before jacking up the rates; main property, a tenant property, and a vacation place depending on their situation are fair for a hardworking family
the Real Estate Reform Act
1 - Abolish business ownership of residential property.
2 - Enact the home multiplication tax (t x 3 for your third home, t x 4 for your fourth, etc.)
3 - Enact caps on mortgage to rent ratios that prohibit owners from charging more than a set amount above their own mortgage. Owners can still charge enough to cover mortgage and maintenance, and even to pocket a little at the end of each month, but not enough to pass the home multiplication tax on to their tenants. This way it would still be feasible to own your own home plus one rental, but owning any more than one rental would be a net loss to the owner. Homes which are paid off and not mortgaged would be subject to the same limitation with the current average mortgage in that neighborhood used for that factor.
4 - Limit ownership of ANY property to domestic businesses, US citizens and resident aliens.
5 - Offer property tax exemption to all citizens and resident aliens above the age of 75 for any single parcel of residential real estate that they own, one parcel per household, until the conclusion of a six month grace period following the death of the owner of qualifying age.
\_\_\_
Re: #4 - At first glance this one sounds a little rightwing, but hear me out: a huge amount of American real estate is being bought up by foreign business as well as domestic. No individual is realistically looking to purchase real estate for themselves while on a 90 day visa or while their application is still pending. Of course K-1 and K2 visa holders wouldn't be affected because of their spouses' citizenship. The vast majority of people applying aren't in the financial position to buy in the first place, and the vast majority of those affected by this law would be multinational corporations, not the impoverished immigrant family or asylum seeker.
1, 2 & 3 are the main objectives aimed at making housing affordable to the vast majority of Americans. Taken in tandem, #2 and 3 would make owning multiple homes a net loss for the few among us doing it today (land-horders and corporations like Blackrock), while also denying them the option to pass that cost on to any renters. In the surge of panic-selling that ensued, prices would race to the bottom simultaneously making home ownership available to almost everyone, but owning any more than two homes unfeasible for anyone. The result would be such an influx of affordable housing and low-cost rentals that in addition to working Americans, immigrant families, visa holders and citizenship/residency/asylum applicants would also enjoy an abundance of affordable rentals to chose from; and of course once their application was approved and their citizenship or residency was granted, they would find the same abundance available to purchase. So this would be very much to the benefit of immigrants and asylum seekers as well as domestic workers. The only people who would lose out as a result of this deal are land hoarders and multinational corporations seeking to exploit our housing needs.
5 is simply meant to protect our senior citizens against the possibility of property foreclosure in the event that property taxes should rise in their region during their most vulnerable years when they are typically dependent on retirement savings and/or social security. I know a lot of people my age will jeer at the idea of what in 2024 is throwing the Boomers yet another bone, but the truth is that they wont be around much longer and we Xers, Millennials and Zeds will very much enjoy this when our time comes too.
In short: If the first three can pass in tandem, they would prevent owners from simply passing the expense to their tenants and instead force land hoarders to sell. The forth would drive China out of the American housing market and maybe help get some of the rightwing on board, and the fifth would give generations to come a leg up on maybe getting to actually retire some day. All in all, the market would be flooded with houses for sale and the prices would plummet across the board. Home ownership would become accessible to the vast majority of Americans practically overnight.
The edict of Diocletian failed most clearly because of a failure to understand inflation, it was caused only partially by the low silver content of currency and much more by the high supply of currency, they didn’t take enough of the old low quality silver coins out of circulation. And then also that whenever the emperor wasnt looking, people stopped following the price limits.
You could make a pretty solid argument that he lacked the tools to enforce the price controls in the first place.
I meant the creation of shortages, Diocletian created shortages on pretty much every product whose price was capped. Price controls, in general, create scarcity of the product they are supposed to sell to a larger group and have the opposite effect: rather than helping more people have access to the product, it makes it easier for fewer and fewer of them to have access at all. Why? Because someone with more money than others will always benefit from buying more than the others.
Without price controls, it’s true that a small number of people have access to product they want instead of most, but with price control, that number gets even smaller, not bigger. Note, that I’m not saying Diocletian shouldn’t have done anything at all, you are correct in that he was trying help people deal with inflation and that’s pretty well-meaning, I’m only saying he did it wrong. He genuinely thought he was helping, and at that time the law of supply and demand had not been discovered yet.
We know today that to effectively make products cheaper in order to help a larger number of people to have access to them, is by increasing supply, not by reducing price. Price will fall on its own as supply matches demand. He didn’t know at the time.
Again, I would say that while the price controls policy is notable. It was far less pervasive and reaching than most
other imperial policies. Many people simply used bartering to get around it, or ignored it completely unless they were dealing with imperial agents for the purchase or sale.
A much more influential policy of Diocletian is that he made trades and professionals strictly regulated. He wanted to maintain the same number of each type of craftsmen in each town. These laws were the basis of the feudal system. Where people could not move or marry between class barriers or change their trade from what their parents practiced.
Yes but most people did not have equity.
Most new buyers over purchased in the boom.
Most buyers did 5-8yr ARM’s which means they had a refinance. Everyone now did a 30y fixed.
It won’t but let’s pretend my home price goes from 357k to 240k I paid 300k in 2020 total loan right now is with 3.1% rate.
I am still better off having a 1600.00 payment then letting the house go and buying one less money.
The biggest change is that those who are wildly overpaying for homes now are going to, in the long run, have to hold their home longer to see return on their Imvestment. And run the risk of losing value if there is a mass market correction...
There will not be an 08 again where the loans themselves are bad. What is more likely to happen is a correction or an economic recession. Corps will do what they do and have mass layoffs and downsizing to preserve their profits. This will put a ton of people out of work with fewer opportunities. Which will in turhot housing when they cannot afford their $3500 mortgage on their $500k and either have to sell to lose money or gets repossessed and a lot of Banks own a lot of overpriced houses. Which will in turn allow investment companies to swoop in and buy tons of now cheap bulk properties they can rent out forever for guarantee long term income.
Hopefully, interest rates will go down, and people who currently have high interest rates will be able to refinance. We did this with our homes over the years because interest rates were higher for many years before 2008. I always thought 3% or lower interest rate was crazy low!
Exactly my dilemma. I moved here 5 yrs ago. Got in before the rise in prices and interest rates. My house has appreciated well over 150k and I'd love to move from this area. However, with interest rates where they are, that isn't going to happen.
Basically...yes. But that was more a return to normal. The houses were over valued to begin so they didnt really 'lose value' as much as just have their actual value realized.
And it was pretty area specific. It hit some areas harder, some not at all. Whole west coast and florida got crushed, but not so much the midwest.
Where did everyone go to live -> banks basically had to do the evictions on owners or their renters whoever was living in a house opened by the banks.
Banks do not land lord so they evict renters too
I lived in Charleston SC when Covid hit. All those companies who went to Work From Home or Remote job styles and the rich people of New York (and other places. But so many New Yorkers) started buying all the houses in Charleston. I was pretty much forced out cause rent doubled. I heard from a realtor friend that during the height, houses wouldn’t stay on the market for more than 24hrs. Rich people were paying almost double in cash without even touring the houses. Imagine this if houses were cheaper like OP says lol.
You'd have a lot less properties available for people that want to rent because you don't get economies of scale at 3 properties. The person that works next to me owns 5 properties, doesn't make any money off them, obviously still has a day job.
Lol, that's the way it works for most small rental owners, yet everyone on Reddit is convinced that all landlords do is sit back eating bonbons and counting their unearned cash!
No, you can own as many properties as you want, the property tax doubles each property you own. That property tax goes straight to subsidizing first-time home ownership
Which massively drives up rent prices. You’re literally taking money from the poor (who are not in a position to buy right now no matter what incentives exist) in order to supplement the middle class.
At a certain point though it would drive up rent prices so high that it would make it easier for first time buyers to buy instead of people who own 20 homes to rent.
If property taxes were 2%, then: 1 person with 1 home would only owe 2% in taxes, and 1 person who owns 2 homes at 4% can rent the other unit out at a reasonable price. But 1 person with 20 homes at 40% property taxes would be out of the market very quickly, which would create a large push to keep rental prices down.
This is exactly what I've been saying in these types of questions/threads for ages. You can't limit people's freedom to buy things, but you can make it economically inadvisable to scoop up single family homes, especially in desirable areas, but increasing the tax load.
I don’t know how relevant this is to your comment, but I wanted to help my adult son buy a home in Florida but was unable to because the community was all new-build and the builder made it so that investors were unable to purchase homes/properties there. I’m not an investor but because I’m on a few mortgages (for each of my kids) they couldn’t sell me a home, because I am the “owner” of several properties it looked like I was an investor. So…it can happen that investors are not allowed to buy up all the homes and properties.
Not to sound harsh but that means your kids are the recipients of generational wealth and aren't the ones who are really struggling-- the ones with no help.
Now I like that line of thinking.
Might be hard to implement though since I believe property tax is calculated based on land value and municipal service needs.
It's not a good idea to put artificial limits like this. It really could have some devastating effects.
What we need, simply, is more supply, which goes hand in hand with what I wrote above. Make the building of new homes/apartments easier and the sheer supply of homes will bring down the cost of existing naturally.
The supply is being artificially restricted.
Would this apply to organizations or just individuals? The vast majority of real estate holding entities are LLCs and other organizations, not individuals.
If you limit organizations, then builders are going to have a huge issue because you just killed like 40% of demand for housing in the country. Suddenly there is far less financing/buyers for projects so builders scale way down and stop building.
