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The FED ruined young peoples ability to afford a home. This will have ripple effects across the next generation. Much harder to start a family, and if you do, y

The FED ruined young peoples ability to afford a home. This will have ripple effects across the next generation. Much harder to start a family, and if you do, you have a long road of hard work and stringent saving. They claimed they were helping the middle and lower classes with all of that money printing, but what they really did is send a 600$ check and then push those classes further into wage slavery. We are watching the looting of the american citizen in real time, communism/collectivism is once again the wolf in sheeps clothing. There is no free lunch. Last thing, theres an equation in finance, I forget it, but roughly: Cost to borrow money (for an institutional investor) and buy a home with that money, is generating a positive return. As long as that is true, they will continue purchasing homes at a rapid rate. This is a monetary issue, money should not be available to buy homes like this. This is incompetence and negligence from the financial elite governing our nation.

bushbaba 5y ago
Nah the next president will just start offering government backed 100 year mortgages with 0 down. Really the most concerning aspect is that the cost to build new housing has drastically gone up. We are at an all time housing deficit. I don’t see how that corrects itself unless we get to the point where building a new house is cheaper than buying an existing house.
- ldjkfkdsjnv 5y ago
  Nah its a monetary problem. Basically, from a finance perspective: Cost to borrow money (for an institutional investor) and buy a house with that money generates a return. Meaning they can buy these homes up all day long and make a profit.
  - mywittyname 5y ago
    Single family home are poor long term investments for institutions, outside of maybe California. Prices tend to follow inflation while property taxes and maintenance eat growth. States without income taxes tends to make up revenue through higher property taxes. Because of these facts, I don't see this trend of investors gobbling up SFHs to be sustainable. I suspect most of them are in this for a quick buck, and will quickly dump these homes the minute it becomes obvious that this was a dumb idea.
    - adam_arthur 5y ago
      They buy them with leverage though. A 3% yearly return with 5x leverage is 15% a year
- lijogdfljk 5y ago
  > Really the most concerning aspect is that the cost to build new housing has drastically gone up. Any idea why? This is a life plan for my wife and I, we're currently looking for the right spot of land (~10 acres) and then we hope to start building in ~5 years after significant saving and planning. We're in the initial stages of planning out our floor plan/etc, and costs are high, but we haven't really noticed a huge difference between building and buying. .. but i suppose we also aren't far enough long that we're getting real price estimates either.
  - mywittyname 5y ago
    There's a large gradient between "custom" and custom. Modifying an already designed home is so much cheaper than something from the ground up. As in, thousands vs tens of thousands. Depending on where you live and what you're building, that's a decent % of the total cost of a house.
  - UncleOxidant 5y ago
    Lumber, materials, labor. Homebuilding needs to be disrupted with more automation, use of cheaper, sustainable materials (3D printed concrete, for example).
  - abcc8 5y ago
    Here is the link to a very interesting reddit post about the various reasons for the increase in the price of wood: https://old.reddit.com/r/investing/comments/stwrnr/ive_documented_every_major_reason_lumber_has/ https://old.reddit.com/r/investing/comments/stwrnr/ive_docum... While the post is worth a read, the TLDR is that there are multiple issues, each of which could seemingly independently be the source of the increase.
  - yardie 5y ago
    From what I heard, from an architect friend, the difference in price between a builder and custom home is 10% premium. Because whatever economy of scale saved by the build is taken up in profit. To the buyer prices are just about the same. And conveniently, the commission for an architect is also 10%. So if you can design and self certify you also save a bit.
pydry 5y ago
Wealth inequality did this. It would have happened with or without the fed. As long as r > g the problem will only get worse. If the US returned to a 1950s style tax system or enacted very high wealth taxes this problem could be avoided, but the forces arrayed against you for proposing such reforms would mean political suicide for anyone who does it. Which makes me think that the problem will get worse until some sort of structural break occurs (at which point, as with 2008, it'll probably get worse at an accelerated rate with a cure worse than the disease).
- FredPret 5y ago
  r cannot possibly be greater than g over the long term. It’ll revert to the mean. Even if it’s greater than g due to an exceptional investor like Warren Buffet, eventually his heirs will take over, and they are likely not as good as he is. It is profoundly hard and unusual to keep a family rich for many generations.
  - pydry 5y ago
    Of course not. The reversion to mean will probably happen as a result of a violent structural break, though, not as a gradual reversal. This means economic or political crisis. And, the same people who were made so fantastically rich from r > g will likely be the ones deciding what to do about it. It's not like governments will wake up from their stupor and implement a basic income. Whatever happens (fascism, war, financial crisis), it'll likely make us wish for the good old days of right here and now. I'm almost more afraid of the structural break than I am the inexorable rise of wealth inequality.
  - patentatt 5y ago
    > r cannot possibly be greater than g over the long term. Thomas Piketty would like to have a word with you. https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Century https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Ce...
    - dcolkitt 5y ago
      Piketty’s empirical research has been thoroughly refuted and found to have major gaps that it’s not even funny anymore. This is why he hasn’t won the Nobel, for research that if actually accurate would have otherwise been a shoe in for the prize. https://marginalrevolution.com/marginalrevolution/2014/05/what-do-the-piketty-data-problems-really-mean.html https://marginalrevolution.com/marginalrevolution/2014/05/wh...
willis936 5y ago
Yes it's the $600 checks. Not the corporate welfare and corporate profit margins outpacing inflation. It's time to break up the mergers.
- adam_arthur 5y ago
  You hand somebody 1000 dollars, they spend it one time, and where did that money go in the end? Primarily on corporate balance sheets, paid to investors via dividends, buybacks etc. Of course also used to hire new workers and so on. The point being handing somebody money in a one time transfer only helps them in the immediate term but the inflationary impacts actually harm them longer term. I would venture to guess most of the stimulus money ended up in pockets of already wealthy asset holders at the end of the day.
  - willis936 5y ago
    Yes and the investor class are the rich. Profit margins should not be rising in a time of scarcity. It's profiteering and nobody is doing anything about it.
    - adam_arthur 5y ago
      Blaming inflation on corporate greed is a tale as old as time. And it's largely debunked economic pseudo science. Companies and people are greedy all the time, that's the fundamental basis of capitalism. Capitalism is an acceptance of this and regulations to shape around actors working in their own self interest. Are companies more greedy now than they were in 2019? No An opt in moralism based economy will never work and has been tried and failed many times.
      - Supermancho 5y ago
        > Blaming inflation on corporate greed is a tale as old as time. And it's largely debunked economic pseudo science. That wasn't a claim. > Companies and people are greedy all the time, that's the fundamental basis of capitalism. Oversimplification. > An opt in moralism based economy will never work and has been tried and failed many times. This wasn't suggested. Your comment is vapid, in case you're wondering.
UncleOxidant 5y ago
