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> All-cash is basically the new norm. It’s paradoxical that all-cash became the norm in a period where mortgage rates were at all time lows…

DragonStrength 4y ago
Well, only if you ignore how we got there. Housing output took far too long to recover after 2008, and on top of that, many homeowners felt entitled to the gains they lost during the recession because that is what the American Dream promised. We could also pull on the demographic weirdness of the moment as Baby Boomers only finally cede political power, skipping a generation. What have all are priorities concerned since they came of voting age? Should we be surprised our recent policies continued to favor older people who owned homes over young people deciding the shape of our next generation? And to be clear, I'm not blaming any motives. I'm saying much of this can be explained by an "accident" (or maybe "conclusion") of demographics. The worst is if our incentives are for lazy capital returns (like rapidly rising residential real estate) for retirees the people who benefit in the younger generations are not going to be the people taking risks like starting businesses.
- throw8383833jj 4y ago
  In the long term, housing should always return to the cost of building it plus the cost of land, that's the long term trend line. Now, why this trend line is increasing so fast is the real reason why housing is so expensive (something no one ever talks about), everything else is just incidental and or temporary effects.
- deleted 4y ago
  [deleted]
andsoitis 4y ago
> It’s paradoxical that all-cash became the norm in a period where mortgage rates were at all time lows… Cash transactions have less friction and chance of falling through, so it makes sense that sellers prefer cash purchases. Consequently, you see cash offers because buyers know that sellers prefer - you essentially jump to the front of the line.
- dionidium 4y ago
  And just to make the connection explicit: if lots of buyers are making competitive offers because rates are low and money is cheap, then that's going to encourage the people who can afford to pay cash to make an all-cash offer where otherwise they might not have.
- shrimpx 4y ago
  I guess my core question is: do they keep the cash in the house, or do they use cash just as a vehicle for the purchase, and then finance the cash out of it? Because there was a concurrent trend to refinance houses at 2% loans and put the cash in the stock market, which is assumed to beat that 2% over the duration of the loan.

DragonStrength 4y ago

Well, only if you ignore how we got there. Housing output took far too long to recover after 2008, and on top of that, many homeowners felt entitled to the gains they lost during the recession because that is what the American Dream promised. We could also pull on the demographic weirdness of the moment as Baby Boomers only finally cede political power, skipping a generation. What have all are priorities concerned since they came of voting age? Should we be surprised our recent policies continued to favor older people who owned homes over young people deciding the shape of our next generation? And to be clear, I'm not blaming any motives. I'm saying much of this can be explained by an "accident" (or maybe "conclusion") of demographics. The worst is if our incentives are for lazy capital returns (like rapidly rising residential real estate) for retirees the people who benefit in the younger generations are not going to be the people taking risks like starting businesses.

throw8383833jj 4y ago
In the long term, housing should always return to the cost of building it plus the cost of land, that's the long term trend line. Now, why this trend line is increasing so fast is the real reason why housing is so expensive (something no one ever talks about), everything else is just incidental and or temporary effects.
deleted 4y ago
[deleted]

andsoitis 4y ago

> It’s paradoxical that all-cash became the norm in a period where mortgage rates were at all time lows… Cash transactions have less friction and chance of falling through, so it makes sense that sellers prefer cash purchases. Consequently, you see cash offers because buyers know that sellers prefer - you essentially jump to the front of the line.

dionidium 4y ago
And just to make the connection explicit: if lots of buyers are making competitive offers because rates are low and money is cheap, then that's going to encourage the people who can afford to pay cash to make an all-cash offer where otherwise they might not have.
shrimpx 4y ago
I guess my core question is: do they keep the cash in the house, or do they use cash just as a vehicle for the purchase, and then finance the cash out of it? Because there was a concurrent trend to refinance houses at 2% loans and put the cash in the stock market, which is assumed to beat that 2% over the duration of the loan.