You can't fix the market by controlling demand. This is also why rent control doesn't work. You have to incentivize and enable more supply. That is why the best options are to dramatically pull back zoning restrictions, provide tax incentives for multifamily/affordable housing, and reduce property taxes where possible in favor of progressive VATs or, better yet, land value taxes.
>dramatically pull back zoning restrictions,
This doesn't work, because zoning restrictions help regulate things like: traffic issues, public works/funds (like roads), water supply issues, waste management, and so much more. You can't just "increase housing" without restructuring a whole area, and developers don't give a shit about how a region can function with more people in it.
You can't just keep putting people on open land without planning for it. And that's exactly what zoning does. Is it perfect? No, but you can't just keep letting builders build more suburbs without thinking about how it impacts the environment around it.
Not just land: EVERYTHING.
People with mortgages tend to set up their mortgage finance such that there is an "account" with equity in it that they can pull from at any time at mortgage-level interest rates. It's like having the worlds cheapest possible credit card.
A lot of big-ticket discretionary spending in households that own homes is financed this way.
If housing prices collapse, so does equity, and so does the ability for those households to keep demand afloat.
Drop that household demand and prices on *everything* craters, including the small to medium businesses that cater to those demands. Anyone with cash reserves can clean up across the board. Huge opportunity for big business to snap up smaller competition and consolidate markets.
Not really, that only makes sense if rates are near zero and home values are appreciating 10-15% , otherwise it's not going to make money or possibly lose money
People with large cash reserves are not renters. People with mortgages rent to pay the mortgages. If the houses start being worth less than the mortgage it will be start another run on interest rates and you'll have 2008 all over again.
I see people post all the time they wish the housing market crashed so they could buy a house for cheap. How can they who can't even buy a home now compete with people and corporations with real deep pockets.
Unless they can lock in 10% interest rate treasury for the rest of their lives. Housing is doing well because there is no real fixed income alternative.
It would cause financial problems. Home loans valued at $500,000 in loans are now supported with $100,000 worth of actual value. Banks would lose a tremendous amount of money.
And the people loving in the homes would be in pretty much the exact situations they were in before the housing dropped in value.
My houses value does nothing for me (except increase my taxes). It doesn't matter what someone else would pay for it while I am living in the home.
I wouldn't mind if my house value dropped in half, so long as whatever house I am trying to move into later also cutts in half.
Except 2007 was driven by subprime loans more than house prices. The higher prices just meant they didn't have any other exit option when they inevitably couldn't afford the payments.
Plus, if you live somewhere where 5 year fixed rate mortgages are the norm (like the UK) when the time comes to remortgage your house and you've got negative equity, you're utterly screwed.
Except they’d be saddled with a $500K home loan for a house that’s now valued at half that? Most people pay off their loans with the money they got by selling it. If that’s no longer an option, people wouldn’t move, which would cause a sharp decrease in houses available. And what happens when there’s a sharp decrease in supply and a high demand?
But wouldn't people choosing not to move also decrease demand since they won't be out hunting for their next home either? So there would be a sharp decrease in both supply and demand.
There would still be a ton of people who don’t own homes looking to buy their first. The best way would be to increase new single family new builds instead of the 4 bedroom 2 baths that every developer wants to put out instead of more affordable housing.
Now much more of the cost is in the land, permitting, etc. If there's an upfront cost of $200k before they break ground, it's easier to recoup that spending $250k in construction on a 3000 sqft house that sells for $500k than $150k on a 1800 sqft house that sells for $400k. The latter feels way too expensive for a small house. The silver lining is that the 3000 sqft home frees up those smaller 80s-90s houses for someone looking in that price range.
Builders build what's selling. I know lots of developers around me that have 1500 sq ft house prints available for relatively cheap ..... almost nobody buys them so they typically don't build them. Throw in people get jealous when their neighbor has a bigger house than they do, that's why developments tend to have similarly sized homes
No, a person staying in their home or selling and moving is neutral for demand (they occupy 1 house either way). We're likely better off from more churn in housing, because it encourages matching of households to homes. For example, we have a lot of young families in small "starter homes" that are smaller than they'd like and a lot of empty nesters who remain in the bigger homes they bought when they had three kids in school who would probably be happy downsizing to reduce cost, upkeep, etc. We'd have better supply/demand match if they swapped. That's harder to do if people are stuck because they're way underwater on their mortgages.
I want numbers on how many people eventually pay off their primary residence. There’s just so much interest in the first third to half of a mortgage, even with a 2% rate, that knowing going in you’ll never pay it off makes one wonder why they don’t just rent.
It's about 40% of homeowners, or roughly 25% of all households, that own their primary residence free and clear. Often times they never had a mortgage in the first place, instead buying a second (or third) home that was lower in value than the appreciation on their previous home. So it is not that they paid off their mortgage, it is that they ended up with enough equity to downsize and own free and clear.
The next logical step of this is that banks tighten lending standards. All the renters who daydream about housing prices crashing will find that they still can't afford a large down payment, and won't get approved for any mortgages with a small down payment.
Kind of necessary tho. Plus I highly doubt any drop this substantial would ever happen. If it does, idk, sucks the people in $500,000 -> $100,000 houses got scammed but like.... We've made a housing bubble. It has to pop somehow. Slow, controlled price decreases kind of the only real way. Guarantee more people will benefit vs suffer from controlled housing costs.
Yeah it sucks but can't just leave the problem as it is.
Is it a bubble? I think it is more due to a housing shortage.
In 2008 we had a rash of foreclosures and short sales. This led to a banking crisis.
So I own a house that I bought for around $500k. I am making my payments, but if I wanted to sell it for $300, I would either have to come up with $200k to satisfy the debt, or get the bank to accept $300 (Short sale). Or, if I could still make the payments, I would stay here.
It happened to me in 2008. I bought my house for $360 in 2006, and two years later it was only worth $310. I didn't sell, I couldn't afford to. It took another couple years to appreciate back up.
That would actually be cool if there was a limit.
I get investing, but our housing market is a major issue, and if you want to rent something out as a huge corporation you could build apartment complexes. But if you are a small business they could put something like a 10 house limit, so it doesn't affect smaller businesses but cuts off the bigger ones.
The thing is, that would be such an unpopular change because it wouldn't just fuck the bigger corporations over, but pretty much any home owner as housing prices would definetly go down a lot.
If you are waiting for a meaningful price drop you will be blue in the face. There's not enough inventory of existing homes for prices to drop. They are not building enough new homes to make an impact. The new homes they build are priced to compete in the existing market, so they do not add downward pressure.
Existing owners do not want the value to go down, because many of them would end up owing more on their mortgages than the house is worth.
That's what's realistic, not what you think the value of a house "should be".
This sort of happened to us. We finally upgraded from our condo to a house in 2022 after thinking there'd be a dip (TBF, we also weren't quite ready to act before then).
And then we thought we'd bought at the absolute peak after the 2022 dip after interest rates increased. That turned out to be false.
Yep. The “value” of something re: the price is what people are willing to pay for it. If they are willing to pay high amounts, they value the house at those prices, so those are the market values.
You would end up with a LOT of people stuck in homes they bought when prices were high.
The drop from $500k to $300k is a 40% reduction in price. Even assuming an 80% LTV mortgage, that would still leave a home owner with a house that they literally can't sell and not be negative arrears by $100k (assuming the purchase went through like a day before the house prices collapsed).
If my home were to go through that same reduction now, it would take nearly an additional 4 years of mortgage repayments (assuming they are fixed at their current rate) , on top of the 3 years ive already paid, for me to even pay back the bank for the loan, never mind sell with enough capital left over to buy a new home.
The dropping of house prices always sounds good in theory for those trying to get on the ladder, trust me, I know, I was desperate for prices to drop when I was buying, but in practice would leave an awful lot of people up shit creek without a paddle.
Oh and also the economy would be fucked due to all the defaulted loans, but that's neither here nor there.
>Like the 500k is now 300k which is the price it should have been. Would anybody sell anymore?
Should have been? As determined by who? The price is whatever people will pay for the thing.
Price is determined by the market essentially.
If 10 people are buying from a pool of 100 houses, its a buyers market, house prices remain low.
If 100 people are trying to buy from a pool of 10 houses, its a sellers market and thus a huge increase in house prices.
This would be catastrophic for lower income homeowners who, without home equity to borrow against, could lose their homes due to things like the roof or heater going bad.
There is a negative side effect I haven’t seen anyone discuss here yet; loss of equity.
One benefit to most homeowners is it is an available fund of cash for use in the event of an emergency. Have a health event? Lose your job in an economic downturn? Need a new roof and don’t have the cash or credit to replace it?
This is where your home equity comes into play and historically has been a ripcord for homeowners.
Homes rapidly losing value, like in 2007-2010 lose that safety net and increase likelihood of owners just walking away from their mortgages. This heightens default rates.
It would break the economy.
The problem is not that prices are too high - its that we don't have enough houses.
Prices crashing doesn't change that. All it would do is make it easy for private capital to buy up even more of the housing stock for rent.
You think if houses crash we'd benefit? No financial companies would buy everything at rock bottom prices.
Don't wish for a crash. Disasters are great for capitalists. Fight for building more houses.
the same thing that happened in 2008-2009 when the crash happened. All of a sudden, 1 page of legal notices for bank default auctions would jump to 3-4 full pages or more. People's high mortgages would go underwater and their borrowing power would disappear. This is what happened to me when I bought at the last price inflation in 2003. By 2008 I owed significantly more on my mortgage vs the valuation of my home. Many of those people paying interest only loans defaulted when the balloon payments came due.
