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Home Prices Fell in February for First Time in 11 Years

182 points by lxm 4y ago

EarthIsHome 4y ago
https://archive.ph/y8iF7 https://archive.ph/y8iF7
neom 4y ago
Folks who are good at real asset economics: If real estate prices decrease does rent increase? (less $$ here = push for more $$ there?) or do more renters have access to ownership? Curious about these dynamics.
- drhagen 4y ago
  Buying a house and renting an apartment are substitute goods, so falling home prices should lead to falling rents.
  - nemo44x 4y ago
    That's not true at all. Mortgages are based on a combination of interest rates and principal. This combination (plus taxes) create a monthly cost to purchase and live in a home. As interest rates go up, asking prices will go down so we end up at the same monthly price. Unless there's a big change in what people can afford per month. Rent is based simply on what people that want to live in a property are willing/able to pay. Again, if there's a big change in what people can afford (lots of unemployment would drive down, inflation of wages would drive up) then rents will change. Otherwise they won't. In the end, the price of a house going down as interest rates go up just means that the bank is getting more of the monthly payment.
    - deleted 4y ago
      [deleted]
    - drhagen 4y ago
      I stand by my original statement, which admittedly did not cover the complexity of what is going on in the market. Falling home prices will cause falling rent prices, all else being equal. However, rising mortgage costs from higher interest rates will cause rising rent prices (also via substitution). Rising mortgage costs will directly cause home prices to fall, so the effect on rents will be somewhat mitigated. How much of the home price decrease that comes from mortgage costs versus other effects will determine what happens to rent prices. As you say, if most of the decrease on home prices is caused by rises in interest rates, then it likely that rents will increase rather than decrease even if the direct effect of lower home prices would be to lower rents.
    - AbrahamParangi 4y ago
      But each day people make the decision to rent or buy and which they do is a function of how much each costs. While the mortgage doesn’t necessarily change the principal does and what we call housing prices is the price of houses people currently trying to sell. If rent is cheaper today it will depress housing prices today.
- Our_Benefactors 4y ago
  Almost never. Real estate prices going down does not affect the costs to the landlord (assuming it is an investment property), their mortgage expenses are fixed. If they don’t have a mortgage, it’s still unlikely, because having a lower property value doesn’t translate to pressuring them to find renters more easily by lowering the rent.
  - shiftpgdn 4y ago
    Supply in the number of rental units available is what drives down prices. This is extremely obvious to anyone who visits Dallas or Houston Texas where developers are allowed to build as much as they want vs the bay area where supply is extremely restricted.
    - jeffbee 4y ago
      I thought what the OP was suggesting was if people are not buying houses then they are renting them, which may put pressure on the supply of rental properties which are not the same set of homes. In the short term a given house does not instantly transition from for-sale to for-rent.
  - vasco 4y ago
    > their mortgage expenses are fixed. If they don’t have a mortgage The article is about the US but if it's interesting, there are quite a few countries around the world where variable rate mortgages (for example following Euribor) are the default, so in this environment their payments would've actually gone up (with higher interest rates), at the same time as the property value would go down.
    - causi 4y ago
      where variable rate mortgages (for example following Euribor) are the default That seems so reckless. Why would anyone risk the largest part of their budget spiraling out of control at the whim of the market?
      - 4y ago
- Ancalagon 4y ago
  Do you mean real-estate prices decrease? Or real-estate supply or demand? Price decreases: More people can buy homes and exit the renters market. Rent, in theory, should flatten/decrease. This may not be the case because as we've seen in the past couple years, corporate landlords are raising and holding rents in sync. Supply decreases: Lower supply, same demand, rents go up Demand decreases: Lower demand for real-estate should decrease prices as fewer sellers can sell at the price they bought at or at whatever price point they feel their homes are worth. This could take a long time to play out though. Lots of options for owners to hold-out on selling til a better market and many have very good interest rates on their homes with very little reason to move, especially for a much more expensive monthly payment. Anyways lower demand should in theory equate to increased supply, which should lower prices on homes and on rents. With the caveat again of the corporate landlord cartel.
  - neom 4y ago
    Edited: price decrease.
- toomuchtodo 4y ago
  https://www.axios.com/2022/12/15/us-rents-drop-at-the-fastest-rate-in-7-years-per-zillow https://www.axios.com/2022/12/15/us-rents-drop-at-the-fastes...
- deathanatos 4y ago
  I think you want to look at cost, not price, i.e., you want to add in that interest rates have risen to the equation. Does the decreased price more than make up for the increased mortgage? Given the Fed's stated intent with interest rates is demand destruction: raise interest rates, make mortgages more costly, which (to them) hopefully causes some people to not pursue mortgages, and ultimately not buy houses. This would lower the price of homes (less demand) and there would presumably be some new equilibrium. But people gotta live somewhere, and if they're not buying homes, then there's a chance they're renting instead. So if there are more renters than before, I'm not going to hold my breath on rent going down. Although, > “Surprisingly, we are finding that the buyers are still out there,” despite the increased mortgage rates IMO, the housing crisis is a lack of supply. Fixing it will require more homes.
  - highwaylights 4y ago
