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You are correct. >Is it more likely the trend continues and young people will simply become priced out, or is a correction more likely? As a layman, take this

You are correct. >Is it more likely the trend continues and young people will simply become priced out, or is a correction more likely? As a layman, take this with a huge grain of salt: it depends. By established rules, a major correction should be imminent. In fact, it should have happened one of several times already. Examples of catalysts include a bond liquidity crisis in late 2019, the flash crash at the start of the COVID pandemic, the Gamestop debacle in early 2021, the collapse of the Chinese real estate market later in 2021, and the US bank collapses of early 2023. There are also others, though several venture into conspiracy theory territory. In every example I mentioned, unprecedented action was undertaken to prevent a catastrophic event that might have lead to financial contagion across global markets. There will be probably be more. It remains to be seen whether authorities will continue undertaking steps to shore things up when the bubble threatens to pop. (Trump's return to office is an interesting wrinkle; grab another grain of salt, but it's my opinion that the Gamestop thing only got as bad as it did because the regulatory regime under his tenure was asleep at the wheel.) It should be noted that a correction doesn't necessarily lead to affordability if purchasing power simply continues falling or remains stagnant, as a result of a weaker job market. There are people who believe that sellers will simply refuse to drop residential real estates prices, as they have with commercial properties. Consolidation of ownership under large entities - as we've already seen to some extent - would allow owners to simply squat on properties, perhaps renting then out. Who knows what happens to the algorithmic rent fixing lawsuits, that might have brought those costs back to Earth a bit, after this year's electoral red wave.