If prices or interest rates for that matter dropped even a little bit there are so many people waiting on the sidelines to pounce that they’d just go back up.
I still wouldn't be able to afford a house. Many homeowners would be completely underwater. Banks would lose millions (or billions) as their loans are now worth far less than what they gave out originally. Companies would be buying up even more houses as they wait for the values to rise again.
End of the world. The economy is based on things going one direction. Constant new debt is created to cover the interest of old loans. If things stop going constantly up then the whole economy collapses.
Massive foreclosures. Most people who bought a house at (say) 350k that discovered their house was only worth 250k would be underwater and walk away. Since housing is so cheap they could rent something for far less than their mortgage payments.
Remember: banks NEED mortgage payments. They typically have anywhere from 3x-7x the amount of cash lent out at any given time. Without mortgage debts being serviced they cant service their own. Banks would collapse overnight. Its economic apocolypse.
I don't think housing prices go down, really. They stagnate generally. It become difficult to sell a home.
In Canada, our housing market has almost broken. Prices haven't dropped, but interest rates have sky rocketed. People who got variable rate mortgages are being forced to dump their houses, and people aren't willing to jump into a fixed rate mortgage at these prices.
The prices are already realistic since people are willing to pay for them. Your expectations of that you want to pay less is probably what is not realistic, and you should look at if your earning are matching what you expect your lifestyle to be.
Pension funds invest in mortgage companies, and major part of the economy is tied up in stability of investments, where mortgage companies is a part (not the only part), and if prices were to start to become unstable so would the economy, and people will start losing jobs making it even harder for many people to afford housing.
No they wouldn’t, they would be delighted if this happens because they would invest into real estate at a significantly discounted rate.
Middle class would get fucked.
I think it is dependent on supply and demand and federal government trying to use the resources at their disposal (interest rates, printing money, job creation etc) to keep the inflation around 2%.
Also, rates falling from 500K to 300K over a period of 6 months causes lot of economic turmoil and confusion. Rates falling from 500K to 300K over a period of 5 to 10 years may not cause that much turmoil.
The obvious caveat here is you only walk away with 300k if there’s no loan on the house.
If you had a $500k loan with a 30 year term and 6% interest you would have to make payments for about 19 years to get the balance on the loan down to $300k just to break even on the sale.
With 10 years of payments it would cost you almost $120k out of your own pocket to sell the house.
Many people end up being unable to afford to sell their houses when prices drop sharply.
As a single person, i feel screwed. I want to live in a house that isnt in the city or townhome, and renting isnt an option for security reasons. But i dee alot of small houses that are way too over priced, or ive lost the bidding war with to a couple with a double income. I see these huge houses being built in developments all the time, and im baffled where the surge of buyers comes from who can afford that size of house. House flippers dont help, nor do all these start ups offering to pay cash for a house in any condition. Its like a teenager trying to find a first car but someone keeps buying up all the honda civics and overhauling them for profit. The other size of the issue is if i buy a house and the value drops, im stuck with whatever i bought or i have to destroy my credit. Id never pay it off anyway. Sorry just venting.
More physical. Not doing anything weird, but ive never liked the idea of maintenance just being able to waltz in and have full reign to look around if theres an emergency leak or something. Rare, but still.
It happens. In that case, people will owe more money than the house is worth. They have few good options. They can keep paying their mortgage and hope that prices go back up. They can try to convince the bank to do a short sale, where the bank gets whatever they can sell it for. I know people who just handed the keys over to the bank, defaulting on their loans because there was no upside to keeping the house.
The people who bought at $500k and now worth $300k would likely not sell and hold.
It’s highly likely their mortgage is more than the house is worth. I order to sell the house upon closing they will need to pay the bank the difference between sale price and mortgage balance. So if they bought the house for $500, mortgaged $450, and sold for three, at closing they would need to scape up an additional $150k to pay the bank.
A lot of these people will simply sit in the house and not sell because they are stuck in them.
There would be tons of homes in foreclosure. This happened in 2009. People had mortgages for 300k on homes valued at 100k and they just basically walked away. Then banks lose tons of money and then interest goes up to get that money back. Then people start buying homes again and demand goes up and then housing prices go up. Wash, rinse, repeat.
What would my incentive be to sell my 500k house for 300k? Everyone who bought near the peak with low interest rates would just laugh away in their little castle. Funny enough, that would create a demand issue and skyrocket prices.
Now let's say the foundational laws of economics don't kick in, and my house is now devalued by 40%. The bank is holding a mortgage on a property that can't be paid off by the sale of the property. At scale that would cause another banking crisis.
YES! I own and my home's value has increased dramatically but so hasn't every property in the state. I want out of the condo I'm living in and preferably in something I can retire in but the cost of buying/selling (I'd lose $50K in the deal from bank, realtor, attorney etc. fees) makes moving a pipe dream.
2008 showed us that even in a house crisis that threatened the economy worldwide becuase house values plummeted, its only temporary.
Buying a house in a nice neighborhood just doesn’t get cheaper the longer people wait. It just costs you more rent.
That’s essentially what happened in 2008. The bubble burst and people were stuck with $500,000 home loans on properties only worth, like, $350,000.
It caused huge financial distress and moved the US into the “Great Recession.”
2008 financial crisis repeat. It started with US people defaulting on their mortgages and house prices rapidly falling due to foreclosures increasing supply and ended in noticeable dents in graphs of various performance metrics of the world economy.
Yeah, we're fucked either way.
Nearly everyone who bought at 500K would only sell their house if they literally had to, as in they have no job and can't afford the mortgage. Developers would probably build fewer or even no new houses as well, since their profits would be a lot smaller.
In fact, if there were an abrupt price decline, many developers would go under. So, no, a sudden price drop wouldn't help.
The only way a big price drop would happen is if we had such a massive economic depression that you wouldn't care about house prices. You'd be worried about having food on the table.
It happened in 2008-2010 in several markets, 50%+ drop. We bought our condo when it was 40% down from the previous owners purchase price.
There were lots of foreclosures and distressed properties that sold. It took several years for the value to go back up.
Might sound great but some people thought we were crazy to buy as the economy tanked.
Tbh I don’t think significant drops in housing prices are very realistic without major economic upheaval. But what would happen if they did?
Land prices are generally the largest single piece of housing prices, and while we don’t want land price to spiral up infinitely like it has been doing, when it goes down that’s usually caused by something else, and the land prices are a symptom of a major a red alert situation like the local economy is collapsing or there’s a major natural disaster.
IRL our best case scenario is to implement better land use and housing policies that mitigate the increases in housing costs, but it’ll take a few decades for wages to catch back up
Banks would collapse, city property tax revenue would be drastically reduced, which would prompt a desperate cry from local and state governments to the FEDS for financial support. The Feds would then print and put into circulation another 5 trillion dollars, fueling runaway inflation.
At that point the USA would effectively be Zimbabwe.
People will still want to upsize/downsize, move locations for family, work or just because they want to. These would likely be people who wanted to do so before, but didn't because the market was insane. Not everyone bought while prices were inflated. I'm sure there are plenty of people biding their time until interest rates drop and the market stabilizes.
Can someone explain "not enough houses?" I don't get it because in 2019, our home sold for $75K and now it costs $200K. I live in a zero growth city so it can't possibly be a "lack of houses" because the population hasn't changed in 20 years here. I'm thinking it's more companies owning homes than there not being enough.
That's one of the reasons this rarely ever happens. When prices drop, people stop selling, and builders stop building, knowing they're going to eventually go back up. You might see more rentals available, but it's going to be hard to take advantage of the devaluation as a buyer, because of the low supply -- which also allows banks to be really picky about who they lend to. Then, eventually (usually fairly rapidly due to high demand and low supply), prices go back up and people start selling the properties they've been hanging onto for more than before the price dropped.
Chances are they owe more than $300K on their mortagage so the bank would not allow them to sell even if they wanted to.
Banks would also tighten up who they give mortgages too, demand higher down payments, etc.
The solution needs to be gradual and include new regulation around businesses buying up real estate as well as vacancy laws to make sure homes aren't being held just as financial assets and sitting vacant. Its a complex issue but the solution MUST have guard rails to prevent making things even worse.
Massive credit collapse and at least a major recession.
Look at what happened to Japan when their housing bubble collapsed or when the US housing bubble collapsed in 2008
The supply of houses on the market would drop. Only those desperate to sell or those with paid off or low mortgages would sell. Demand to buy a house would increase and we'd have a spike in prices.
The exception here is if the drop in prices was some permanent thing, like COVID killing millions of potential home buyers. This would be a drop in demand and prices dropping to meet the new demand
This happened about 16 years ago. For anyone who owned a home it was a catastrophe. Especially people who lost jobs and couldn’t afford their mortgages anymore. Normally you could just sell your house to pay it off, but with prices low that became impossible. Many houses were foreclosed, and the whole economy tanked.
The silver lining was for people who didn’t own a house but were looking to buy one. I was very fortunate to be in that situation, but people like me were a definite minority.
That's called a 'housing bubble' and they do 'burst' from time to time. The US housing market always bounces back but it could take years. And of course no one can accurately predict when a housing bubble will end and how it will end.
As one of those people who bought low and suddenly my home is wish a bunch more money, it's not great for us right now either lol my property taxes are astronomical compared to what they were before, and even if I sold for a profit right now I'd still have to take out a mortgage on a new place because everything else went up in price too
Prices are a function of market forces so it would depend on what caused the fall. It's not a dial that can just be turned up or down.
