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The housing market is starting to crack – Sellers are cutting prices

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Re: The housing market is starting to crack – Sellers are cutting prices

#101

Post by danaris »

poulsbohemian wrote: post #90
wing-_-nuts wrote: post #60

Earlier quoted context omitted.

Homes 'should' be affordable to the people who live there. I.e. I would hope the median housing costs are no more than a third of the median take home pay for the average resident. Now, I'm not going to sit here and advocate for price fixing, but you can do a few things. 1. Ban AirBnB short term rentals by people who do not own and live in the house. 2. Ban foreign ownership of real estate. A nations laws are there f…

These are popular ideas in many places, but here are just some things to consider: 1a) If you town bans short-term rentals but the next town over doesn't, then guess what - the investors just migrate and you haven't actually changed much. 1b) Highest and best use is a really important concept. There are properties that make for not great permanent dwellings but are great short-term rentals. When you put artificial re…

> 1a) If you town bans short-term rentals but the next town over doesn't, then guess what - the investors just migrate and you haven't actually changed much.

On the contrary: you've changed the housing supply in your town. Sure, some of the money will go to the next town over, but if you're running your town as if it's a business you deserve to end up with a hollow wasteland.

> 2) There is so much money here in the US that even banning foreign ownership doesn't matter much. I live in a tourist / second-home market and it's people from the region who are buying up the investments.

Given what I've heard about the amount of properties being bought up by Chinese investors (which tracks with what else I know about the market and how China has been progressing in recent years, so I have no reason to doubt it), I think it unlikely that, were they all to be forced out of the market, domestic investors would be able to simply fill the vacuum with no net change. Investment dollars chasing real estate may be far more plentiful than is healthy, but they are not infinite.

Re: The housing market is starting to crack – Sellers are cutting prices

#102

Post by poulsbohemian »

danaris wrote: post #100
poulsbohemian wrote: post #74

Earlier quoted context omitted.

I'm looking out the window of my real estate office toward a neighborhood a lot like what you are describing - except our median income is abut $20K less and we aren't in the midwest. Those houses here would be within the same range you are talking about, and it's just basic supply+demand, plus the replacement cost. What does that same house cost today to build? It may not seem fair, but that's why even the "affordab…

Ultimately, while it is certainly a problem that housing is this expensive, the deeper, more structural problem is that incomes are still this low. It's been 40 years now since incomes started stagnating compared to productivity; anyone who thinks this wasn't going to have serious negative effects on society and the economy had really better wake up, because we're already seeing those effects.

Amen dude - can't agree more. Wish more communities were paying attention to this as a component of their housing issue.

Re: The housing market is starting to crack – Sellers are cutting prices

#103

Post by mihaic »

jeffreyrogers wrote: post #61
jfengel wrote: post #48

Earlier quoted context omitted.

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 h…

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…

Is this true if the price of all houses fall? In that case it seems like it's easier to swap up.

Re: The housing market is starting to crack – Sellers are cutting prices

#104

Post by starttoaster »

lenerdenator wrote: post #84
poulsbohemian wrote: post #74

Earlier quoted context omitted.

I'm looking out the window of my real estate office toward a neighborhood a lot like what you are describing - except our median income is abut $20K less and we aren't in the midwest. Those houses here would be within the same range you are talking about, and it's just basic supply+demand, plus the replacement cost. What does that same house cost today to build? It may not seem fair, but that's why even the "affordab…

I wouldn't describe it as a matter of fairness, thinking deeper about it. We're really just mortgaging quarterly earnings for those with major residential real estate holdings (like pension funds paying out to those born during the Baby Boom) with future economic growth at this point. When asked if they'd rather have sustainable growth that will see them able to put food on their tables 20 years from now or make the…

The other user brought up that the cost to build a home has gone up substantially, and this response seems more like an addendum onto what you were already saying rather than a response to that. Just fyi. I think there is inherent truth to what you're saying as well, in that business decisions more often than not seem driven by the dangling carrot of short term profits. But there can be a multitude of reasons why the cost of a house is just out of reach to what we used to consider the "average middle class American."

Re: The housing market is starting to crack – Sellers are cutting prices

#105

Post by stvltvs »

jeffreyrogers wrote: post #61
jfengel wrote: post #48

Earlier quoted context omitted.

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 h…

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…

They probably wouldn't sell at a loss, but they would sell if their profit is bit less than when the market was higher.

Re: The housing market is starting to crack – Sellers are cutting prices

#106

Post by poulsbohemian »

danaris wrote: post #101
poulsbohemian wrote: post #90

Earlier quoted context omitted.

