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All of the above. - Prices are determined by comparables. When home owners sell, and can push prices higher, it pushes all possible future prices for all prope
by maxsilver 2y ago
All of the above.
- Prices are determined by comparables. When home owners sell, and can push prices higher, it pushes all possible future prices for all properties nearby higher simultaneously.
- Corporate interests are buying up real estate, and especially rentals. (public and private equity purchases are 6x higher than they were a decade ago here). Higher rental prices encourage people to leave rentals faster, making people more desperate to buy, increasing their willingness to take on more debt.
- (in a few areas) construction is limited and not keeping up with growth. In most of Midwest US, construction outpaces growth, but since prices are determined by comparables, new construction in an area can be priced at top of the market, resetting those comparables higher too. Paradoxically, even though we do need new housing construction to have housing, our financial system is setup such that new housing construction generally raises all prices for all housing on average -- the "more supply" benefits don't really take effect for about 30 years, when they become normal mid-market units.
- In some areas, new Hotels entrants are escaping basic regulation by lying about who they are. (see AirBnB, Vrbo and similar hotel chains). This removes housing supply, and can't be market corrected by other competitive hotels (since they would have to follow basic hotel regulation, but AirBnB and Vrbo are allowed to break the law)
- Unlike in 2008, corporate interests are willing to just eat massive losses to prevent property prices from falling. And the federal government is willing to extend massive amount of lending to them to allow them to do this almost indefinitely. So even in places where there's a massive supply of empty units, those units aren't making it to the market at any reduced prices because it's too affordable to simply sit on them instead and hope they're eventually able to rent out again at ultra-high pricing. I suspect we'll never see a gentle market reset back to real-world-based numbers like we saw in 2008 for that reason.
Any one of those problems would raise property prices for everyone. But we're dealing with all of them, simultaneously.
Something like this https://ny1.com/nyc/all-boroughs/news/2024/01/05/hedge-fund-rental-housing-home-affordable-representative-adam-smith-congress- https://ny1.com/nyc/all-boroughs/news/2024/01/05/hedge-fund-... would be a gentle start to attempt to address the above problems, but it remains to be seen if they actually get this through.
- HDThoreaun 2y agoCorporations only buy housing because it is a good investment. Its only a good investment because supply is severely limited by the government. If you think corporate ownership is a problem the solution is building more, LVT wouldnt hurt either.
- maxsilver 2y ago> Its only a good investment because supply is severely limited by the government. The entire American Midwest exists, and proves this point severely wrong. Supply can be infinite and unlimited, and it's still profitable for companies to exploit housing.
- HDThoreaun 2y agoCorporations arent buying housing in the vast midwest for this exact reason. We need housing where people want to be.
- maxsilver 2y ago> Corporations arent buying housing in the vast midwest for this exact reason Except they are buying lots of housing. Even in nothingsville-small-city Midwest, we're experiencing exploding housing prices, despite no real barriers to construction at all.
- bombcar 2y agoThere was a basically "one-time burst" where prices rose to match the nearby cities as covid allowed people to escape, but prices are definitely plateauing if not cooling off, and once builders build through their backlog we will see some serious competition (I've noticed builders already offering "free upgrades" which is how they first do price cuts).
- chaosharmonic 2y agoAdd to this the 3-part RealPage grift: - build a platform that tells landlords, algorithmically, how much they can feasibly afford to raise rents YoY, based on what other landlords in their area are charging for similar properties - write terms of service that require them to use your pricing suggestions most of the time - target large-scale landlords in big metro areas, to get a lot of market penetration relative to the size of your customer base -- so that when you tell your customers it's based on the behavior of other landlords in your area you actually mean that it's the behavior of their other users, who are also bound to these same terms I keep losing track of which ones are where, but there have been several price-fixing lawsuits over this -- they range across a couple of AGs, private parties, and I think DoJ
- chaosharmonic 2y agoI should also note that just the first one amounts in practical terms to collusion as a service -- in that what they're ultimately doing is gathering a dataset of pricing data from a bunch of "competing" landlords, who: - are informed that their data is being collected for this - offer it up voluntarily to join the scheme - and are in fact paying them for it
- gottorf 2y ago> Prices are determined by comparables. When home owners sell, and can push prices higher, it pushes all possible future prices for all properties nearby higher simultaneously. Prices are determined by supply and demand. What you're describing is only true because supply is so choked relative to demand.
- bombcar 2y agoOffering prices are roughly set by comparables (and loan officers look at them) but you definitely can have prices start to drop, and drop fast. Anyone who didn't live through the last two house crashes will be in for a world of surprise when the next occurs, and it will - at some point; because something's gotta give.