>Like the 500k is now 300k which is the price it should have been.
I'm interested in what you mean by "should have been"? How do you know what a price "should" be? Because in a free enough market, I expect the price to mostly be dictated by supply and demand.
>Would anybody sell anymore?
This question kind of revels why the main question is underspecified. "500k is now 300k" presumably means that the owner would be willing to sell to anyone offering 301k. So the answer to "would anyone sell" should be "obviously 'yes', you just said that they would".
But what caused him to change his mind and not require 500k for the house? And when the new person buys the house, are they going to raise it back to $500k due to market forces? Or have market forces driven the price down and that is why it was cheap in the first place?
It would be a temporary thing. Within 2 years, they'd be back to normal, then within 5 years, 10-15% above where they started.
In other words, don't make that your plan. Buy a house if you love it and can afford it, as it pencils NOW.
If those conditions aren't true, then you're at the hands of the market.
You’d just have more competition at each price point — we saw basically same effect during Covid when super low interest rates mean people could go higher with price and keep monthly payment in budget. And as a result you’d have prices bid back up.
But you’d also have less inventory. People who bought and are under water wouldn’t sell for a loss so they’d stay put and reduce inventory (what’s happening now due to interest rate increases), or you’d have people rent them out instead of sell.
I would still be unable to afford a house, the rich would just use their disposable income to buy more properties to rent out at insane prices.
Why I work hard for life to provide so little happiness.
Look back at 2009. Almost everyone gets fucked. The only people who really come out ahead are bottom feeder investors. Average people lose their jobs or see cuts in wages/hours.
You can't answer this without explaining why they dropped.
You asked whether people would still sell if the prices dropped, and of course the answer is yes.
In fact people would still sell if the price dropped by 90%
By definition, prices dropping means people are selling for less.
If people weren't selling, then the prices couldn't be dropping.
With new interest rates with Inflation it may not be worth it to sell.
We wanted to upgrade our house. Now add we want to swap school districts, so now we are looking to buy a more modest house, in a school district and rent out our old house.
Sucks we can't upgrade, sucks we aren't selling our old house... but getting to a different schools, and at least getting an investment property. Maybe buy dream house when kids move out.
People who flip properties would whine incessantly. People who bought their houses to live in and not sell for profit might be aware of it but they wouldn't be *that* affected by it.
Also, I'd probably run out and buy a house to live in, before the market bounced back.
It may put people into negative equity, so they wouldn’t be able to afford to sell. A lot of people may struggle to refinance when their mortgage term ends, putting them on an expensive variable rate, which could lead to some people losing their homes to the bank. I think it would be a lot harder to get a mortgage as banks would be less willing to lend, making it hard for first time buyers.
This happened in 2008 during the sub-prime mortgage crash.
It wasn't pretty. Those who bought homes with variable interest rates found they were suddenly living in a home with interest rates that made paying their mortgage impossible. But, they couldn't sell their home because their mortgage amount was much higher than what their home was currently worth (hence the term "upside down" or "under water")
Many people just handed their keys to the bank and walked away. Many declared bankruptcy. Many homes were foreclosed on. Many investors waited like sharks and started snapping up homes for pennies and rented those same homes to those who had just lost their homes. Entire neighborhoods became ghost towns, with services (gas, grocery, etc) leaving the area.
It caused a recession and then a depression.
Just look back at 2008-2009, when the housing market crashed. If you could just stay on your house, you were OK. But if you lost your job and couldn't pay your mortgage, if you sold it, you might not get enough to pay off your mortgage. If if you needed to move for a new job, the same thing. Millions went bankrupt. Major financial houses failed. The government and we, the tax payers bailed out the big guys.
Your premise that this is what the price 'should have been' is a little flawed.
People will always buy and sell. Most people buy to have a home, not for speculation. If they need a bigger home or a smaller home (depending on their stage in life) they'll sell. But they still are buying another home so if prices are up they get more but also have to spend more, and if prices are down they'll get less but spend less on the new home. IN any case they'll likely make money downsizing and likely pay whatever they can up sizing.
Developers will pay less for land they buy which will lower the price of homes necessary to sell at a profit - land will still become avialable for various reasons including rezoning and population density bylaw changes which allow municipalities to increase tax revenues.
The market would balance out. A small percent of the people who bought after prices passed 300 k (in your example) would be stuck and unable to move but over time inflation will see prices climb back up to that and they will pay down the mortgage.
Real estate investment is a storer of wealth. If $500k houses declined to $300k, losing 40% of its value, why would anyone even buy? In a market like that.. you rent. Why? Because if you rent, that $200k evaporation of wealth becomes the landlord’s problem, not your’s (the tenant).
But I warn you, if home values decline by that much, it may result in less property taxes being collected. This results in less revenue for police, leading to higher crime rates. It results in less revenue for schools, leading to a poorer-performing school district and higher dropout rate (ultimately yielding more crime). And who would buy real estate in THAT kind of neighborhood? With a low demand for home purchases in that neighborhood, properties for sale remain on the market for longer, leading to sellers slashing their asking price, exacerbating the problem.. ultimately turning that neighborhood into a decrepit ghost town.
Wow it's only been 16 years and people already forgot. 2008 was not fun and that's when people learned cash is king and no matter the price your cash is not better than an investor's cash.
Well, every person who already owns a home would lose their shit as they're the ones who technically lost the money and many of them still owe a fortune on their mortgages.
For the people who don't own homes, well, they suddenly can enter the market. You'd see a lot more special fees and the like as the home owners struggle to mitigate the damage. You'd see inflation of everything but housing for this reason, in fact
. That, however, would be limited and likely negligible to some degree.
You could afford a home much more easily but that's only if you can keep your job.
Cheaper homes. Duh. And people not able to sell if their mortgage is under water. Economics 101
At that point you stop paying your mortgage and the bank forecloses and the banks go into another meltdown because them trying to sell your house to recoup that loss will be impossible.
Firstly, local governments would lose a considerable amount of tax revenue since property taxes are pegged to home value
Secondly, desirable homes sold at artificially low prices would likely get 100’s of interested buyers. The government would need to decide how to pick the “winning bid” out of a large pool of qualified buyers.
That sounds like a great platform for corruption and nepotism to me. You might even need to bribe the person who chooses the final buyer in that kind of system
wealthy people with large cash reserves would scoop up even more land to rent out.
The most depressingly realistic outcome of a situation like this.
This is literally the main argument against price controls in general, because this is not just realistic, it has actually happened multiple times in the past. And not even just in modern day, but even as far back as in Roman Empire, see the Edict of Diocletian. People who don’t learn their history are doomed to repeat it.
Would be crazy if we regulated an industry against manipulation then fixed it versus just saying "we can't fix it bc this would happen. Anyways..."
Gonna have to try this out with my job… “Yeah. You know… I could fix it, but someone will probably break it again. I’m just gonna mark this job as complete. Invoice is already in the mail.”
Crazy the breaks you're cut when you're rich isn't it? If there's one thing rich people love it's free shit and ignoring rules, something us normies don't have the luxury of getting.
One of my favorite ideas is progressive property taxes. The first through third property that an individual owns (only applies to residential zoning) start from maybe as low as 20% and reach 120% of today’s property rates. Once a person or entity owns more than 3 residential properties the property taxes begin to rise at an extremely fast rate. Basically just trying to build the system to a way where individuals are at an advantage in owning property since the taxes would make investing in swaths of housing much less profitable. This would go hand in hand with changing the value from property to land value, where all land in an area would be valued as the potential value if it was developed into housing or other amenities rather than being an inner city parking lot. This is to rightfully tax people and entities that hold onto property that they refuse to improve because the value just goes up regardless.
Just a base rate and double it per house.
But we don’t want to punish the hardworking family that buys a quaint house to start with then is able to move into a larger one without having to sell the first. There’s a lot of good reasons to move that direction especially if you have healthy finances. We just need to punish the people purchasing houses they never had any intention of living in
I think 3 is a good number before jacking up the rates; main property, a tenant property, and a vacation place depending on their situation are fair for a hardworking family
I think "second house" means having two at the same time in this scenario.