The $600 check isn't what caused house prices to go through the roof it was the too-low-for-too-long interest rates. Historically the mean mortgage rate is about 7%. I suspect that we'll see a reversion to mean for rates as the Fed tries to fight inflation. If that inflation turns out to be "sticky" like it was in the 70s rates could overshoot and go well over 7%. If that happens... well, take a look at home sales data from the early 80s. People looking to buy a house at this point should cheer rising rates because it will mean lower prices. Buy at a high rate but lower price, refi when rates fall.
- llamataboot 5y ago
  There is also a pretty severe housing shortage in most urban areas. I'm not so sure prices are going to be that sensitive to interest rates, however they could be sensitive to purchasing power. But historically, US housing is so much cheaper to buy than say, any country in Europe, it can sustain quite some rise.
  - UncleOxidant 5y ago
    It's all about that monthly cash-flow. If too many buyers are priced out (by either high prices or high interest rates or a combination of both) then we'll see markets stagnate. The housing market in an area can only remain stagnant so long before some sellers become desperate to sell and start lowering prices. Also, with more liberal WFH policies we should be seeing a spreading out as people who want to buy a house seek out places where homes are cheaper/more available.
    - dodobirdlord 5y ago
      > If too many buyers are priced out (by either high prices or high interest rates or a combination of both) then we'll see markets stagnate. Not if there’s a supply shortage. If there is a supply shortage then that necessarily means that some people will be priced out without corresponding downward price movement. 10 people, 5 houses, the market-clearing price is the 5th highest price any of the people are willing to pay. Remove the 5 people on the low end and that’s still the market-clearing price. The equilibriating force of price increases causing demand to drop causing downward price pressure only keeps prices in equilibrium around the market-clearing price. Supply shortages shift the supply curve and cause the market-clearing price itself to move. The equilibriating force that should address this is that increased prices should incentivize new supply to be created from sources that were previously uneconomical, but the supply shortage exists because of legal restrictions that distort the market.
RC_ITR 5y ago
The FED had nothing to do with the stimulus. Famously the FED “takes fiscal policy as it arrives at their doorstep” You should re-evaluate some of the connections you’re making, because you have good thoughts, but your villains are the wrong Ones.
- ldjkfkdsjnv 5y ago
  No people just dont understand what monetary policy does to assets.
lijogdfljk 5y ago
Communism? We sit here and allow wealth inequality to take record highs and then we're shocked when the capitalists are so strong that they own the government? This is uncontrolled capitalism imo. When the rich have such buying power that they own governments, as they do now, you can't really call it communism now can you? The government is just an arm of the rich now, and nothing will change until that is brought into check. Getting rid of government wouldn't stop the rich either.
- nopenopenopeno 5y ago
  Not just in your opinion but in Adam Smith’s and Karl Marx’s as well.
- triceratops 5y ago
  > Communism? In the US, anything you think is bad is "communism/Marxism" if you're on the political right, and "unrestrained capitalism" if you're on the political left. Don't fall into the trap of thinking there's any logic behind any of this.
  - lijogdfljk 5y ago
    I think everyone is right there, to a degree. Ie yea, the government is at fault, but who is controlling the government here? etc The solution is balance. I'm a capitalist, but unrestrained capitalism is difficult to impossible. Unrestricted government or capitalism will fail in both cases imo.
- sdoering 5y ago
  Came here to ask similar questions/take a similar argumentative position. I don't know what in the eyes of cop is supposed to be communist about the current US social structure. I see (from the outside) modern feudalism and a social structure that, despite a simulation of democracy, is closer to European industrialization and its industrial barons and their working precariat than to a modern, democratic and fair society.
pinephoneguy 5y ago
- tsycho 5y ago
  Immigration?? It's been at record low levels since 2018, once Trump's policies came into full effect.
  - pinephoneguy 5y ago
iso1631 5y ago
The US is going through the housing boom that happened in the UK about 20 years ago, nothing to do with giving everyone $1k for free. You think that $400b is a lot to "print"? Billionaires increased their wealth 10-fold in the same time, let alone the millionaires that have made a fortune from 10 years of rocketing stock market growth and leverage availability.
wbsss4412 5y ago
This has very little to do with $600 checks and everything to do with the policy response to 2008. We’ve had over a decade of cheap money creating asset price inflation and exacerbating inequality, not to mention the total collapse of the home building for several years and the exodus of qualified talent from that period drained much needed supply from the market. All of this happening while the largest generation since the baby boom entered prime home buying age. This has been a 15 year trend. It didn’t start yesterday and it won’t end for a long time.
- adam_arthur 5y ago
  And when the Fed went to course correct in 2018, they immediately bailed after markets started to decline to historically normal levels. Fiscal policy should be used to address economic gaps, not distortion through monetary policy. Of course, very hard to achieve alignment and consensus in the US political system. Despite the inflation, it's pretty clear the recovery after 2008 could have been much more rapid with greater fiscal injections. The Fed should be an algorithm IMO. Way too politically influenced.
  - wbsss4412 5y ago
    Your last sentence really hits the nail on the head. In a lot of ways, the feds hands are tied by the political dysfunction in our political branches. They’re just putzing along, trying to plug the holes in a leaky ship.
    - adam_arthur 5y ago
      Yeah, and they tend to operate with short term thinking front of mind. I mean the Fed didn't even flinch at all in 2021 as all asset valuations reached bubble territory. Real estate appreciated faster than anytime in history. This becomes a real liability down the line if normalization of policy is ever needed. Bubbles can be disastrous to the economy longer term. They removed the moral hazard of risk taking for the past decade or so.
      - 5y ago
wnevets 5y ago
> The FED ruined young peoples ability to afford a home. Young people just need to cancel their Netflix, stop buying Starbucks, iPhones and pull themselves up by their bootstraps! /s
nine_zeros 5y ago
> Cost to borrow money (for an institutional investor) and buy a home with that money, is generating a positive return. As long as that is true, they will continue purchasing homes at a rapid rate. This is a monetary issue, money should not be available to buy homes like this. This is incompetence and negligence from the financial elite governing our nation. It is not strictly a monetary problem but you are close. It is a allocation of money problem. When the FED increases supply of money and/or lowers interest rates, people think that this will help the poorest get on the debt and get themselves going. But reality is that it is the rich (and institutions) that have assets good enough for collateralization. Which means that in a low interest rate environment the rich (and institutions) can borrow MUCH MORE than the poor, more easily. It plays out very simply. Banks literally salivate at lending to the rich in a low interest rate environment because the counterparty risk is super low. Just take the free money. With poor people the counterparty risk does not disappear with low interest rates. Over decades, the rich (or institutions) keep getting richer with the same mechanism. It's a misallocation. When the FED reduces rates, the rate reduction should not allow the rich to borrow at lower rates. The inequality is spiraling out of control at this point.
rowanseymour 5y ago
Some would argue that ability of the capital class to convert everything including the basic necessities of life such as housing into commodities, whilst convincing much of populace to blame boogeymen like "communism" for their decreasing social mobility, is why you're in this mess.
