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To put this in context, the $2.3T drop is for the prior six months. In the prior 36 months (including the six months with this drop), the housing market posted

by hrunt 4y ago

To put this in context, the $2.3T drop is for the prior six months. In the prior 36 months (including the six months with this drop), the housing market posted a gain of $13T, a gain of approximately 40% (based on the peak valuation of $47.7T from the article). While it may signal some cooling, housing is still substantially less affordable than it was pre-pandemic. * edited to correct the time frame, 36 months not 24 months.

colechristensen 4y ago
[comment regarding error addressed]
- hrunt 4y ago
  I miscalculated the time frame. The time frame is 36 months, February 2020, which is before the pandemic started. I have since edited.
epicureanideal 4y ago
> While it may signal some cooling, housing is still substantially less affordable than it was pre-pandemic. Yes, and in addition, interest rates are higher, so the monthly payment is dramatically higher.
- beanjuiceII 4y ago
  yea I was looking to downsize and my payments are actually going to be higher
- darth_avocado 4y ago
  To put this in context, the monthly payment for a million dollar loan (something that is almost a necessity in the big cities mentioned in the article), at 3% was 4200/month, but at the current rate of 6.75%, it is almost 6500/month, a more than 50% increase.
tastysandwich 4y ago
This is pretty much the same in Australia. And if you're a buyer, it's even harder because nobody wants to sell right now, particularly established homes. It's mostly just new (and tiny) units/townhouses/apartments.
- entangledqubit 4y ago
  I was under the impression that Australia doesn't have the 30-year fixed-rate mortgages that the US has. I assume this leads to having less of a locked-in real estate base?
  - JenrHywy 4y ago
    In general, we have variable rate loans, though you can choose fixed rates for a certain period (usually 1-5 years). So yes, it should be more liquid than the US.
  - neverforever 4y ago
    In theory yes, but in the most populous states we also have large stamp duty taxes that get charged every time you buy a house that lock people in. For a $1 million house I bought this came out to ~$40k. In general people usually renovate their houses or stay inside houses that are way too big for them instead of moving into one that better fits them.
    - tastysandwich 4y ago
      What's mental is that people buying $1m houses aren't anywhere near rich. That's just how much houses cost now. You spend years saving, and then the Government pinches most of your deposit!
  - tastysandwich 4y ago
    You're correct. Most people have variable-rate home loans. In the past few years, fixed five-year loans have become more common. Basically you're on a fixed rate for the first five years, and then after that you're onto a normal variable rate. Most economists here predict house prices will fall further as people sell due to mortgage stress. At the moment it looks like most people are hanging on. Historically speaking, interest rates are still pretty low. And I think people are reluctant to sell due to fear they won't get a decent price, and that if they wait a few years house prices will be back up.
lazide 4y ago
Correct, and be aware that pricing generally has momentum. Increases on prices put pressure on buyers to bid higher, and sellers to hold out for more. Sudden decreases put pressure on buyers to hold off (it will be cheaper next year), and sellers to either hold off on selling (we’ll wait for the next boom), or in rare cases panic sell ASAP if they need to liquidate due to some weird life circumstance (divorce, death, unexpected emergency move and can’t afford to keep it, etc). So price decreases are likely to have two different types of effects depending on the ‘part of town’ you’re looking at. The rich part can wait out boom/bust cycles (generally), so inventory will dry up and prices will stay high because no one will be forced to sell and take a loss - but most potential buyers will also be less willing to buy as the prices are even more ridiculous (relatively) than they were before. The poor part of town will have significant inventory increases and major price drops, as people have to sell more often due to job changes, financial hits, etc. Overall sales volume will drop across the board, as financing is harder to get - which it being easier is really what caused the boom, and it being harder is causing these overall shifts too. Modulo local market factors of course.
- bink 4y ago
  I'm always confused when I see the claim that anyone can "wait it out" when it comes to housing. Rich people still get divorced, suffer job losses, trade up, retire, etc. And they're more likely to be able to stomach a drop in value as they've owned longer and even if they haven't they can actually bring money to the table. The vast majority of people in the country who own residential real estate did not purchase it in the last few years. If the "value" of their home doubled and then dropped 20% they really aren't going to care, regardless of the mortgage rates. And beyond all that, there are always going to be people who have to sell, whether they bring money to the table, still have a profit, use a short sale, or what have you. And those sales will still set comps for entire neighborhoods. I'd love to see some concrete examples of rich neighborhoods "holding out" during downturns as I simply do not believe that has ever happened.
  - Clubber 4y ago
    They have the option to rent while they wait for the market to pick up, assuming they have another place to live.
barumrho 4y ago
Are these nominal or inflation-adjusted figures?
stevenjgarner 4y ago
Some more context: if it were homogenous, that is only a drop of $16,429 per home for each of 140 million homes in the US.