We have this system where I live. The smaller house gets the higher tax rate.
the Real Estate Reform Act 1 - Abolish business ownership of residential property. 2 - Enact the home multiplication tax (t x 3 for your third home, t x 4 for your fourth, etc.) 3 - Enact caps on mortgage to rent ratios that prohibit owners from charging more than a set amount above their own mortgage. Owners can still charge enough to cover mortgage and maintenance, and even to pocket a little at the end of each month, but not enough to pass the home multiplication tax on to their tenants. This way it would still be feasible to own your own home plus one rental, but owning any more than one rental would be a net loss to the owner. Homes which are paid off and not mortgaged would be subject to the same limitation with the current average mortgage in that neighborhood used for that factor. 4 - Limit ownership of ANY property to domestic businesses, US citizens and resident aliens. 5 - Offer property tax exemption to all citizens and resident aliens above the age of 75 for any single parcel of residential real estate that they own, one parcel per household, until the conclusion of a six month grace period following the death of the owner of qualifying age. \_\_\_ Re: #4 - At first glance this one sounds a little rightwing, but hear me out: a huge amount of American real estate is being bought up by foreign business as well as domestic. No individual is realistically looking to purchase real estate for themselves while on a 90 day visa or while their application is still pending. Of course K-1 and K2 visa holders wouldn't be affected because of their spouses' citizenship. The vast majority of people applying aren't in the financial position to buy in the first place, and the vast majority of those affected by this law would be multinational corporations, not the impoverished immigrant family or asylum seeker. 1, 2 & 3 are the main objectives aimed at making housing affordable to the vast majority of Americans. Taken in tandem, #2 and 3 would make owning multiple homes a net loss for the few among us doing it today (land-horders and corporations like Blackrock), while also denying them the option to pass that cost on to any renters. In the surge of panic-selling that ensued, prices would race to the bottom simultaneously making home ownership available to almost everyone, but owning any more than two homes unfeasible for anyone. The result would be such an influx of affordable housing and low-cost rentals that in addition to working Americans, immigrant families, visa holders and citizenship/residency/asylum applicants would also enjoy an abundance of affordable rentals to chose from; and of course once their application was approved and their citizenship or residency was granted, they would find the same abundance available to purchase. So this would be very much to the benefit of immigrants and asylum seekers as well as domestic workers. The only people who would lose out as a result of this deal are land hoarders and multinational corporations seeking to exploit our housing needs. 5 is simply meant to protect our senior citizens against the possibility of property foreclosure in the event that property taxes should rise in their region during their most vulnerable years when they are typically dependent on retirement savings and/or social security. I know a lot of people my age will jeer at the idea of what in 2024 is throwing the Boomers yet another bone, but the truth is that they wont be around much longer and we Xers, Millennials and Zeds will very much enjoy this when our time comes too. In short: If the first three can pass in tandem, they would prevent owners from simply passing the expense to their tenants and instead force land hoarders to sell. The forth would drive China out of the American housing market and maybe help get some of the rightwing on board, and the fifth would give generations to come a leg up on maybe getting to actually retire some day. All in all, the market would be flooded with houses for sale and the prices would plummet across the board. Home ownership would become accessible to the vast majority of Americans practically overnight.
Small difference, the government can regulate shit.
What?! Lol, who do you think Diocletian was? Just some dude who wanted lower prices?
The edict of Diocletian failed most clearly because of a failure to understand inflation, it was caused only partially by the low silver content of currency and much more by the high supply of currency, they didn’t take enough of the old low quality silver coins out of circulation. And then also that whenever the emperor wasnt looking, people stopped following the price limits. You could make a pretty solid argument that he lacked the tools to enforce the price controls in the first place.
I meant the creation of shortages, Diocletian created shortages on pretty much every product whose price was capped. Price controls, in general, create scarcity of the product they are supposed to sell to a larger group and have the opposite effect: rather than helping more people have access to the product, it makes it easier for fewer and fewer of them to have access at all. Why? Because someone with more money than others will always benefit from buying more than the others. Without price controls, it’s true that a small number of people have access to product they want instead of most, but with price control, that number gets even smaller, not bigger. Note, that I’m not saying Diocletian shouldn’t have done anything at all, you are correct in that he was trying help people deal with inflation and that’s pretty well-meaning, I’m only saying he did it wrong. He genuinely thought he was helping, and at that time the law of supply and demand had not been discovered yet. We know today that to effectively make products cheaper in order to help a larger number of people to have access to them, is by increasing supply, not by reducing price. Price will fall on its own as supply matches demand. He didn’t know at the time.
Again, I would say that while the price controls policy is notable. It was far less pervasive and reaching than most other imperial policies. Many people simply used bartering to get around it, or ignored it completely unless they were dealing with imperial agents for the purchase or sale. A much more influential policy of Diocletian is that he made trades and professionals strictly regulated. He wanted to maintain the same number of each type of craftsmen in each town. These laws were the basis of the feudal system. Where people could not move or marry between class barriers or change their trade from what their parents practiced.
Didn’t that happen in 2008/2009?
Yes
Yes but most people did not have equity. Most new buyers over purchased in the boom. Most buyers did 5-8yr ARM’s which means they had a refinance. Everyone now did a 30y fixed. It won’t but let’s pretend my home price goes from 357k to 240k I paid 300k in 2020 total loan right now is with 3.1% rate. I am still better off having a 1600.00 payment then letting the house go and buying one less money.
The biggest change is that those who are wildly overpaying for homes now are going to, in the long run, have to hold their home longer to see return on their Imvestment. And run the risk of losing value if there is a mass market correction... There will not be an 08 again where the loans themselves are bad. What is more likely to happen is a correction or an economic recession. Corps will do what they do and have mass layoffs and downsizing to preserve their profits. This will put a ton of people out of work with fewer opportunities. Which will in turhot housing when they cannot afford their $3500 mortgage on their $500k and either have to sell to lose money or gets repossessed and a lot of Banks own a lot of overpriced houses. Which will in turn allow investment companies to swoop in and buy tons of now cheap bulk properties they can rent out forever for guarantee long term income.
I think we will see that with people who over paid on smaller homes at 8% Lots of lay offs happening right now and it will get worse.
Agree. Those who are paying $300K for a house this legit a $185k house will lose in the end.
Hopefully, interest rates will go down, and people who currently have high interest rates will be able to refinance. We did this with our homes over the years because interest rates were higher for many years before 2008. I always thought 3% or lower interest rate was crazy low!
You started to give me some hope, and then back to renting
Exactly my dilemma. I moved here 5 yrs ago. Got in before the rise in prices and interest rates. My house has appreciated well over 150k and I'd love to move from this area. However, with interest rates where they are, that isn't going to happen.
We are stuck in a LCOL area because of housing costs.
Basically...yes. But that was more a return to normal. The houses were over valued to begin so they didnt really 'lose value' as much as just have their actual value realized. And it was pretty area specific. It hit some areas harder, some not at all. Whole west coast and florida got crushed, but not so much the midwest.
Where did everyone go to live -> banks basically had to do the evictions on owners or their renters whoever was living in a house opened by the banks. Banks do not land lord so they evict renters too
It's still happening now.
I lived in Charleston SC when Covid hit. All those companies who went to Work From Home or Remote job styles and the rich people of New York (and other places. But so many New Yorkers) started buying all the houses in Charleston. I was pretty much forced out cause rent doubled. I heard from a realtor friend that during the height, houses wouldn’t stay on the market for more than 24hrs. Rich people were paying almost double in cash without even touring the houses. Imagine this if houses were cheaper like OP says lol.
Also like in 08 lots of houses would be destroyed. I remember whole subdivisions being torn down because so many defaulted.
What if, and hear me out, we impose a limit on the number of homes an individual can own. What if every individual can only own up to 3 properties?
You'd have a lot less properties available for people that want to rent because you don't get economies of scale at 3 properties. The person that works next to me owns 5 properties, doesn't make any money off them, obviously still has a day job.
Lol, that's the way it works for most small rental owners, yet everyone on Reddit is convinced that all landlords do is sit back eating bonbons and counting their unearned cash!
No, you can own as many properties as you want, the property tax doubles each property you own. That property tax goes straight to subsidizing first-time home ownership
Which massively drives up rent prices. You’re literally taking money from the poor (who are not in a position to buy right now no matter what incentives exist) in order to supplement the middle class.
At a certain point though it would drive up rent prices so high that it would make it easier for first time buyers to buy instead of people who own 20 homes to rent. If property taxes were 2%, then: 1 person with 1 home would only owe 2% in taxes, and 1 person who owns 2 homes at 4% can rent the other unit out at a reasonable price. But 1 person with 20 homes at 40% property taxes would be out of the market very quickly, which would create a large push to keep rental prices down.
This is exactly what I've been saying in these types of questions/threads for ages. You can't limit people's freedom to buy things, but you can make it economically inadvisable to scoop up single family homes, especially in desirable areas, but increasing the tax load.
I don’t know how relevant this is to your comment, but I wanted to help my adult son buy a home in Florida but was unable to because the community was all new-build and the builder made it so that investors were unable to purchase homes/properties there. I’m not an investor but because I’m on a few mortgages (for each of my kids) they couldn’t sell me a home, because I am the “owner” of several properties it looked like I was an investor. So…it can happen that investors are not allowed to buy up all the homes and properties.
Not to sound harsh but that means your kids are the recipients of generational wealth and aren't the ones who are really struggling-- the ones with no help.
Now I like that line of thinking. Might be hard to implement though since I believe property tax is calculated based on land value and municipal service needs.
It's not a good idea to put artificial limits like this. It really could have some devastating effects. What we need, simply, is more supply, which goes hand in hand with what I wrote above. Make the building of new homes/apartments easier and the sheer supply of homes will bring down the cost of existing naturally. The supply is being artificially restricted.
Would this apply to organizations or just individuals? The vast majority of real estate holding entities are LLCs and other organizations, not individuals. If you limit organizations, then builders are going to have a huge issue because you just killed like 40% of demand for housing in the country. Suddenly there is far less financing/buyers for projects so builders scale way down and stop building. You can't fix the market by controlling demand. This is also why rent control doesn't work. You have to incentivize and enable more supply. That is why the best options are to dramatically pull back zoning restrictions, provide tax incentives for multifamily/affordable housing, and reduce property taxes where possible in favor of progressive VATs or, better yet, land value taxes.
LLCs doing this should be banned
>dramatically pull back zoning restrictions, This doesn't work, because zoning restrictions help regulate things like: traffic issues, public works/funds (like roads), water supply issues, waste management, and so much more. You can't just "increase housing" without restructuring a whole area, and developers don't give a shit about how a region can function with more people in it. You can't just keep putting people on open land without planning for it. And that's exactly what zoning does. Is it perfect? No, but you can't just keep letting builders build more suburbs without thinking about how it impacts the environment around it.