woodruffw 5y ago
In what meaningful sense could either the current or previous administration's policies be characterized as either communism or collectivism? It's hard to take this kind of rhetoric seriously, given that investors are the ones fomenting inequality here. There's no point in speculating on real estate/house value in a society where everyone is guaranteed a home -- where would the demand be?
bluedino 5y ago
More than just the $600 checks. They're still sending out child tax credits and increased benefits in other areas like SNAP.
namlem 5y ago
I didn't know the Fed was responsible for exclusionary zoning laws.
thrwy_ywrht 5y ago
>The FED ruined young peoples ability to afford a home. House prices have certainly risen substantially in the last few years [1]. But if the FED is to blame, why has the same thing happened in the UK [2], Germany [3] and Australia [4] ? [1] https://fred.stlouisfed.org/series/QUSR628BIS https://fred.stlouisfed.org/series/QUSR628BIS [2] https://fred.stlouisfed.org/series/QGBN628BIS https://fred.stlouisfed.org/series/QGBN628BIS [3] https://fred.stlouisfed.org/series/QDER628BIS https://fred.stlouisfed.org/series/QDER628BIS [4] https://fred.stlouisfed.org/series/QAUR628BIS https://fred.stlouisfed.org/series/QAUR628BIS
- lordnacho 5y ago
  Because interest rates went down in those countries as well? We're only just coming off the lowest rates ever in the UK. The Euro hasn't existed for long but record lows there too. Oz as well.
  - arcticbull 5y ago
    Why hasn't the same thing happened in Japan, which has tripled its money supply since 1990? House prices (and the price of everything else) has remained dead-ass flat. The difference is the have federal zoning rules that allow the supply of houses to meet the demand of houses.
    - adam_arthur 5y ago
      Japan has a declining population. Residential real estate inevitably declines with this demographic trajectory. More housing units per person. Also Japan did not have a lot of nimby mentality blocking new housing, to my knowledge Lower rates offsets the price reduction to a certain extent.
      - CountSessine 5y ago
        Japan has a declining population. Residential real estate inevitably declines with this demographic trajectory. The Kansai region has an increasing population and real estate prices are still in decline or stable. Also Japan did not have a lot of nimby mentality blocking new housing, to my knowledge Yes, they did - prior to 2001 when the national government took zoning authority away from municipalities.
duped 5y ago
Lenders were granting loans last year for 5% down at below 3% interest and prices went up accordingly. Homes were more affordable than ever from the perspective of the cost of a mortgage per dollar. They became unaffordable due to the surge in demand because money was so cheap! What do you want the Fed to do? If they make money more expensive then mortgages become less affordable and housing prices slump, but if they make money easier to get then housing prices go up. Meanwhile, the Fed's mandates are maximum employment at sustainable inflation - not home ownership. The cost of housing has been dominated by local and state regulations for quite some time, it's not something the Fed can or should fix. What that means is that last year you could have bought a $300k home for $15k in cash and pay around $2k in mortgage/taxes/insurance. The real problems are that there were so few $300k homes and the vast majority of Americans don't have $15k for a downpayment. The Fed can't fix those problems. If you want to point a finger, point it at municipalities and who don't care about home ownership rates. They could make holding single family homes as long term investment properties unaffordable tomorrow, but choose not to. They could encourage new home construction, but they don't. (side note, "Fed" is not an acronym, it's an abbreviation for the Federal Reserve)
- treis 5y ago
  >Lenders were granting loans last year for 5% down at below 3% interest and prices went up accordingly. Homes were more affordable than ever from the perspective of the cost of a mortgage per dollar. They became unaffordable due to the surge in demand because money was so cheap I had to scroll distressingly far to see this post. The record set was going from ~13% investor bought to ~15%. It's a marginal change. Prices sky rocketed because, as you noted, (1) it was/is one of the best financial environments for home buying ever and (2) Covid accelerated timelines for home buying.
  - duped 5y ago
    I think the point I'd like to harp on is that money was extremely cheap last year and it was the best time to buy a home - if you had the savings for a downpayment, that 30 year fixed rate mortgage was cheaper than rent! The problem is that half of Americans don't have more than a thousand dollars in the bank, and we need to focus less on the sheer cost of homes (when homes were incredibly affordable) and more on why Americans can't save for down payments.
rednerrus 5y ago
Isn't the fact that we had a dramatic slowdown in building houses following the great recession the leading cause of increasing home prices?
patentatt 5y ago
And now they're in a catch-22 because any significant decrease of housing prices would cause ripple effects throughout the system too. Which is why I think they're pursuing an inflationary policy to simply inflate their way out of it, but that also has negative consequences. There's not really a good way out of it at this point. It's almost like the free lunch they bought by setting rates to next-to-nothing after 2008 wasn't actually free.
bmitc 5y ago
How does communism relate? What's happening in the U.S. is state sanctioned class separation and a beyond disproportionate support of the so-called elite class. The U.S. has essentially had a non-violent coop in the sense of the ultra wealthy owning politicians and the government. The ultra wealthy and by extension the politicians they support are national security risks.
CydeWeys 5y ago
> communism/collectivism is once again the wolf in sheeps clothing. Huh? What you see here is capitalism in action.
- closeparen 5y ago
  Capitalism in action would involve a lot more building.
DoctorNick 5y ago
depicting problems with capitalism This is communism, actually
noobermin 5y ago
It is disappointing to see essentially red-baiting conspiracy theories at the top of a thread in hn.
- adam_arthur 5y ago
  What is the conspiracy? If Fed takes risk out of markets, risk premium disappears and value of assets expands. On top of cheaper money, of course. It's been clear to Fed observers that they've pursued a policy driven with asset pricing front of mind.
mschuster91 5y ago
> communism/collectivism is once again the wolf in sheeps clothing Authoritarian communism certainly is, no disagreement there. But in America, everything left of the GQP is branded as "communism" these days, including stuff that is considered a basic part of the system in Europe like public, affordable healthcare. If Americans were able to debate the successes of European policy - and that includes even part of what the former GDR did, like providing access to childcare for mothers so they could work, or provide access to safe abortions - on face value, without resorting to "but that's communism!!!", your life would be so much better.
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jp42 5y ago
for those who dont know. Read about "Cantillon Effect", it basically means whoever gets newly printed money first benefits the most at the cost on whoever gets it later.
- arcticbull 5y ago
  Nobody, and I mean nobody, seems to have quantified the Cantillon effect. Money is "printed" when a fractional reserve loan is issued. That means when people borrow money. Everyone borrowing new money is doing so from the printer. Please either quantify the Cantillon effect or find a new scapegoat. The issue is zoning.
graaben 5y ago
I haven't really seen much written on this (maybe I'm just not looking) but what does the future look like when only the top 10-20% can afford a home? Do 80% of families rent forever with no real possibility of being able to buy a home near an economic center? What does that look like for the broader society when so much of the American dream and self-worth is built on being a homeowner? I live in LA and I think about this a lot when I see the only homes for sale here going for $3-4+ million. How much longer can this continue?
- 01100011 5y ago
