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Unless the housing supply increases this will just be a temporary thing. As long as people are able to make their mortgage payments they typically won't sell th

Unless the housing supply increases this will just be a temporary thing. As long as people are able to make their mortgage payments they typically won't sell their homes at a loss (even if their equity is negative). Some people will always be forced to sell due to life events and that's what will set current market comps. Since mortgage rates have recently spiked upwards people who need a mortgage to buy a home can afford less, so they either aren't buying or are buying a smaller/worse home than they would've previously. But since most people aren't forced to sell, the available supply will shrink, which will push up prices eventually, until people can sell at a profit again. The rising rates also make it harder for developers to get loans, and lower prices make development projects riskier, compounding the supply problem.

mnky9800n 3y ago
There should just be a pandemic or something that puts a lot of people out of work so that they have to sell at low prices so that large real estate companies can buy their houses and then rent them back to them. They can even have a reverse rental program that allows people to stay in their homes through the hard times and instead pay rent to the new owners.
- nilespotter 3y ago
  Did that actually happen?
  - westmeal 3y ago
    In so many words yes, it's just a little oversimplified for humor.
jfengel 3y ago
I'm afraid I don't follow that. House-sellers are generally also house-buyers. They move out of one place into another. It's neutral with respect to supply. If there's a glut of people owning houses but not living in them and not successfully renting them, then that does reduce supply, but they're also suffering opportunity cost. If they're willing to throw away money like that I don't think increasing supply would help -- they'd just buy up the new houses as well.
- jeffreyrogers 3y ago
  If someone sells a house for less than they purchased it their equity available to purchase another house decreases. Since mortgage rates have increased that means they can only afford a smaller/worse house (because they have less money to make a down payment with). So why would they sell in that situation unless they need to? People sell when their homes have appreciated because they have positive equity and can get a new mortgage, so they can buy a better home by rolling their existing equity into the new home as a down payment (they also don't pay capital gains when doing this and the interest on the new mortgage is deductible, making it attractive from a tax perspective). Edit: I think I see where the confusion is. You are right that the literal supply of houses doesn't increase or decrease unless people stop/start renting or new homes are built. But the supply of houses available for purchase depends on whether people want to list them right now or not. Which is influenced by current prices because most people won't sell at a loss unless they have to.
  - smcin 3y ago
    I think "inventory" = "supply of houses available for purchase [or sale being processed]".
  - theGnuMe 3y ago
    I mean, you could sell for less than you purchased (say you put 20% down) and buy a new home with 5% or 10% down.. so you take a haircut and increase your mortgage. People may do this if they have to move for a job.
  - mihaic 3y ago
    Is this true if the price of all houses fall? In that case it seems like it's easier to swap up.
  - stvltvs 3y ago
    They probably wouldn't sell at a loss, but they would sell if their profit is bit less than when the market was higher.
  - labcomputer 3y ago
Tade0 3y ago
Note that baby boomers are reaching an age at which they're starting to pass away. What else to do with an inherited house than either live in it or sell it?
- ThalesX 3y ago
  Rent it?
  - lotsofpulp 3y ago
    Renting is not a new option, and it is not trivial. Is there a reason to assume a higher rate of inheritors to rent rather than sell?
- jrumbut 3y ago
  I wonder if there is a difference, as far as housing market fluctuations go, between an aging person who passes away and leaves their home to their heirs and one who sells their home before they pass away in order to fund their retirement/healthcare. Obviously the outcome for the family is very different and worth examining, but for the moment I'm considering the broader impact on the housing market.
  - poulsbohemian 3y ago
    I live in a place that has received awards as a retirement destination, IE: we have people in the scenario you describe... I don't really see a difference in these outcomes in terms of inventory. One observation I'd make is that many people who stay in their homes to the end often don't have the means (money, health, etc) to maintain their homes, meaning those homes are often in worse shape and thus a lower valuation. Often too if you think of a "last home" it is either going to be a "downsize" or it's a "dream home" neither of which may be appropriate for all segments of the market. This segmentation is something that gets overlooked when we talk about supply side problems. I have lots of houses available in my market, but they may not be the square footage or condition that all buyers are willing to accept.
TheSoftwareGuy 3y ago
> Unless the housing supply increases this will just be a temporary thing I'll go a half-step further and say that unless this is a result of broad actions that have made home-building less costly, it will be temporary. Whenever house prices go down, home-builders become less incentivized to build new homes, and so less homes get built, and prices go up again. This will happen unless the price drop was a result of houses becoming easier to build
analyte123 3y ago
There are a record number of housing units under construction: https://fred.stlouisfed.org/series/UNDCONTSA/ https://fred.stlouisfed.org/series/UNDCONTSA/
- pixl97 3y ago
  If you look at the dip before now, it's because we're a record number of housing starts behind. We pretty much stopped building houses in 2008.
comte7092 3y ago
Selling at a loss is dependent on your cost basis, and fortunately most owners didn’t buy within the last few years of dramatically overinflated prices.
- jeffreyrogers 3y ago
  Many people refinanced in the last few years to take advantage of low rates and take money out of their homes.
spaceflunky 3y ago
>Unless the housing supply increases this will just be a temporary thing. The housing supply will increase dramatically in the next decade, not by building but by attrition. More than 55% of all homes in America are owned by Silent Gens or Boomers[0]. That figure includes non-SFHs, of SFHs I've read they own >70% of (lost my source unfortunately). They are going to start dying of en masse within the next decade. That means A LOT of SFH are going to hit the market, all around the same time. The share of millenials and genzers who are financially fit to even purchase a home are going to be far less than the amount of people who are dying. For the non-believers, it's all written in the demographics. Unless we import a shit load of migrants who can also afford expensive real estate, or we print money so that institutions can buy these properties, the prices are going to sink like crazy. [0]https://ipropertymanagement.com/research/homeownership-rate-by-age https://ipropertymanagement.com/research/homeownership-rate-...
- jeffreyrogers 3y ago
  Well their kids could live in them, or sell it and buy a different house to live in. Forecasting what the effect of that supply will be on prices seems hard to me. Housing units per capita is lower than it was 20 years ago[0] and I think if you could find a longer time series you would see the pattern continue back many decades. That timeseries also includes all housing, not just SFH. I think if you just looked at SFH the decline would be more dramatic. [0]: https://fred.stlouisfed.org/graph/?g=j9kH https://fred.stlouisfed.org/graph/?g=j9kH
  - spaceflunky 3y ago
    >Well their kids could live in them Unlikely. There's a very high likelihood the house will have to be sold, either to pay off debts of the deceased (or bereaved), or because the children already have their own lives going, or because they don't want to assume the tax burden, or simply because each child wants their share to do with as they please. >or sell it and buy a different house to live This is what's going to happen. All of these property will be sold. A very small percentage will be assumed by the children because of the all issues mentioned above.
- 3y ago