toomuchtodo 2y ago
A correction won't occur because there is a housing shortage of between 3-8M units, depending on who you ask. There is not enough labor to build more units at any reasonable rate, so it'll be a slow burn as the system reaches equilibrium over time (new housing comes into the market when owners must sell, demand destruction due to pricing). Due to demographics, a lot more housing could be satisfied by smaller units accounting for reduced forward looking family formation, but the challenge remains in sourcing labor to build these units. With regards to the labor market, due to structural demographics and labor shortages, it is highly unlikely in my opinion that the job market weakens to the point where housing experiences a crisis from a rapid, sustained increase in homeowners who cannot afford their mortgage payments. https://www.voronoiapp.com/demographics/Over-Half-of-Households-in-the-US-Dont-Have-Kids--2933 https://www.voronoiapp.com/demographics/Over-Half-of-Househo... ("Over Half of Households in the U.S. Don't Have Kids") https://www.fanniemae.com/research-and-insights/perspectives/us-housing-shortage https://www.fanniemae.com/research-and-insights/perspectives... ("U.S. Housing Shortage: Everything, Everywhere, All at Once") https://www.fanniemae.com/media/45106/display https://www.fanniemae.com/media/45106/display ("Fannie Mae: The U.S. Housing Shortage from a Local Perspective") https://www.marketplace.org/shows/marketplace/the-housing-sector-droops-under-a-labor-shortage-and-price-hikes/ https://www.marketplace.org/shows/marketplace/the-housing-se... ("APM Marketplace: The housing sector droops under a labor shortage and price hikes") https://www.businessinsider.com/baby-boomers-housing-wealth-home-prices-housing-shortage-retirement-2024-11 https://www.businessinsider.com/baby-boomers-housing-wealth-... | https://archive.today/OsNgL https://archive.today/OsNgL ("Business Inside: Baby boomer homeowners got rich from skyrocketing house prices. Now they can't find retirement housing.") https://www.bloomberg.com/news/articles/2024-09-18/us-faces-a-deficit-of-6-million-workers-in-less-than-a-decade https://www.bloomberg.com/news/articles/2024-09-18/us-faces-... | https://archive.today/Lyr5t https://archive.today/Lyr5t ("Bloomberg: US Faces a Deficit of 6 Million Workers in Less Than a Decade") https://www.axios.com/2024/06/27/labor-shortage-workforce-economy https://www.axios.com/2024/06/27/labor-shortage-workforce-ec... ("Axios: Labor shortages are the new normal") https://www.axios.com/2023/08/27/labor-shortages-air-traffic-health-care-teachers-police https://www.axios.com/2023/08/27/labor-shortages-air-traffic... ("Axios: Labor shortages plague high-stakes industries") https://www.axios.com/2023/05/08/us-labor-shortage-older-workers https://www.axios.com/2023/05/08/us-labor-shortage-older-wor... ("Axios: Why labor shortages could be here to stay")
- ericmay 2y ago
  Never say never, but yes, agreed. And that shortage depending on how it’s calculated may be more pronounced if we look at where people plan to live in the future. Central Ohio where I live is on track to gain in population while the state as a whole loses population. A house in a rural county doesn’t necessarily count/help, even if it’s included in official “here are many houses we have” statistics. Home builders, especially with a risk-free 4% return today, do not have any incentive to build “cheap” or “affordable” housing, and as material prices continue to increase because there are 330 million people in America who also want those resources, new builds will have to continue to increase in price and perhaps decrease in quality, depending on how much oil goes into the construction of the house. Home builders, absent clear evidence of industry collusion will simply increase their profitability and will not build ‘starter homes” or “affordable housing”. We can address the issue in a few ways, for example removing artificially limiting zoning practices, generally speaking, or perhaps the elected government can just pay for cheaper housing, or we can craft good legislation. But on its own I don’t see a good catalyst right now that will cause home prices to “correct”* without a treatment worse than the disease (economic depression or global war or something else that is otherwise catastrophic). * The term “correction” is popular but misused. The current price of an asset is always correct. When an asset decreases in price, that decrease is no more correct than a corresponding increase in price.
  - toomuchtodo 2y ago
    Great points, great comment. An additional measure to solve for this would be by making remote work a protected labor right (assuming it does not overly burden the employer and such), so workers can move where the housing is, or the housing is cheap. But we'd rather let old, status seeking folks at the top of the corporate ladder "show workers who is in charge" and maintain control while workers get extracted from for higher than necessary rent or mortgage payments near an office (where housing is in demand but very slow for additional supply to come online, if it ever does at all). https://news.ycombinator.com/item?id=39037589 https://news.ycombinator.com/item?id=39037589 ("HN: Remote work doesn't seem to affect productivity, Fed study finds") https://www.stlouisfed.org/on-the-economy/2024/nov/why-do-wfh-workers-move https://www.stlouisfed.org/on-the-economy/2024/nov/why-do-wf... ("Federal Reserve Bank of St Louis: Nearly half of people working from home — who moved to a different state — moved because of housing.") People argue about paperclip maximizers that don't exist yet while being unaware of the one they live their lives in today.