  I have mixed feelings on this. On the one hand we have a massive wealth/power gap and I desperately want myself and every other human to have a shot at owning a single-family home in a desirable area with all of the comforts of modern life. On the other hand I know that we are overtaxing the world's resources and short of some massive changes in our system many middle class folks in the western world are going to see a drop in their quality of life as globalization continues and our living standards average out with those of people in developing nations.
- closeparen 5y ago
  A mass-affordable Los Angeles is geometrically impossible. The single-family house and car culture are central to what it means to be "LA" and there are fundamental scaling limits on those.
  - JoeJonathan 5y ago
    LA was zoned for ~10 million as recently as 1960. While I think you're right that the problem is probably intractable—who would want to give up their house for an apartment, unless maybe a dense, walkable area appeared overnight?—I wonder if there are legislative solutions, like rolling back Prop 13 (which will probably never happen).
    - strangesongs 5y ago
      But people don't have to give up single family homes to create density -- we just need to build more of everything else, wherever we can, to increase housing. No one is coming for existing single-family homes -- they can peacefully co-exist alongside properties that house 5x the amount of people.
01100011 5y ago
If the latest FOMC minutes are still relevant given the subsequent data drops showing even hotter inflation, then it looks like the FED will be scaling back mortgage purchases soon while continuing to support a lower federal funds rate. I don't know, but this seems like it screws individual home owners/buyers, where most middle class folks store their wealth, while continuing to support elevated commodity and equity prices where the rich store the majority of their wealth. Hopefully the recent data will force the rich bastards who run the fed to stop putting themselves and their elite compatriots first and finally slow down inflation and asset prices but given their history that seems like wishful thinking.
bsedlm 5y ago
> This is incompetence and negligence from the financial elite governing our nation. that is one possibility, the other is that their intent is different than what one would expect, it's pretty much impossible to tell which is it. consider the war on drugs, an utter failure if one believes that it's actually intended to diminish drug use. however given it only recently begun slowing down, without real signs of stopping, I cannot help but consider the possibility that the actual intentions behind it have been a great success but then that means the american government has intentionally caused terrible evil towards most of latin america. this is why I consider the possibility that it might not be incompetence in this case either
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huevosabio 5y ago
Zoning and local vetocracy (aka NIMBYism) ruined people's ability to afford home. The horror here is that we have artificially limited house building and at the same time encouraged the population to treat it as an asset class. We treat residential real estate like crypto-bros treat their NFTs.
- strangesongs 5y ago
  Exactly this. Look at the slow-moving nightmare happening in Berkeley because of NIMBYism and CEQA reviews. The city/state/UC system is going to lose an incredible amount of funding and student enrollment is going to plummet because some rich Berkeley assholes don't want new apartments in their neighborhood. California (and all states) need to build massive amounts of housing (any kind! public, social, market-rate, affordable -- it doesn't matter just do all of it at once) to address the immediate demand while we also work on destroying the concept of housing as an asset and not a guaranteed right.
diob 5y ago
What in the world do you mean by the communism/collectivism thing? This was a move by the Trump administration, was it not? And especially the "no ability to track" part of the handout to big business.
runako 5y ago
On the contrary, housing is more affordable now than at any time in the last 40 years, except for the period right after the 2008 crash. Higher prices are more than offset by lower mortgage costs. Money got cheaper faster than housing got more expensive. Most people who are not rich are buying money with a house kicker in 30 years, so the cost of money is the important factor. https://ritholtz.com/2021/08/how-expensive-are-houses/ https://ritholtz.com/2021/08/how-expensive-are-houses/
- adam_arthur 5y ago
  Article is dated. Mortgage rates are up over 1% since then, and slated to continue rising rapidly. Affordability will be just about record lows at 5%. Inflation adjusted home prices have already surpassed the 2000s peak, and are a few std deviations above historical norms. If inflation doesn't abate, we can expect 6% mortgages in the near future.
  - runako 5y ago
    This is absolutely all correct, and also supports the basic argument that houses are not wildly more unaffordable now than they were in (say) 1990.
    - adam_arthur 5y ago
      Affordability is almost as bad as the 2000s peak already. If you judge by housing payment relative to income
      - runako 5y ago
        Would you mind sharing a link to your source? I would love to update my mental cache? Thanks!
        adam_arthur 5y ago
        I'll try to find the chart I saw on this recently. But here's home price relative to median income, which is at a record. Then apply logic that mortgage rates are 4.1% now and likely to be 5% soon. https://www.longtermtrends.net/home-price-median-annual-income-ratio/ https://www.longtermtrends.net/home-price-median-annual-inco... 2000s affordability was still worse at the peak, but will shift quickly if mortgage rates continue to rise. Anyway, will edit when I find
thatfrenchguy 5y ago
Wealth inequality, no meaningful inheritance tax, zoning and underproduction of housing did this, not the fed.
tootie 5y ago
You have no idea what you're talking about. The Fed didn't send checks, Congress did. Fed has a dual mandate to curb inflation and maximize employment. They have zero obligation to home buyers or home owners and have never said otherwise. It is entirely up to Congress (and state governments) to manage housing issues. The Fed can't create loans, they can't create housing stock, they can't control supply, they can't control a pandemic, they can't keep investors out of consumer markets. That's all up to legislators. Home prices are rising along with everything else right now and the Fed is almost certainly going to start to tighten very soon, but everything for the past two years and really the past 20 years has been emergency measures against perceived looming disaster. I'd rather deal with high house prices than famine or some other truly existential crisis.
szundi 5y ago
At least since QE was introduced, real US GDP is growing slower, 10%+ lost.
0x4d464d48 5y ago
"This is incompetence and negligence from the financial elite governing our nation." Wrong. This was a deliberate and planned response to protect their true stake holders from the liquidity crunch that COVID lockdowns almost unleashed. Asset owners. For all intents and purposes it worked extremelly well. https://www.barrons.com/articles/blackrock-is-biggest-beneficiary-of-fed-purchases-of-corporate-bond-etfs-51591034726 https://www.barrons.com/articles/blackrock-is-biggest-benefi... https://www.forbes.com/sites/sergeiklebnikov/2022/02/11/two-senior-federal-reserve-staffers-made-trades-amid-central-banks-2020-stimulus/?sh=505ce0961bee https://www.forbes.com/sites/sergeiklebnikov/2022/02/11/two-... https://www.forbes.com/sites/moneyshow/2020/02/25/moral-hazard-debt--bubbles-theres-more-to-worry-about-than-the-coronavirus/?sh=27cf89e91741 https://www.forbes.com/sites/moneyshow/2020/02/25/moral-haza... Nothing incompetent about it. This is moral hazard in action and has been the bull case for some time now. Fundamentals don't matter anymore because anytime the market gets rickety its been a safe bet that either the Fed will swoop in with more QE and low interest rates or the federal government will issue more bailouts. Risk is socialized while gains are privatized.
newaccount2021 5y ago
HWR_14 5y ago
> communism/collectivism is once again the wolf in sheeps clothing. Yes. The use of capital to purchase large scale investments causing negative ripple effects on society is communism. The system that famously loves and allows for private capital.

