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Until home prices start falling significantly, I'm not very hopeful about the future. Homes should not be investments, they should be commodities.
by beebmam 3y ago
Until home prices start falling significantly, I'm not very hopeful about the future. Homes should not be investments, they should be commodities.
- nonethewiser 3y agoSounds like you’d love deflation
- geerlingguy 3y agoThe problem is many people have been priced out of home ownership. Heck, I could not afford to buy the house I live in currently if I were purchasing it today (and my neighborhood is not nearly as insane as many others in my region in terms of inflated home prices).
- nluken 3y agoThere’s no need for deflation, at least in the long term. Just home prices that don’t increase relative to inflation.
- stefan_ 3y agoBecause an economy based on restricting housing for imaginary value gains is totally not a local maximum trap you have fallen headfirst into.
- skapadia 3y agoExactly. I keep reading articles about how home prices are "falling" or "plummeting". Yeah right. They are more expensive than ever, especially when you factor in interest rates. Home prices need to collapse in order for the middle class to be able to afford them.
- redeux 3y agoI keep track of my home sale price estimate on Zillow, not because I think it’s wholly accurate but because it gives me an overall idea of how the market is trending. At the beginning of the year my home value dropped significantly, roughly 10-15% in a matter of months. It’s since completely recovered. Of course this is anecdata, but it seems to jive with what I’m seeing in general.
- bushbaba 3y agoSimilar happened pre 08 housing crash. Give it time.
- lotsofpulp 3y agoJob losses have to come first. 2008 had a far greater proportion of loans given to people with tenuous cash flows. Since then, underwriting was tightened up to stop the strippers taking out 4 mortgages situation, so unless we start seeing large scale layoffs causing people to miss payments and lose their homes, you will not see the defaults that cascade into more defaults and so on.
- JumpCrisscross 3y ago> Job losses have to come first Not necessarily. New supply can come online. Or people can decide to wait to buy a home. Job losses are required to lower home prices only if supply stays fixed and demand is inelastic, i.e. consumers have a compulsion to buy homes irrespective of price.
- lotsofpulp 3y agoTrue, but I do not see that as a realistic possibility based on the already tight markets for the type of labor needed to build homes, especially in the locations that people want homes. 2008 had quick price reductions because people had to sell, and sell quickly, sufficiently increasing supply relative to demand.
- eli_gottlieb 3y agoI just checked mine and it appears to have gone up by about $30k since I checked on it last year. This doesn't seem like a good thing for most people.
- JumpCrisscross 3y ago> keep reading articles about how home prices are "falling" or "plummeting". Yeah right Home prices are heterogenous; they can be stable in one place and falling in another [1]. > are more expensive than ever, especially when you factor in interest rates Home prices can fall while the cost of a home, i.e., mortgage payment for a new-home purchase, rises. The latter is closer to what PCE tracks [2]. [1] https://www.newyorkfed.org/research/home-price-index https://www.newyorkfed.org/research/home-price-index [2] https://www.bea.gov/sites/default/files/methodologies/RIPfactsheet.pdf https://www.bea.gov/sites/default/files/methodologies/RIPfac...
- artemonster 3y agoyeah but it will never happen again. what happens to all other people that already took 30year loans for their overpriced garbage?
- AnIdiotOnTheNet 3y agoThey'll be hurt by it, obviously, but I'd rather take that pain now than condemn the future indefinitely. Of course that puts me at odds with what is apparently the vast majority of humanity. Fuck you, got mine and all that.
- nabla9 3y agoAsset prices (house prices, stocks, etc. ) are not calculated into inflation, nor they should be. Only rents, and costs of maintaining houses are a part general level of prices for goods and services.
- lotsofpulp 3y agoSo official inflation statistics should not be applicable to people interested in purchasing assets, such as land? I am not understanding the reasoning. Since most goods and services flow through the largest publicly listed companies, I consider equity market indexes like VTI or VOO to be a better gauge of inflation over the course of decades. It has been my experience that the prices I pay for things like land, daycare, education, healthcare, and even services like electricians/plumbers/other specialized labor follows the increase in equity markets, at least in my high cost of living area. Also, the government will backstop equity prices by reducing the purchasing power of the currency, so that also tells me equity prices are tracking purchasing power.
