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I think most people in this thread should read this report [1]. It's quite eye opening to see how a small change in interest rates exerts strong downward pressu

I think most people in this thread should read this report [1]. It's quite eye opening to see how a small change in interest rates exerts strong downward pressure on housing prices because of how many buyers get priced out. Essentially, I think the ECB is saying that if interest rates go up, and they have nowhere else to go, then housing prices _have_ to come down, regardless of the other factors at play. People just get priced out. [1] https://www.nahb.org/-/media/NAHB/news-and-economics/docs/housing-economics-plus/special-studies/2021/special-study-nahb-priced-out-estimates-for-2021-february-2021.pdf https://www.nahb.org/-/media/NAHB/news-and-economics/docs/ho...

88913527 5y ago
How do we know that institutional buyers won't step in and take advantage of the price dip, minimizing the overall decline? Imagine a quarter of falling prices, then the big money comes in to make purchases, easing the blow to prices. It's hard to know how much cash is sitting on the sidelines but it's certainly a possibility given the proportional increase in institutional purchases.
- gfodor 5y ago
  Yep. Interest rates don't mean jack if there's a bottomless market of buyers who will not use debt and just want to put capital somewhere, anywhere, that will appreciate in a highly inflationary environment. It will be tragic that average people won't be buying homes, but the notion that consumer home purchases have the power to move market prices much seems like a weaker and weaker assumption.
  - woeirua 5y ago
    There are estimates that put the total annual RE transaction value in the US at > $1.5 trillion. Blackrock, Opendoor, Offerpad, etc. are small potatoes compared to the overall size of the market.
    - gfodor 5y ago
      Blackrock alone manages 6T. A trillion ain’t what it used to be.
- woeirua 5y ago
  1 - The most recent estimates that I've seen suggest that institutional buyers are still a small portion of the market overall. I have seen no evidence, anywhere, to suggest that institutional players alone could keep home prices growing at this rate. 2 - As interest rates rise bonds and other investments become significantly more lucrative and will draw money out of real estate, as real estate is significantly less liquid than most other investments.

88913527 5y ago

How do we know that institutional buyers won't step in and take advantage of the price dip, minimizing the overall decline? Imagine a quarter of falling prices, then the big money comes in to make purchases, easing the blow to prices. It's hard to know how much cash is sitting on the sidelines but it's certainly a possibility given the proportional increase in institutional purchases.

gfodor 5y ago
Yep. Interest rates don't mean jack if there's a bottomless market of buyers who will not use debt and just want to put capital somewhere, anywhere, that will appreciate in a highly inflationary environment. It will be tragic that average people won't be buying homes, but the notion that consumer home purchases have the power to move market prices much seems like a weaker and weaker assumption.
- woeirua 5y ago
  There are estimates that put the total annual RE transaction value in the US at > $1.5 trillion. Blackrock, Opendoor, Offerpad, etc. are small potatoes compared to the overall size of the market.
  - gfodor 5y ago
    Blackrock alone manages 6T. A trillion ain’t what it used to be.
woeirua 5y ago
1 - The most recent estimates that I've seen suggest that institutional buyers are still a small portion of the market overall. I have seen no evidence, anywhere, to suggest that institutional players alone could keep home prices growing at this rate. 2 - As interest rates rise bonds and other investments become significantly more lucrative and will draw money out of real estate, as real estate is significantly less liquid than most other investments.