These are popular ideas in many places, but here are just some things to consider: 1a) If you town bans short-term rentals but the next town over doesn't, then guess what - the investors just migrate and you haven't actually changed much. 1b) Highest and best use is a really important concept. There are properties that make for not great permanent dwellings but are great short-term rentals. When you put artificial re…

> 1a) If you town bans short-term rentals but the next town over doesn't, then guess what - the investors just migrate and you haven't actually changed much. On the contrary: you've changed the housing supply in your town . Sure, some of the money will go to the next town over, but if you're running your town as if it's a business you deserve to end up with a hollow wasteland. > 2) There is so much money here in the…

>On the contrary: you've changed the housing supply in your town.

Obvs every market is going to have its nuances and differences... in my area, the largest city banned new STR a few years ago - and absolutely nothing changed. Ironically, the smaller city next door that didn't ban is growing and thriving on multiple levels in ways the town that banned is not. Likewise, because the county (and next county over as well, which is just a few mile away) didn't ban, all it really meant was that city that put in place a ban received less tourism tax revenue while all the other entities benefitted.

The other nuance I was trying to communicate - we had a lot of housing built during the war to support the training base. They are great little houses for a weekend visit, but they stink as permanent dwellings. This is a part of the supply / inventory problem I don't hear discussed enough. For example, if you have a ton of 4000 square foot houses ($$$$) but your buyers are all first-time / first-upgrade types ($$), you've still got an inventory problem.

Re: The housing market is starting to crack – Sellers are cutting prices

#107

Post by labcomputer »

jeffreyrogers wrote: post #61
jfengel wrote: post #48

Earlier quoted context omitted.

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 h…

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…

In response to your edit, what you’re still missing is that a household that decides not to sell (and thus withhold inventory from the market) is also a household that is not entering the market on the demand side.

So, to a first order approximation, there is no change to ratio of supply to demand. The absolute level or supply is irrelevant. The absolute level of demand is also irrelevant. What matters is the amount of supply relative to demand.

It does not matter to the overall supply and demand picture if someone “can’t afford to sell” because they also can’t afford to buy. People who do have to sell will get fewer offers, and so people who are still in the market to buy have less competition.

What really matters is how many renters are converting to buyers, how many owners are dying or moving to nursing homes, and how many investors are buying or selling rental units. Higher interest rates tend to have little effect on mortality, but do discourage first-time homeowners and investors.

Re: The housing market is starting to crack – Sellers are cutting prices

#108

Post by poulsbohemian »

lastofthemojito wrote: post #4

I've noticed this anecdotally over the past few weeks in my town. After a couple of years of houses being listed on Thursday, shown over the weekend, in-contract for above asking price the following Tuesday, houses have finally begun to sit on the market for several weeks. And I've seen gasp a couple of asking price reductions. Too soon to tell if this is the beginning of a minor correction or a major bubble burst, b…

I'm trying to wrap my head around WTF is happening in my market. Median price this year is $100,000 above last year, and actual monthly sales are same as Oct 22, but half of Oct 21 (Oct being latest full month reporting). By all available data, there are plenty of buyers still, but inventory overall and DOM continues to climb. The weird part to me is that almost every house on market is overpriced - and not just "I feel the price should be lower" but as in, "OMG that would have been overpriced by $$$$$$$ even at the height of the market 18 months ago!" Like the best explanation I can come up with is that sellers feel like they missed out, so they are jacking up prices to absolutely ridiculous levels either out of hubris or desperation. It's a seriously weird time.

Re: The housing market is starting to crack – Sellers are cutting prices

#110

Post by poulsbohemian »

lenerdenator wrote: post #84
poulsbohemian wrote: post #74

Earlier quoted context omitted.

I'm looking out the window of my real estate office toward a neighborhood a lot like what you are describing - except our median income is abut $20K less and we aren't in the midwest. Those houses here would be within the same range you are talking about, and it's just basic supply+demand, plus the replacement cost. What does that same house cost today to build? It may not seem fair, but that's why even the "affordab…

I wouldn't describe it as a matter of fairness, thinking deeper about it. We're really just mortgaging quarterly earnings for those with major residential real estate holdings (like pension funds paying out to those born during the Baby Boom) with future economic growth at this point. When asked if they'd rather have sustainable growth that will see them able to put food on their tables 20 years from now or make the…

Ah, I think I get you now - you are talking more about issues of wealth or opportunity inequality, IE: structural problems, where perhaps the housing is really a symptom as much as a cause. It's a rubber-hits-the-road view of what's happening overall.
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