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I am just not sure about this. There are more Millennials than Gen X, and Millennials are in their prime family-building and house-buying years. At the same tim

I am just not sure about this. There are more Millennials than Gen X, and Millennials are in their prime family-building and house-buying years. At the same time, in the aftermath of the Great Recession, not much new housing was built. The intersection of those two trends might mean demand exceeds supply purely mathematically. Especially if people who locked in mortgages at lower rates are reluctant to sell as a result, furthering lowering supply. Certainly prices may come down in some locations as interest rates go up if there aren't enough cash buyers, but will it be enough to counteract the imbalance of demand and supply? I think it's an open question.

swexbe 4y ago
At the same time, boomers are starting to die off.
arberx 4y ago
Prices are already down in many places, and it's only been 5 months since rates started rising. Many factors to supply imbalance. Look at the increase in the amount of Airbnbs since 2010. People might be reluctant to sell, but they might need to when they can't rent, Airbnb, or lose their job.
- phlipski 4y ago
  I do wonder how many people can afford that vacation home without making use of Airbnb (or other vacation rental type system) to help with the payments...
ghastmaster 4y ago
> Millennials are in their prime family-building and house-buying years. They have less earnings and savings than the previous generation as compared to the price of homes at the same time in their lives. While government intervention in the USA has adjusted the requirements to get a loan approved, it will not be enough to keep up with rising interest rates. Prices have to come down for millennials to make purchases. This will cause a "house-price" slump.
technotony 4y ago
This demand effect is certainly real, but is going to be weighed against the higher rates effect. A lot of the increase in prices was purely mathematically driven by the falling interest rates. The monthly payment if you get a mortgage has now doubled for most people. There's no way that's sustainable, especially as most first time buyers were already stretcing to their limit. All it takes is a belief that prices might fall to put off buyers a year or two and balance the demand side of the equation enough for prices to fall. House prices typically fall slowly though, as sellers are reluctant to sell at first and buyers just start waiting. Seems we are already seeing that impact on transaction volumes drying up.
mywittyname 4y ago
Agreed. Prices might fall relative to the wackiness of Covid peaks that were hit in the past year or so, but the long term trend will be for prices to outpace inflation unless a building spree hits due to demographic changes. A bright light I'm seeing is that material costs have largely fallen back to pre-covid levels. There are a few bits that are expensive or hard to obtain (windows), and the labor market is still aging. But still, the cost to build in many areas has fallen dramatically.
macNchz 4y ago
> Certainly prices may come down in some locations as interest rates go up if there aren't enough cash buyers The interest rates make a huge difference here...a hypothetical buyer who could afford $5000/month in payments would qualify for a $1.22 million mortgage at 2.75% interest, whereas that same payment at 7% would only cover a $750k mortgage. Cash buyers are generally about 25% of the market, which is a good chunk, but not enough to prop up prices if the other 75% of buyers they're competing with have had their purchasing power drop by 40% in the past 6 months.
- Raidion 4y ago
  FWIW, those numbers are off because of escrow and taxes. 1.22MM house means AT LEAST 30k in property taxes a year, which mean's they'll end up at >~7.5k a payment, which means they'll need to buy a smaller house.
  - HarHarVeryFunny 4y ago
    Not where I live in NJ. 1.2M house is going to be < 20K taxes.
    - macNchz 4y ago
      Yeah this is very market dependent, especially with regard to whether there are state/local income taxes or the government depends mostly on property taxes. Here in NYC I’d expect to pay $10k or less in annual taxes for a property in that price range, however there are city and state income taxes plus apartment building building common charges. It’s hard to compare this stuff apples to apples, but the one constant regardless of locality is that higher rates significantly reduce buying power for people relying on mortgages.
    - googlryas 4y ago
      Where do you live in NJ? The average effective property tax rate is 2.470% of the home value. Property taxes would be ~$38k in Gloucester county(across the river from Philly).
z9znz 4y ago
Traditional institutions, like home ownership, marriage, and religion, are fading in their appeal. In the case of home ownership, the benefits depend quite a lot on the number of years the property will be owned. I'm not sure what the numbers are now, but when I bought and later sold my house, I determined that 6-7 years was the minimum duration that made home ownership better than just renting. People change jobs more frequently now than in the past, and consequently they tend to move around more often. That makes investing in a home more risky, as it's really unclear if one will still want to be in that home/location in 5 years. Renting, by comparison, is less risky. It may be less economical over the long run, but not if you would find yourself moving every small few years. Also, the remote work thing is not going to decrease; if anything, it will increase, reducing location pressure (and consequently reducing the value (or rate of increase in value) of homes in certain areas). That implies even more risk for homeowners in those areas, as they cannot rely on ever-increasing values.