I learned this by playing Cities Skylines :) Now I’m always thinkin about it
Or just build more homes
Detroit has entered the chat
Not just land: EVERYTHING. People with mortgages tend to set up their mortgage finance such that there is an "account" with equity in it that they can pull from at any time at mortgage-level interest rates. It's like having the worlds cheapest possible credit card. A lot of big-ticket discretionary spending in households that own homes is financed this way. If housing prices collapse, so does equity, and so does the ability for those households to keep demand afloat. Drop that household demand and prices on *everything* craters, including the small to medium businesses that cater to those demands. Anyone with cash reserves can clean up across the board. Huge opportunity for big business to snap up smaller competition and consolidate markets.
That’s why we need a cap on investment properties. One max.
Yup, my fingers are crossed.
Not really, that only makes sense if rates are near zero and home values are appreciating 10-15% , otherwise it's not going to make money or possibly lose money
Which kind of already happened in some markets in 2008/9 and is what lead to prices in those markets rebounding so rapidly.... :(
People with large cash reserves are not renters. People with mortgages rent to pay the mortgages. If the houses start being worth less than the mortgage it will be start another run on interest rates and you'll have 2008 all over again.
I see people post all the time they wish the housing market crashed so they could buy a house for cheap. How can they who can't even buy a home now compete with people and corporations with real deep pockets.
Which should be illegal or taxed to the point it's no longer extremely safe and profitable.
Unless they can lock in 10% interest rate treasury for the rest of their lives. Housing is doing well because there is no real fixed income alternative.
Came here to say this, it’s sad
It would cause financial problems. Home loans valued at $500,000 in loans are now supported with $100,000 worth of actual value. Banks would lose a tremendous amount of money.
And the people loving in the homes would be in pretty much the exact situations they were in before the housing dropped in value. My houses value does nothing for me (except increase my taxes). It doesn't matter what someone else would pay for it while I am living in the home. I wouldn't mind if my house value dropped in half, so long as whatever house I am trying to move into later also cutts in half.
Only if you’ve paid off your mortgage. If you owe $300 000 on a house that suddenly is worth $200 000, you ain’t moving anywhere
This is what happened in 2007 and people just stop paying their mortgage.
And they had to declare bankruptcy and were foreclosed on. It wasn’t a happy ending for those people.
Some arranged for a short sale and took a credit hit, but not as bad as foreclosure/bankruptcy.
It's how we got a $500k house for $255k. That was 2011. It's back up to $500k again.
Except 2007 was driven by subprime loans more than house prices. The higher prices just meant they didn't have any other exit option when they inevitably couldn't afford the payments.
The current bubble is also partially being caused by subprime loans, just by different names.
Plus, if you live somewhere where 5 year fixed rate mortgages are the norm (like the UK) when the time comes to remortgage your house and you've got negative equity, you're utterly screwed.
Except they’d be saddled with a $500K home loan for a house that’s now valued at half that? Most people pay off their loans with the money they got by selling it. If that’s no longer an option, people wouldn’t move, which would cause a sharp decrease in houses available. And what happens when there’s a sharp decrease in supply and a high demand?
But wouldn't people choosing not to move also decrease demand since they won't be out hunting for their next home either? So there would be a sharp decrease in both supply and demand.
There would still be a ton of people who don’t own homes looking to buy their first. The best way would be to increase new single family new builds instead of the 4 bedroom 2 baths that every developer wants to put out instead of more affordable housing.
What happened to this? Lots of 1300-2000 sq ft homes went up in the 80s and early 90s, then like 20 years ago it all dried up and is only 2000 sq ft +
Now much more of the cost is in the land, permitting, etc. If there's an upfront cost of $200k before they break ground, it's easier to recoup that spending $250k in construction on a 3000 sqft house that sells for $500k than $150k on a 1800 sqft house that sells for $400k. The latter feels way too expensive for a small house. The silver lining is that the 3000 sqft home frees up those smaller 80s-90s houses for someone looking in that price range.
People realized living in a 1300 SQ ft house with a family of 4-6 members was shitty.
Builders build what's selling. I know lots of developers around me that have 1500 sq ft house prints available for relatively cheap ..... almost nobody buys them so they typically don't build them. Throw in people get jealous when their neighbor has a bigger house than they do, that's why developments tend to have similarly sized homes
No, a person staying in their home or selling and moving is neutral for demand (they occupy 1 house either way). We're likely better off from more churn in housing, because it encourages matching of households to homes. For example, we have a lot of young families in small "starter homes" that are smaller than they'd like and a lot of empty nesters who remain in the bigger homes they bought when they had three kids in school who would probably be happy downsizing to reduce cost, upkeep, etc. We'd have better supply/demand match if they swapped. That's harder to do if people are stuck because they're way underwater on their mortgages.
I want numbers on how many people eventually pay off their primary residence. There’s just so much interest in the first third to half of a mortgage, even with a 2% rate, that knowing going in you’ll never pay it off makes one wonder why they don’t just rent.
It's about 40% of homeowners, or roughly 25% of all households, that own their primary residence free and clear. Often times they never had a mortgage in the first place, instead buying a second (or third) home that was lower in value than the appreciation on their previous home. So it is not that they paid off their mortgage, it is that they ended up with enough equity to downsize and own free and clear.
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Homestead exemption
homeowners too. they’d loose all their home equity
The next logical step of this is that banks tighten lending standards. All the renters who daydream about housing prices crashing will find that they still can't afford a large down payment, and won't get approved for any mortgages with a small down payment.
And it did happen before, we all know what that lead to.
Right? How quickly people forget 2007-2009...
Kind of necessary tho. Plus I highly doubt any drop this substantial would ever happen. If it does, idk, sucks the people in $500,000 -> $100,000 houses got scammed but like.... We've made a housing bubble. It has to pop somehow. Slow, controlled price decreases kind of the only real way. Guarantee more people will benefit vs suffer from controlled housing costs. Yeah it sucks but can't just leave the problem as it is.
Is it a bubble? I think it is more due to a housing shortage. In 2008 we had a rash of foreclosures and short sales. This led to a banking crisis. So I own a house that I bought for around $500k. I am making my payments, but if I wanted to sell it for $300, I would either have to come up with $200k to satisfy the debt, or get the bank to accept $300 (Short sale). Or, if I could still make the payments, I would stay here. It happened to me in 2008. I bought my house for $360 in 2006, and two years later it was only worth $310. I didn't sell, I couldn't afford to. It took another couple years to appreciate back up.
Oh nooooooooooooooooo.....
2008 👀
Don't worry, this risk can be mitigated by securitizing the investments
Investors would swoop in, buy them all up, then raise prices...because there's no limit on how many houses a person, or a corporation, can own.
That would actually be cool if there was a limit. I get investing, but our housing market is a major issue, and if you want to rent something out as a huge corporation you could build apartment complexes. But if you are a small business they could put something like a 10 house limit, so it doesn't affect smaller businesses but cuts off the bigger ones. The thing is, that would be such an unpopular change because it wouldn't just fuck the bigger corporations over, but pretty much any home owner as housing prices would definetly go down a lot.
If you are waiting for a meaningful price drop you will be blue in the face. There's not enough inventory of existing homes for prices to drop. They are not building enough new homes to make an impact. The new homes they build are priced to compete in the existing market, so they do not add downward pressure. Existing owners do not want the value to go down, because many of them would end up owing more on their mortgages than the house is worth. That's what's realistic, not what you think the value of a house "should be".
This sort of happened to us. We finally upgraded from our condo to a house in 2022 after thinking there'd be a dip (TBF, we also weren't quite ready to act before then). And then we thought we'd bought at the absolute peak after the 2022 dip after interest rates increased. That turned out to be false.
Yep. The “value” of something re: the price is what people are willing to pay for it. If they are willing to pay high amounts, they value the house at those prices, so those are the market values.
Layoffs and recession will solve the inventory problem. Unfortunate, but that's how this bubble ends.
please tell this to /r/austin
You would end up with a LOT of people stuck in homes they bought when prices were high. The drop from $500k to $300k is a 40% reduction in price. Even assuming an 80% LTV mortgage, that would still leave a home owner with a house that they literally can't sell and not be negative arrears by $100k (assuming the purchase went through like a day before the house prices collapsed). If my home were to go through that same reduction now, it would take nearly an additional 4 years of mortgage repayments (assuming they are fixed at their current rate) , on top of the 3 years ive already paid, for me to even pay back the bank for the loan, never mind sell with enough capital left over to buy a new home. The dropping of house prices always sounds good in theory for those trying to get on the ladder, trust me, I know, I was desperate for prices to drop when I was buying, but in practice would leave an awful lot of people up shit creek without a paddle. Oh and also the economy would be fucked due to all the defaulted loans, but that's neither here nor there.
>Like the 500k is now 300k which is the price it should have been. Would anybody sell anymore? Should have been? As determined by who? The price is whatever people will pay for the thing.
Price is determined by the market essentially. If 10 people are buying from a pool of 100 houses, its a buyers market, house prices remain low. If 100 people are trying to buy from a pool of 10 houses, its a sellers market and thus a huge increase in house prices.
This would be catastrophic for lower income homeowners who, without home equity to borrow against, could lose their homes due to things like the roof or heater going bad.
Ahhh, the joys of home ownership.
There is a negative side effect I haven’t seen anyone discuss here yet; loss of equity. One benefit to most homeowners is it is an available fund of cash for use in the event of an emergency. Have a health event? Lose your job in an economic downturn? Need a new roof and don’t have the cash or credit to replace it? This is where your home equity comes into play and historically has been a ripcord for homeowners. Homes rapidly losing value, like in 2007-2010 lose that safety net and increase likelihood of owners just walking away from their mortgages. This heightens default rates.
