5 ms·

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

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.
  - adam_arthur 5y ago
    On a country wide scale, housing units to households is in line with historical norms. 1.1 housing units per household. Same as year 2000. But you're right that local areas could have worse ratios. https://fred.stlouisfed.org/series/TTLHH https://fred.stlouisfed.org/series/TTLHH https://fred.stlouisfed.org/series/ETOTALUSQ176N https://fred.stlouisfed.org/series/ETOTALUSQ176N
    - llamataboot 5y ago
      rental units are not the same as a house you want to buy, even regardless of location and amenities and size etc
      - adam_arthur 5y ago
        Housing is fungible. Lower rents decrease demand for purchasing and vice versa. There will of course be a subset of people who will exclusively only buy regardless of price, but in aggregate the principle applies

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.
- adam_arthur 5y ago
  On a country wide scale, housing units to households is in line with historical norms. 1.1 housing units per household. Same as year 2000. But you're right that local areas could have worse ratios. https://fred.stlouisfed.org/series/TTLHH https://fred.stlouisfed.org/series/TTLHH https://fred.stlouisfed.org/series/ETOTALUSQ176N https://fred.stlouisfed.org/series/ETOTALUSQ176N
  - llamataboot 5y ago
    rental units are not the same as a house you want to buy, even regardless of location and amenities and size etc
    - adam_arthur 5y ago
      Housing is fungible. Lower rents decrease demand for purchasing and vice versa. There will of course be a subset of people who will exclusively only buy regardless of price, but in aggregate the principle applies