- jeffbee 4y ago
  > People change jobs more frequently now than in the past Pretty sure that’s wrong. Tenure in job is near an all time high in America. Boomers were the job hoppers.
  - rippercushions 4y ago
    Depends on the industry. For many people in IT, changing jobs every few years is pretty standard, as is relocating if a good enough opportunity pops up.
    - jeffbee 4y ago
      I'm going to need a citation on that.
      - mkr-hn 4y ago
        Numbers would be interesting to compare to the widespread discussion on HN that makes it seem common.
hedora 4y ago
Put very simply: Affordability will continue to decrease, due to the lack of supply of housing and of skilled labor to build new housing. At the same time, real prices (what is paid to existing homeowners, adjusted for inflation) will decrease due to higher interest rates. As corrolaries: Real mortgage payments will increase, and property tax revenue will decrease. So, the banks win, schools, local governments and individuals lose--nothing new there.
- seiferteric 4y ago
  Ya, this is not like 2008 where interest rates were low AND housing prices collapsed, which actually did make houses more affordable. This happened because the recession was specifically about real estate and the bad mortgage loans blowing up. Since this is not happening now, even if housing prices stagnate or go down a bit, unless you are paying with cash, things are not going to be more affordable since rates are up.
  - rdtwo 4y ago
    I don’t see why the Covid peak couldn’t all blow off. Very few new buyers actually bought then and will be underwater
    - seiferteric 4y ago
      Ya but being underwater doesn't really matter if you plan on living there for a long while. People will need a good reason to sell their house, like no longer being able to make payments due to job loss etc. (or they bought like 10 houses like in early 2000's...) So as long as the rest of the economy is okayish, I just see prices stagnating for a while. Also, inflation actually helps when you have a fixed mortgage...
      - hedora 4y ago
        You forget margin calls (mortgages with margin call provisions are illegal in California, and probably some other states in the US). Basically, your mortgage says you have to maintain N% down. So, if the house price drops enough, you make a balloon payment or the bank forecloses, and sells the house at auction. Once margin calls start triggering, there's an automatic sell off of whatever asset is impacted, causing more margin calls and a feedback loop. 90% of Britain's pension funds were hours away from being zeroed out by margin calls a few weeks ago. The Bank of England intervened. It made for some great reading. This is why the UK gov't keeps walking back the mini-budget, and the IMF is making noises usually reserved for failing dictatorships.
nugget 4y ago
Millennial here. In the last 18 months I've substantially increased the % of net worth I'm comfortable allocating to a home, reflected in both purchase price and remodeling costs: - it's not clear that pandemic-era is over, whether that be new Covid strains or other mutant viruses (not to mention global thermonuclear war) - work from home requires much more space to do well + i'm home more often to enjoy the rest of the house - most of my close friends work from home which means they can come and visit much more often - due to Covid, parents are afraid of nursing homes + kids taking longer to leave the nest = intergenerational living is back on the radar - life is short, a little bit of post-Covid YOLO I'm not sure how widespread the sentiment is but if enough people feel this way it could make an impact.
- benjaminwootton 4y ago
  Not saying you are right or wrong, but you seem to be over indexing for Covid. Most people seem to have moved on finally, and even the last bastion WFH will come under pressure with the bad economy.
  - VBprogrammer 4y ago
    As things stand I'd need a significant pay rise to start working from an office again. Bills and mortgage increases have eaten the benefits I got from not having to travel so if I had to travel into work most days I'd be significantly worse off. There seems to be an implicit assumption that WFH is somehow less productive. I've not seen much evidence of this personally. It certainly makes management harder but it's a small price to pay when it's saving a bunch of travel costs for the employee and office costs for the employer
    - batch12 4y ago
      > As things stand I'd need a significant pay rise to start working from an office again If I am understanding the parent, the point being made is this may be less of an option for many if companies revert. If there aren't many opportunities to work remotely, this will become more of a perk, like free lunches, and not something other organizations will compensate you for. Not everyone may have a choice to demand more money if the number of WFH options are very limited.
arcticbull 4y ago
Sort of, the bigger problem in the US is that the US market is short something like 6 million houses due to zoning rules. Volume is going to dry up significantly, and prices will go down a little bit - but there won't be a deluge of forced sellers like there were in 2008 because most people are on long-term fixed-rate loans. The majority of sellers will be divorcees and estates, as individuals chill in their 2.625% APR 30y fixed's - or own their homes outright. Unlike 2008 we're not coming off a deluge of building, quite the opposite - and unlike 2008, most people don't have 5 houses on variable rate debt. tl;dr: Prices will go down a bit, but the market is so short housing, it won't really matter. Longer term anyone who buys at 7% APR will just refi down when rates drop - and probably cash-out refi at that.