    I'm not sure this comparison is as clear cut as it's always made out to be. People can continue to live with their parents. In many cultures multiple generations live under a single roof. You may not want to do that, but it can be done. None of this is to say that I think people should be forced to live with their parents or that it's a solution, I'm just saying if you were looking at this from the perspective of destroying demand to right the ship then it's not impossible that it creates a situation where a lot of people find a way to make it work in the short term, which might in itself be enough to create a drop in asking prices/rent. Even then, the problem isn't even remotely a lack of homes, it's a glut of poverty profiteers in the form of landlords, but good luck getting a political class that's on the take to fix that the just way (by taxing rentals enough that it's no longer palatable).
    - BobbyJo 4y ago
      The opportunity cost of living with your parents (what jobs are available in that area) is high in many places, especially in a country as spread out as the US. The economy pays a price when it allows housing costs to prevent worker mobility.
      - 4y ago
- sph 4y ago
  In markets with housing under-supply, i.e. London, rents increase independently from real estate prices. The only way to reduce rents, is to have more (affordable) housing being built.
- highwaylights 4y ago
  Rents will inevitably decrease. Landlords won't willingly drop their asking rate, and in most cases wouldn't be able to do so as their mortgage is separate from the market value of the property, but that cuts both ways - the market doesn't care about the landlord's mortgage any more than it cares about your ability to make rent in a month. The asking rates for rent will drop when landlords are forced into it or repossessed.
  - listless 4y ago
    > Rents will inevitably decrease What indicators do you see to make this look likely? It seems to me that if you take home ownership off the table, you increase the number of renters which in turn increases demand. Rising rent seems inevitable at least in the short term. People gotta live somewhere and increased interest rates means less new construction of newer rentable properties - not like the US is any good at building affordable housing anyway.
    - zeroonetwothree 4y ago
      Buying homes is a substitute good for renting. So if buying becomes cheaper, it will decrease demand for renting. Of course it's unclear if buying is actually cheaper now, since sales price is only one factor.
- tristor 4y ago
  Because of rental pricing cartels [1], rent only every goes up in the US. I just got done talking to my landlord, they use this or similar software, not only did they increase the rent between initial showing/discussions and lease signing based on my income verification results, but I've already been told that there are /no circumstances/ in which rent will ever go down, and that at renewal they cannot negotiate. This is actually blatantly illegal price-fixing, but in the US we have effectively no regulation of how business behave. Because essentially every landlord (most of which are large corporate landlords) in my metro area use this or similar systems, there is no real alternative, so even if I wanted to suck it up and deal with the stress of moving, there is no upside. Renting is a scam in the US, buying a house isn't a scam, but it's ridiculously overpriced currently. Housing in the US is super-fucked currently. [1]: https://www.propublica.org/article/yieldstar-rent-increase-realpage-rent https://www.propublica.org/article/yieldstar-rent-increase-r...
jeffbee 4y ago
According to the U. Michigan survey of consumers there has never been a worse time to buy a house in the 65-year history of the survey. It's a 2-sided market so you can't really expect houses to sell briskly under those conditions.
- jarebear6expepj 4y ago
  In my anecdotal neck of the woods I hear people very excited about sitting in their houses forever at (insert mortgage interest rate here).
  - Arrath 4y ago
    Sounds like my dad, happy as a clam when the county assessor lowballed the house. "Less property tax? Well, if you insist."
  - cragfar 4y ago
    Of course they say that, but then life happens.
    - notch898a 4y ago
      When life happened before, you sold out. Now they'll just rent it out. Even the divorce lawyers will realize it's more profitable to have a two party rental income arrangement.
    - krschultz 4y ago
      There are fewer forced sellers now that remote work is more common.
- sndean 4y ago
  Here's a chart of the data I'm assuming you're referring to: https://data.sca.isr.umich.edu/get-chart.php?y=2023&m=1&n=41h&d=ylch&f=pdf&k=3ff25b801d561a34472fb9e24444d7c556b22a116c2e40890bbd9668f1add507 https://data.sca.isr.umich.edu/get-chart.php?y=2023&m=1&n=41... I wonder how strong the correlation is with actual house buying, prices, etc.
GalenErso 4y ago
Homes should be depreciating assets, like in Japan, and like every other item. Furniture depreciates (with few exceptions, like antiques). Clothes, motor vehicles, electronics, carpets, gym equipment, lawn mowers: name it. With rare exceptions, everything depreciates over time. That's how it should be. But what about mortgages ending up underwater? Well, that's life. And if home prices were low enough, it wouldn't be a concern. I don't expect to turn a profit on the above items. I buy them for their intrinsic utility, not as a speculative instrument, an investment vehicle, or a way to finance my future retirement. So should it be with housing. If you want to save for retirement, open a 401K, a Roth IRA, and a non registered account. Small time landlords are okay. There is a market need for rental units. But corporate landlords need to be broken up.
- jleyank 4y ago
  The land under the house doesn’t depreciate like the house does. Can always put a new house up. Hard to get new land, so unless regional demand goes down it’s a value-growth proposition.
  - robertlagrant 4y ago
    Indeed. And the neighbourhood, the schools, the nearby jobs or leisure activities or woodland or whatever it is that makes that location valuable also don't change, or not as quickly. If they get better, does the house appreciate? Does it also appreciate if I paint my house? If so, why not let the market calculate that depreciation or appreciation? What's the point of second-order accounting when you can just expose the asset on a free market?
- nemo44x 4y ago
  This makes no sense. Property/land doesn't depreciate. The actual home structure does but you forget that homes aren't static assets. They are continuously being improved. In essence, from the day a house is built, it needs to be rebuilt piece by piece over time. This affects the price. Also you need to consider the lifetime of materials VS the inflated cost of new materials and labor to built an equivalent today.
- 4y ago
deleted 4y ago
[deleted]
