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Hard disagree. I'm not a Fed economist though... How is a scarce resource going to devalue in a high inflationary environment? The cost of building homes con

Hard disagree. I'm not a Fed economist though... How is a scarce resource going to devalue in a high inflationary environment? The cost of building homes continues to go up, the availability of land has not changed, restrictive housing policies are not being lifted, wages are growing, the population is growing... Where does the decline in price come from? Demand side prices can come down if lots are divided. But supply side profit remains the same or grows. High rates will not help first-time home buyers. More housing will.

asdajksah2123 4y ago
Housing isn't a scarce resource. If it was, there would be far more homeless people living on the streets. What is scarce, however, is affordable housing. The problem with housing is indeed the artificially propped up prices which makes it impossible for people to buy new housing. Btw, this does not counter the YIMBY argument, which argues that we can drop housing prices by making housing easier to build. Part of that would be by increasing supply. But another major part of the YIMBY argument is that if housing was easier to build, everytime a developer got an opportunity to build new housing stock in a desirable area, they wouldn't always need to go for the highest value, i.e. luxury housing, build. They could actually look at market needs and build affordable and/or starter housing. Right now getting the right to build a property in desirable areas is a once in a decade opportunity, so they're willing to keep their built housing empty for many years, because they won't get a similar opportunity until much later, if ever.
- whimsicalism 4y ago
  "Luxury" housing is the market need when building is so suppressed. Also, most new construction is going to be labeled luxury, then later enter the affordable supply. This is the lifecycle of housing.
  - bombcar 4y ago
    That's the lifecycle that has been constrained - the affordable supply hasn't been happening because prices have been rising too fast (in the cities, but even in the 'burbs).
whimsicalism 4y ago
Price is the intersection of supply and demand. Raising rates shifts demand left. Price goes down.
- deathanatos 4y ago
  In the end, demand for "housing" seems pretty inelastic. I would think this would push a lot of would be home-buyers back onto the rental market, where landlords will capture the slack/gains. … case in point, my apartment's rent is going up 10-80% YoY, depending on lease.
  - whimsicalism 4y ago
    Elasticity of demand is irrelevant. this shifts the entire curve Also, demand for housing at a particular price, size, and location is not inelastic.
sp332 4y ago
Even with the paywall in place, you can read the first sentence of the article which indicates high mortgage rates are driving the decline. People literally can't afford the monthly payments at current prices, now that interest rates are higher. Thats why prices will fall.
EricDeb 4y ago
there is 16 million vacant homes in the US. scarce maybe where lots of people want to live..
- mywittyname 4y ago
  But how many of those homes are habitable? I grew up an area with a lot of "vacant" housing. They are vacant largely because nobody would want to live there. After a year or two, they are uninhabitable and the cost to remove the place exceeds the value of the land. Lots of them ended up mysteriously burning down.
- roflyear 4y ago
  There aren't vacant homes in places people want to live.
bombcar 4y ago
The first major decline in price will come from investors shedding inventory to "get ahead of the curve". The second will come from rentals being turned into owner-occupied.
datadata 4y ago
You really need to look at real prices, rather than nominal prices. Housing is after all the largest component of CPI, which determines inflation. Scarcity also does not guarantee value. For one thing, housing demand is baseline proportional to the number of people. Population growth is really slowing [1]. The decades of home price gains might mostly have been due to a population surge, which is ending. [1]: https://www.census.gov/library/stories/2021/12/us-population-grew-in-2021-slowest-rate-since-founding-of-the-nation.html https://www.census.gov/library/stories/2021/12/us-population...
anm89 4y ago
So what happened in 2008? Are you arguing that was about dividing lots ?
- stickyricky 4y ago
  Mass foreclosure forced people out of homes. If that happens housing prices will decline. I think we had a surplus of homes in 2008 as well.
Rury 4y ago
Depends on if you mean in real terms, or nominal terms. In nominal terms, guaranteed it will tank home prices, if given enough time. This is because trade involves two items, and it's entirely possible to make dollars more scarce than houses. I mean for hyperbole, it'd be impossible to sell a house for 300k+ dollars, if there was only 2 dollars in existence in the entirety of the world. Again, that was hyperbole, but the Fed raising interest rates and reducing their balance sheet, literally work to remove money from existence, and works to move us closer to that regard. But as for real terms, that's another matter...