bwestergard 4y ago
If millennials were as wealthy as earlier generations at the same age, I think you'd be right. But millennials hold about half the fraction of national wealth that the baby boom generation did at the same age.
freeopinion 4y ago
I welcome a slump. I doubt it will be as big as I hope. My first home cost me ~2x my new grad salary. Today homes cost 5+x a new grad salary. And it isn't because Millennials are buying up the market. Investors are buying up the market and making it impossible for run-of-the-mill families to own a home. I hope those investors lose a lot of money. It needs to hurt bad enough to settle into long term memory and discourage such behavior for generations to come.
randomdata 4y ago
> in the aftermath of the Great Recession, not much new housing was built. Notably due to the Great Recession aligning with record high (at the time) food commodity prices, which saw farmers outcompeting home buyers for development lands. Food commodities have completely smashed those records over the past year or two and if that continues we will no doubt have farmers willing to bet big, which again will constrain housing development. What will be interesting is if we are able to get our food supply issues under control. Food prices have been known to drop like a rock before.
- dan-robertson 4y ago
  I’m slightly surprised by this comment. The main story I see online is more like ‘the places that people [with reasonable amounts of money to spend on property] want to live are in or near the centres of large cities and land-use policies in those cities mean that it is very difficult for developers to build significant amounts of property, so it mostly doesn’t get built’. Obviously there aren’t farmers rushing to convert car-parks in San Francisco into wheat fields. But perhaps what I’ve read is just wrong or biased towards the kind of wealthier youngish people who want to live near the centres of these big cities and can already afford to rent there.
  - rdtwo 4y ago
    I think near is the key. 5 years ago It used to be that the city core was cool now city cores are just a dumping ground of empty offices and societies rejects. We’re in another era of sprawl this time driven by for from home convenience
  - randomdata 4y ago
    I don't think they are at odds with each other. A city not being able to easily sprawl into the surrounding farmlands, as they have historically done, puts increased pressure in the city centre. Maybe you prefer the city centre, but if you could build a new home in the suburbs for pennies on the dollar, it would be hard to pass up. But when building that suburban home costs just as much then there is little reason to compromise. There is still a lot of sprawl happening, to be sure. But when competing for use, you're going to pay a lot more, which in turn drives up the cost in the city centre. Prior to 2007 when food commodities first started going nuts farmland was significantly less valuable. Cities don't stand as islands. They exist within a much larger world.
petercooper 4y ago
There are more Millennials than Gen X, Quite a few major countries are going to struggle though. The US may have a bigger Millennial cohort, but if we say Gen Xers are 42-55 and Millennials are 26-41, the population pyramids for many large economies make for grim reading. Consider Italy (adjust ages for being 4 years ago): https://commons.wikimedia.org/wiki/File:Italy_population_pyramid_(2018).jpg https://commons.wikimedia.org/wiki/File:Italy_population_pyr... .. or, to a lesser extent, China: https://commons.wikimedia.org/wiki/File:China_population_pyramid_(2018).jpg https://commons.wikimedia.org/wiki/File:China_population_pyr...
chadash 4y ago
My 30-year mortgage is locked in at 2.875%. My overall mortgage payments would go up 60% if I took out a new loan for the same amount at 7%. On one hand, this means that prices need to come down to get houses into peoples' price ranges. On the other hand, if the market is down, there's no way in hell that I'm selling my house. A loan at 2.875% is almost like having free money, so even if I need to move, I'd prefer to rent out my house than sell it. It's unclear if we will see low prices, but fewer sellers, or high prices, but fewer buyers. What's clear though is that this is going to be a low liquidity housing market without a lot of transactions.
- lotsofpulp 4y ago
  > On the other hand, if the market is down, there's no way in hell that I'm selling my house. As long as you are occupying a residence, it would not effect nationwide or region-wide supply and demand, right? You selling would be offset by you buying. Deaths, divorces, immigration, births, and of course, new construction is what would shift supply and demand curves, on average.
  - chadash 4y ago
    Yes, but in this environment, I'd probably try to buy something new without selling (but renting out instead). Also, if lots of people are buying and selling, even if aggregate demand is the same, it's a more liquid market. If I'm a first-time homebuyer, I'd rather play in a market of musical chairs then try to buy in a theater where only the dead and divorced get up from their seats.
  - bombcar 4y ago
    That's entirely true if all houses are the proverbial spherical identical house, but people chasing to remain "where they are" also slows down upgrades and downgrades. If a family that would normally have sold their older two bedroom and moved to a four bedroom instead chooses to remain in the two bedroom longer, that two bedroom doesn't appear on the market, a four bedroom languishes. And if nobody is building two bedroom houses, that can have ripple effects.
- 4y ago