bushbaba 5y ago

Nah the next president will just start offering government backed 100 year mortgages with 0 down. Really the most concerning aspect is that the cost to build new housing has drastically gone up. We are at an all time housing deficit. I don’t see how that corrects itself unless we get to the point where building a new house is cheaper than buying an existing house.

ldjkfkdsjnv 5y ago
Nah its a monetary problem. Basically, from a finance perspective: Cost to borrow money (for an institutional investor) and buy a house with that money generates a return. Meaning they can buy these homes up all day long and make a profit.
- mywittyname 5y ago
  Single family home are poor long term investments for institutions, outside of maybe California. Prices tend to follow inflation while property taxes and maintenance eat growth. States without income taxes tends to make up revenue through higher property taxes. Because of these facts, I don't see this trend of investors gobbling up SFHs to be sustainable. I suspect most of them are in this for a quick buck, and will quickly dump these homes the minute it becomes obvious that this was a dumb idea.
  - adam_arthur 5y ago
    They buy them with leverage though. A 3% yearly return with 5x leverage is 15% a year
lijogdfljk 5y ago
> Really the most concerning aspect is that the cost to build new housing has drastically gone up. Any idea why? This is a life plan for my wife and I, we're currently looking for the right spot of land (~10 acres) and then we hope to start building in ~5 years after significant saving and planning. We're in the initial stages of planning out our floor plan/etc, and costs are high, but we haven't really noticed a huge difference between building and buying. .. but i suppose we also aren't far enough long that we're getting real price estimates either.
- mywittyname 5y ago
  There's a large gradient between "custom" and custom. Modifying an already designed home is so much cheaper than something from the ground up. As in, thousands vs tens of thousands. Depending on where you live and what you're building, that's a decent % of the total cost of a house.
- UncleOxidant 5y ago
  Lumber, materials, labor. Homebuilding needs to be disrupted with more automation, use of cheaper, sustainable materials (3D printed concrete, for example).
- abcc8 5y ago
  Here is the link to a very interesting reddit post about the various reasons for the increase in the price of wood: https://old.reddit.com/r/investing/comments/stwrnr/ive_documented_every_major_reason_lumber_has/ https://old.reddit.com/r/investing/comments/stwrnr/ive_docum... While the post is worth a read, the TLDR is that there are multiple issues, each of which could seemingly independently be the source of the increase.
- yardie 5y ago
  From what I heard, from an architect friend, the difference in price between a builder and custom home is 10% premium. Because whatever economy of scale saved by the build is taken up in profit. To the buyer prices are just about the same. And conveniently, the commission for an architect is also 10%. So if you can design and self certify you also save a bit.

pydry 5y ago

Wealth inequality did this. It would have happened with or without the fed. As long as r > g the problem will only get worse. If the US returned to a 1950s style tax system or enacted very high wealth taxes this problem could be avoided, but the forces arrayed against you for proposing such reforms would mean political suicide for anyone who does it. Which makes me think that the problem will get worse until some sort of structural break occurs (at which point, as with 2008, it'll probably get worse at an accelerated rate with a cure worse than the disease).

FredPret 5y ago
r cannot possibly be greater than g over the long term. It’ll revert to the mean. Even if it’s greater than g due to an exceptional investor like Warren Buffet, eventually his heirs will take over, and they are likely not as good as he is. It is profoundly hard and unusual to keep a family rich for many generations.
- pydry 5y ago
  Of course not. The reversion to mean will probably happen as a result of a violent structural break, though, not as a gradual reversal. This means economic or political crisis. And, the same people who were made so fantastically rich from r > g will likely be the ones deciding what to do about it. It's not like governments will wake up from their stupor and implement a basic income. Whatever happens (fascism, war, financial crisis), it'll likely make us wish for the good old days of right here and now. I'm almost more afraid of the structural break than I am the inexorable rise of wealth inequality.
- patentatt 5y ago
  > r cannot possibly be greater than g over the long term. Thomas Piketty would like to have a word with you. https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Century https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Ce...
  - dcolkitt 5y ago
    Piketty’s empirical research has been thoroughly refuted and found to have major gaps that it’s not even funny anymore. This is why he hasn’t won the Nobel, for research that if actually accurate would have otherwise been a shoe in for the prize. https://marginalrevolution.com/marginalrevolution/2014/05/what-do-the-piketty-data-problems-really-mean.html https://marginalrevolution.com/marginalrevolution/2014/05/wh...

willis936 5y ago

Yes it's the $600 checks. Not the corporate welfare and corporate profit margins outpacing inflation. It's time to break up the mergers.

adam_arthur 5y ago
You hand somebody 1000 dollars, they spend it one time, and where did that money go in the end? Primarily on corporate balance sheets, paid to investors via dividends, buybacks etc. Of course also used to hire new workers and so on. The point being handing somebody money in a one time transfer only helps them in the immediate term but the inflationary impacts actually harm them longer term. I would venture to guess most of the stimulus money ended up in pockets of already wealthy asset holders at the end of the day.
- willis936 5y ago
  Yes and the investor class are the rich. Profit margins should not be rising in a time of scarcity. It's profiteering and nobody is doing anything about it.
  - adam_arthur 5y ago
    Blaming inflation on corporate greed is a tale as old as time. And it's largely debunked economic pseudo science. Companies and people are greedy all the time, that's the fundamental basis of capitalism. Capitalism is an acceptance of this and regulations to shape around actors working in their own self interest. Are companies more greedy now than they were in 2019? No An opt in moralism based economy will never work and has been tried and failed many times.
    - Supermancho 5y ago
      > Blaming inflation on corporate greed is a tale as old as time. And it's largely debunked economic pseudo science. That wasn't a claim. > Companies and people are greedy all the time, that's the fundamental basis of capitalism. Oversimplification. > An opt in moralism based economy will never work and has been tried and failed many times. This wasn't suggested. Your comment is vapid, in case you're wondering.

