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>> But rising home prices are just one factor impacting affordability. High interest rates are another. I believe that statement is in error. Higher interest r

>> But rising home prices are just one factor impacting affordability. High interest rates are another. I believe that statement is in error. Higher interest rates should lower home prices, just like lowering them from 1980 through 2000 contributed to rising prices. There are economists scratching their head right now wondering why the recent rate hikes have not resulted in lower prices in some areas. IMHO There is definitely something else going on in the real estate market. I'm sure those benefitting most are laughing maniacally as people scurry around trying to figure it out.

throwaway11460 2y ago
It's really not hard to understand... Extreme undersupply due to regulation/bureaucracy and extreme overdemand due to lack of opportunities elsewhere. I live in the capital city of my country, just checked the situation in my hometown - average jobs pay 1/2 and the job I do would pay 1/5 - while the rental and property prices are just 10-20% lower; schools are terrible, no night life, no interesting restaurants, literally zero startups of any kind, people are (voting for) racists and conservatives... What the hell would I do there? I like my nice cheap (compared to my buying power) apartment in the middle of a nice progressive cosmopolitan city.
- KoolKat23 2y ago
  I agree with nearly everything you say. I'm of the opinion that regulation/bureaucracy are being scapegoated to an extent. Supply of knowledgeable builders and development finance is not very elastic and does not increase easily even when there is less regulation. The real reason I feel is the higher risk = higher reward equation is broken. Building fewer units means increasing scarcity, allowing increased prices despite there being lower (due to building less houses). Developers are chasing good profit margins rather than revenue. Less regulation just means even better profit margins for these developers.
  - throwaway11460 2y ago
    Where I live there would be 100 people waiting to buy an apartment you just built, giving you absurd amounts of money for it. There is no reason to build less than the absolute maximum possible. There are many developers and builders who want to do it, could do it and eventually will do it - but getting an approval takes 11 years.
    - bombcar 2y ago
      The timeline is a killer, because 11 years (and more) from beginning to end means you could end up with your new building opening just as the area goes into a slump. When the turnaround time is shorter, the builder is taking much less risk, and so they're more willing to build. (They can still overextend as happened during the last housing bubble, mind you.)
- mtalantikite 2y ago
  I just spent 10 days in the town I grew up in north of Boston to take care of a family member. Was completely surprised that people are putting homes on the market in my old neighborhood for nearly $1 million. Rents are not even that far off from what you could get in Bushwick, Brooklyn and you would need to own a car. The restaurants were more expensive than my regular spots in Brooklyn, and just way way worse quality. It's not a bad place to live, but it's ridiculous that everything is this expensive everywhere.
  - throwaway11460 2y ago
    My parents always tell me I waste so much money by going to restaurants all the time and that taxis are absurd luxury - yeah but my taxi costs 3x less than in the hometown, my restaurant meal is 1/2 cheaper and much better than anything I could make myself (or buy anywhere in the hometown) - and in this city I can actually spend the time working and making a lot of additional income instead of killing time in a shopping mall and cleaning.
ajmurmann 2y ago
AFAIK the higher interest rates led to less inventory on the market because people who sell and night buy elsewhere would also be getting higher interest rates. So they don't sell. I also bhave friends who actually bought a new home, but are renting out the previous one because the mortgage is so good. That said, I've not seen actual numbers on this. Demand also can't really go down. What option do people have? Become homeless or move a 4-hourb flight away from work?
- mtalantikite 2y ago
  Just a couple days ago I was walking behind a couple here in NYC, probably in their mid-50s, talking about how they really couldn't justify moving because they'd have to ditch their 2%-ish interest rate for a much higher one. I definitely have friends in the same situation. Must have been nice to get all that nearly free money when they were passing it out!
  - ajmurmann 2y ago
    This is also really bad for the economy because it reduces mobility. It drastically raises the barrier for relocating for a better job. It makes our job-to-worker mappings much worse.
  - HarHarVeryFunny 2y ago
    There was a sweet spot about 10 years ago when mortgage rates hit bottom but people were still afraid to buy and house prices were affordable. Mortgage rates today are still extremely low by historical standards, but unfortunately at the same time that mortgage rates have been rising, so have house prices (somewhat oddly), so affordability is horrible. I think the comment you overheard is pretty typical - people are stuck in houses since if they sold and moved elsewhere their monthly payment would be double or more. People retiring and wanting to move from good job locations to cheaper retirement ones are not able to do so.
    - bombcar 2y ago
      When you're in a situation where you incur heavy charges for "selling your house and buying it back" (or selling it and buying the identical one next door) beyond the 5-10% you lose in transaction costs, you're basically going to stay put. There are ways to avoid some of the downsides, but they involve additional risks many are not willing to take. The most common is to rent out the house you're living in (the "good location" one) and use the proceeds from the rental to both pay the mortgage and help with a new purchase elsewhere. Then you're effectively running arbitrage on your low rate loan.