vineyardmike 4y ago
Hi. Millennial here. I was house shopping this year but had to wait as I moved for a new job. In January I was quoted $>1M of buying power (without my partner). Now I’m quoted <$700k. I’m not buying anything soon. My father is looking at moving to a new condo for retirement but was hesitant about HOA fees. This year he spent $50k to replace all the windows in his current home to prep for sale. That $50k in maintenance would cover $300mo in equivalent hoa fees, and that’s not considering every other maintenance cost he’s spent. The math just doesn’t justify home ownership from a financial perspective - if your home value isn’t skyrocketing. I’ll be a renter for a while it seems. Maybe that’s ok.
- bombcar 4y ago
  As a side note it's often not worth maintenance in prep for sale, unless it takes it from uninhabitable to habitable (or more precisely unmortgageable to mortgageable). The $50k you spend on windows would often only recoup $45k or even less, people vastly underestimate the costs of many things (but not all, foundation problems people always overestimate). The saddest story I read about was someone who was told that putting $20k of new windows would let them sell for $40k more; and they did, and the buyer bulldozed the house to build a new one.
  - nostrademons 4y ago
    People often overestimate the universality of their tastes. Our sellers assumed that one of the first things we'd do would be a kitchen remodel, but we actually love the kitchen the way it is, and are just doing minor appliance replacements. Meanwhile what we actually did was new windows, solar, and a bunch of energy efficiency upgrades, which had been totally off their radar screens. If they'd gotten a different buyer it probably would've been a very different set of upgrades.
- secabeen 4y ago
  The value in home ownership is in reliability of housing. With a family, I seriously value knowing that I'm not likely to have my home pulled out from under me by the landlord for a higher and better use.
Merad 4y ago
Another big factor here is that the boomers are starting to die off. The oldest of that generation is 77 now and 80% of them are homeowners, so the next 20-30 years are going to see quite a lot of wealth (including homes) pass from boomers to their GenX and Millenial children.
- CameronNemo 4y ago
  Why do you assume that the homes will be inherited? Often people sell their homes to finance their retirement, or pay medical bills. Assisted living does not come cheap.
  - Merad 4y ago
    Yes, more than a few will be lost that way. From what I've read though boomers as a whole want to stay out of assisted care facilities, probably because many of them saw their own parents rot in such places. My own parents are near the leading edge of the boomer cohort (they're 75) and it's a common feeling among their friends. Also, the grim reality is that you have to live long enough to need assisted living. A life expectancy of 78 sounds good on paper, but by the time you get to your late 60s and early 70s people in your age bracket are dropping pretty quickly.
    - ptmcc 4y ago
      They may want to stay out of assisted care facilities, but late life decline makes independent living difficult to impossible for many. They may try to put it off as long as possible, but it will catch up to them. And then it does not take long for the costs to consume their would-be estate. And the irony is that it's the system their generation built for their parents.
    - ncallaway 4y ago
      Keep in mind that the life expectancy for a 70 year old is often a bigger number than the average life expectancy. For example in the US a male has a life expectancy of 76.22 (https://www.ssa.gov/oact/STATS/table4c6.html https://www.ssa.gov/oact/STATS/table4c6.html), but a 70 year old male has a life expectancy of 84.59 years. But that doesn't take away from your main point about people wanting to avoid that situation.
Aperocky 4y ago
> not much new housing was built. Are you from California?
- codexjourneys 4y ago
  No, the Northeast. A general rundown that mentions the post-2008 building shortfall: https://www.npr.org/2022/03/29/1089174630/housing-shortage-new-home-construction-supply-chain https://www.npr.org/2022/03/29/1089174630/housing-shortage-n... This one's older (from 2020) but digs into details by area of the country: https://eyeonhousing.org/2020/01/a-decade-of-home-building-the-long-recovery-of-the-2010s/ https://eyeonhousing.org/2020/01/a-decade-of-home-building-t...
andrewmutz 4y ago
There are two big forces pushing prices in opposite directions. Prices will be pushed downwards by rising interest rates. Prices will be pushed upwards by a genuine housing shortage in the US. Which force will prevail? No one knows. We will find out.
monkeynotes 4y ago
Wait, we are in the aftermath of a recession? From where I am standing we are in the thick of it with a long road ahead of very uncomfortable economic pressures restricting personal upward mobility. What person is looking at a 20% increase in living costs, high interest rates, and houses that were priced for low interest and more money in people's pockets? Reality is people can't afford the pre-recession prices, so they will rent and ride it out for a while longer which will put downward pressure on people trying to sell and the market will meet the demand that way.
- StevePerkins 4y ago
  Or institutional buyers will just continue absorbing housing stock as it goes on the market, and converting it into rental units. Squeezing more people out of ownership and into permanent rental.
- colinmhayes 4y ago
  I think you misunderstand. OP was commenting on how new builds plummeted after the 08 recession, meaning we don't have enough supply now.
  - monkeynotes 4y ago
    Ah, that makes sense, thanks.

