10 ms·

BofA says–it's a housing recession, 1980s-style

21 points by fairytalemtg 3y ago

b112 3y ago
This is a looney article. In Canada, 80s rates hit over 20%. Rates today are not even remotely high, they're lower than the late 90s!
- mikestew 3y ago
  If you were expecting a 1:1 comparison, you will be disappointed. But if the only counter-argument is that interest rates aren't as high (and give it time, rates didn't hit 18% in the 80s right away), we're just talking about magnitude. The underlying environment today sure has a bouquet similar to the 80s, with slight hints of recession, and a stagnant-housing-market finish.
  - hedora 3y ago
    The relative change is what matters. If rates were 20% for the last few decades then house prices would be lower, but mortgage payments would be approximately the same percentage of people’s income. Property tax rates would probably also need to be higher, since they are based on property value and not mortgage payments.
- adam_arthur 3y ago
  Rate is only relevant in relation to price... real home prices are much higher today than they were the in the 80s. Would you buy a $100 home on a 1000% rate? Yes, most people would. Would you buy a $100,000,000 2000sqft home on a 0% rate? No, most people wouldn't
- SkyPuncher 3y ago
  For most people, Home is a long-term monthly expense. All that really matters is the monthly cost, most directly a combination of sale price and interest rates (with consumables like gas, water, and electric playing a smaller role. Interest rates and sale price are pretty closely tied together. As interest goes down, people can pay more for the sale price. The sellers in the market realize that and raise their asking price. After all, if you could afford a $350k house at 5% interest, you could afford that same house at $500k with 2% interest (numbers aren’t correct, just an example). That exactly what happened over the recent past. Now interest rates are rising, so people can’t afford the same amount of house they could two years ago. This is compounded by the fact that many people are sitting on low interest loans. Unless they’re forced to sell, they’re not going to.
shortrounddev2 3y ago
Prices need to utterly collapse tbh
- sieabahlpark 3y ago
  [dead]
- fullshark 3y ago
  Never going to happen unless a law gets passed with severe penalties for investment purchases (i.e. not an individual's primary residence).
  - fairytalemtg 3y ago
    too many stories out there where folks are buying as primary and they putting it on rent 4-6months in, and then picking another primary. There are some states that restrict such activity, others do not flag and allow for it.
  - shortrounddev2 3y ago
    Investment properties aren't the problem, supply is
- mikestew 3y ago
  But they most likely won't, just like they didn't in the 80s. What will collapse will be home sales, but not prices (as so stated in TFA). Houses will just sit on the market for months. I see that happening now in the Seattle suburb of Redmond. I go for a lengthy run six days a week, so I see the real estate signs. And I see the same signs (in some cases) going on months now. Whereas not that long ago I'd see a sign, and in a couple of weekends it would be gone.
  - voiceblue 3y ago
    This seems like a strange way to decide homes aren't being sold. Couldn't this just as easily be an indicator of people buying with loans rather than cash? In the former case, it can take a long time to close the transaction (on the order of months -- especially if there's any back and forth on fixups or appraisals), and realtors aren't allowed to make it a 'SOLD' sign until that happens.
metadat 3y ago
https://archive.today/hdVuy https://archive.today/hdVuy
revlolz 3y ago
Am I reading incorrectly, or the author legitimately believes that low inventory and selling to milenials is going to stop all out recession? High interest rates are going to keep inventory so low that newer generations that should be buying homes and starting new families won't be able to afford it. Homes will only come into the market once there current occupants pass or move and there has been unprecedented amount of holds/hold to rents in this cycle (since the previous recession). I'm curious too about how Bofa analysts or speculators would evaluate current home building or if there is some primer recently up to date.

21 points by fairytalemtg 3y ago

b112 3y ago

This is a looney article. In Canada, 80s rates hit over 20%. Rates today are not even remotely high, they're lower than the late 90s!

mikestew 3y ago
If you were expecting a 1:1 comparison, you will be disappointed. But if the only counter-argument is that interest rates aren't as high (and give it time, rates didn't hit 18% in the 80s right away), we're just talking about magnitude. The underlying environment today sure has a bouquet similar to the 80s, with slight hints of recession, and a stagnant-housing-market finish.
- hedora 3y ago
  The relative change is what matters. If rates were 20% for the last few decades then house prices would be lower, but mortgage payments would be approximately the same percentage of people’s income. Property tax rates would probably also need to be higher, since they are based on property value and not mortgage payments.
adam_arthur 3y ago
Rate is only relevant in relation to price... real home prices are much higher today than they were the in the 80s. Would you buy a $100 home on a 1000% rate? Yes, most people would. Would you buy a $100,000,000 2000sqft home on a 0% rate? No, most people wouldn't
SkyPuncher 3y ago
For most people, Home is a long-term monthly expense. All that really matters is the monthly cost, most directly a combination of sale price and interest rates (with consumables like gas, water, and electric playing a smaller role. Interest rates and sale price are pretty closely tied together. As interest goes down, people can pay more for the sale price. The sellers in the market realize that and raise their asking price. After all, if you could afford a $350k house at 5% interest, you could afford that same house at $500k with 2% interest (numbers aren’t correct, just an example). That exactly what happened over the recent past. Now interest rates are rising, so people can’t afford the same amount of house they could two years ago. This is compounded by the fact that many people are sitting on low interest loans. Unless they’re forced to sell, they’re not going to.

shortrounddev2 3y ago

Prices need to utterly collapse tbh

sieabahlpark 3y ago
[dead]
fullshark 3y ago
Never going to happen unless a law gets passed with severe penalties for investment purchases (i.e. not an individual's primary residence).
- fairytalemtg 3y ago
  too many stories out there where folks are buying as primary and they putting it on rent 4-6months in, and then picking another primary. There are some states that restrict such activity, others do not flag and allow for it.
- shortrounddev2 3y ago
  Investment properties aren't the problem, supply is
mikestew 3y ago
But they most likely won't, just like they didn't in the 80s. What will collapse will be home sales, but not prices (as so stated in TFA). Houses will just sit on the market for months. I see that happening now in the Seattle suburb of Redmond. I go for a lengthy run six days a week, so I see the real estate signs. And I see the same signs (in some cases) going on months now. Whereas not that long ago I'd see a sign, and in a couple of weekends it would be gone.
- voiceblue 3y ago
  This seems like a strange way to decide homes aren't being sold. Couldn't this just as easily be an indicator of people buying with loans rather than cash? In the former case, it can take a long time to close the transaction (on the order of months -- especially if there's any back and forth on fixups or appraisals), and realtors aren't allowed to make it a 'SOLD' sign until that happens.

metadat 3y ago

https://archive.today/hdVuy https://archive.today/hdVuy

revlolz 3y ago

Am I reading incorrectly, or the author legitimately believes that low inventory and selling to milenials is going to stop all out recession? High interest rates are going to keep inventory so low that newer generations that should be buying homes and starting new families won't be able to afford it. Homes will only come into the market once there current occupants pass or move and there has been unprecedented amount of holds/hold to rents in this cycle (since the previous recession). I'm curious too about how Bofa analysts or speculators would evaluate current home building or if there is some primer recently up to date.