rybosworld 4y ago
Zillow estimates for all markets I follow have been trending down since October-ish.
- radres 4y ago
  Yeah, title is clickbaity but correct. Out of all the Februaries in the previous years, this february is a february that monthly price increase is negative.
woeirua 4y ago
I really think we're going to see a classic bubble blowoff here in the next year. Home values were crazy relative to median incomes from a historical perspective, and the number of investors using "free" loans to buy homes was out of control. As the market turns, there's going to be a run for the exits as it turns out that rents don't always go up, and as people realize it may take 10+ years for home values to return to where they were last year. All in all, I'm getting big 2008 vibes with the bank failures and now the housing market turning. By the fall we might be right back into a similar crisis too, the banks are holding billions in assets that are no longer worth what they claim they're worth.
- deleted 4y ago
  [deleted]
- notch898a 4y ago
  Sell it and do what with your dollars though? USD is in a free fall with massive inflation and equities are in turmoil. Furthermore the fed is signalling the end of raising rates so bonds aren't going to do you much better. If I had property I'd be holding onto those sweet sweet negative real interest mortgages for dear life.
- epistasis 4y ago
  At the same time, we have a historic undersupply of homes and have been building less than we need to for a very long time. So in a few markets with oversupply, there might be a bubble pop, but in many areas with strong economies there's not much to pop. Vacation homes or other areas with highly variable supply seem more likely to pop, but in the economic power houses of the economy we are still undersupplied and this it self has been a huge limiter on national GDP, by denying people access to higher paying jobs.
  - dawnerd 4y ago
    Bunch of new homes being built here in socal and the developers have doubled the prices since beginning of the pandemic. As long as the developers can hold on to empty units longer I can see them holding out in hopes people cave and pay. Seems to be working.
cubefox 4y ago
I get that Hacker News has US Americans as primary audience, but adding [in the US] to the title seems like a good idea.
- monetus 4y ago
  Tell us all about housing woes, give us some perspective! Also, yes, you're right.
chasebank 4y ago
I'm not sure what to make of it but my little sister lives in Boise, ID, and has 3 AirBNB units. She goes to 'RE investor meetups' regularly and told me that the gist of the message is to take full HELOCs out and roll over into more property. She says she has the least # of units and everyone there has a minimum of 10s of units and a handful of people have hundreds, all purchased the same way. I have to imagine this doesn't end well but who knows.
- sbaidon94 4y ago
  oh boy here we go again...
- hcurtiss 4y ago
  One hot take -- If the fed loses appetite or ability to continue increasing interest rates, I think those carrying large amounts of debt on hard assets are going to look like geniuses in the face of runaway inflation.
  - hnuser847 4y ago
    Real estate investors and even regular old homeowners have always looked liked geniuses for exactly this reason. When the dollar loses value every year, loans are cheap, mortgages are subsidized and largely purchased by the government, and the supply of new housing is constrained, the absolute smartest investment to make is in real estate.
    - vanilla_nut 4y ago
      Seems like a housing price crash and AirBnB regulation would make them look a little bit less like geniuses, no? A lot of people have a hard time spending >$500k on very basic or even dilapidated homes across the USA. I'd enjoy seeing the speculators left holding the bag on massive losses if those prices return to normal AND they lose their main revenue stream.
      - hnuser847 4y ago
vbtemp 4y ago
I just got an update from my realtor that, compared to 2021, houses are now getting 5-10 offers instead of 10-20. Every open house I go to is packed and has an offer deadline at noon the day after (they aren't bluffing - it goes straight to under contract the next day). It's impossible to have any contingencies - even home inspection. Most are going for $50-$100K over asking. This is even with 7% interest rates, the stock market down 20% and tens of thousands of layoffs in my relatively tech (and Amazon) heavy area. The rental market is so tight - there's basically nothing on the market and the few dilapidated homes that go for rent are between $5-7k/mo. And this is late-March 2023.
- sciencesama 4y ago
  Hmm, wait for a couple of months and see how the value of the homes fall !!
  - afavour 4y ago
    I'm not saying it won't happen but people have been saying exactly this for a decade.
    - cloverich 4y ago
      That doesnt make sense... interest rates have been low for a decade. Why would falling prices be predicted?
      - afavour 4y ago
        I just mean in a very general sense "just wait until the housing market collapses!" is a very common refrain, absent any evidence to prompt it.
      - tomrod 4y ago
        Supply remains constrained, now with people not wanting to take on higher interest rates. Move rates are roughly 9-10% a year. I bet we see that a lot lower for this quarter and next few quarters.
partiallypro 4y ago
They could fall for a while and still not be down or close to flat over the past 2-3 years. Home prices were up 25%+ in many areas from 2020 to 2022. One of the craziest things I've seen. There are so many entrenched interests in housing that barring a crazy downturn they aren't going to fall much, unfortunately. A home which was $250k around my area in 2017 is now going for $500k, despite the current conditions. Make that make sense. The Fed, zoning boards, entrenched investors, and builders royally screwed everyone.
adamredwoods 4y ago
This is a US average, correct? In the areas I'm looking at to purchase, prices dipped a little, then increased again this past month. One house I was about to tour sold prior to the weekend open house. I don't know who can afford US$1.2+ million houses (not me), but they seem to be quite active and prices are not wavering, thus causing many houses that I thought were affordable to go up in price.
radres 4y ago
Title explanation: Out of all the Februaries in the previous years, this february is a february that monthly price increase is negative.
- rrrrrrrrrrrryan 4y ago
  Residential real estate is tremendously seasonal. "Worst February in a decade" might not be meaningful for grocery store sales, but it makes sense for home sales.