geysersam 2y ago
Pretty sure house prices have fallen a bit in most places if you take inflation into account. One reason they haven't come down more is probably that most people think the current interest rate is just a temporary anomaly caused by recent disruptions to global supply chains (Covid+war in Ukraine). Fundamentally little has changed and I guess people are betting once this blows over house prices will continue up like they've done the last three decades.
- graemep 2y ago
  They have. I have occasionally looked at this site to see what is happening in areas of the UK I am interested in and there are far more real terms drops: https://houseprices.io/ https://houseprices.io/ its lagging data BTW. Based on government data that takes time to be reported.
graemep 2y ago
There are multiple possible explanations, that differ in different places (bearing in mind this affects most developed economies). 1. cash buyers 2. people holding off selling in hope of a recover in prices 3. inflation turning real terms declines into currency terms rises 4. demographic changes (smaller household sizes) increasing demand for the number of units 5. population movements both within and between countries 6. laws and regulations that slow down building.
notaustinpowers 2y ago
This is my very American-centric view on the housing prices continuing to rise despite high interest rates: Large investment companies are beginning to leave the Commercial Real Estate sector due to the consequences of the pandemic. While commercial RE was seen as a stable investment strategy, that is no longer the case. The residential market is the new (somewhat) stable investment. Not everyone needs an office, but everyone needs somewhere to live. These investment companies are now beginning to purchase newly-built communities of hundreds of single-family homes and turning them into rental-only communities. Removing homes from the sale market and locking them behind rentals. Rental prices are much more stable during a recession or contraction in a market. When the market is great and homes are "affordable", it's still a competition of wealthier, older generations that can outbid those in their 20s or early 30s, locking the younger generation into rentals. And when the market is bad and everyone is getting foreclosed, rentals become more in demand, increasing those rental prices. My city has built over 1,000 new homes in various communities in the past 2-3 years but they were all purchased by investment firms before construction was completed and they are now rental-only neighborhoods. The recent prices aren't being lowered due to the rate hikes because of these investment firms. To sellers, demand is still high (they don't care whether the buyer is a person or a company), so why lower prices? EDIT: This is specifically noticeable in suburban metro areas due to the higher average income of residents and the high demand for housing.
- wrl 2y ago
  > These investment companies are now beginning to purchase newly-built communities of hundreds of single-family homes and turning them into rental-only communities. Removing homes from the sale market and locking them behind rentals. I always see takes about how the only solution out of a housing crisis is "building more housing" and not any sort of control or regulation over the accumulation of housing stock. But yeah, when even new construction is immediately snapped up... I mean, is there anything to do but regulate the buying side?
  - brigadier132 2y ago
    The problem is the government. Have you not realized that all of the absurdly priced industries also happen to have the most government intervention? The government needs to sit back and just do the basics like preventing collusion and monopolies (which they absolutely fail at) and get rid of regulations that prevent more housing being built.
dustedcodes 2y ago
> There are economists scratching their head right now wondering why the recent rate hikes have not resulted in lower prices in some areas House prices were not stagnant before, they were rising YoY and higher interest rates might just slower the rise but not revert it due to the existing pressures which probably have a much larger impact than the interest rate at the moment.
sys_64738 2y ago
In the USA there is a lack of inventory due to those people who locked in 30 year fixed rates in the 2-3% range. Those folk might want to move but they're not moving when rates are currently 7%+. The supply won't improve until rates come under 5%.
- alistairSH 2y ago
  Presumably, this will eventually even out as people have to move for one reason or another and 7% mortgages become more normal (and historically, they aren't unusual). But, yeah, right now, the number of people I know who have paused plans to move? A lot. Both within the area and others who were contemplating relocation. We were considering a move to a smaller city, but prices there have gone up just as fast as our current area (DC metro). Along with the interest increases, it's not viable any more (would require wife to find new employment, probably at the lower prevailing wage for that area).
- HarHarVeryFunny 2y ago
  It also doesn't help that there are now taxes to pay on house appreciation whenever you sell, so you can't sell and take the proceeds to buy elsewhere since the taxman will take a large chunk of it. It used to be that if you sold one house and bought another for same price then there would be no appreciation taxes, but that stopped a few(?) years ago. Until something changes, many people are stuck in their homes, unless they are willing to accept the huge downgrade in what they can afford if they moved.
  - sys_64738 2y ago
    You can still build 500k$ of equity for a married couple in the USA.
  - ryandrake 2y ago
    > It used to be that if you sold one house and bought another for same price then there would be no appreciation taxes, but that stopped a few(?) years ago. The IRS's 121 Home Sale Exclusion still applies which allows you to exclude $250,000 ($500,000 if married) of capital gains on the sale of your primary residence. For an investment property, you can also do a like-kind exchange to defer taxes.