UncleOxidant 5y ago

The $600 check isn't what caused house prices to go through the roof it was the too-low-for-too-long interest rates. Historically the mean mortgage rate is about 7%. I suspect that we'll see a reversion to mean for rates as the Fed tries to fight inflation. If that inflation turns out to be "sticky" like it was in the 70s rates could overshoot and go well over 7%. If that happens... well, take a look at home sales data from the early 80s. People looking to buy a house at this point should cheer rising rates because it will mean lower prices. Buy at a high rate but lower price, refi when rates fall.

llamataboot 5y ago
There is also a pretty severe housing shortage in most urban areas. I'm not so sure prices are going to be that sensitive to interest rates, however they could be sensitive to purchasing power. But historically, US housing is so much cheaper to buy than say, any country in Europe, it can sustain quite some rise.
- UncleOxidant 5y ago
  It's all about that monthly cash-flow. If too many buyers are priced out (by either high prices or high interest rates or a combination of both) then we'll see markets stagnate. The housing market in an area can only remain stagnant so long before some sellers become desperate to sell and start lowering prices. Also, with more liberal WFH policies we should be seeing a spreading out as people who want to buy a house seek out places where homes are cheaper/more available.
  - dodobirdlord 5y ago
    > If too many buyers are priced out (by either high prices or high interest rates or a combination of both) then we'll see markets stagnate. Not if there’s a supply shortage. If there is a supply shortage then that necessarily means that some people will be priced out without corresponding downward price movement. 10 people, 5 houses, the market-clearing price is the 5th highest price any of the people are willing to pay. Remove the 5 people on the low end and that’s still the market-clearing price. The equilibriating force of price increases causing demand to drop causing downward price pressure only keeps prices in equilibrium around the market-clearing price. Supply shortages shift the supply curve and cause the market-clearing price itself to move. The equilibriating force that should address this is that increased prices should incentivize new supply to be created from sources that were previously uneconomical, but the supply shortage exists because of legal restrictions that distort the market.

RC_ITR 5y ago

The FED had nothing to do with the stimulus. Famously the FED “takes fiscal policy as it arrives at their doorstep” You should re-evaluate some of the connections you’re making, because you have good thoughts, but your villains are the wrong Ones.

ldjkfkdsjnv 5y ago
No people just dont understand what monetary policy does to assets.

lijogdfljk 5y ago

Communism? We sit here and allow wealth inequality to take record highs and then we're shocked when the capitalists are so strong that they own the government? This is uncontrolled capitalism imo. When the rich have such buying power that they own governments, as they do now, you can't really call it communism now can you? The government is just an arm of the rich now, and nothing will change until that is brought into check. Getting rid of government wouldn't stop the rich either.

nopenopenopeno 5y ago
Not just in your opinion but in Adam Smith’s and Karl Marx’s as well.
triceratops 5y ago
> Communism? In the US, anything you think is bad is "communism/Marxism" if you're on the political right, and "unrestrained capitalism" if you're on the political left. Don't fall into the trap of thinking there's any logic behind any of this.
- lijogdfljk 5y ago
  I think everyone is right there, to a degree. Ie yea, the government is at fault, but who is controlling the government here? etc The solution is balance. I'm a capitalist, but unrestrained capitalism is difficult to impossible. Unrestricted government or capitalism will fail in both cases imo.
sdoering 5y ago
Came here to ask similar questions/take a similar argumentative position. I don't know what in the eyes of cop is supposed to be communist about the current US social structure. I see (from the outside) modern feudalism and a social structure that, despite a simulation of democracy, is closer to European industrialization and its industrial barons and their working precariat than to a modern, democratic and fair society.

pinephoneguy 5y ago

tsycho 5y ago
Immigration?? It's been at record low levels since 2018, once Trump's policies came into full effect.
- pinephoneguy 5y ago

iso1631 5y ago

The US is going through the housing boom that happened in the UK about 20 years ago, nothing to do with giving everyone $1k for free. You think that $400b is a lot to "print"? Billionaires increased their wealth 10-fold in the same time, let alone the millionaires that have made a fortune from 10 years of rocketing stock market growth and leverage availability.

wbsss4412 5y ago

This has very little to do with $600 checks and everything to do with the policy response to 2008. We’ve had over a decade of cheap money creating asset price inflation and exacerbating inequality, not to mention the total collapse of the home building for several years and the exodus of qualified talent from that period drained much needed supply from the market. All of this happening while the largest generation since the baby boom entered prime home buying age. This has been a 15 year trend. It didn’t start yesterday and it won’t end for a long time.

adam_arthur 5y ago
And when the Fed went to course correct in 2018, they immediately bailed after markets started to decline to historically normal levels. Fiscal policy should be used to address economic gaps, not distortion through monetary policy. Of course, very hard to achieve alignment and consensus in the US political system. Despite the inflation, it's pretty clear the recovery after 2008 could have been much more rapid with greater fiscal injections. The Fed should be an algorithm IMO. Way too politically influenced.
- wbsss4412 5y ago
  Your last sentence really hits the nail on the head. In a lot of ways, the feds hands are tied by the political dysfunction in our political branches. They’re just putzing along, trying to plug the holes in a leaky ship.
  - adam_arthur 5y ago
    Yeah, and they tend to operate with short term thinking front of mind. I mean the Fed didn't even flinch at all in 2021 as all asset valuations reached bubble territory. Real estate appreciated faster than anytime in history. This becomes a real liability down the line if normalization of policy is ever needed. Bubbles can be disastrous to the economy longer term. They removed the moral hazard of risk taking for the past decade or so.
    - 5y ago

wnevets 5y ago

> The FED ruined young peoples ability to afford a home. Young people just need to cancel their Netflix, stop buying Starbucks, iPhones and pull themselves up by their bootstraps! /s

nine_zeros 5y ago

> Cost to borrow money (for an institutional investor) and buy a home with that money, is generating a positive return. As long as that is true, they will continue purchasing homes at a rapid rate. This is a monetary issue, money should not be available to buy homes like this. This is incompetence and negligence from the financial elite governing our nation. It is not strictly a monetary problem but you are close. It is a allocation of money problem. When the FED increases supply of money and/or lowers interest rates, people think that this will help the poorest get on the debt and get themselves going. But reality is that it is the rich (and institutions) that have assets good enough for collateralization. Which means that in a low interest rate environment the rich (and institutions) can borrow MUCH MORE than the poor, more easily. It plays out very simply. Banks literally salivate at lending to the rich in a low interest rate environment because the counterparty risk is super low. Just take the free money. With poor people the counterparty risk does not disappear with low interest rates. Over decades, the rich (or institutions) keep getting richer with the same mechanism. It's a misallocation. When the FED reduces rates, the rate reduction should not allow the rich to borrow at lower rates. The inequality is spiraling out of control at this point.

rowanseymour 5y ago

Some would argue that ability of the capital class to convert everything including the basic necessities of life such as housing into commodities, whilst convincing much of populace to blame boogeymen like "communism" for their decreasing social mobility, is why you're in this mess.

woodruffw 5y ago

In what meaningful sense could either the current or previous administration's policies be characterized as either communism or collectivism? It's hard to take this kind of rhetoric seriously, given that investors are the ones fomenting inequality here. There's no point in speculating on real estate/house value in a society where everyone is guaranteed a home -- where would the demand be?