ineedasername 4y ago
Though I doubt they fell even close to far enough to makeup for the increased TCO due to rising interest rates. 60%. That how much higher my monthly payment would be at today’s interest rates than when I took a small equity loan at the bottom of rates a few years back
nikanj 4y ago
A 50% drop would wipe out millions of households, ruin the economy for decades, and take housing prices back to ~2015 when they were already unaffordable to most. Letting the housing shortage/bubble spiral out of hand was a mistake we’ll be regretting for a long time.
- AlwaysRock 4y ago
  One thing on a long list of what seems like unsolvable problems in the US.
- carlosjobim 4y ago
  Wipe out millions of households? You mean these people will have to start working for a living instead of borrowing money against their house? Like the rest of us? Who have been "wiped out" for decades.
purpleblue 4y ago
What all of you are not understanding is that if house prices drop, large property hedge funds will swoop in and buy them. They can't let the rest of their portfolio plummet, so they are going to keep buying to prop up prices. So it might drop a little, but heavily invested ares of the country like Sacramento, Phoenix, etc will not fall too much.
paulpauper 4y ago
Prices are still way, way up over the past decade. This seems like data mining at its finest. I don't see how this is so newsworthy. Unless prices never fall at all, some down months or even down years are inevitable . Every few years it's like this--prices fall, like in 2020 during Covid or in 2018, or whatever, commenters and pundits start to prematurely celebrate a supposed new regime of housing affordability, ignoring or losing sight all the earlier accumulated gains--and then prices come roaring back when least expected, sorta like GameStop stock today. It's the same pattern over and over.
whack 4y ago
Ca you imagine people's reactions if gas prices dropped 10%? Or if food prices fell 10%? Or car/university prices fell 10%? Society functions best when it actively tries to minimize cost of living. Unfortunately we have created an political-economic system where half the population is incentivized to push housing costs as high as possible, or at least prevent it from falling, because it will enhance their personal wealth. I hope for my childrens' sakes that there will be a massive boom in medium/high density housing construction over the next few decades, that brings house prices and rents to all-time lows. But this will never happen because homeowner-voters will never allow their personal nest egg to be threatened.
- reeboo 4y ago
  Its counter intuitive at first glance, but in my area (west coast) it is actually the renter-friendly voters who scare off development. Too many rental protections lead to developers opting for development in red-er pastures.
- malfist 4y ago
  Gas prices go up and down 10% all the time
  - Thervicarl 4y ago
    Because that is a liquid commodity.
    - jareklupinski 4y ago
      i see what you did there
  - deleted 4y ago
    [deleted]
- rr808 4y ago
  It doesn't work that way because if house prices dropped 10% people would just buy bigger/nicer houses. Houses today are so luxurious today, granite countertops, ducted A/C, beautiful wood floors its just become normal.
xnx 4y ago
Interesting to note that (median housing spend / median income) isn't much different than it was 70 years ago: https://twitter.com/quantian1/status/1638414334731886593 https://twitter.com/quantian1/status/1638414334731886593
- DonsDiscountGas 4y ago
  Picking out two time points isn't a good way to look at trends. I dunno about the other goods, but housing has gotten way less affordable: https://listwithclever.com/research/home-price-v-income-historical-study/ https://listwithclever.com/research/home-price-v-income-hist...
  - xnx 4y ago
    Fair. Income vs. home price isn't much use because monthly mortgage payment is what matters to most people. Rent v. income is a good comparison, but might have the growing preference for more people living in fewer places (e.g. top cities) embedded in it.
- pwinnski 4y ago
  Oof, so many things wrong with this tweet, starting with the fact that the chart doesn't address the claim of the the image to which he's responding. The claim is that all of those things could be afford on a single income. The chart doesn't look at individual income, but uses "family income" in both cases, hand-waving away protests by saying two-income homes were already common in 1953. That is debatable, and the tweet offers no evidence or basis for comparison, but again, does not address the claim of the original image, which involves a single income. Smugly pre-declaring that you've made a case you haven't made, and gently mocking people trying to point out your error, it's not a good look.
- aschearer 4y ago
  Isn't this ignoring the fact that nowadays two people earn income in the household? Suggesting that in fact housing is twice as expensive as 1950? Also we have the data: - Median income[1]: 1984 v 2023 = 55k V 71k = 1.29 - Median home price[2]: 1984 v 2023 = 80k v 468k = 5.85 - Case-Shiller[3]: 1987 v 2023 = 63 v 294 = 4.66 Make those numbers sound like everything's stayed the same. [1]: https://fred.stlouisfed.org/series/MEHOINUSA672N https://fred.stlouisfed.org/series/MEHOINUSA672N [2]: https://fred.stlouisfed.org/series/MSPUS https://fred.stlouisfed.org/series/MSPUS [3]: https://fred.stlouisfed.org/series/CSUSHPINSA https://fred.stlouisfed.org/series/CSUSHPINSA
aschearer 4y ago
Copy and paste from past conversations on the subject, but I feel like it says it all: Case-Shiller Index: The same house being tracked through subsequent sales over time. 1990s: 70-100 2010s: 140-212 2020s: 200-300-??? https://fred.stlouisfed.org/series/CSUSHPINSA https://fred.stlouisfed.org/series/CSUSHPINSA Make of it what you will, but we're 50% above even the start of the decade!
vlixfernandez 4y ago
I mean it should've gone down more but you always have PE funds buying up inventory and holding them. There'll be a point where they will probably have to sell and that will truly bring home prices down. Maybe when unemployment increases too because it takes 6-9 months for those effects to hit
acd 4y ago
General trend: Interest rates go up then home prices fall. Interest goes low then home prices rize. People borrow what they can afford to pay in mortage which drives home prices. Which is a simplified generalisation which does not take into account job market, government policies and incentives and economic booms.