brigadier132 2y ago
The problem is government intervention on behalf of home owners. The cost of housing is the #1 highest impact thing that is affecting all non-property owning Americans and politicians are not talking about it. I don't understand how the cost of living crisis is not the #1 conversation topic in presidential debates. The reason why is because the older home owners are the most important voters so campaigning on lowering property prices by eg building homes and getting rid of regulation is perceived as political suicide.
- P_I_Staker 2y ago
  I perfectly understand it. The reality is that the USA has quite an large middle class. It's not just the ultra wealthy that have privileges, due to housing. While I don't understand everyone's financial situation, in the USA a TON of people own homes. It's not just them, but some of their friends and family influenced by In the USA, owning a home is considered a status symbol and a sign of competency. The culture is such bullshit. I've seen so many people buy a home and suddenly turn into scrooges. It creeps me out. It's gotten to the point that I've just figured: "Buying a home and starting a family turn you into a bad person." I'm sick of watching people change and treat their homes as proof of their value in society. I was reading something about oxytocin ("the love chemical") being tied to racism. I'm not at all surprised by this anymore. Especially when you see how much "bonding" can be tied to territorialism and selfishness. When it's "us against the world", that's a big fuck you to the whole entire world.
notfbi 2y ago
"Affordability" usually refers to cost of ownership, generally as a proportion to some sort of income metric, not the full value of the home. If home prices don't fall in unison with increased rates sufficiently then of course monthly mortgage payments (or imputed rent) goes up and affordability metrics worsen. I don't think this is making economists scratch their head so much, if so it's like how "experts don't know how the pyramids were made" -- we know many ways it could happen, we just can't prove which one. Even in the simplest model of valuation, it's not the current interest rate that determines the home prices, it's the full expected rate over the lifetime of the asset. Of course if interest rates are 5% today but expected to be 1% next year, the price will be based mostly on the 1%. The longer term bonds and hence longer term mortgage rates can capture a consensus expectation, but there can still be divergence of expectations by the marginal seller. My dental hygienist on selling her house "The government needs to cut rates back so that people can afford to buy my house" with unsaid portion as I heard it "at my arbitrary zero-interest-rate-phenomenon based expectation of value".
instagib 2y ago
Hopefully economists are not scratching their heads but armchair economists may be. What is said on the news may not always be the large change some may expect and it could be false yet they got someone-anyone on a show to say it was true. There are real estate investment trusts available to invest in that perform quite well. A recent statistic for a major city: 40% of homes are unoccupied. We need to look into failed states that diverge from us to see what could happen or may be done to prevent it.
- khuey 2y ago
  > A recent statistic for a major city: 40% of homes are unoccupied. [citation needed]
  - bombcar 2y ago
    Might be true in Detroit or something. Usually there's a qualifier, like 40% of non-owner-occupied housing is unoccupied, and in the area that's 1% of houses or something. (As a baseline, rentals are assumed to be unoccupied 10-20% of the time - so the total number of dwelling units in an area would be (number of owner occupied) + (number of remaining families) + (10% of remaining families) or so).
    - Kon-Peki 2y ago
      > Might be true in Detroit or something Not a chance. At least not for habitable housing. And by the way, the population density in metropolitan Detroit is 10th highest in the US. It's hardly the empty wasteland that people imagine.
Ekaros 2y ago
I think the reality is that there is not yet enough sale pressure. So units are not coming to market. This will likely change when the recession actually hits.
- bombcar 2y ago
  This is most of it, right here. Home sales will be normal when interest rates are stable. If they drop, home sales will stay normal or rise, because you can "get out of your high rate loan AND upgrade" at the same time. But now, when rates are climbing? You'll be selling your house AND your 3% mortgage to buy a ... 7% one? Since "selling your house and buying it back" would result in a larger monthly payment (swapping the loan from 3% to 7%) the first thing we should expect to see is sales slow down. After they've slowed down for awhile, the prices might begin to drop - if people need to sell.
imtringued 2y ago
Interest rates increase the cost of financing. This means that given the same monthly budget, you're still going to spend your whole budget. You get less house for the same amount of money. The difference is that the money goes to the bank instead of the previous owner. At some point housing prices do drop, but the reality is that demand exceeds supply. The problem isn't financing itself. Places with supply exceeding demand massively benefit from cheaper financing as it makes the cost of living smaller.
John23832 2y ago
People who have cashed out equity in their home also have an interest in the price of their home going up.
diogenescynic 2y ago
That's only part of the issue though. The other issue is that inflation is going up from everything going on in Europe (Ukraine/Russia) and Middle East (Israel/Suez Canal pirates/blocks) and then after the great financial recession many of the blue collar workers who were part of the home building industry changed careers, cities/states have increased housing zoning laws and requirements, and inflation on materials has made building a home more expensive. All these factors are pushing prices up.