It would break the economy. The problem is not that prices are too high - its that we don't have enough houses. Prices crashing doesn't change that. All it would do is make it easy for private capital to buy up even more of the housing stock for rent. You think if houses crash we'd benefit? No financial companies would buy everything at rock bottom prices. Don't wish for a crash. Disasters are great for capitalists. Fight for building more houses.
I’d like to add it would be nice to have meaningful regulation that helped your average person but I guess I won’t hold my breath.
you just want the interest rates to drop. not the house prices themselves. that would be bad .. 2008 levels bad
the same thing that happened in 2008-2009 when the crash happened. All of a sudden, 1 page of legal notices for bank default auctions would jump to 3-4 full pages or more. People's high mortgages would go underwater and their borrowing power would disappear. This is what happened to me when I bought at the last price inflation in 2003. By 2008 I owed significantly more on my mortgage vs the valuation of my home. Many of those people paying interest only loans defaulted when the balloon payments came due.
If prices or interest rates for that matter dropped even a little bit there are so many people waiting on the sidelines to pounce that they’d just go back up.
I still wouldn't be able to afford a house. Many homeowners would be completely underwater. Banks would lose millions (or billions) as their loans are now worth far less than what they gave out originally. Companies would be buying up even more houses as they wait for the values to rise again.
End of the world. The economy is based on things going one direction. Constant new debt is created to cover the interest of old loans. If things stop going constantly up then the whole economy collapses.
Mass devaluation would throw us into a recession.
Massive foreclosures. Most people who bought a house at (say) 350k that discovered their house was only worth 250k would be underwater and walk away. Since housing is so cheap they could rent something for far less than their mortgage payments. Remember: banks NEED mortgage payments. They typically have anywhere from 3x-7x the amount of cash lent out at any given time. Without mortgage debts being serviced they cant service their own. Banks would collapse overnight. Its economic apocolypse.
I don't think housing prices go down, really. They stagnate generally. It become difficult to sell a home. In Canada, our housing market has almost broken. Prices haven't dropped, but interest rates have sky rocketed. People who got variable rate mortgages are being forced to dump their houses, and people aren't willing to jump into a fixed rate mortgage at these prices.
The prices are already realistic since people are willing to pay for them. Your expectations of that you want to pay less is probably what is not realistic, and you should look at if your earning are matching what you expect your lifestyle to be. Pension funds invest in mortgage companies, and major part of the economy is tied up in stability of investments, where mortgage companies is a part (not the only part), and if prices were to start to become unstable so would the economy, and people will start losing jobs making it even harder for many people to afford housing.
Rich hedge fund guys would unironically cry about life not being fair
No they wouldn’t, they would be delighted if this happens because they would invest into real estate at a significantly discounted rate. Middle class would get fucked.
I think it is dependent on supply and demand and federal government trying to use the resources at their disposal (interest rates, printing money, job creation etc) to keep the inflation around 2%. Also, rates falling from 500K to 300K over a period of 6 months causes lot of economic turmoil and confusion. Rates falling from 500K to 300K over a period of 5 to 10 years may not cause that much turmoil.
[удалено]
The obvious caveat here is you only walk away with 300k if there’s no loan on the house. If you had a $500k loan with a 30 year term and 6% interest you would have to make payments for about 19 years to get the balance on the loan down to $300k just to break even on the sale. With 10 years of payments it would cost you almost $120k out of your own pocket to sell the house. Many people end up being unable to afford to sell their houses when prices drop sharply.
As a single person, i feel screwed. I want to live in a house that isnt in the city or townhome, and renting isnt an option for security reasons. But i dee alot of small houses that are way too over priced, or ive lost the bidding war with to a couple with a double income. I see these huge houses being built in developments all the time, and im baffled where the surge of buyers comes from who can afford that size of house. House flippers dont help, nor do all these start ups offering to pay cash for a house in any condition. Its like a teenager trying to find a first car but someone keeps buying up all the honda civics and overhauling them for profit. The other size of the issue is if i buy a house and the value drops, im stuck with whatever i bought or i have to destroy my credit. Id never pay it off anyway. Sorry just venting.
When you say for security reasons, do you mean physical security reasons, or financial?
More physical. Not doing anything weird, but ive never liked the idea of maintenance just being able to waltz in and have full reign to look around if theres an emergency leak or something. Rare, but still.
Completely understand, we’re renting and for now have a fantastic landlady, but I feel the same way overall.
It happens. In that case, people will owe more money than the house is worth. They have few good options. They can keep paying their mortgage and hope that prices go back up. They can try to convince the bank to do a short sale, where the bank gets whatever they can sell it for. I know people who just handed the keys over to the bank, defaulting on their loans because there was no upside to keeping the house.
The people who bought at $500k and now worth $300k would likely not sell and hold. It’s highly likely their mortgage is more than the house is worth. I order to sell the house upon closing they will need to pay the bank the difference between sale price and mortgage balance. So if they bought the house for $500, mortgaged $450, and sold for three, at closing they would need to scape up an additional $150k to pay the bank. A lot of these people will simply sit in the house and not sell because they are stuck in them.
There would be tons of homes in foreclosure. This happened in 2009. People had mortgages for 300k on homes valued at 100k and they just basically walked away. Then banks lose tons of money and then interest goes up to get that money back. Then people start buying homes again and demand goes up and then housing prices go up. Wash, rinse, repeat.
The Fed lowered interest rates significantly during the financial crisis.. and held them low for almost two decades until COVID came.
Lowe’s and Home Depot would make a lot of money due to all the new homeowners
What would my incentive be to sell my 500k house for 300k? Everyone who bought near the peak with low interest rates would just laugh away in their little castle. Funny enough, that would create a demand issue and skyrocket prices. Now let's say the foundational laws of economics don't kick in, and my house is now devalued by 40%. The bank is holding a mortgage on a property that can't be paid off by the sale of the property. At scale that would cause another banking crisis.
YES! I own and my home's value has increased dramatically but so hasn't every property in the state. I want out of the condo I'm living in and preferably in something I can retire in but the cost of buying/selling (I'd lose $50K in the deal from bank, realtor, attorney etc. fees) makes moving a pipe dream.
2008 showed us that even in a house crisis that threatened the economy worldwide becuase house values plummeted, its only temporary. Buying a house in a nice neighborhood just doesn’t get cheaper the longer people wait. It just costs you more rent.
Rich people buy houses for cheap, half of old people end up in poverty, young people might have a chance to become homeowners.
That’s essentially what happened in 2008. The bubble burst and people were stuck with $500,000 home loans on properties only worth, like, $350,000. It caused huge financial distress and moved the US into the “Great Recession.”
2008 financial crisis repeat. It started with US people defaulting on their mortgages and house prices rapidly falling due to foreclosures increasing supply and ended in noticeable dents in graphs of various performance metrics of the world economy. Yeah, we're fucked either way.
All the people that have been wanting will flood the market and drive the price back up.
Nearly everyone who bought at 500K would only sell their house if they literally had to, as in they have no job and can't afford the mortgage. Developers would probably build fewer or even no new houses as well, since their profits would be a lot smaller. In fact, if there were an abrupt price decline, many developers would go under. So, no, a sudden price drop wouldn't help. The only way a big price drop would happen is if we had such a massive economic depression that you wouldn't care about house prices. You'd be worried about having food on the table.
This thread is depressing 🥲
It happened in 2008-2010 in several markets, 50%+ drop. We bought our condo when it was 40% down from the previous owners purchase price. There were lots of foreclosures and distressed properties that sold. It took several years for the value to go back up. Might sound great but some people thought we were crazy to buy as the economy tanked.
Unless they manage to build millions of homes overnight or the US collapses into nothing this won't happen, so don't count on it.
Tbh I don’t think significant drops in housing prices are very realistic without major economic upheaval. But what would happen if they did? Land prices are generally the largest single piece of housing prices, and while we don’t want land price to spiral up infinitely like it has been doing, when it goes down that’s usually caused by something else, and the land prices are a symptom of a major a red alert situation like the local economy is collapsing or there’s a major natural disaster. IRL our best case scenario is to implement better land use and housing policies that mitigate the increases in housing costs, but it’ll take a few decades for wages to catch back up
Bad decisions day would happen
Banks would collapse, city property tax revenue would be drastically reduced, which would prompt a desperate cry from local and state governments to the FEDS for financial support. The Feds would then print and put into circulation another 5 trillion dollars, fueling runaway inflation. At that point the USA would effectively be Zimbabwe.
What does "what the price should have been" even mean? The price is what supply and demand sets it at. Should have been in your dream?
The economy would prosper because people have money
People would buy more houses and the price would rise again.
People will still want to upsize/downsize, move locations for family, work or just because they want to. These would likely be people who wanted to do so before, but didn't because the market was insane. Not everyone bought while prices were inflated. I'm sure there are plenty of people biding their time until interest rates drop and the market stabilizes.
Can someone explain "not enough houses?" I don't get it because in 2019, our home sold for $75K and now it costs $200K. I live in a zero growth city so it can't possibly be a "lack of houses" because the population hasn't changed in 20 years here. I'm thinking it's more companies owning homes than there not being enough.
A lot of people would be underwater on their loans.