182 points by lxm 4y ago

https://archive.ph/y8iF7 https://archive.ph/y8iF7

neom 4y ago

Folks who are good at real asset economics: If real estate prices decrease does rent increase? (less $$ here = push for more $$ there?) or do more renters have access to ownership? Curious about these dynamics.

drhagen 4y ago
Buying a house and renting an apartment are substitute goods, so falling home prices should lead to falling rents.
- nemo44x 4y ago
  That's not true at all. Mortgages are based on a combination of interest rates and principal. This combination (plus taxes) create a monthly cost to purchase and live in a home. As interest rates go up, asking prices will go down so we end up at the same monthly price. Unless there's a big change in what people can afford per month. Rent is based simply on what people that want to live in a property are willing/able to pay. Again, if there's a big change in what people can afford (lots of unemployment would drive down, inflation of wages would drive up) then rents will change. Otherwise they won't. In the end, the price of a house going down as interest rates go up just means that the bank is getting more of the monthly payment.
  - deleted 4y ago
    [deleted]
  - drhagen 4y ago
    I stand by my original statement, which admittedly did not cover the complexity of what is going on in the market. Falling home prices will cause falling rent prices, all else being equal. However, rising mortgage costs from higher interest rates will cause rising rent prices (also via substitution). Rising mortgage costs will directly cause home prices to fall, so the effect on rents will be somewhat mitigated. How much of the home price decrease that comes from mortgage costs versus other effects will determine what happens to rent prices. As you say, if most of the decrease on home prices is caused by rises in interest rates, then it likely that rents will increase rather than decrease even if the direct effect of lower home prices would be to lower rents.
  - AbrahamParangi 4y ago
    But each day people make the decision to rent or buy and which they do is a function of how much each costs. While the mortgage doesn’t necessarily change the principal does and what we call housing prices is the price of houses people currently trying to sell. If rent is cheaper today it will depress housing prices today.
Our_Benefactors 4y ago
Almost never. Real estate prices going down does not affect the costs to the landlord (assuming it is an investment property), their mortgage expenses are fixed. If they don’t have a mortgage, it’s still unlikely, because having a lower property value doesn’t translate to pressuring them to find renters more easily by lowering the rent.
- shiftpgdn 4y ago
  Supply in the number of rental units available is what drives down prices. This is extremely obvious to anyone who visits Dallas or Houston Texas where developers are allowed to build as much as they want vs the bay area where supply is extremely restricted.
  - jeffbee 4y ago
    I thought what the OP was suggesting was if people are not buying houses then they are renting them, which may put pressure on the supply of rental properties which are not the same set of homes. In the short term a given house does not instantly transition from for-sale to for-rent.
- vasco 4y ago
  > their mortgage expenses are fixed. If they don’t have a mortgage The article is about the US but if it's interesting, there are quite a few countries around the world where variable rate mortgages (for example following Euribor) are the default, so in this environment their payments would've actually gone up (with higher interest rates), at the same time as the property value would go down.
  - causi 4y ago
    where variable rate mortgages (for example following Euribor) are the default That seems so reckless. Why would anyone risk the largest part of their budget spiraling out of control at the whim of the market?
    - 4y ago
Ancalagon 4y ago
Do you mean real-estate prices decrease? Or real-estate supply or demand? Price decreases: More people can buy homes and exit the renters market. Rent, in theory, should flatten/decrease. This may not be the case because as we've seen in the past couple years, corporate landlords are raising and holding rents in sync. Supply decreases: Lower supply, same demand, rents go up Demand decreases: Lower demand for real-estate should decrease prices as fewer sellers can sell at the price they bought at or at whatever price point they feel their homes are worth. This could take a long time to play out though. Lots of options for owners to hold-out on selling til a better market and many have very good interest rates on their homes with very little reason to move, especially for a much more expensive monthly payment. Anyways lower demand should in theory equate to increased supply, which should lower prices on homes and on rents. With the caveat again of the corporate landlord cartel.
- neom 4y ago
  Edited: price decrease.
toomuchtodo 4y ago
https://www.axios.com/2022/12/15/us-rents-drop-at-the-fastest-rate-in-7-years-per-zillow https://www.axios.com/2022/12/15/us-rents-drop-at-the-fastes...
deathanatos 4y ago
I think you want to look at cost, not price, i.e., you want to add in that interest rates have risen to the equation. Does the decreased price more than make up for the increased mortgage? Given the Fed's stated intent with interest rates is demand destruction: raise interest rates, make mortgages more costly, which (to them) hopefully causes some people to not pursue mortgages, and ultimately not buy houses. This would lower the price of homes (less demand) and there would presumably be some new equilibrium. But people gotta live somewhere, and if they're not buying homes, then there's a chance they're renting instead. So if there are more renters than before, I'm not going to hold my breath on rent going down. Although, > “Surprisingly, we are finding that the buyers are still out there,” despite the increased mortgage rates IMO, the housing crisis is a lack of supply. Fixing it will require more homes.
- highwaylights 4y ago
  I'm not sure this comparison is as clear cut as it's always made out to be. People can continue to live with their parents. In many cultures multiple generations live under a single roof. You may not want to do that, but it can be done. None of this is to say that I think people should be forced to live with their parents or that it's a solution, I'm just saying if you were looking at this from the perspective of destroying demand to right the ship then it's not impossible that it creates a situation where a lot of people find a way to make it work in the short term, which might in itself be enough to create a drop in asking prices/rent. Even then, the problem isn't even remotely a lack of homes, it's a glut of poverty profiteers in the form of landlords, but good luck getting a political class that's on the take to fix that the just way (by taxing rentals enough that it's no longer palatable).
  - BobbyJo 4y ago
    The opportunity cost of living with your parents (what jobs are available in that area) is high in many places, especially in a country as spread out as the US. The economy pays a price when it allows housing costs to prevent worker mobility.
    - 4y ago
sph 4y ago
In markets with housing under-supply, i.e. London, rents increase independently from real estate prices. The only way to reduce rents, is to have more (affordable) housing being built.
highwaylights 4y ago
Rents will inevitably decrease. Landlords won't willingly drop their asking rate, and in most cases wouldn't be able to do so as their mortgage is separate from the market value of the property, but that cuts both ways - the market doesn't care about the landlord's mortgage any more than it cares about your ability to make rent in a month. The asking rates for rent will drop when landlords are forced into it or repossessed.
- listless 4y ago
  > Rents will inevitably decrease What indicators do you see to make this look likely? It seems to me that if you take home ownership off the table, you increase the number of renters which in turn increases demand. Rising rent seems inevitable at least in the short term. People gotta live somewhere and increased interest rates means less new construction of newer rentable properties - not like the US is any good at building affordable housing anyway.
  - zeroonetwothree 4y ago
    Buying homes is a substitute good for renting. So if buying becomes cheaper, it will decrease demand for renting. Of course it's unclear if buying is actually cheaper now, since sales price is only one factor.
tristor 4y ago
Because of rental pricing cartels [1], rent only every goes up in the US. I just got done talking to my landlord, they use this or similar software, not only did they increase the rent between initial showing/discussions and lease signing based on my income verification results, but I've already been told that there are /no circumstances/ in which rent will ever go down, and that at renewal they cannot negotiate. This is actually blatantly illegal price-fixing, but in the US we have effectively no regulation of how business behave. Because essentially every landlord (most of which are large corporate landlords) in my metro area use this or similar systems, there is no real alternative, so even if I wanted to suck it up and deal with the stress of moving, there is no upside. Renting is a scam in the US, buying a house isn't a scam, but it's ridiculously overpriced currently. Housing in the US is super-fucked currently. [1]: https://www.propublica.org/article/yieldstar-rent-increase-realpage-rent https://www.propublica.org/article/yieldstar-rent-increase-r...