swexbe 4y ago

At the same time, boomers are starting to die off.

arberx 4y ago

Prices are already down in many places, and it's only been 5 months since rates started rising. Many factors to supply imbalance. Look at the increase in the amount of Airbnbs since 2010. People might be reluctant to sell, but they might need to when they can't rent, Airbnb, or lose their job.

phlipski 4y ago
I do wonder how many people can afford that vacation home without making use of Airbnb (or other vacation rental type system) to help with the payments...

ghastmaster 4y ago

> Millennials are in their prime family-building and house-buying years. They have less earnings and savings than the previous generation as compared to the price of homes at the same time in their lives. While government intervention in the USA has adjusted the requirements to get a loan approved, it will not be enough to keep up with rising interest rates. Prices have to come down for millennials to make purchases. This will cause a "house-price" slump.

technotony 4y ago

This demand effect is certainly real, but is going to be weighed against the higher rates effect. A lot of the increase in prices was purely mathematically driven by the falling interest rates. The monthly payment if you get a mortgage has now doubled for most people. There's no way that's sustainable, especially as most first time buyers were already stretcing to their limit. All it takes is a belief that prices might fall to put off buyers a year or two and balance the demand side of the equation enough for prices to fall. House prices typically fall slowly though, as sellers are reluctant to sell at first and buyers just start waiting. Seems we are already seeing that impact on transaction volumes drying up.

mywittyname 4y ago

Agreed. Prices might fall relative to the wackiness of Covid peaks that were hit in the past year or so, but the long term trend will be for prices to outpace inflation unless a building spree hits due to demographic changes. A bright light I'm seeing is that material costs have largely fallen back to pre-covid levels. There are a few bits that are expensive or hard to obtain (windows), and the labor market is still aging. But still, the cost to build in many areas has fallen dramatically.

macNchz 4y ago

> Certainly prices may come down in some locations as interest rates go up if there aren't enough cash buyers The interest rates make a huge difference here...a hypothetical buyer who could afford $5000/month in payments would qualify for a $1.22 million mortgage at 2.75% interest, whereas that same payment at 7% would only cover a $750k mortgage. Cash buyers are generally about 25% of the market, which is a good chunk, but not enough to prop up prices if the other 75% of buyers they're competing with have had their purchasing power drop by 40% in the past 6 months.

Raidion 4y ago
FWIW, those numbers are off because of escrow and taxes. 1.22MM house means AT LEAST 30k in property taxes a year, which mean's they'll end up at >~7.5k a payment, which means they'll need to buy a smaller house.
- HarHarVeryFunny 4y ago
  Not where I live in NJ. 1.2M house is going to be < 20K taxes.
  - macNchz 4y ago
    Yeah this is very market dependent, especially with regard to whether there are state/local income taxes or the government depends mostly on property taxes. Here in NYC I’d expect to pay $10k or less in annual taxes for a property in that price range, however there are city and state income taxes plus apartment building building common charges. It’s hard to compare this stuff apples to apples, but the one constant regardless of locality is that higher rates significantly reduce buying power for people relying on mortgages.
  - googlryas 4y ago
    Where do you live in NJ? The average effective property tax rate is 2.470% of the home value. Property taxes would be ~$38k in Gloucester county(across the river from Philly).

z9znz 4y ago

Traditional institutions, like home ownership, marriage, and religion, are fading in their appeal. In the case of home ownership, the benefits depend quite a lot on the number of years the property will be owned. I'm not sure what the numbers are now, but when I bought and later sold my house, I determined that 6-7 years was the minimum duration that made home ownership better than just renting. People change jobs more frequently now than in the past, and consequently they tend to move around more often. That makes investing in a home more risky, as it's really unclear if one will still want to be in that home/location in 5 years. Renting, by comparison, is less risky. It may be less economical over the long run, but not if you would find yourself moving every small few years. Also, the remote work thing is not going to decrease; if anything, it will increase, reducing location pressure (and consequently reducing the value (or rate of increase in value) of homes in certain areas). That implies even more risk for homeowners in those areas, as they cannot rely on ever-increasing values.