mnky9800n 3y ago

There should just be a pandemic or something that puts a lot of people out of work so that they have to sell at low prices so that large real estate companies can buy their houses and then rent them back to them. They can even have a reverse rental program that allows people to stay in their homes through the hard times and instead pay rent to the new owners.

nilespotter 3y ago
Did that actually happen?
- westmeal 3y ago
  In so many words yes, it's just a little oversimplified for humor.

jfengel 3y ago

I'm afraid I don't follow that. House-sellers are generally also house-buyers. They move out of one place into another. It's neutral with respect to supply. If there's a glut of people owning houses but not living in them and not successfully renting them, then that does reduce supply, but they're also suffering opportunity cost. If they're willing to throw away money like that I don't think increasing supply would help -- they'd just buy up the new houses as well.

jeffreyrogers 3y ago
If someone sells a house for less than they purchased it their equity available to purchase another house decreases. Since mortgage rates have increased that means they can only afford a smaller/worse house (because they have less money to make a down payment with). So why would they sell in that situation unless they need to? People sell when their homes have appreciated because they have positive equity and can get a new mortgage, so they can buy a better home by rolling their existing equity into the new home as a down payment (they also don't pay capital gains when doing this and the interest on the new mortgage is deductible, making it attractive from a tax perspective). Edit: I think I see where the confusion is. You are right that the literal supply of houses doesn't increase or decrease unless people stop/start renting or new homes are built. But the supply of houses available for purchase depends on whether people want to list them right now or not. Which is influenced by current prices because most people won't sell at a loss unless they have to.
- smcin 3y ago
  I think "inventory" = "supply of houses available for purchase [or sale being processed]".
- theGnuMe 3y ago
  I mean, you could sell for less than you purchased (say you put 20% down) and buy a new home with 5% or 10% down.. so you take a haircut and increase your mortgage. People may do this if they have to move for a job.
- mihaic 3y ago
  Is this true if the price of all houses fall? In that case it seems like it's easier to swap up.
- stvltvs 3y ago
  They probably wouldn't sell at a loss, but they would sell if their profit is bit less than when the market was higher.
- labcomputer 3y ago

Tade0 3y ago

Note that baby boomers are reaching an age at which they're starting to pass away. What else to do with an inherited house than either live in it or sell it?

