4 ms·

Can't wait to see an implosion. The current house prices are ridiculous, especially in the bay area

gsibble 5y ago
Unlike 2008 where people were over-extended and buying up investment properties, this price increase is caused by an overall shortage of housing. The demand is there as are the people willing to pay the prices. I don't think we're going to see an implosion anytime soon.
- ChuckNorris89 5y ago
  >Unlike 2008 where people were over-extended and buying up investment properties, this price increase is caused by an overall shortage of housing. The demand is there as are the people willing to pay the prices. What if the people paying the prices now are also over extending themselves just like the others did in until 2008? Considering how much low-interest money the banks are handing out to everyone now it certainly looks like it to me.
  - t3rabytes 5y ago
    2008's problem was also that banks didn't have much oversight/regulation on what they had to verify when writing new loans. That is not the case today -- lenders are far more strict on what criteria you have to meet for a new mortgage.
  - theincredulousk 5y ago
    For all of these people "over extending" it is hard to imagine anything besides an economic implosion that causes mass unemployment among homeowners. If COVID didn't already do that, what will? What's the catalyst? Increasingly it seems the only reasonable catalysts are global-scale disasters like a meteor impact, super volcano eruption, world war, a pandemic (much) worse than COVID, etc.. Given the amount of investors involved now (and since the mortgage crisis) buying up properties to rent, I could see one trigger being (some reason) that causes it to no longer be a good (or optimal) investment, and them dumping huge inventory onto the market. The government cracking down via regulation on investment ownership (or mass ownership) of single-family homes could be one route to that, although somehow that doesn't feel likely to happen. It is not the same this time where people with a credit score of 450 were buying multiple homes. This time the people "over extending", in my experience, are on relatively solid financial ground. In my opinion almost anyone that is borrowing 500k+ (because they don't have it, not because it's financial strategy) are "over extending". They are in fact exposed to risk of default, but that doesn't at all correlate to the probability of default. The real risk, meaning probability of occurrence, is most likely pegged to the risk of them losing their source of income, which could (and seems for a while now) in reality to be quite low. Anecdotally, many I know that are "over extending" could afford to be out of work for months and not lose their home. Either through their own savings, or safety nets in the form of their now retired baby-boomer parents sitting on substantial nest eggs. Very common since all it took for the boomers was to make some average stock investments and own a home to easily become relatively rich over the past 30 years. I would be interested most to know the % of current homeowners that could make mortgage payments for 3-6 months if one or more jobs in the household were lost. I guess that would be a decent proxy for how likely any implosion of the housing market would be, if it would be triggered by owner-occupants defaulting.
- Zigurd 5y ago
  When I went digging for reasons for both high prices and for whether to expect a large correction, I came up with this answer: New home construction failed, over at least the past decade, to keep up with population. I, too would welcome a correction. One of my kids has not bought a house yet. It would be nice if they had an easier time doing so. Small corrections might happen regionally, based on regional shifts in population. But it is unlikely to happen nationally. I also do not have much hope that remote workers moving to low cost locations will make enough of a dent in demand in high prices areas.
- tmnvix 5y ago
  Do you not think that if the ratio of people to properties remained the same, but interest rates declined, then prices might also go up? I don't think that a supply shortage gets to the crux of this problem. I think a more significant factor is availability of credit. It's worth considering that a credit fueled speculative boom creates excessive demand.
HideousKojima 5y ago
We sold my grandparents house in the bay area for $1.6 million about 6 years ago, it sold again for $2 million last year, and Zillow currently estimates it to be worth about $2.3 million. My grandparents bought the place in the 60's for under $50,000, if I recall correctly.
hanoz 5y ago
Don't get your hopes up. I've been waiting twenty years for non-ridiculous house prices in the UK. It's only got worse and worse. And successive governments have proved willing to do anything it takes to keep it that way.
- ChuckNorris89 5y ago
  >And successive governments have proved willing to do anything it takes to keep it that way. That's basically political NIMBYISM and is in every government in Europe (And I guess in the US, Canada, Australia, etc.) and it makes sense they would do that as the politicians themselves plus the majority of the population (over 50%) in every country owns some form of real estate, so they have a vested interest to make themselves and over 50% of their electorate richer on paper since it's a good way to get votes and support for your policies. Those less than 50% who don't own anything can go screw themselves basically since being a minority in terms of votes, they don't have the democratic power to change anything in their favor, so the housing policies reflect their lack of leverage. The ship will only change course when(if) the percentage of the owning class dips significantly below 50%, causing the democratic power to shift to those who don't own anything and we might start seeing things like larger taxes on your second homes or larger inheritance taxes.
  - tmnvix 5y ago
    Are you sure over 50% own real estate? Usually when I hear this stated, people seem to mean that over 50% live in an owner occupied residence. I doubt that the commenter above who has moved back in with parents to save on rent considers themselves to own real estate (even if they may someday inherit it).
  - l33tbro 5y ago
    How much property the elite class own has little to do with it. Politicians love housing prices going up because it means more money (debt) flowing into the economy through new loans / fractional reserve banking. This eventually increases consumption in other areas and increases GDP. Government is then able to say "hey look how well we're managing economy" when facing re-election.
afpx 5y ago
Prices are only going to go up. The side-effect of bringing 60M new people each year into the middle class.