jeffbee 4y ago

According to the U. Michigan survey of consumers there has never been a worse time to buy a house in the 65-year history of the survey. It's a 2-sided market so you can't really expect houses to sell briskly under those conditions.

jarebear6expepj 4y ago
In my anecdotal neck of the woods I hear people very excited about sitting in their houses forever at (insert mortgage interest rate here).
- Arrath 4y ago
  Sounds like my dad, happy as a clam when the county assessor lowballed the house. "Less property tax? Well, if you insist."
- cragfar 4y ago
  Of course they say that, but then life happens.
  - notch898a 4y ago
    When life happened before, you sold out. Now they'll just rent it out. Even the divorce lawyers will realize it's more profitable to have a two party rental income arrangement.
  - krschultz 4y ago
    There are fewer forced sellers now that remote work is more common.
sndean 4y ago
Here's a chart of the data I'm assuming you're referring to: https://data.sca.isr.umich.edu/get-chart.php?y=2023&m=1&n=41h&d=ylch&f=pdf&k=3ff25b801d561a34472fb9e24444d7c556b22a116c2e40890bbd9668f1add507 https://data.sca.isr.umich.edu/get-chart.php?y=2023&m=1&n=41... I wonder how strong the correlation is with actual house buying, prices, etc.

GalenErso 4y ago

Homes should be depreciating assets, like in Japan, and like every other item. Furniture depreciates (with few exceptions, like antiques). Clothes, motor vehicles, electronics, carpets, gym equipment, lawn mowers: name it. With rare exceptions, everything depreciates over time. That's how it should be. But what about mortgages ending up underwater? Well, that's life. And if home prices were low enough, it wouldn't be a concern. I don't expect to turn a profit on the above items. I buy them for their intrinsic utility, not as a speculative instrument, an investment vehicle, or a way to finance my future retirement. So should it be with housing. If you want to save for retirement, open a 401K, a Roth IRA, and a non registered account. Small time landlords are okay. There is a market need for rental units. But corporate landlords need to be broken up.

jleyank 4y ago
The land under the house doesn’t depreciate like the house does. Can always put a new house up. Hard to get new land, so unless regional demand goes down it’s a value-growth proposition.
- robertlagrant 4y ago
  Indeed. And the neighbourhood, the schools, the nearby jobs or leisure activities or woodland or whatever it is that makes that location valuable also don't change, or not as quickly. If they get better, does the house appreciate? Does it also appreciate if I paint my house? If so, why not let the market calculate that depreciation or appreciation? What's the point of second-order accounting when you can just expose the asset on a free market?
nemo44x 4y ago
This makes no sense. Property/land doesn't depreciate. The actual home structure does but you forget that homes aren't static assets. They are continuously being improved. In essence, from the day a house is built, it needs to be rebuilt piece by piece over time. This affects the price. Also you need to consider the lifetime of materials VS the inflated cost of new materials and labor to built an equivalent today.
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rybosworld 4y ago

Zillow estimates for all markets I follow have been trending down since October-ish.

radres 4y ago
Yeah, title is clickbaity but correct. Out of all the Februaries in the previous years, this february is a february that monthly price increase is negative.

woeirua 4y ago

I really think we're going to see a classic bubble blowoff here in the next year. Home values were crazy relative to median incomes from a historical perspective, and the number of investors using "free" loans to buy homes was out of control. As the market turns, there's going to be a run for the exits as it turns out that rents don't always go up, and as people realize it may take 10+ years for home values to return to where they were last year. All in all, I'm getting big 2008 vibes with the bank failures and now the housing market turning. By the fall we might be right back into a similar crisis too, the banks are holding billions in assets that are no longer worth what they claim they're worth.