ThalesX 3y ago
Rent it?
- lotsofpulp 3y ago
  Renting is not a new option, and it is not trivial. Is there a reason to assume a higher rate of inheritors to rent rather than sell?
jrumbut 3y ago
I wonder if there is a difference, as far as housing market fluctuations go, between an aging person who passes away and leaves their home to their heirs and one who sells their home before they pass away in order to fund their retirement/healthcare. Obviously the outcome for the family is very different and worth examining, but for the moment I'm considering the broader impact on the housing market.
- poulsbohemian 3y ago
  I live in a place that has received awards as a retirement destination, IE: we have people in the scenario you describe... I don't really see a difference in these outcomes in terms of inventory. One observation I'd make is that many people who stay in their homes to the end often don't have the means (money, health, etc) to maintain their homes, meaning those homes are often in worse shape and thus a lower valuation. Often too if you think of a "last home" it is either going to be a "downsize" or it's a "dream home" neither of which may be appropriate for all segments of the market. This segmentation is something that gets overlooked when we talk about supply side problems. I have lots of houses available in my market, but they may not be the square footage or condition that all buyers are willing to accept.

TheSoftwareGuy 3y ago

> Unless the housing supply increases this will just be a temporary thing I'll go a half-step further and say that unless this is a result of broad actions that have made home-building less costly, it will be temporary. Whenever house prices go down, home-builders become less incentivized to build new homes, and so less homes get built, and prices go up again. This will happen unless the price drop was a result of houses becoming easier to build

analyte123 3y ago

There are a record number of housing units under construction: https://fred.stlouisfed.org/series/UNDCONTSA/ https://fred.stlouisfed.org/series/UNDCONTSA/

pixl97 3y ago
If you look at the dip before now, it's because we're a record number of housing starts behind. We pretty much stopped building houses in 2008.

comte7092 3y ago

Selling at a loss is dependent on your cost basis, and fortunately most owners didn’t buy within the last few years of dramatically overinflated prices.

jeffreyrogers 3y ago
Many people refinanced in the last few years to take advantage of low rates and take money out of their homes.

spaceflunky 3y ago

>Unless the housing supply increases this will just be a temporary thing. The housing supply will increase dramatically in the next decade, not by building but by attrition. More than 55% of all homes in America are owned by Silent Gens or Boomers[0]. That figure includes non-SFHs, of SFHs I've read they own >70% of (lost my source unfortunately). They are going to start dying of en masse within the next decade. That means A LOT of SFH are going to hit the market, all around the same time. The share of millenials and genzers who are financially fit to even purchase a home are going to be far less than the amount of people who are dying. For the non-believers, it's all written in the demographics. Unless we import a shit load of migrants who can also afford expensive real estate, or we print money so that institutions can buy these properties, the prices are going to sink like crazy. [0]https://ipropertymanagement.com/research/homeownership-rate-by-age https://ipropertymanagement.com/research/homeownership-rate-...

jeffreyrogers 3y ago
Well their kids could live in them, or sell it and buy a different house to live in. Forecasting what the effect of that supply will be on prices seems hard to me. Housing units per capita is lower than it was 20 years ago[0] and I think if you could find a longer time series you would see the pattern continue back many decades. That timeseries also includes all housing, not just SFH. I think if you just looked at SFH the decline would be more dramatic. [0]: https://fred.stlouisfed.org/graph/?g=j9kH https://fred.stlouisfed.org/graph/?g=j9kH
- spaceflunky 3y ago
  >Well their kids could live in them Unlikely. There's a very high likelihood the house will have to be sold, either to pay off debts of the deceased (or bereaved), or because the children already have their own lives going, or because they don't want to assume the tax burden, or simply because each child wants their share to do with as they please. >or sell it and buy a different house to live This is what's going to happen. All of these property will be sold. A very small percentage will be assumed by the children because of the all issues mentioned above.
3y ago