- nabla9 3y agoOK. > I am not understanding the reasoning. .... I consider equity market indexes like VTI or VOO to be a better gauge of inflation Ask yourself: What use would be an inflation measure that takes into account asset valuation?
- lotsofpulp 3y agoIf one’s goal is to acquire the asset (like land/house), then it seems relevant. Additionally, when one’s government has a goal of increasing equity prices even at the expense of the purchasing power of the currency, it seems like one has to be invested in assets to keep up.
- deleted 3y ago[deleted]
- viraptor 3y agoHouse prices are correlated to rent, because the higher rent you can get, the more the house is worth as an investment. So in theory they're not included... but in practice yeah.
- hotpotamus 3y agoMy mother is a part-time real estate agent (mostly for friends and family type work). She's got one house on the market now and having a hard time selling. If they don't get an offer in the next week or two, they'll be lowering the asking price. Just one datapoint/anecdote, but it's a far cry from the last few years in my experience.
- geerlingguy 3y agoThat seems much more reasonable than the status quo of houses being purchased for 10-30% above asking price, in cash, before an open house happens, sans inspection. It's been frustrating seeing a few friends try to buy a home in the past couple years, but basically get steamrolled at every turn because they aren't willing to drop all their income on a home purchase sight-unseen.
- jtbayly 3y agoMy zip code average selling price is above 100% list price still...
- sokoloff 3y agoInitial listing prices are arbitrary though, chosen to provoke the buying response the seller thinks will be best. If I think a house will sell for 100 units of value and I list it for 80 and sell for 100, it went for 125% of asking. If I list it for 125 and sell for 100, it went for 80% of listing. Nothing changed about the health or frothiness of the market; the only difference was my listing price strategy.
- pzo 3y agoIn my hometown prices doubled in the last few years. If someone still wanna sell at peak prices or offer just 10% discount from peak thats no wonder hard to sale in current environment where harder to get credit, people lost job or inflation reduced their money power.
- phh 3y agocf sibling's comment: You need to factor-in credit's price. I've been looking for a flat near Paris for 2 years, and sure the prices are lowering. But still, the cost (either total cost, or percentage of my salary) for me increased. My mental model of housing in my area is that I have the n-th salary in that area, so I get the n-th best flat. The pricing will then be exactly what I can afford (which is legally 35% of my salary here). What changes is who gets how much, 3 years ago it would go at 95% to the previous owner, nowadays it's 70%.
- ekianjo 3y ago> Homes should not be investments, they should be commodities. Tell politiciants to stop regulating the building market
- bfeynman 3y agoI think at this point that would be catastrophic, the average persons most valuable asset usually is their home (for better or for worse). A all encompassing reversal would economically cataclysmic. I would think we need better incentives for new market entrants (first time home buyers) and penalties for n-private home owners who rent out.
- enlyth 3y agoThe only thing people use that valuable asset is to then sell it and buy a bigger house. If all houses go down in value then that bigger house is also cheaper now. I never understood this mantra of why house prices _NEED_ to go up. They don't, the only people that benefit are investors and landlords, not people who actually want to live somewhere.
- dahfizz 3y ago> The only thing people use that valuable asset is to then sell it and buy a bigger house. No? They sell that valuable asset and move into a smaller house, netting them a huge chunk of cash and rent-free living. Its called "downsizing". This enables retirement for people who otherwise would not be able to.
- ajsnigrutin 3y agoThis also works if all houses are 50% cheaper... you pay 50% less to buy it, sell it for 50% less, buy a cheaper house at 50% less, and since you paid less for the initial buy, you have money leftover still. But if you don't own a house now, you're basically fucked with the current housing prices.
- JumpCrisscross 3y ago> also works if all houses are 50% cheaper... you pay 50% less to buy it, sell it for 50% less, buy a cheaper house at 50% less If you’ve paid off your mortgage.