jeffbee 4y ago
> People change jobs more frequently now than in the past Pretty sure that’s wrong. Tenure in job is near an all time high in America. Boomers were the job hoppers.
- rippercushions 4y ago
  Depends on the industry. For many people in IT, changing jobs every few years is pretty standard, as is relocating if a good enough opportunity pops up.
  - jeffbee 4y ago
    I'm going to need a citation on that.
    - mkr-hn 4y ago
      Numbers would be interesting to compare to the widespread discussion on HN that makes it seem common.

hedora 4y ago

Put very simply: Affordability will continue to decrease, due to the lack of supply of housing and of skilled labor to build new housing. At the same time, real prices (what is paid to existing homeowners, adjusted for inflation) will decrease due to higher interest rates. As corrolaries: Real mortgage payments will increase, and property tax revenue will decrease. So, the banks win, schools, local governments and individuals lose--nothing new there.

seiferteric 4y ago
Ya, this is not like 2008 where interest rates were low AND housing prices collapsed, which actually did make houses more affordable. This happened because the recession was specifically about real estate and the bad mortgage loans blowing up. Since this is not happening now, even if housing prices stagnate or go down a bit, unless you are paying with cash, things are not going to be more affordable since rates are up.
- rdtwo 4y ago
  I don’t see why the Covid peak couldn’t all blow off. Very few new buyers actually bought then and will be underwater
  - seiferteric 4y ago
    Ya but being underwater doesn't really matter if you plan on living there for a long while. People will need a good reason to sell their house, like no longer being able to make payments due to job loss etc. (or they bought like 10 houses like in early 2000's...) So as long as the rest of the economy is okayish, I just see prices stagnating for a while. Also, inflation actually helps when you have a fixed mortgage...
    - hedora 4y ago
      You forget margin calls (mortgages with margin call provisions are illegal in California, and probably some other states in the US). Basically, your mortgage says you have to maintain N% down. So, if the house price drops enough, you make a balloon payment or the bank forecloses, and sells the house at auction. Once margin calls start triggering, there's an automatic sell off of whatever asset is impacted, causing more margin calls and a feedback loop. 90% of Britain's pension funds were hours away from being zeroed out by margin calls a few weeks ago. The Bank of England intervened. It made for some great reading. This is why the UK gov't keeps walking back the mini-budget, and the IMF is making noises usually reserved for failing dictatorships.

nugget 4y ago

Millennial here. In the last 18 months I've substantially increased the % of net worth I'm comfortable allocating to a home, reflected in both purchase price and remodeling costs: - it's not clear that pandemic-era is over, whether that be new Covid strains or other mutant viruses (not to mention global thermonuclear war) - work from home requires much more space to do well + i'm home more often to enjoy the rest of the house - most of my close friends work from home which means they can come and visit much more often - due to Covid, parents are afraid of nursing homes + kids taking longer to leave the nest = intergenerational living is back on the radar - life is short, a little bit of post-Covid YOLO I'm not sure how widespread the sentiment is but if enough people feel this way it could make an impact.

benjaminwootton 4y ago
Not saying you are right or wrong, but you seem to be over indexing for Covid. Most people seem to have moved on finally, and even the last bastion WFH will come under pressure with the bad economy.
- VBprogrammer 4y ago
  As things stand I'd need a significant pay rise to start working from an office again. Bills and mortgage increases have eaten the benefits I got from not having to travel so if I had to travel into work most days I'd be significantly worse off. There seems to be an implicit assumption that WFH is somehow less productive. I've not seen much evidence of this personally. It certainly makes management harder but it's a small price to pay when it's saving a bunch of travel costs for the employee and office costs for the employer
  - batch12 4y ago
    > As things stand I'd need a significant pay rise to start working from an office again If I am understanding the parent, the point being made is this may be less of an option for many if companies revert. If there aren't many opportunities to work remotely, this will become more of a perk, like free lunches, and not something other organizations will compensate you for. Not everyone may have a choice to demand more money if the number of WFH options are very limited.

arcticbull 4y ago

Sort of, the bigger problem in the US is that the US market is short something like 6 million houses due to zoning rules. Volume is going to dry up significantly, and prices will go down a little bit - but there won't be a deluge of forced sellers like there were in 2008 because most people are on long-term fixed-rate loans. The majority of sellers will be divorcees and estates, as individuals chill in their 2.625% APR 30y fixed's - or own their homes outright. Unlike 2008 we're not coming off a deluge of building, quite the opposite - and unlike 2008, most people don't have 5 houses on variable rate debt. tl;dr: Prices will go down a bit, but the market is so short housing, it won't really matter. Longer term anyone who buys at 7% APR will just refi down when rates drop - and probably cash-out refi at that.

bwestergard 4y ago

If millennials were as wealthy as earlier generations at the same age, I think you'd be right. But millennials hold about half the fraction of national wealth that the baby boom generation did at the same age.