Unlike 2008 where people were over-extended and buying up investment properties, this price increase is caused by an overall shortage of housing. The demand is there as are the people willing to pay the prices. I don't think we're going to see an implosion anytime soon.

ChuckNorris89 5y ago
>Unlike 2008 where people were over-extended and buying up investment properties, this price increase is caused by an overall shortage of housing. The demand is there as are the people willing to pay the prices. What if the people paying the prices now are also over extending themselves just like the others did in until 2008? Considering how much low-interest money the banks are handing out to everyone now it certainly looks like it to me.
- t3rabytes 5y ago
  2008's problem was also that banks didn't have much oversight/regulation on what they had to verify when writing new loans. That is not the case today -- lenders are far more strict on what criteria you have to meet for a new mortgage.
- theincredulousk 5y ago
  For all of these people "over extending" it is hard to imagine anything besides an economic implosion that causes mass unemployment among homeowners. If COVID didn't already do that, what will? What's the catalyst? Increasingly it seems the only reasonable catalysts are global-scale disasters like a meteor impact, super volcano eruption, world war, a pandemic (much) worse than COVID, etc.. Given the amount of investors involved now (and since the mortgage crisis) buying up properties to rent, I could see one trigger being (some reason) that causes it to no longer be a good (or optimal) investment, and them dumping huge inventory onto the market. The government cracking down via regulation on investment ownership (or mass ownership) of single-family homes could be one route to that, although somehow that doesn't feel likely to happen. It is not the same this time where people with a credit score of 450 were buying multiple homes. This time the people "over extending", in my experience, are on relatively solid financial ground. In my opinion almost anyone that is borrowing 500k+ (because they don't have it, not because it's financial strategy) are "over extending". They are in fact exposed to risk of default, but that doesn't at all correlate to the probability of default. The real risk, meaning probability of occurrence, is most likely pegged to the risk of them losing their source of income, which could (and seems for a while now) in reality to be quite low. Anecdotally, many I know that are "over extending" could afford to be out of work for months and not lose their home. Either through their own savings, or safety nets in the form of their now retired baby-boomer parents sitting on substantial nest eggs. Very common since all it took for the boomers was to make some average stock investments and own a home to easily become relatively rich over the past 30 years. I would be interested most to know the % of current homeowners that could make mortgage payments for 3-6 months if one or more jobs in the household were lost. I guess that would be a decent proxy for how likely any implosion of the housing market would be, if it would be triggered by owner-occupants defaulting.
Zigurd 5y ago
When I went digging for reasons for both high prices and for whether to expect a large correction, I came up with this answer: New home construction failed, over at least the past decade, to keep up with population. I, too would welcome a correction. One of my kids has not bought a house yet. It would be nice if they had an easier time doing so. Small corrections might happen regionally, based on regional shifts in population. But it is unlikely to happen nationally. I also do not have much hope that remote workers moving to low cost locations will make enough of a dent in demand in high prices areas.
tmnvix 5y ago
Do you not think that if the ratio of people to properties remained the same, but interest rates declined, then prices might also go up? I don't think that a supply shortage gets to the crux of this problem. I think a more significant factor is availability of credit. It's worth considering that a credit fueled speculative boom creates excessive demand.

HideousKojima 5y ago

We sold my grandparents house in the bay area for $1.6 million about 6 years ago, it sold again for $2 million last year, and Zillow currently estimates it to be worth about $2.3 million. My grandparents bought the place in the 60's for under $50,000, if I recall correctly.

hanoz 5y ago

Don't get your hopes up. I've been waiting twenty years for non-ridiculous house prices in the UK. It's only got worse and worse. And successive governments have proved willing to do anything it takes to keep it that way.

ChuckNorris89 5y ago
>And successive governments have proved willing to do anything it takes to keep it that way. That's basically political NIMBYISM and is in every government in Europe (And I guess in the US, Canada, Australia, etc.) and it makes sense they would do that as the politicians themselves plus the majority of the population (over 50%) in every country owns some form of real estate, so they have a vested interest to make themselves and over 50% of their electorate richer on paper since it's a good way to get votes and support for your policies. Those less than 50% who don't own anything can go screw themselves basically since being a minority in terms of votes, they don't have the democratic power to change anything in their favor, so the housing policies reflect their lack of leverage. The ship will only change course when(if) the percentage of the owning class dips significantly below 50%, causing the democratic power to shift to those who don't own anything and we might start seeing things like larger taxes on your second homes or larger inheritance taxes.
- tmnvix 5y ago
  Are you sure over 50% own real estate? Usually when I hear this stated, people seem to mean that over 50% live in an owner occupied residence. I doubt that the commenter above who has moved back in with parents to save on rent considers themselves to own real estate (even if they may someday inherit it).
- l33tbro 5y ago
  How much property the elite class own has little to do with it. Politicians love housing prices going up because it means more money (debt) flowing into the economy through new loans / fractional reserve banking. This eventually increases consumption in other areas and increases GDP. Government is then able to say "hey look how well we're managing economy" when facing re-election.

afpx 5y ago

Prices are only going to go up. The side-effect of bringing 60M new people each year into the middle class.