bluedino 5y ago

More than just the $600 checks. They're still sending out child tax credits and increased benefits in other areas like SNAP.

namlem 5y ago

I didn't know the Fed was responsible for exclusionary zoning laws.

thrwy_ywrht 5y ago

>The FED ruined young peoples ability to afford a home. House prices have certainly risen substantially in the last few years [1]. But if the FED is to blame, why has the same thing happened in the UK [2], Germany [3] and Australia [4] ? [1] https://fred.stlouisfed.org/series/QUSR628BIS https://fred.stlouisfed.org/series/QUSR628BIS [2] https://fred.stlouisfed.org/series/QGBN628BIS https://fred.stlouisfed.org/series/QGBN628BIS [3] https://fred.stlouisfed.org/series/QDER628BIS https://fred.stlouisfed.org/series/QDER628BIS [4] https://fred.stlouisfed.org/series/QAUR628BIS https://fred.stlouisfed.org/series/QAUR628BIS

lordnacho 5y ago
Because interest rates went down in those countries as well? We're only just coming off the lowest rates ever in the UK. The Euro hasn't existed for long but record lows there too. Oz as well.
- arcticbull 5y ago
  Why hasn't the same thing happened in Japan, which has tripled its money supply since 1990? House prices (and the price of everything else) has remained dead-ass flat. The difference is the have federal zoning rules that allow the supply of houses to meet the demand of houses.
  - adam_arthur 5y ago
    Japan has a declining population. Residential real estate inevitably declines with this demographic trajectory. More housing units per person. Also Japan did not have a lot of nimby mentality blocking new housing, to my knowledge Lower rates offsets the price reduction to a certain extent.
    - CountSessine 5y ago
      Japan has a declining population. Residential real estate inevitably declines with this demographic trajectory. The Kansai region has an increasing population and real estate prices are still in decline or stable. Also Japan did not have a lot of nimby mentality blocking new housing, to my knowledge Yes, they did - prior to 2001 when the national government took zoning authority away from municipalities.

duped 5y ago

Lenders were granting loans last year for 5% down at below 3% interest and prices went up accordingly. Homes were more affordable than ever from the perspective of the cost of a mortgage per dollar. They became unaffordable due to the surge in demand because money was so cheap! What do you want the Fed to do? If they make money more expensive then mortgages become less affordable and housing prices slump, but if they make money easier to get then housing prices go up. Meanwhile, the Fed's mandates are maximum employment at sustainable inflation - not home ownership. The cost of housing has been dominated by local and state regulations for quite some time, it's not something the Fed can or should fix. What that means is that last year you could have bought a $300k home for $15k in cash and pay around $2k in mortgage/taxes/insurance. The real problems are that there were so few $300k homes and the vast majority of Americans don't have $15k for a downpayment. The Fed can't fix those problems. If you want to point a finger, point it at municipalities and who don't care about home ownership rates. They could make holding single family homes as long term investment properties unaffordable tomorrow, but choose not to. They could encourage new home construction, but they don't. (side note, "Fed" is not an acronym, it's an abbreviation for the Federal Reserve)

treis 5y ago
>Lenders were granting loans last year for 5% down at below 3% interest and prices went up accordingly. Homes were more affordable than ever from the perspective of the cost of a mortgage per dollar. They became unaffordable due to the surge in demand because money was so cheap I had to scroll distressingly far to see this post. The record set was going from ~13% investor bought to ~15%. It's a marginal change. Prices sky rocketed because, as you noted, (1) it was/is one of the best financial environments for home buying ever and (2) Covid accelerated timelines for home buying.
- duped 5y ago
  I think the point I'd like to harp on is that money was extremely cheap last year and it was the best time to buy a home - if you had the savings for a downpayment, that 30 year fixed rate mortgage was cheaper than rent! The problem is that half of Americans don't have more than a thousand dollars in the bank, and we need to focus less on the sheer cost of homes (when homes were incredibly affordable) and more on why Americans can't save for down payments.

rednerrus 5y ago

Isn't the fact that we had a dramatic slowdown in building houses following the great recession the leading cause of increasing home prices?

patentatt 5y ago

And now they're in a catch-22 because any significant decrease of housing prices would cause ripple effects throughout the system too. Which is why I think they're pursuing an inflationary policy to simply inflate their way out of it, but that also has negative consequences. There's not really a good way out of it at this point. It's almost like the free lunch they bought by setting rates to next-to-nothing after 2008 wasn't actually free.

bmitc 5y ago

How does communism relate? What's happening in the U.S. is state sanctioned class separation and a beyond disproportionate support of the so-called elite class. The U.S. has essentially had a non-violent coop in the sense of the ultra wealthy owning politicians and the government. The ultra wealthy and by extension the politicians they support are national security risks.

CydeWeys 5y ago

> communism/collectivism is once again the wolf in sheeps clothing. Huh? What you see here is capitalism in action.

closeparen 5y ago
Capitalism in action would involve a lot more building.

DoctorNick 5y ago

depicting problems with capitalism This is communism, actually

noobermin 5y ago

It is disappointing to see essentially red-baiting conspiracy theories at the top of a thread in hn.

adam_arthur 5y ago
What is the conspiracy? If Fed takes risk out of markets, risk premium disappears and value of assets expands. On top of cheaper money, of course. It's been clear to Fed observers that they've pursued a policy driven with asset pricing front of mind.

mschuster91 5y ago

> communism/collectivism is once again the wolf in sheeps clothing Authoritarian communism certainly is, no disagreement there. But in America, everything left of the GQP is branded as "communism" these days, including stuff that is considered a basic part of the system in Europe like public, affordable healthcare. If Americans were able to debate the successes of European policy - and that includes even part of what the former GDR did, like providing access to childcare for mothers so they could work, or provide access to safe abortions - on face value, without resorting to "but that's communism!!!", your life would be so much better.

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jp42 5y ago

for those who dont know. Read about "Cantillon Effect", it basically means whoever gets newly printed money first benefits the most at the cost on whoever gets it later.

arcticbull 5y ago
Nobody, and I mean nobody, seems to have quantified the Cantillon effect. Money is "printed" when a fractional reserve loan is issued. That means when people borrow money. Everyone borrowing new money is doing so from the printer. Please either quantify the Cantillon effect or find a new scapegoat. The issue is zoning.

graaben 5y ago

I haven't really seen much written on this (maybe I'm just not looking) but what does the future look like when only the top 10-20% can afford a home? Do 80% of families rent forever with no real possibility of being able to buy a home near an economic center? What does that look like for the broader society when so much of the American dream and self-worth is built on being a homeowner? I live in LA and I think about this a lot when I see the only homes for sale here going for $3-4+ million. How much longer can this continue?