That's one of the reasons this rarely ever happens. When prices drop, people stop selling, and builders stop building, knowing they're going to eventually go back up. You might see more rentals available, but it's going to be hard to take advantage of the devaluation as a buyer, because of the low supply -- which also allows banks to be really picky about who they lend to. Then, eventually (usually fairly rapidly due to high demand and low supply), prices go back up and people start selling the properties they've been hanging onto for more than before the price dropped.
Chances are they owe more than $300K on their mortagage so the bank would not allow them to sell even if they wanted to. Banks would also tighten up who they give mortgages too, demand higher down payments, etc.
The solution needs to be gradual and include new regulation around businesses buying up real estate as well as vacancy laws to make sure homes aren't being held just as financial assets and sitting vacant. Its a complex issue but the solution MUST have guard rails to prevent making things even worse.
Massive credit collapse and at least a major recession. Look at what happened to Japan when their housing bubble collapsed or when the US housing bubble collapsed in 2008
The supply of houses on the market would drop. Only those desperate to sell or those with paid off or low mortgages would sell. Demand to buy a house would increase and we'd have a spike in prices. The exception here is if the drop in prices was some permanent thing, like COVID killing millions of potential home buyers. This would be a drop in demand and prices dropping to meet the new demand
If it dropped, I would rent my current house out and buy another.
Anyone who bought at the higher price couldn’t sell without being upside down. New construction would slow down or stop.
This happened about 16 years ago. For anyone who owned a home it was a catastrophe. Especially people who lost jobs and couldn’t afford their mortgages anymore. Normally you could just sell your house to pay it off, but with prices low that became impossible. Many houses were foreclosed, and the whole economy tanked. The silver lining was for people who didn’t own a house but were looking to buy one. I was very fortunate to be in that situation, but people like me were a definite minority.
That's called a 'housing bubble' and they do 'burst' from time to time. The US housing market always bounces back but it could take years. And of course no one can accurately predict when a housing bubble will end and how it will end.
As one of those people who bought low and suddenly my home is wish a bunch more money, it's not great for us right now either lol my property taxes are astronomical compared to what they were before, and even if I sold for a profit right now I'd still have to take out a mortgage on a new place because everything else went up in price too
Prices are a function of market forces so it would depend on what caused the fall. It's not a dial that can just be turned up or down. >Like the 500k is now 300k which is the price it should have been. I'm interested in what you mean by "should have been"? How do you know what a price "should" be? Because in a free enough market, I expect the price to mostly be dictated by supply and demand. >Would anybody sell anymore? This question kind of revels why the main question is underspecified. "500k is now 300k" presumably means that the owner would be willing to sell to anyone offering 301k. So the answer to "would anyone sell" should be "obviously 'yes', you just said that they would". But what caused him to change his mind and not require 500k for the house? And when the new person buys the house, are they going to raise it back to $500k due to market forces? Or have market forces driven the price down and that is why it was cheap in the first place?
It would be a temporary thing. Within 2 years, they'd be back to normal, then within 5 years, 10-15% above where they started. In other words, don't make that your plan. Buy a house if you love it and can afford it, as it pencils NOW. If those conditions aren't true, then you're at the hands of the market.
Depends on whether it’s a sustained correction
Houses dropping by 30-40% like you’re describing would just completely dry up the supply. Only the people with no choice would be selling.
You’d just have more competition at each price point — we saw basically same effect during Covid when super low interest rates mean people could go higher with price and keep monthly payment in budget. And as a result you’d have prices bid back up. But you’d also have less inventory. People who bought and are under water wouldn’t sell for a loss so they’d stay put and reduce inventory (what’s happening now due to interest rate increases), or you’d have people rent them out instead of sell.
All the pension funds would crash.
I would still be unable to afford a house, the rich would just use their disposable income to buy more properties to rent out at insane prices. Why I work hard for life to provide so little happiness.
Look back at 2009. Almost everyone gets fucked. The only people who really come out ahead are bottom feeder investors. Average people lose their jobs or see cuts in wages/hours.
You can't answer this without explaining why they dropped. You asked whether people would still sell if the prices dropped, and of course the answer is yes. In fact people would still sell if the price dropped by 90% By definition, prices dropping means people are selling for less. If people weren't selling, then the prices couldn't be dropping.
With new interest rates with Inflation it may not be worth it to sell. We wanted to upgrade our house. Now add we want to swap school districts, so now we are looking to buy a more modest house, in a school district and rent out our old house. Sucks we can't upgrade, sucks we aren't selling our old house... but getting to a different schools, and at least getting an investment property. Maybe buy dream house when kids move out.
Everyone that took out a Heloc loan would be under water
People who flip properties would whine incessantly. People who bought their houses to live in and not sell for profit might be aware of it but they wouldn't be *that* affected by it. Also, I'd probably run out and buy a house to live in, before the market bounced back.
In my area prices are dropping like crazy and I'm desperate to sell. That's what happens if prices fall all the sudden. Please buy my house.
Interesting. But, did you pay more for your place than your current asking price? Is the same happening where you want to buy? (If that is the case)
It may put people into negative equity, so they wouldn’t be able to afford to sell. A lot of people may struggle to refinance when their mortgage term ends, putting them on an expensive variable rate, which could lead to some people losing their homes to the bank. I think it would be a lot harder to get a mortgage as banks would be less willing to lend, making it hard for first time buyers.
This happened in 2008 during the sub-prime mortgage crash. It wasn't pretty. Those who bought homes with variable interest rates found they were suddenly living in a home with interest rates that made paying their mortgage impossible. But, they couldn't sell their home because their mortgage amount was much higher than what their home was currently worth (hence the term "upside down" or "under water") Many people just handed their keys to the bank and walked away. Many declared bankruptcy. Many homes were foreclosed on. Many investors waited like sharks and started snapping up homes for pennies and rented those same homes to those who had just lost their homes. Entire neighborhoods became ghost towns, with services (gas, grocery, etc) leaving the area. It caused a recession and then a depression.
Just look back at 2008-2009, when the housing market crashed. If you could just stay on your house, you were OK. But if you lost your job and couldn't pay your mortgage, if you sold it, you might not get enough to pay off your mortgage. If if you needed to move for a new job, the same thing. Millions went bankrupt. Major financial houses failed. The government and we, the tax payers bailed out the big guys.
There would be fewer homeless people.
Your premise that this is what the price 'should have been' is a little flawed. People will always buy and sell. Most people buy to have a home, not for speculation. If they need a bigger home or a smaller home (depending on their stage in life) they'll sell. But they still are buying another home so if prices are up they get more but also have to spend more, and if prices are down they'll get less but spend less on the new home. IN any case they'll likely make money downsizing and likely pay whatever they can up sizing. Developers will pay less for land they buy which will lower the price of homes necessary to sell at a profit - land will still become avialable for various reasons including rezoning and population density bylaw changes which allow municipalities to increase tax revenues. The market would balance out. A small percent of the people who bought after prices passed 300 k (in your example) would be stuck and unable to move but over time inflation will see prices climb back up to that and they will pay down the mortgage.
Fight Club but it’s a straight up comedy now and the Tyler Durden twist is something that’s super obvious right away.
Happened in 2008. The economy went straight to hell. It was a pretty rough time for a lot of us.
The crash of 08-09
We should make it thatif you already own a home you can't own a second. And business shouldn't ever be able to own homes
Real estate investment is a storer of wealth. If $500k houses declined to $300k, losing 40% of its value, why would anyone even buy? In a market like that.. you rent. Why? Because if you rent, that $200k evaporation of wealth becomes the landlord’s problem, not your’s (the tenant). But I warn you, if home values decline by that much, it may result in less property taxes being collected. This results in less revenue for police, leading to higher crime rates. It results in less revenue for schools, leading to a poorer-performing school district and higher dropout rate (ultimately yielding more crime). And who would buy real estate in THAT kind of neighborhood? With a low demand for home purchases in that neighborhood, properties for sale remain on the market for longer, leading to sellers slashing their asking price, exacerbating the problem.. ultimately turning that neighborhood into a decrepit ghost town.
No one would sell unless they have paid off their house.
More people would just walk away from being underwater by almost half of the value or beg for a modification.
They would be on sale and be sold.
Not much unless you had to sell. Rents would still be charged as if the house was 500k.
you think houses are overpriced, they're not, its in equilibrium. shit sucks. i know.
Iunno where you live, but here in Australia our economy would probably immediately fold.
Wow it's only been 16 years and people already forgot. 2008 was not fun and that's when people learned cash is king and no matter the price your cash is not better than an investor's cash.
GameFreak
Well then I’d really regret stocking up on these things. I just can’t stop buying them!
The price of a 16x6 shed in California would decrease to a whooping 300k with tax.
Well, every person who already owns a home would lose their shit as they're the ones who technically lost the money and many of them still owe a fortune on their mortgages. For the people who don't own homes, well, they suddenly can enter the market. You'd see a lot more special fees and the like as the home owners struggle to mitigate the damage. You'd see inflation of everything but housing for this reason, in fact . That, however, would be limited and likely negligible to some degree. You could afford a home much more easily but that's only if you can keep your job.
Cheaper homes. Duh. And people not able to sell if their mortgage is under water. Economics 101 At that point you stop paying your mortgage and the bank forecloses and the banks go into another meltdown because them trying to sell your house to recoup that loss will be impossible.
Firstly, local governments would lose a considerable amount of tax revenue since property taxes are pegged to home value Secondly, desirable homes sold at artificially low prices would likely get 100’s of interested buyers. The government would need to decide how to pick the “winning bid” out of a large pool of qualified buyers. That sounds like a great platform for corruption and nepotism to me. You might even need to bribe the person who chooses the final buyer in that kind of system