throwaway11460 2y ago

It's really not hard to understand... Extreme undersupply due to regulation/bureaucracy and extreme overdemand due to lack of opportunities elsewhere. I live in the capital city of my country, just checked the situation in my hometown - average jobs pay 1/2 and the job I do would pay 1/5 - while the rental and property prices are just 10-20% lower; schools are terrible, no night life, no interesting restaurants, literally zero startups of any kind, people are (voting for) racists and conservatives... What the hell would I do there? I like my nice cheap (compared to my buying power) apartment in the middle of a nice progressive cosmopolitan city.

KoolKat23 2y ago
I agree with nearly everything you say. I'm of the opinion that regulation/bureaucracy are being scapegoated to an extent. Supply of knowledgeable builders and development finance is not very elastic and does not increase easily even when there is less regulation. The real reason I feel is the higher risk = higher reward equation is broken. Building fewer units means increasing scarcity, allowing increased prices despite there being lower (due to building less houses). Developers are chasing good profit margins rather than revenue. Less regulation just means even better profit margins for these developers.
- throwaway11460 2y ago
  Where I live there would be 100 people waiting to buy an apartment you just built, giving you absurd amounts of money for it. There is no reason to build less than the absolute maximum possible. There are many developers and builders who want to do it, could do it and eventually will do it - but getting an approval takes 11 years.
  - bombcar 2y ago
    The timeline is a killer, because 11 years (and more) from beginning to end means you could end up with your new building opening just as the area goes into a slump. When the turnaround time is shorter, the builder is taking much less risk, and so they're more willing to build. (They can still overextend as happened during the last housing bubble, mind you.)
mtalantikite 2y ago
I just spent 10 days in the town I grew up in north of Boston to take care of a family member. Was completely surprised that people are putting homes on the market in my old neighborhood for nearly $1 million. Rents are not even that far off from what you could get in Bushwick, Brooklyn and you would need to own a car. The restaurants were more expensive than my regular spots in Brooklyn, and just way way worse quality. It's not a bad place to live, but it's ridiculous that everything is this expensive everywhere.
- throwaway11460 2y ago
  My parents always tell me I waste so much money by going to restaurants all the time and that taxis are absurd luxury - yeah but my taxi costs 3x less than in the hometown, my restaurant meal is 1/2 cheaper and much better than anything I could make myself (or buy anywhere in the hometown) - and in this city I can actually spend the time working and making a lot of additional income instead of killing time in a shopping mall and cleaning.

