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But why have prices soared in just a few years while the population barely grew? Something else seems to be driving up prices other than just "people need a pl

But why have prices soared in just a few years while the population barely grew? Something else seems to be driving up prices other than just "people need a place to live", and I don't see any inherit reason as to why housing prices cant go down 20-30% just like the stock market.

dlp211 4y ago
Demand significantly outstrips supply in desirable areas. It's not just about population growth, it's about where that population chooses to live and how much of the population are looking to buy a home.
- pbuzbee 4y ago
  Over the last two years, it feels like even undesirable places have had huge price increases too.
- mupuff1234 4y ago
  > Demand significantly outstrips supply in desirable areas Is there a state that hasn't seen major price increases? Edit: Just checked, and except Alaska all states saw at least a 20% increase in the last 2 years (and quite a few had 30-50% increases) > how much of the population are looking to buy So if mortgage rates go higher that should mostly likely drop, no?
  - dlp211 4y ago
    > Just checked, and except Alaska all states saw at least a 20% increase in the last 2 years (and quite a few had 30-50% increases) Which goes to my last point, the population of people wanting to purchase a home has grown. > So if mortgage rates go higher that should mostly likely drop, no? I don't know why so many people try to boil down markets to "A therefore B" statements. These are complex systems with 100's of different inputs plus 10's of millions of individual actors. Interest rates don't affect just the buy side, but also the supply side. If supply drops in proportion to demand, then the marginal house will still maintain these high price levels. We could also see a pullback in less desirable areas and a leveling off or even a continued increase in prices in desirable areas. There are many different scenarios that can play out, and yes, prices could pull back...but by how much? My best guess is that prices level off or have a small pull back.
    - dragonwriter 4y ago
      > Which goes to my last point, the population of people wanting to purchase a home has grown. It seems pretty clear to me that the issue is more that the number of people wanting to sell a home has shrunk; active listings are way down in every state.
      - dlp211 4y ago
        That is a consequence of rising interest rates. Folks who refinanced at sub 3% on a 30-year fix can't afford to move and are locked into their home.
dragonwriter 4y ago
> But why have prices soared in just a few years while the population barely grew? No one is selling; supply (active listings) is way down over the last few years, and the buyers (the ones that actually get to complete a transaction, given the few units on the market) are the relatively price insensitive, so market clearing prices are way up. Click through any of the state listings and check the charts: https://fred.stlouisfed.org/release/tables?rid=462&eid=1129344#snid=1129349 https://fred.stlouisfed.org/release/tables?rid=462&eid=11293...
- mupuff1234 4y ago
  Interesting, thanks! If that's the case, I think this type of collective "hodl" mentality usually breaks down very quickly when even small pressure is applied as people would always try to cash out if they suspect the market has topped, but that's just a hunch.

dlp211 4y ago

Demand significantly outstrips supply in desirable areas. It's not just about population growth, it's about where that population chooses to live and how much of the population are looking to buy a home.

pbuzbee 4y ago
Over the last two years, it feels like even undesirable places have had huge price increases too.
mupuff1234 4y ago
> Demand significantly outstrips supply in desirable areas Is there a state that hasn't seen major price increases? Edit: Just checked, and except Alaska all states saw at least a 20% increase in the last 2 years (and quite a few had 30-50% increases) > how much of the population are looking to buy So if mortgage rates go higher that should mostly likely drop, no?
- dlp211 4y ago
  > Just checked, and except Alaska all states saw at least a 20% increase in the last 2 years (and quite a few had 30-50% increases) Which goes to my last point, the population of people wanting to purchase a home has grown. > So if mortgage rates go higher that should mostly likely drop, no? I don't know why so many people try to boil down markets to "A therefore B" statements. These are complex systems with 100's of different inputs plus 10's of millions of individual actors. Interest rates don't affect just the buy side, but also the supply side. If supply drops in proportion to demand, then the marginal house will still maintain these high price levels. We could also see a pullback in less desirable areas and a leveling off or even a continued increase in prices in desirable areas. There are many different scenarios that can play out, and yes, prices could pull back...but by how much? My best guess is that prices level off or have a small pull back.
  - dragonwriter 4y ago
    > Which goes to my last point, the population of people wanting to purchase a home has grown. It seems pretty clear to me that the issue is more that the number of people wanting to sell a home has shrunk; active listings are way down in every state.
    - dlp211 4y ago
      That is a consequence of rising interest rates. Folks who refinanced at sub 3% on a 30-year fix can't afford to move and are locked into their home.

dragonwriter 4y ago

> But why have prices soared in just a few years while the population barely grew? No one is selling; supply (active listings) is way down over the last few years, and the buyers (the ones that actually get to complete a transaction, given the few units on the market) are the relatively price insensitive, so market clearing prices are way up. Click through any of the state listings and check the charts: https://fred.stlouisfed.org/release/tables?rid=462&eid=1129344#snid=1129349 https://fred.stlouisfed.org/release/tables?rid=462&eid=11293...

mupuff1234 4y ago
Interesting, thanks! If that's the case, I think this type of collective "hodl" mentality usually breaks down very quickly when even small pressure is applied as people would always try to cash out if they suspect the market has topped, but that's just a hunch.