01100011 5y ago
I have mixed feelings on this. On the one hand we have a massive wealth/power gap and I desperately want myself and every other human to have a shot at owning a single-family home in a desirable area with all of the comforts of modern life. On the other hand I know that we are overtaxing the world's resources and short of some massive changes in our system many middle class folks in the western world are going to see a drop in their quality of life as globalization continues and our living standards average out with those of people in developing nations.
closeparen 5y ago
A mass-affordable Los Angeles is geometrically impossible. The single-family house and car culture are central to what it means to be "LA" and there are fundamental scaling limits on those.
- JoeJonathan 5y ago
  LA was zoned for ~10 million as recently as 1960. While I think you're right that the problem is probably intractable—who would want to give up their house for an apartment, unless maybe a dense, walkable area appeared overnight?—I wonder if there are legislative solutions, like rolling back Prop 13 (which will probably never happen).
  - strangesongs 5y ago
    But people don't have to give up single family homes to create density -- we just need to build more of everything else, wherever we can, to increase housing. No one is coming for existing single-family homes -- they can peacefully co-exist alongside properties that house 5x the amount of people.

01100011 5y ago

If the latest FOMC minutes are still relevant given the subsequent data drops showing even hotter inflation, then it looks like the FED will be scaling back mortgage purchases soon while continuing to support a lower federal funds rate. I don't know, but this seems like it screws individual home owners/buyers, where most middle class folks store their wealth, while continuing to support elevated commodity and equity prices where the rich store the majority of their wealth. Hopefully the recent data will force the rich bastards who run the fed to stop putting themselves and their elite compatriots first and finally slow down inflation and asset prices but given their history that seems like wishful thinking.

bsedlm 5y ago

> This is incompetence and negligence from the financial elite governing our nation. that is one possibility, the other is that their intent is different than what one would expect, it's pretty much impossible to tell which is it. consider the war on drugs, an utter failure if one believes that it's actually intended to diminish drug use. however given it only recently begun slowing down, without real signs of stopping, I cannot help but consider the possibility that the actual intentions behind it have been a great success but then that means the american government has intentionally caused terrible evil towards most of latin america. this is why I consider the possibility that it might not be incompetence in this case either

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huevosabio 5y ago

Zoning and local vetocracy (aka NIMBYism) ruined people's ability to afford home. The horror here is that we have artificially limited house building and at the same time encouraged the population to treat it as an asset class. We treat residential real estate like crypto-bros treat their NFTs.

strangesongs 5y ago
Exactly this. Look at the slow-moving nightmare happening in Berkeley because of NIMBYism and CEQA reviews. The city/state/UC system is going to lose an incredible amount of funding and student enrollment is going to plummet because some rich Berkeley assholes don't want new apartments in their neighborhood. California (and all states) need to build massive amounts of housing (any kind! public, social, market-rate, affordable -- it doesn't matter just do all of it at once) to address the immediate demand while we also work on destroying the concept of housing as an asset and not a guaranteed right.

diob 5y ago

What in the world do you mean by the communism/collectivism thing? This was a move by the Trump administration, was it not? And especially the "no ability to track" part of the handout to big business.

runako 5y ago

On the contrary, housing is more affordable now than at any time in the last 40 years, except for the period right after the 2008 crash. Higher prices are more than offset by lower mortgage costs. Money got cheaper faster than housing got more expensive. Most people who are not rich are buying money with a house kicker in 30 years, so the cost of money is the important factor. https://ritholtz.com/2021/08/how-expensive-are-houses/ https://ritholtz.com/2021/08/how-expensive-are-houses/

adam_arthur 5y ago
Article is dated. Mortgage rates are up over 1% since then, and slated to continue rising rapidly. Affordability will be just about record lows at 5%. Inflation adjusted home prices have already surpassed the 2000s peak, and are a few std deviations above historical norms. If inflation doesn't abate, we can expect 6% mortgages in the near future.
- runako 5y ago
  This is absolutely all correct, and also supports the basic argument that houses are not wildly more unaffordable now than they were in (say) 1990.
  - adam_arthur 5y ago
    Affordability is almost as bad as the 2000s peak already. If you judge by housing payment relative to income
    - runako 5y ago
      Would you mind sharing a link to your source? I would love to update my mental cache? Thanks!
      - adam_arthur 5y ago
        I'll try to find the chart I saw on this recently. But here's home price relative to median income, which is at a record. Then apply logic that mortgage rates are 4.1% now and likely to be 5% soon. https://www.longtermtrends.net/home-price-median-annual-income-ratio/ https://www.longtermtrends.net/home-price-median-annual-inco... 2000s affordability was still worse at the peak, but will shift quickly if mortgage rates continue to rise. Anyway, will edit when I find

thatfrenchguy 5y ago

Wealth inequality, no meaningful inheritance tax, zoning and underproduction of housing did this, not the fed.

tootie 5y ago

You have no idea what you're talking about. The Fed didn't send checks, Congress did. Fed has a dual mandate to curb inflation and maximize employment. They have zero obligation to home buyers or home owners and have never said otherwise. It is entirely up to Congress (and state governments) to manage housing issues. The Fed can't create loans, they can't create housing stock, they can't control supply, they can't control a pandemic, they can't keep investors out of consumer markets. That's all up to legislators. Home prices are rising along with everything else right now and the Fed is almost certainly going to start to tighten very soon, but everything for the past two years and really the past 20 years has been emergency measures against perceived looming disaster. I'd rather deal with high house prices than famine or some other truly existential crisis.

szundi 5y ago

At least since QE was introduced, real US GDP is growing slower, 10%+ lost.

0x4d464d48 5y ago

"This is incompetence and negligence from the financial elite governing our nation." Wrong. This was a deliberate and planned response to protect their true stake holders from the liquidity crunch that COVID lockdowns almost unleashed. Asset owners. For all intents and purposes it worked extremelly well. https://www.barrons.com/articles/blackrock-is-biggest-beneficiary-of-fed-purchases-of-corporate-bond-etfs-51591034726 https://www.barrons.com/articles/blackrock-is-biggest-benefi... https://www.forbes.com/sites/sergeiklebnikov/2022/02/11/two-senior-federal-reserve-staffers-made-trades-amid-central-banks-2020-stimulus/?sh=505ce0961bee https://www.forbes.com/sites/sergeiklebnikov/2022/02/11/two-... https://www.forbes.com/sites/moneyshow/2020/02/25/moral-hazard-debt--bubbles-theres-more-to-worry-about-than-the-coronavirus/?sh=27cf89e91741 https://www.forbes.com/sites/moneyshow/2020/02/25/moral-haza... Nothing incompetent about it. This is moral hazard in action and has been the bull case for some time now. Fundamentals don't matter anymore because anytime the market gets rickety its been a safe bet that either the Fed will swoop in with more QE and low interest rates or the federal government will issue more bailouts. Risk is socialized while gains are privatized.

newaccount2021 5y ago

HWR_14 5y ago

> communism/collectivism is once again the wolf in sheeps clothing. Yes. The use of capital to purchase large scale investments causing negative ripple effects on society is communism. The system that famously loves and allows for private capital.