- martythemaniak 3y agoHome prices (and thus rents) can be controlled with simple supply, independently of the Fed's changes to interest rates. If you're interested in lower house prices, join (or start) a local YIMBY-type advocacy org.
- jandrese 3y agoI'd like to see areas with chronic shortages implement vacancy taxes. A rental unit that sits empty for 3 months starts getting taxed at 20% of the fair market rent for the unit every month, and that percentage goes up 20% every month up to 100% after 7 months.
- martythemaniak 3y agoYou can do it, but it doesn't matter. Places that have been struggling with high prices for a long time (Vancouver or Toronto for example) have tried various flavours of vacant homes tax, foreign buyers tax etc and it didn't make a difference.
- HWR_14 3y agoDo you have any evidence that home and rent prices can be controlled by simple supply, as opposed to new stock being purchased by large landlords and investors?
- state_less 3y agoThe real rate is 0.86% according to the Fed, which is historically cheap. In other words, if people get a mortgage loan at 6% and inflation is running at 4%, they’re not paying that much. If inflation drops, and the Fed lowers interest rates to follow suit, they’ll refinance, so the only real risk at the moment would be that the Fed squeezes by raising the real rate. That washes out speculators and put pressure on home sellers. Money is still relatively cheap. https://fred.stlouisfed.org/series/REAINTRATREARAT10Y https://fred.stlouisfed.org/series/REAINTRATREARAT10Y
- ajsnigrutin 3y agoWhy are you looking at percentages? Percents don't matter... What matters is, how many monthly/yearly median wages does it take to buy a house now, compared to 30 years ago?
- sokoloff 3y agoBecause the calculation that governs the ability to make the monthly payments is heavily influenced by the interest rate on the mortgage. House prices are set by the marginal buyer and the marginal buyer is taking a mortgage.
- ajsnigrutin 3y agoBut the mortgage is highly influenced by the price of realestate. I live in a country where ~20 years ago an apartment could cost below 100k eur, and now is being sold at 300k+ eur. Yes, the percentages influence how much mortgage you can afford, but the fact that instead of borrowing ~70k, you now need ~250k influences it a lot more. (and no, the paychecks didn't go up not nearly as much)
- sokoloff 3y agoThe mortgage payment has a linear relationship with mortgage amount and an exponential relationship with the mortgage rate.
- melling 3y agoI like it. Rage, rage, rage against the system. Perhaps give it some thought about what would happen if housing prices nationally dropped 20-30%.
- jandrese 3y agoWe would be back to the house prices of (checks notes) 2021?
- willio58 3y agoHaha this was my first thought too
- eli_gottlieb 3y ago>Perhaps give it some thought about what would happen if housing prices nationally dropped 20-30%. My best friend might finally be able to buy a place?
- jl6 3y agoOr it would trigger a giant recession where your friend loses their job and can’t afford anything, housing or otherwise. I’m fully onboard with the idea that we need to find a way of decoupling housing from investment, but sudden cliff edge events are usually bad for everyone. We need de-escalation, not a crash.
- dragonwriter 3y agoRealistically, a large short-term drop in home prices is only happening because there is giant recession with high job losses and/or wage drops. Supply improvements could produce a slow real decline, but not a sudden, widespread one in any realistic scenario.
- Kon-Peki 3y ago> but sudden cliff edge events are usually bad for everyone Rich and/or connected people have a tendency to look pretty good coming out the other side... All the more reason to not like such events.
- jandrese 3y agoReal Estate prices are notoriously sticky. People can't afford to sell if the house goes under water, so they'll keep the listing at the original price up at the original price even if it realistically isn't going to sell.
- deleted 3y ago[deleted]
- roflyear 3y agoDo you think we should increase housing supply?
- antisthenes 3y agoIf you think we should increase housing supply, allow people to build cheaper housing and relax building codes. As it stands, home builders will extract all possible value from building a house and take it for themselves, building homes exactly as expensive as the current ones in the market. There's no incentive to lower the price.
- xnx 3y agoI completely agree. Now we just need to convince every current homeowner of this.