6 ms·

The article seems to imply some meltdown in housing is around the corner, but it seems more like the housing market is just leveling off as a result of market f

The article seems to imply some meltdown in housing is around the corner, but it seems more like the housing market is just leveling off as a result of market forces. You can only drive home prices so high before there aren't enough people who can afford them anymore. Hopefully that means that rent prices will also level off in the area in the near future.

raldi 11y ago
In years past, there was a surge in the market due to the IPOs of companies like Twitter and Facebook. This could indeed just be a return to the mean.
yardie 11y ago
That's not exactly true. A lot of REIs are built on complex structures. The SF estate market might be fueling other investments. Once one starts to collapse it can have a domino effect. Basically if investors were expecting 10% annual return and you tell them this year might be 1-2% they'll take that money and move it elsewhere. Now you have to raise money or sell. When I used to live in downtown Miami there were high rises going up everywhere with prices starting at 500k-1mm. These same places would later be short sales for 150-250k after the GFC. There was a glut of luxury apartments and few buyers. I wanted to buy one of these condos but couldn't find a bank that would give me a loan. They're were petrified at what was happening there
- ilostmykeys 11y ago
  << Basically if investors were expecting 10% annual return and you tell them this year might be 1-2% they'll take that money and move it elsewhere. Now you have to raise money or sell. >> How can they take that money and move it somewhere? Most such investment contracts don't allow it. Am I missing something?
  - underdown 11y ago
    They stop adding more money in. Less future investment?
  - giaour 11y ago
    Some REITs are publicly traded. Investors can simply sell their shares and buy into something else.
- kspaans 11y ago
  REI means Real Estate Index? Or do you mean REIT (RE Investment Trust)?
  - pyre 11y ago
    I think Real Estate Investment.
- chollida1 11y ago
  > When I used to live in downtown Miami there were high rises going up everywhere with prices starting at 500k-1mm. These same places would later be short sales for 150-250k after the GFC. This sentence doesn't make any sense to me. The definition of a short is to sell something you dont' own with the explicit intention of buying it back later at a lower price. How can you sell a condo you don't own? and then why plan on buying the condo back at a later date?
  - simantel 11y ago
    You're thinking of the practice of shorting stocks, which is different than a short sale. From Wikipedia: A short sale is a sale of real estate in which the net proceeds from selling the property will fall short of the debts secured by liens against the property. In this case, if all lien holders agree to accept less than the amount owed on the debt, a sale of the property can be accomplished.
    - chollida1 11y ago
      Well how about that. I learned something today! I appreciate you taking the time to write this out!
  - deleted 11y ago
    [deleted]
  - ruggeri 11y ago
    https://en.wikipedia.org/wiki/Short_sale_(real_estate) https://en.wikipedia.org/wiki/Short_sale_(real_estate)
  - bluedino 11y ago
    In real estate a short sale is when the bank allows the borrower to sell the property for less than what they owe on it. I buy a condo for $500k, sell it for $250k in a short sale but I need the agreement of the lienholder in order for this to happen.
- scurvy 11y ago
  And Miami is hot again from foreign (Russian and South American) buyers. Blocks of housing in Edgewater are razed to put up huge luxury condos. My wife (Brazilian) and I joke that we won't have to take the kids all the way to Brazil. We just need to go to Miami.
  - outworlder 11y ago
    Given the way the economy has crashed, this won't go on for long.
    - scurvy 11y ago
      Which economy has crashed?
      - yardie 11y ago
        Probably Brazil's. It's a shitstorm at the moment. I think the smart, rich brazilians moved their money overseas, Miami for example.
avn2109 11y ago
From the article: >> "...historically low inventory" >> "...many sellers are sitting this year out." >> "...The median sale price ... fell by 1.8 percent..." The article's authors are confused. Their explanation for falling prices consists entirely of "Supply is down." That's exactly the opposite of how supply, demand, and prices are related. If they wanted to claim that low prices are scaring sellers out of the market, since those sellers are hoping for a future rebound in prices, I might believe it. But the article claims the causality is going the other way.
- rspeer 11y ago
  In Cambridge, a faction of candidates for city council promises that they will make housing affordable by opposing the construction of new housing. Apparently you can just tell people that supply and demand work the opposite way in the housing market, and people will believe you.
  - home_boi 11y ago
    The reasoning might be that if a place gets luxury apartments, rich people will flood the area. Then the crime rate per capita goes down. The criminal population becomes diluted. It starts a snowball effect where crappy apartments in the area looks more and more attractive to the upper middle class as more upper middle class outbid previous poorer renters for the old housing.
    - rspeer 11y ago
      I know that's the argument, but it doesn't make much sense to me. It's comparing to a fictitious alternative where rich people don't move in. Why wouldn't they? It's already a desirable place to live, so rich people desire it too, and by definition they can afford to act on that desire. It is not hard for a rich person to outbid a poorer renter. I mean, this doesn't require a complicated explanation. Whether or not there's new housing, rich people can already outbid current renters because they have more money. And when this happens without new housing, not only does a rich person move in, someone else moves out. By trying to prevent gentrification from indirectly causing displacement, you just cause the displacement right away. This still sounds like supply and demand doing what one would expect, not doing the opposite.