ajmurmann 2y ago

AFAIK the higher interest rates led to less inventory on the market because people who sell and night buy elsewhere would also be getting higher interest rates. So they don't sell. I also bhave friends who actually bought a new home, but are renting out the previous one because the mortgage is so good. That said, I've not seen actual numbers on this. Demand also can't really go down. What option do people have? Become homeless or move a 4-hourb flight away from work?

mtalantikite 2y ago
Just a couple days ago I was walking behind a couple here in NYC, probably in their mid-50s, talking about how they really couldn't justify moving because they'd have to ditch their 2%-ish interest rate for a much higher one. I definitely have friends in the same situation. Must have been nice to get all that nearly free money when they were passing it out!
- ajmurmann 2y ago
  This is also really bad for the economy because it reduces mobility. It drastically raises the barrier for relocating for a better job. It makes our job-to-worker mappings much worse.
- HarHarVeryFunny 2y ago
  There was a sweet spot about 10 years ago when mortgage rates hit bottom but people were still afraid to buy and house prices were affordable. Mortgage rates today are still extremely low by historical standards, but unfortunately at the same time that mortgage rates have been rising, so have house prices (somewhat oddly), so affordability is horrible. I think the comment you overheard is pretty typical - people are stuck in houses since if they sold and moved elsewhere their monthly payment would be double or more. People retiring and wanting to move from good job locations to cheaper retirement ones are not able to do so.
  - bombcar 2y ago
    When you're in a situation where you incur heavy charges for "selling your house and buying it back" (or selling it and buying the identical one next door) beyond the 5-10% you lose in transaction costs, you're basically going to stay put. There are ways to avoid some of the downsides, but they involve additional risks many are not willing to take. The most common is to rent out the house you're living in (the "good location" one) and use the proceeds from the rental to both pay the mortgage and help with a new purchase elsewhere. Then you're effectively running arbitrage on your low rate loan.

geysersam 2y ago

Pretty sure house prices have fallen a bit in most places if you take inflation into account. One reason they haven't come down more is probably that most people think the current interest rate is just a temporary anomaly caused by recent disruptions to global supply chains (Covid+war in Ukraine). Fundamentally little has changed and I guess people are betting once this blows over house prices will continue up like they've done the last three decades.

graemep 2y ago
They have. I have occasionally looked at this site to see what is happening in areas of the UK I am interested in and there are far more real terms drops: https://houseprices.io/ https://houseprices.io/ its lagging data BTW. Based on government data that takes time to be reported.

graemep 2y ago

There are multiple possible explanations, that differ in different places (bearing in mind this affects most developed economies). 1. cash buyers 2. people holding off selling in hope of a recover in prices 3. inflation turning real terms declines into currency terms rises 4. demographic changes (smaller household sizes) increasing demand for the number of units 5. population movements both within and between countries 6. laws and regulations that slow down building.