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notch898a 4y ago
Sell it and do what with your dollars though? USD is in a free fall with massive inflation and equities are in turmoil. Furthermore the fed is signalling the end of raising rates so bonds aren't going to do you much better. If I had property I'd be holding onto those sweet sweet negative real interest mortgages for dear life.
epistasis 4y ago
At the same time, we have a historic undersupply of homes and have been building less than we need to for a very long time. So in a few markets with oversupply, there might be a bubble pop, but in many areas with strong economies there's not much to pop. Vacation homes or other areas with highly variable supply seem more likely to pop, but in the economic power houses of the economy we are still undersupplied and this it self has been a huge limiter on national GDP, by denying people access to higher paying jobs.
- dawnerd 4y ago
  Bunch of new homes being built here in socal and the developers have doubled the prices since beginning of the pandemic. As long as the developers can hold on to empty units longer I can see them holding out in hopes people cave and pay. Seems to be working.

cubefox 4y ago

I get that Hacker News has US Americans as primary audience, but adding [in the US] to the title seems like a good idea.

monetus 4y ago
Tell us all about housing woes, give us some perspective! Also, yes, you're right.

chasebank 4y ago

I'm not sure what to make of it but my little sister lives in Boise, ID, and has 3 AirBNB units. She goes to 'RE investor meetups' regularly and told me that the gist of the message is to take full HELOCs out and roll over into more property. She says she has the least # of units and everyone there has a minimum of 10s of units and a handful of people have hundreds, all purchased the same way. I have to imagine this doesn't end well but who knows.

sbaidon94 4y ago
oh boy here we go again...
hcurtiss 4y ago
One hot take -- If the fed loses appetite or ability to continue increasing interest rates, I think those carrying large amounts of debt on hard assets are going to look like geniuses in the face of runaway inflation.
- hnuser847 4y ago
  Real estate investors and even regular old homeowners have always looked liked geniuses for exactly this reason. When the dollar loses value every year, loans are cheap, mortgages are subsidized and largely purchased by the government, and the supply of new housing is constrained, the absolute smartest investment to make is in real estate.
  - vanilla_nut 4y ago
    Seems like a housing price crash and AirBnB regulation would make them look a little bit less like geniuses, no? A lot of people have a hard time spending >$500k on very basic or even dilapidated homes across the USA. I'd enjoy seeing the speculators left holding the bag on massive losses if those prices return to normal AND they lose their main revenue stream.
    - hnuser847 4y ago

vbtemp 4y ago

I just got an update from my realtor that, compared to 2021, houses are now getting 5-10 offers instead of 10-20. Every open house I go to is packed and has an offer deadline at noon the day after (they aren't bluffing - it goes straight to under contract the next day). It's impossible to have any contingencies - even home inspection. Most are going for $50-$100K over asking. This is even with 7% interest rates, the stock market down 20% and tens of thousands of layoffs in my relatively tech (and Amazon) heavy area. The rental market is so tight - there's basically nothing on the market and the few dilapidated homes that go for rent are between $5-7k/mo. And this is late-March 2023.

sciencesama 4y ago
Hmm, wait for a couple of months and see how the value of the homes fall !!
- afavour 4y ago
  I'm not saying it won't happen but people have been saying exactly this for a decade.
  - cloverich 4y ago
    That doesnt make sense... interest rates have been low for a decade. Why would falling prices be predicted?
    - afavour 4y ago
      I just mean in a very general sense "just wait until the housing market collapses!" is a very common refrain, absent any evidence to prompt it.
    - tomrod 4y ago
      Supply remains constrained, now with people not wanting to take on higher interest rates. Move rates are roughly 9-10% a year. I bet we see that a lot lower for this quarter and next few quarters.

partiallypro 4y ago

They could fall for a while and still not be down or close to flat over the past 2-3 years. Home prices were up 25%+ in many areas from 2020 to 2022. One of the craziest things I've seen. There are so many entrenched interests in housing that barring a crazy downturn they aren't going to fall much, unfortunately. A home which was $250k around my area in 2017 is now going for $500k, despite the current conditions. Make that make sense. The Fed, zoning boards, entrenched investors, and builders royally screwed everyone.

adamredwoods 4y ago

This is a US average, correct? In the areas I'm looking at to purchase, prices dipped a little, then increased again this past month. One house I was about to tour sold prior to the weekend open house. I don't know who can afford US$1.2+ million houses (not me), but they seem to be quite active and prices are not wavering, thus causing many houses that I thought were affordable to go up in price.

radres 4y ago

Title explanation: Out of all the Februaries in the previous years, this february is a february that monthly price increase is negative.

rrrrrrrrrrrryan 4y ago
Residential real estate is tremendously seasonal. "Worst February in a decade" might not be meaningful for grocery store sales, but it makes sense for home sales.

ineedasername 4y ago

Though I doubt they fell even close to far enough to makeup for the increased TCO due to rising interest rates. 60%. That how much higher my monthly payment would be at today’s interest rates than when I took a small equity loan at the bottom of rates a few years back

nikanj 4y ago

A 50% drop would wipe out millions of households, ruin the economy for decades, and take housing prices back to ~2015 when they were already unaffordable to most. Letting the housing shortage/bubble spiral out of hand was a mistake we’ll be regretting for a long time.