freeopinion 4y ago

I welcome a slump. I doubt it will be as big as I hope. My first home cost me ~2x my new grad salary. Today homes cost 5+x a new grad salary. And it isn't because Millennials are buying up the market. Investors are buying up the market and making it impossible for run-of-the-mill families to own a home. I hope those investors lose a lot of money. It needs to hurt bad enough to settle into long term memory and discourage such behavior for generations to come.

randomdata 4y ago

> in the aftermath of the Great Recession, not much new housing was built. Notably due to the Great Recession aligning with record high (at the time) food commodity prices, which saw farmers outcompeting home buyers for development lands. Food commodities have completely smashed those records over the past year or two and if that continues we will no doubt have farmers willing to bet big, which again will constrain housing development. What will be interesting is if we are able to get our food supply issues under control. Food prices have been known to drop like a rock before.

dan-robertson 4y ago
I’m slightly surprised by this comment. The main story I see online is more like ‘the places that people [with reasonable amounts of money to spend on property] want to live are in or near the centres of large cities and land-use policies in those cities mean that it is very difficult for developers to build significant amounts of property, so it mostly doesn’t get built’. Obviously there aren’t farmers rushing to convert car-parks in San Francisco into wheat fields. But perhaps what I’ve read is just wrong or biased towards the kind of wealthier youngish people who want to live near the centres of these big cities and can already afford to rent there.
- rdtwo 4y ago
  I think near is the key. 5 years ago It used to be that the city core was cool now city cores are just a dumping ground of empty offices and societies rejects. We’re in another era of sprawl this time driven by for from home convenience
- randomdata 4y ago
  I don't think they are at odds with each other. A city not being able to easily sprawl into the surrounding farmlands, as they have historically done, puts increased pressure in the city centre. Maybe you prefer the city centre, but if you could build a new home in the suburbs for pennies on the dollar, it would be hard to pass up. But when building that suburban home costs just as much then there is little reason to compromise. There is still a lot of sprawl happening, to be sure. But when competing for use, you're going to pay a lot more, which in turn drives up the cost in the city centre. Prior to 2007 when food commodities first started going nuts farmland was significantly less valuable. Cities don't stand as islands. They exist within a much larger world.

petercooper 4y ago

There are more Millennials than Gen X, Quite a few major countries are going to struggle though. The US may have a bigger Millennial cohort, but if we say Gen Xers are 42-55 and Millennials are 26-41, the population pyramids for many large economies make for grim reading. Consider Italy (adjust ages for being 4 years ago): https://commons.wikimedia.org/wiki/File:Italy_population_pyramid_(2018).jpg https://commons.wikimedia.org/wiki/File:Italy_population_pyr... .. or, to a lesser extent, China: https://commons.wikimedia.org/wiki/File:China_population_pyramid_(2018).jpg https://commons.wikimedia.org/wiki/File:China_population_pyr...

chadash 4y ago

My 30-year mortgage is locked in at 2.875%. My overall mortgage payments would go up 60% if I took out a new loan for the same amount at 7%. On one hand, this means that prices need to come down to get houses into peoples' price ranges. On the other hand, if the market is down, there's no way in hell that I'm selling my house. A loan at 2.875% is almost like having free money, so even if I need to move, I'd prefer to rent out my house than sell it. It's unclear if we will see low prices, but fewer sellers, or high prices, but fewer buyers. What's clear though is that this is going to be a low liquidity housing market without a lot of transactions.

lotsofpulp 4y ago
> On the other hand, if the market is down, there's no way in hell that I'm selling my house. As long as you are occupying a residence, it would not effect nationwide or region-wide supply and demand, right? You selling would be offset by you buying. Deaths, divorces, immigration, births, and of course, new construction is what would shift supply and demand curves, on average.
- chadash 4y ago
  Yes, but in this environment, I'd probably try to buy something new without selling (but renting out instead). Also, if lots of people are buying and selling, even if aggregate demand is the same, it's a more liquid market. If I'm a first-time homebuyer, I'd rather play in a market of musical chairs then try to buy in a theater where only the dead and divorced get up from their seats.
- bombcar 4y ago
  That's entirely true if all houses are the proverbial spherical identical house, but people chasing to remain "where they are" also slows down upgrades and downgrades. If a family that would normally have sold their older two bedroom and moved to a four bedroom instead chooses to remain in the two bedroom longer, that two bedroom doesn't appear on the market, a four bedroom languishes. And if nobody is building two bedroom houses, that can have ripple effects.
4y ago

vineyardmike 4y ago

Hi. Millennial here. I was house shopping this year but had to wait as I moved for a new job. In January I was quoted $>1M of buying power (without my partner). Now I’m quoted <$700k. I’m not buying anything soon. My father is looking at moving to a new condo for retirement but was hesitant about HOA fees. This year he spent $50k to replace all the windows in his current home to prep for sale. That $50k in maintenance would cover $300mo in equivalent hoa fees, and that’s not considering every other maintenance cost he’s spent. The math just doesn’t justify home ownership from a financial perspective - if your home value isn’t skyrocketing. I’ll be a renter for a while it seems. Maybe that’s ok.