by hrunt 4y ago

colechristensen 4y ago

[comment regarding error addressed]

hrunt 4y ago
I miscalculated the time frame. The time frame is 36 months, February 2020, which is before the pandemic started. I have since edited.

epicureanideal 4y ago

> While it may signal some cooling, housing is still substantially less affordable than it was pre-pandemic. Yes, and in addition, interest rates are higher, so the monthly payment is dramatically higher.

beanjuiceII 4y ago
yea I was looking to downsize and my payments are actually going to be higher
darth_avocado 4y ago
To put this in context, the monthly payment for a million dollar loan (something that is almost a necessity in the big cities mentioned in the article), at 3% was 4200/month, but at the current rate of 6.75%, it is almost 6500/month, a more than 50% increase.

tastysandwich 4y ago

This is pretty much the same in Australia. And if you're a buyer, it's even harder because nobody wants to sell right now, particularly established homes. It's mostly just new (and tiny) units/townhouses/apartments.

entangledqubit 4y ago
I was under the impression that Australia doesn't have the 30-year fixed-rate mortgages that the US has. I assume this leads to having less of a locked-in real estate base?
- JenrHywy 4y ago
  In general, we have variable rate loans, though you can choose fixed rates for a certain period (usually 1-5 years). So yes, it should be more liquid than the US.
- neverforever 4y ago
  In theory yes, but in the most populous states we also have large stamp duty taxes that get charged every time you buy a house that lock people in. For a $1 million house I bought this came out to ~$40k. In general people usually renovate their houses or stay inside houses that are way too big for them instead of moving into one that better fits them.
  - tastysandwich 4y ago
    What's mental is that people buying $1m houses aren't anywhere near rich. That's just how much houses cost now. You spend years saving, and then the Government pinches most of your deposit!
- tastysandwich 4y ago
  You're correct. Most people have variable-rate home loans. In the past few years, fixed five-year loans have become more common. Basically you're on a fixed rate for the first five years, and then after that you're onto a normal variable rate. Most economists here predict house prices will fall further as people sell due to mortgage stress. At the moment it looks like most people are hanging on. Historically speaking, interest rates are still pretty low. And I think people are reluctant to sell due to fear they won't get a decent price, and that if they wait a few years house prices will be back up.

lazide 4y ago

Correct, and be aware that pricing generally has momentum. Increases on prices put pressure on buyers to bid higher, and sellers to hold out for more. Sudden decreases put pressure on buyers to hold off (it will be cheaper next year), and sellers to either hold off on selling (we’ll wait for the next boom), or in rare cases panic sell ASAP if they need to liquidate due to some weird life circumstance (divorce, death, unexpected emergency move and can’t afford to keep it, etc). So price decreases are likely to have two different types of effects depending on the ‘part of town’ you’re looking at. The rich part can wait out boom/bust cycles (generally), so inventory will dry up and prices will stay high because no one will be forced to sell and take a loss - but most potential buyers will also be less willing to buy as the prices are even more ridiculous (relatively) than they were before. The poor part of town will have significant inventory increases and major price drops, as people have to sell more often due to job changes, financial hits, etc. Overall sales volume will drop across the board, as financing is harder to get - which it being easier is really what caused the boom, and it being harder is causing these overall shifts too. Modulo local market factors of course.

bink 4y ago
I'm always confused when I see the claim that anyone can "wait it out" when it comes to housing. Rich people still get divorced, suffer job losses, trade up, retire, etc. And they're more likely to be able to stomach a drop in value as they've owned longer and even if they haven't they can actually bring money to the table. The vast majority of people in the country who own residential real estate did not purchase it in the last few years. If the "value" of their home doubled and then dropped 20% they really aren't going to care, regardless of the mortgage rates. And beyond all that, there are always going to be people who have to sell, whether they bring money to the table, still have a profit, use a short sale, or what have you. And those sales will still set comps for entire neighborhoods. I'd love to see some concrete examples of rich neighborhoods "holding out" during downturns as I simply do not believe that has ever happened.
- Clubber 4y ago
  They have the option to rent while they wait for the market to pick up, assuming they have another place to live.

barumrho 4y ago

Are these nominal or inflation-adjusted figures?

stevenjgarner 4y ago

Some more context: if it were homogenous, that is only a drop of $16,429 per home for each of 140 million homes in the US.