5 ms·

It surprised me, that in so many countries and cities the price of apartment, flat, or house increased significantly (often almost doubled) over last two years.

by xvilka 5y ago

It surprised me, that in so many countries and cities the price of apartment, flat, or house increased significantly (often almost doubled) over last two years. It either reflects raw inflation, or, for some unknown reasons, growing value. If anything, you would expect either prices keeping roughly the same level or falling.

swiley 5y ago
It's part of having high immigration rates combined with our zoning laws.
beambot 5y ago
Don't forget declining interest rates.
deleted 5y ago
[deleted]
GoOnThenDoTell 5y ago
WFH workers want home office. It’s not like the housing supply changed, but the demand very suddenly did
- deleted 5y ago
  [deleted]
yCombLinks 5y ago
The mortgage rate before the 2008 crisis was floating around 6.5%. The mortgage rate in 2020 dropped all the way below 2.75%. https://fred.stlouisfed.org/graph/?g=NUh https://fred.stlouisfed.org/graph/?g=NUh A mortgage rate of 6.5% has a monthly payment of $1977 if a house is $300k with a 20% down payment. Most people make their financial decisions based on short term ability to pay. At 2.75% that same $1977 will pay a monthly mortgage on a 410,000 house (assuming a 20% down payment) https://www.nerdwallet.com/mortgages/mortgage-calculator/calculate-mortgage-payment https://www.nerdwallet.com/mortgages/mortgage-calculator/cal... . People are willing to pay more because they can afford more per month, and outbid people that will not match those prices.
- yCombLinks 5y ago
  There is also the fact that investors can get a higher rate of return by buying and managing a rental property rather than selling a mortgage, so that money is also competing to own the property. I personally feel we are in a bubble, that will pop less explosively than the 2008 bubble.
JanisL 5y ago
Currency debasement combined with low interest rates in nominal terms combined with extremely negative interest rates in real terms is driving a huge portion of the nominal gains in housing everywhere in the last few years. If housing is operating in a bubble the prices can continue to go up without fundamentals supporting it for quite a long time. There's also a huge number of policy decisions that have been made to prop up the real estate market. See Evergrande's issues lately for how this can eventually end up playing out when the new money stops coming in and the regulatory framework changes regarding leverage (in this case the three red lines policy changes forcing deleveraging).
MattGaiser 5y ago
Growing value. With WFH, people are demanding more living space. I know DINK couples buying 4 bedroom detached homes rather than their former 1 bedroom condos. If I buy a place anytime soon, it will likely be 3 bedroom for an office and a guest space if a friend who also WFH comes to visit.

by xvilka 5y ago

swiley 5y ago

It's part of having high immigration rates combined with our zoning laws.

beambot 5y ago

Don't forget declining interest rates.

deleted 5y ago

[deleted]

GoOnThenDoTell 5y ago

WFH workers want home office. It’s not like the housing supply changed, but the demand very suddenly did

deleted 5y ago
[deleted]

yCombLinks 5y ago

The mortgage rate before the 2008 crisis was floating around 6.5%. The mortgage rate in 2020 dropped all the way below 2.75%. https://fred.stlouisfed.org/graph/?g=NUh https://fred.stlouisfed.org/graph/?g=NUh A mortgage rate of 6.5% has a monthly payment of $1977 if a house is $300k with a 20% down payment. Most people make their financial decisions based on short term ability to pay. At 2.75% that same $1977 will pay a monthly mortgage on a 410,000 house (assuming a 20% down payment) https://www.nerdwallet.com/mortgages/mortgage-calculator/calculate-mortgage-payment https://www.nerdwallet.com/mortgages/mortgage-calculator/cal... . People are willing to pay more because they can afford more per month, and outbid people that will not match those prices.

yCombLinks 5y ago
There is also the fact that investors can get a higher rate of return by buying and managing a rental property rather than selling a mortgage, so that money is also competing to own the property. I personally feel we are in a bubble, that will pop less explosively than the 2008 bubble.

JanisL 5y ago

Currency debasement combined with low interest rates in nominal terms combined with extremely negative interest rates in real terms is driving a huge portion of the nominal gains in housing everywhere in the last few years. If housing is operating in a bubble the prices can continue to go up without fundamentals supporting it for quite a long time. There's also a huge number of policy decisions that have been made to prop up the real estate market. See Evergrande's issues lately for how this can eventually end up playing out when the new money stops coming in and the regulatory framework changes regarding leverage (in this case the three red lines policy changes forcing deleveraging).

MattGaiser 5y ago

Growing value. With WFH, people are demanding more living space. I know DINK couples buying 4 bedroom detached homes rather than their former 1 bedroom condos. If I buy a place anytime soon, it will likely be 3 bedroom for an office and a guest space if a friend who also WFH comes to visit.