toomuchtodo 2y ago

A correction won't occur because there is a housing shortage of between 3-8M units, depending on who you ask. There is not enough labor to build more units at any reasonable rate, so it'll be a slow burn as the system reaches equilibrium over time (new housing comes into the market when owners must sell, demand destruction due to pricing). Due to demographics, a lot more housing could be satisfied by smaller units accounting for reduced forward looking family formation, but the challenge remains in sourcing labor to build these units. With regards to the labor market, due to structural demographics and labor shortages, it is highly unlikely in my opinion that the job market weakens to the point where housing experiences a crisis from a rapid, sustained increase in homeowners who cannot afford their mortgage payments. https://www.voronoiapp.com/demographics/Over-Half-of-Households-in-the-US-Dont-Have-Kids--2933 https://www.voronoiapp.com/demographics/Over-Half-of-Househo... ("Over Half of Households in the U.S. Don't Have Kids") https://www.fanniemae.com/research-and-insights/perspectives/us-housing-shortage https://www.fanniemae.com/research-and-insights/perspectives... ("U.S. Housing Shortage: Everything, Everywhere, All at Once") https://www.fanniemae.com/media/45106/display https://www.fanniemae.com/media/45106/display ("Fannie Mae: The U.S. Housing Shortage from a Local Perspective") https://www.marketplace.org/shows/marketplace/the-housing-sector-droops-under-a-labor-shortage-and-price-hikes/ https://www.marketplace.org/shows/marketplace/the-housing-se... ("APM Marketplace: The housing sector droops under a labor shortage and price hikes") https://www.businessinsider.com/baby-boomers-housing-wealth-home-prices-housing-shortage-retirement-2024-11 https://www.businessinsider.com/baby-boomers-housing-wealth-... | https://archive.today/OsNgL https://archive.today/OsNgL ("Business Inside: Baby boomer homeowners got rich from skyrocketing house prices. Now they can't find retirement housing.") https://www.bloomberg.com/news/articles/2024-09-18/us-faces-a-deficit-of-6-million-workers-in-less-than-a-decade https://www.bloomberg.com/news/articles/2024-09-18/us-faces-... | https://archive.today/Lyr5t https://archive.today/Lyr5t ("Bloomberg: US Faces a Deficit of 6 Million Workers in Less Than a Decade") https://www.axios.com/2024/06/27/labor-shortage-workforce-economy https://www.axios.com/2024/06/27/labor-shortage-workforce-ec... ("Axios: Labor shortages are the new normal") https://www.axios.com/2023/08/27/labor-shortages-air-traffic-health-care-teachers-police https://www.axios.com/2023/08/27/labor-shortages-air-traffic... ("Axios: Labor shortages plague high-stakes industries") https://www.axios.com/2023/05/08/us-labor-shortage-older-workers https://www.axios.com/2023/05/08/us-labor-shortage-older-wor... ("Axios: Why labor shortages could be here to stay")

ericmay 2y ago
Never say never, but yes, agreed. And that shortage depending on how it’s calculated may be more pronounced if we look at where people plan to live in the future. Central Ohio where I live is on track to gain in population while the state as a whole loses population. A house in a rural county doesn’t necessarily count/help, even if it’s included in official “here are many houses we have” statistics. Home builders, especially with a risk-free 4% return today, do not have any incentive to build “cheap” or “affordable” housing, and as material prices continue to increase because there are 330 million people in America who also want those resources, new builds will have to continue to increase in price and perhaps decrease in quality, depending on how much oil goes into the construction of the house. Home builders, absent clear evidence of industry collusion will simply increase their profitability and will not build ‘starter homes” or “affordable housing”. We can address the issue in a few ways, for example removing artificially limiting zoning practices, generally speaking, or perhaps the elected government can just pay for cheaper housing, or we can craft good legislation. But on its own I don’t see a good catalyst right now that will cause home prices to “correct”* without a treatment worse than the disease (economic depression or global war or something else that is otherwise catastrophic). * The term “correction” is popular but misused. The current price of an asset is always correct. When an asset decreases in price, that decrease is no more correct than a corresponding increase in price.
- toomuchtodo 2y ago
  Great points, great comment. An additional measure to solve for this would be by making remote work a protected labor right (assuming it does not overly burden the employer and such), so workers can move where the housing is, or the housing is cheap. But we'd rather let old, status seeking folks at the top of the corporate ladder "show workers who is in charge" and maintain control while workers get extracted from for higher than necessary rent or mortgage payments near an office (where housing is in demand but very slow for additional supply to come online, if it ever does at all). https://news.ycombinator.com/item?id=39037589 https://news.ycombinator.com/item?id=39037589 ("HN: Remote work doesn't seem to affect productivity, Fed study finds") https://www.stlouisfed.org/on-the-economy/2024/nov/why-do-wfh-workers-move https://www.stlouisfed.org/on-the-economy/2024/nov/why-do-wf... ("Federal Reserve Bank of St Louis: Nearly half of people working from home — who moved to a different state — moved because of housing.") People argue about paperclip maximizers that don't exist yet while being unaware of the one they live their lives in today.