asdajksah2123 4y ago

Housing isn't a scarce resource. If it was, there would be far more homeless people living on the streets. What is scarce, however, is affordable housing. The problem with housing is indeed the artificially propped up prices which makes it impossible for people to buy new housing. Btw, this does not counter the YIMBY argument, which argues that we can drop housing prices by making housing easier to build. Part of that would be by increasing supply. But another major part of the YIMBY argument is that if housing was easier to build, everytime a developer got an opportunity to build new housing stock in a desirable area, they wouldn't always need to go for the highest value, i.e. luxury housing, build. They could actually look at market needs and build affordable and/or starter housing. Right now getting the right to build a property in desirable areas is a once in a decade opportunity, so they're willing to keep their built housing empty for many years, because they won't get a similar opportunity until much later, if ever.

whimsicalism 4y ago
"Luxury" housing is the market need when building is so suppressed. Also, most new construction is going to be labeled luxury, then later enter the affordable supply. This is the lifecycle of housing.
- bombcar 4y ago
  That's the lifecycle that has been constrained - the affordable supply hasn't been happening because prices have been rising too fast (in the cities, but even in the 'burbs).

whimsicalism 4y ago

Price is the intersection of supply and demand. Raising rates shifts demand left. Price goes down.

deathanatos 4y ago
In the end, demand for "housing" seems pretty inelastic. I would think this would push a lot of would be home-buyers back onto the rental market, where landlords will capture the slack/gains. … case in point, my apartment's rent is going up 10-80% YoY, depending on lease.
- whimsicalism 4y ago
  Elasticity of demand is irrelevant. this shifts the entire curve Also, demand for housing at a particular price, size, and location is not inelastic.

sp332 4y ago

Even with the paywall in place, you can read the first sentence of the article which indicates high mortgage rates are driving the decline. People literally can't afford the monthly payments at current prices, now that interest rates are higher. Thats why prices will fall.

EricDeb 4y ago

there is 16 million vacant homes in the US. scarce maybe where lots of people want to live..

mywittyname 4y ago
But how many of those homes are habitable? I grew up an area with a lot of "vacant" housing. They are vacant largely because nobody would want to live there. After a year or two, they are uninhabitable and the cost to remove the place exceeds the value of the land. Lots of them ended up mysteriously burning down.
roflyear 4y ago
There aren't vacant homes in places people want to live.

bombcar 4y ago

The first major decline in price will come from investors shedding inventory to "get ahead of the curve". The second will come from rentals being turned into owner-occupied.

datadata 4y ago

You really need to look at real prices, rather than nominal prices. Housing is after all the largest component of CPI, which determines inflation. Scarcity also does not guarantee value. For one thing, housing demand is baseline proportional to the number of people. Population growth is really slowing [1]. The decades of home price gains might mostly have been due to a population surge, which is ending. [1]: https://www.census.gov/library/stories/2021/12/us-population-grew-in-2021-slowest-rate-since-founding-of-the-nation.html https://www.census.gov/library/stories/2021/12/us-population...

anm89 4y ago

So what happened in 2008? Are you arguing that was about dividing lots ?

stickyricky 4y ago
Mass foreclosure forced people out of homes. If that happens housing prices will decline. I think we had a surplus of homes in 2008 as well.

Rury 4y ago

Depends on if you mean in real terms, or nominal terms. In nominal terms, guaranteed it will tank home prices, if given enough time. This is because trade involves two items, and it's entirely possible to make dollars more scarce than houses. I mean for hyperbole, it'd be impossible to sell a house for 300k+ dollars, if there was only 2 dollars in existence in the entirety of the world. Again, that was hyperbole, but the Fed raising interest rates and reducing their balance sheet, literally work to remove money from existence, and works to move us closer to that regard. But as for real terms, that's another matter...