notaustinpowers 2y ago

This is my very American-centric view on the housing prices continuing to rise despite high interest rates: Large investment companies are beginning to leave the Commercial Real Estate sector due to the consequences of the pandemic. While commercial RE was seen as a stable investment strategy, that is no longer the case. The residential market is the new (somewhat) stable investment. Not everyone needs an office, but everyone needs somewhere to live. These investment companies are now beginning to purchase newly-built communities of hundreds of single-family homes and turning them into rental-only communities. Removing homes from the sale market and locking them behind rentals. Rental prices are much more stable during a recession or contraction in a market. When the market is great and homes are "affordable", it's still a competition of wealthier, older generations that can outbid those in their 20s or early 30s, locking the younger generation into rentals. And when the market is bad and everyone is getting foreclosed, rentals become more in demand, increasing those rental prices. My city has built over 1,000 new homes in various communities in the past 2-3 years but they were all purchased by investment firms before construction was completed and they are now rental-only neighborhoods. The recent prices aren't being lowered due to the rate hikes because of these investment firms. To sellers, demand is still high (they don't care whether the buyer is a person or a company), so why lower prices? EDIT: This is specifically noticeable in suburban metro areas due to the higher average income of residents and the high demand for housing.

wrl 2y ago
> These investment companies are now beginning to purchase newly-built communities of hundreds of single-family homes and turning them into rental-only communities. Removing homes from the sale market and locking them behind rentals. I always see takes about how the only solution out of a housing crisis is "building more housing" and not any sort of control or regulation over the accumulation of housing stock. But yeah, when even new construction is immediately snapped up... I mean, is there anything to do but regulate the buying side?
- brigadier132 2y ago
  The problem is the government. Have you not realized that all of the absurdly priced industries also happen to have the most government intervention? The government needs to sit back and just do the basics like preventing collusion and monopolies (which they absolutely fail at) and get rid of regulations that prevent more housing being built.

dustedcodes 2y ago

> There are economists scratching their head right now wondering why the recent rate hikes have not resulted in lower prices in some areas House prices were not stagnant before, they were rising YoY and higher interest rates might just slower the rise but not revert it due to the existing pressures which probably have a much larger impact than the interest rate at the moment.

sys_64738 2y ago

In the USA there is a lack of inventory due to those people who locked in 30 year fixed rates in the 2-3% range. Those folk might want to move but they're not moving when rates are currently 7%+. The supply won't improve until rates come under 5%.

alistairSH 2y ago
Presumably, this will eventually even out as people have to move for one reason or another and 7% mortgages become more normal (and historically, they aren't unusual). But, yeah, right now, the number of people I know who have paused plans to move? A lot. Both within the area and others who were contemplating relocation. We were considering a move to a smaller city, but prices there have gone up just as fast as our current area (DC metro). Along with the interest increases, it's not viable any more (would require wife to find new employment, probably at the lower prevailing wage for that area).
HarHarVeryFunny 2y ago
It also doesn't help that there are now taxes to pay on house appreciation whenever you sell, so you can't sell and take the proceeds to buy elsewhere since the taxman will take a large chunk of it. It used to be that if you sold one house and bought another for same price then there would be no appreciation taxes, but that stopped a few(?) years ago. Until something changes, many people are stuck in their homes, unless they are willing to accept the huge downgrade in what they can afford if they moved.
- sys_64738 2y ago
  You can still build 500k$ of equity for a married couple in the USA.
- ryandrake 2y ago
  > It used to be that if you sold one house and bought another for same price then there would be no appreciation taxes, but that stopped a few(?) years ago. The IRS's 121 Home Sale Exclusion still applies which allows you to exclude $250,000 ($500,000 if married) of capital gains on the sale of your primary residence. For an investment property, you can also do a like-kind exchange to defer taxes.

brigadier132 2y ago

The problem is government intervention on behalf of home owners. The cost of housing is the #1 highest impact thing that is affecting all non-property owning Americans and politicians are not talking about it. I don't understand how the cost of living crisis is not the #1 conversation topic in presidential debates. The reason why is because the older home owners are the most important voters so campaigning on lowering property prices by eg building homes and getting rid of regulation is perceived as political suicide.