bombcar 4y ago
As a side note it's often not worth maintenance in prep for sale, unless it takes it from uninhabitable to habitable (or more precisely unmortgageable to mortgageable). The $50k you spend on windows would often only recoup $45k or even less, people vastly underestimate the costs of many things (but not all, foundation problems people always overestimate). The saddest story I read about was someone who was told that putting $20k of new windows would let them sell for $40k more; and they did, and the buyer bulldozed the house to build a new one.
- nostrademons 4y ago
  People often overestimate the universality of their tastes. Our sellers assumed that one of the first things we'd do would be a kitchen remodel, but we actually love the kitchen the way it is, and are just doing minor appliance replacements. Meanwhile what we actually did was new windows, solar, and a bunch of energy efficiency upgrades, which had been totally off their radar screens. If they'd gotten a different buyer it probably would've been a very different set of upgrades.
secabeen 4y ago
The value in home ownership is in reliability of housing. With a family, I seriously value knowing that I'm not likely to have my home pulled out from under me by the landlord for a higher and better use.

Merad 4y ago

Another big factor here is that the boomers are starting to die off. The oldest of that generation is 77 now and 80% of them are homeowners, so the next 20-30 years are going to see quite a lot of wealth (including homes) pass from boomers to their GenX and Millenial children.

CameronNemo 4y ago
Why do you assume that the homes will be inherited? Often people sell their homes to finance their retirement, or pay medical bills. Assisted living does not come cheap.
- Merad 4y ago
  Yes, more than a few will be lost that way. From what I've read though boomers as a whole want to stay out of assisted care facilities, probably because many of them saw their own parents rot in such places. My own parents are near the leading edge of the boomer cohort (they're 75) and it's a common feeling among their friends. Also, the grim reality is that you have to live long enough to need assisted living. A life expectancy of 78 sounds good on paper, but by the time you get to your late 60s and early 70s people in your age bracket are dropping pretty quickly.
  - ptmcc 4y ago
    They may want to stay out of assisted care facilities, but late life decline makes independent living difficult to impossible for many. They may try to put it off as long as possible, but it will catch up to them. And then it does not take long for the costs to consume their would-be estate. And the irony is that it's the system their generation built for their parents.
  - ncallaway 4y ago
    Keep in mind that the life expectancy for a 70 year old is often a bigger number than the average life expectancy. For example in the US a male has a life expectancy of 76.22 (https://www.ssa.gov/oact/STATS/table4c6.html https://www.ssa.gov/oact/STATS/table4c6.html), but a 70 year old male has a life expectancy of 84.59 years. But that doesn't take away from your main point about people wanting to avoid that situation.

Aperocky 4y ago

> not much new housing was built. Are you from California?

codexjourneys 4y ago
No, the Northeast. A general rundown that mentions the post-2008 building shortfall: https://www.npr.org/2022/03/29/1089174630/housing-shortage-new-home-construction-supply-chain https://www.npr.org/2022/03/29/1089174630/housing-shortage-n... This one's older (from 2020) but digs into details by area of the country: https://eyeonhousing.org/2020/01/a-decade-of-home-building-the-long-recovery-of-the-2010s/ https://eyeonhousing.org/2020/01/a-decade-of-home-building-t...

andrewmutz 4y ago

There are two big forces pushing prices in opposite directions. Prices will be pushed downwards by rising interest rates. Prices will be pushed upwards by a genuine housing shortage in the US. Which force will prevail? No one knows. We will find out.

monkeynotes 4y ago

Wait, we are in the aftermath of a recession? From where I am standing we are in the thick of it with a long road ahead of very uncomfortable economic pressures restricting personal upward mobility. What person is looking at a 20% increase in living costs, high interest rates, and houses that were priced for low interest and more money in people's pockets? Reality is people can't afford the pre-recession prices, so they will rent and ride it out for a while longer which will put downward pressure on people trying to sell and the market will meet the demand that way.

StevePerkins 4y ago
Or institutional buyers will just continue absorbing housing stock as it goes on the market, and converting it into rental units. Squeezing more people out of ownership and into permanent rental.
colinmhayes 4y ago
I think you misunderstand. OP was commenting on how new builds plummeted after the 08 recession, meaning we don't have enough supply now.
- monkeynotes 4y ago
  Ah, that makes sense, thanks.