raldi 11y ago

In years past, there was a surge in the market due to the IPOs of companies like Twitter and Facebook. This could indeed just be a return to the mean.

yardie 11y ago

That's not exactly true. A lot of REIs are built on complex structures. The SF estate market might be fueling other investments. Once one starts to collapse it can have a domino effect. Basically if investors were expecting 10% annual return and you tell them this year might be 1-2% they'll take that money and move it elsewhere. Now you have to raise money or sell. When I used to live in downtown Miami there were high rises going up everywhere with prices starting at 500k-1mm. These same places would later be short sales for 150-250k after the GFC. There was a glut of luxury apartments and few buyers. I wanted to buy one of these condos but couldn't find a bank that would give me a loan. They're were petrified at what was happening there

ilostmykeys 11y ago
<< Basically if investors were expecting 10% annual return and you tell them this year might be 1-2% they'll take that money and move it elsewhere. Now you have to raise money or sell. >> How can they take that money and move it somewhere? Most such investment contracts don't allow it. Am I missing something?
- underdown 11y ago
  They stop adding more money in. Less future investment?
- giaour 11y ago
  Some REITs are publicly traded. Investors can simply sell their shares and buy into something else.
kspaans 11y ago
REI means Real Estate Index? Or do you mean REIT (RE Investment Trust)?
- pyre 11y ago
  I think Real Estate Investment.
chollida1 11y ago
> When I used to live in downtown Miami there were high rises going up everywhere with prices starting at 500k-1mm. These same places would later be short sales for 150-250k after the GFC. This sentence doesn't make any sense to me. The definition of a short is to sell something you dont' own with the explicit intention of buying it back later at a lower price. How can you sell a condo you don't own? and then why plan on buying the condo back at a later date?
- simantel 11y ago
  You're thinking of the practice of shorting stocks, which is different than a short sale. From Wikipedia: A short sale is a sale of real estate in which the net proceeds from selling the property will fall short of the debts secured by liens against the property. In this case, if all lien holders agree to accept less than the amount owed on the debt, a sale of the property can be accomplished.
  - chollida1 11y ago
    Well how about that. I learned something today! I appreciate you taking the time to write this out!
- deleted 11y ago
  [deleted]
- ruggeri 11y ago
  https://en.wikipedia.org/wiki/Short_sale_(real_estate) https://en.wikipedia.org/wiki/Short_sale_(real_estate)
- bluedino 11y ago
  In real estate a short sale is when the bank allows the borrower to sell the property for less than what they owe on it. I buy a condo for $500k, sell it for $250k in a short sale but I need the agreement of the lienholder in order for this to happen.
scurvy 11y ago
And Miami is hot again from foreign (Russian and South American) buyers. Blocks of housing in Edgewater are razed to put up huge luxury condos. My wife (Brazilian) and I joke that we won't have to take the kids all the way to Brazil. We just need to go to Miami.
- outworlder 11y ago
  Given the way the economy has crashed, this won't go on for long.
  - scurvy 11y ago
    Which economy has crashed?
    - yardie 11y ago
      Probably Brazil's. It's a shitstorm at the moment. I think the smart, rich brazilians moved their money overseas, Miami for example.

avn2109 11y ago

From the article: >> "...historically low inventory" >> "...many sellers are sitting this year out." >> "...The median sale price ... fell by 1.8 percent..." The article's authors are confused. Their explanation for falling prices consists entirely of "Supply is down." That's exactly the opposite of how supply, demand, and prices are related. If they wanted to claim that low prices are scaring sellers out of the market, since those sellers are hoping for a future rebound in prices, I might believe it. But the article claims the causality is going the other way.

rspeer 11y ago
In Cambridge, a faction of candidates for city council promises that they will make housing affordable by opposing the construction of new housing. Apparently you can just tell people that supply and demand work the opposite way in the housing market, and people will believe you.
- home_boi 11y ago
  The reasoning might be that if a place gets luxury apartments, rich people will flood the area. Then the crime rate per capita goes down. The criminal population becomes diluted. It starts a snowball effect where crappy apartments in the area looks more and more attractive to the upper middle class as more upper middle class outbid previous poorer renters for the old housing.
  - rspeer 11y ago
    I know that's the argument, but it doesn't make much sense to me. It's comparing to a fictitious alternative where rich people don't move in. Why wouldn't they? It's already a desirable place to live, so rich people desire it too, and by definition they can afford to act on that desire. It is not hard for a rich person to outbid a poorer renter. I mean, this doesn't require a complicated explanation. Whether or not there's new housing, rich people can already outbid current renters because they have more money. And when this happens without new housing, not only does a rich person move in, someone else moves out. By trying to prevent gentrification from indirectly causing displacement, you just cause the displacement right away. This still sounds like supply and demand doing what one would expect, not doing the opposite.