P_I_Staker 2y ago
I perfectly understand it. The reality is that the USA has quite an large middle class. It's not just the ultra wealthy that have privileges, due to housing. While I don't understand everyone's financial situation, in the USA a TON of people own homes. It's not just them, but some of their friends and family influenced by In the USA, owning a home is considered a status symbol and a sign of competency. The culture is such bullshit. I've seen so many people buy a home and suddenly turn into scrooges. It creeps me out. It's gotten to the point that I've just figured: "Buying a home and starting a family turn you into a bad person." I'm sick of watching people change and treat their homes as proof of their value in society. I was reading something about oxytocin ("the love chemical") being tied to racism. I'm not at all surprised by this anymore. Especially when you see how much "bonding" can be tied to territorialism and selfishness. When it's "us against the world", that's a big fuck you to the whole entire world.

notfbi 2y ago

"Affordability" usually refers to cost of ownership, generally as a proportion to some sort of income metric, not the full value of the home. If home prices don't fall in unison with increased rates sufficiently then of course monthly mortgage payments (or imputed rent) goes up and affordability metrics worsen. I don't think this is making economists scratch their head so much, if so it's like how "experts don't know how the pyramids were made" -- we know many ways it could happen, we just can't prove which one. Even in the simplest model of valuation, it's not the current interest rate that determines the home prices, it's the full expected rate over the lifetime of the asset. Of course if interest rates are 5% today but expected to be 1% next year, the price will be based mostly on the 1%. The longer term bonds and hence longer term mortgage rates can capture a consensus expectation, but there can still be divergence of expectations by the marginal seller. My dental hygienist on selling her house "The government needs to cut rates back so that people can afford to buy my house" with unsaid portion as I heard it "at my arbitrary zero-interest-rate-phenomenon based expectation of value".

instagib 2y ago

Hopefully economists are not scratching their heads but armchair economists may be. What is said on the news may not always be the large change some may expect and it could be false yet they got someone-anyone on a show to say it was true. There are real estate investment trusts available to invest in that perform quite well. A recent statistic for a major city: 40% of homes are unoccupied. We need to look into failed states that diverge from us to see what could happen or may be done to prevent it.

khuey 2y ago
> A recent statistic for a major city: 40% of homes are unoccupied. [citation needed]
- bombcar 2y ago
  Might be true in Detroit or something. Usually there's a qualifier, like 40% of non-owner-occupied housing is unoccupied, and in the area that's 1% of houses or something. (As a baseline, rentals are assumed to be unoccupied 10-20% of the time - so the total number of dwelling units in an area would be (number of owner occupied) + (number of remaining families) + (10% of remaining families) or so).
  - Kon-Peki 2y ago
    > Might be true in Detroit or something Not a chance. At least not for habitable housing. And by the way, the population density in metropolitan Detroit is 10th highest in the US. It's hardly the empty wasteland that people imagine.

Ekaros 2y ago

I think the reality is that there is not yet enough sale pressure. So units are not coming to market. This will likely change when the recession actually hits.

bombcar 2y ago
This is most of it, right here. Home sales will be normal when interest rates are stable. If they drop, home sales will stay normal or rise, because you can "get out of your high rate loan AND upgrade" at the same time. But now, when rates are climbing? You'll be selling your house AND your 3% mortgage to buy a ... 7% one? Since "selling your house and buying it back" would result in a larger monthly payment (swapping the loan from 3% to 7%) the first thing we should expect to see is sales slow down. After they've slowed down for awhile, the prices might begin to drop - if people need to sell.

imtringued 2y ago

Interest rates increase the cost of financing. This means that given the same monthly budget, you're still going to spend your whole budget. You get less house for the same amount of money. The difference is that the money goes to the bank instead of the previous owner. At some point housing prices do drop, but the reality is that demand exceeds supply. The problem isn't financing itself. Places with supply exceeding demand massively benefit from cheaper financing as it makes the cost of living smaller.

John23832 2y ago

People who have cashed out equity in their home also have an interest in the price of their home going up.

diogenescynic 2y ago

That's only part of the issue though. The other issue is that inflation is going up from everything going on in Europe (Ukraine/Russia) and Middle East (Israel/Suez Canal pirates/blocks) and then after the great financial recession many of the blue collar workers who were part of the home building industry changed careers, cities/states have increased housing zoning laws and requirements, and inflation on materials has made building a home more expensive. All these factors are pushing prices up.