AlwaysRock 4y ago
One thing on a long list of what seems like unsolvable problems in the US.
carlosjobim 4y ago
Wipe out millions of households? You mean these people will have to start working for a living instead of borrowing money against their house? Like the rest of us? Who have been "wiped out" for decades.

purpleblue 4y ago

What all of you are not understanding is that if house prices drop, large property hedge funds will swoop in and buy them. They can't let the rest of their portfolio plummet, so they are going to keep buying to prop up prices. So it might drop a little, but heavily invested ares of the country like Sacramento, Phoenix, etc will not fall too much.

paulpauper 4y ago

Prices are still way, way up over the past decade. This seems like data mining at its finest. I don't see how this is so newsworthy. Unless prices never fall at all, some down months or even down years are inevitable . Every few years it's like this--prices fall, like in 2020 during Covid or in 2018, or whatever, commenters and pundits start to prematurely celebrate a supposed new regime of housing affordability, ignoring or losing sight all the earlier accumulated gains--and then prices come roaring back when least expected, sorta like GameStop stock today. It's the same pattern over and over.

whack 4y ago

Ca you imagine people's reactions if gas prices dropped 10%? Or if food prices fell 10%? Or car/university prices fell 10%? Society functions best when it actively tries to minimize cost of living. Unfortunately we have created an political-economic system where half the population is incentivized to push housing costs as high as possible, or at least prevent it from falling, because it will enhance their personal wealth. I hope for my childrens' sakes that there will be a massive boom in medium/high density housing construction over the next few decades, that brings house prices and rents to all-time lows. But this will never happen because homeowner-voters will never allow their personal nest egg to be threatened.

reeboo 4y ago
Its counter intuitive at first glance, but in my area (west coast) it is actually the renter-friendly voters who scare off development. Too many rental protections lead to developers opting for development in red-er pastures.
malfist 4y ago
Gas prices go up and down 10% all the time
- Thervicarl 4y ago
  Because that is a liquid commodity.
  - jareklupinski 4y ago
    i see what you did there
- deleted 4y ago
  [deleted]
rr808 4y ago
It doesn't work that way because if house prices dropped 10% people would just buy bigger/nicer houses. Houses today are so luxurious today, granite countertops, ducted A/C, beautiful wood floors its just become normal.

xnx 4y ago

Interesting to note that (median housing spend / median income) isn't much different than it was 70 years ago: https://twitter.com/quantian1/status/1638414334731886593 https://twitter.com/quantian1/status/1638414334731886593

DonsDiscountGas 4y ago
Picking out two time points isn't a good way to look at trends. I dunno about the other goods, but housing has gotten way less affordable: https://listwithclever.com/research/home-price-v-income-historical-study/ https://listwithclever.com/research/home-price-v-income-hist...
- xnx 4y ago
  Fair. Income vs. home price isn't much use because monthly mortgage payment is what matters to most people. Rent v. income is a good comparison, but might have the growing preference for more people living in fewer places (e.g. top cities) embedded in it.
pwinnski 4y ago
Oof, so many things wrong with this tweet, starting with the fact that the chart doesn't address the claim of the the image to which he's responding. The claim is that all of those things could be afford on a single income. The chart doesn't look at individual income, but uses "family income" in both cases, hand-waving away protests by saying two-income homes were already common in 1953. That is debatable, and the tweet offers no evidence or basis for comparison, but again, does not address the claim of the original image, which involves a single income. Smugly pre-declaring that you've made a case you haven't made, and gently mocking people trying to point out your error, it's not a good look.
aschearer 4y ago
Isn't this ignoring the fact that nowadays two people earn income in the household? Suggesting that in fact housing is twice as expensive as 1950? Also we have the data: - Median income[1]: 1984 v 2023 = 55k V 71k = 1.29 - Median home price[2]: 1984 v 2023 = 80k v 468k = 5.85 - Case-Shiller[3]: 1987 v 2023 = 63 v 294 = 4.66 Make those numbers sound like everything's stayed the same. [1]: https://fred.stlouisfed.org/series/MEHOINUSA672N https://fred.stlouisfed.org/series/MEHOINUSA672N [2]: https://fred.stlouisfed.org/series/MSPUS https://fred.stlouisfed.org/series/MSPUS [3]: https://fred.stlouisfed.org/series/CSUSHPINSA https://fred.stlouisfed.org/series/CSUSHPINSA

aschearer 4y ago

Copy and paste from past conversations on the subject, but I feel like it says it all: Case-Shiller Index: The same house being tracked through subsequent sales over time. 1990s: 70-100 2010s: 140-212 2020s: 200-300-??? https://fred.stlouisfed.org/series/CSUSHPINSA https://fred.stlouisfed.org/series/CSUSHPINSA Make of it what you will, but we're 50% above even the start of the decade!

vlixfernandez 4y ago

I mean it should've gone down more but you always have PE funds buying up inventory and holding them. There'll be a point where they will probably have to sell and that will truly bring home prices down. Maybe when unemployment increases too because it takes 6-9 months for those effects to hit

acd 4y ago

General trend: Interest rates go up then home prices fall. Interest goes low then home prices rize. People borrow what they can afford to pay in mortage which drives home prices. Which is a simplified generalisation which does not take into account job market, government policies and incentives and economic booms.