What happens when housing prices go down? • Hacker News Board

Re: What happens when housing prices go down?

#71

Post by maplant » Mon, Jul 21, 2025, 1:57 PM UTC

spicybbq wrote: post #63

> Price Drops Don’t Lead to Supply. They Kill It. Is anyone arguing that price drops "lead to" (i.e. happen before) increases in supply? It seems to me that it's the other way around: supply increases "lead to" price drops. This is what supply advocates hope to see in HCOL cities with expensive housing. The author is concerned that builders will stop building when prices fall, but that's rational. Suppliers should re…

Right, these effects seem to lag each other. If prices are affordable, there's no reason to build more housing. We've achieved the goal of making affordable housing. Then, more people move in, prices go up, and the cycle repeats.

Re: What happens when housing prices go down?

#72

Post by VWWHFSfQ » Mon, Jul 21, 2025, 1:57 PM UTC

> You’re not the homebuyer; you’re the mortgage payer. The product that matters isn’t the home; it’s the decades of payments you have promised to make.

A very succinct way of describing the actual relationship. New homeowners are not "buying a house". This is a misconception. They are agreeing to pay _double_ the home's present value for the next 30 years and then get it.

Re: What happens when housing prices go down?

#73

Post by kiba » Mon, Jul 21, 2025, 1:57 PM UTC

micromacrofoot wrote: post #10

billy99k wrote: post #2

"If “build more” was going to bring prices down and stabilize the system, we wouldn’t be seeing these mixed signals." Where have we seen anything close to 'build more'? Regulations in many major cities have prevented building more for decades and I haven't seen any loosening of these regulations (they were only increased during the Biden administration). "Prices are softening. Delinquencies are rising. Builders are w…

The problem is that housing is a major investment vehicle, people in these cities always complain about what's going to happen to their property values so they prefer exclusionary zoning. Developers have a hell of a time building in these areas even once they get zoning variances, because abutters will show up and complain about every single detail and try to make the property as small and unprofitable as possible. Y…

The problem is speculative investing, not making a profit per se. If your incentive is to prevent improvement of your community, then you're going to prevent making it worthwhile for anyone to come in and invest their effort. That could often means deterring developers, for example.

Re: What happens when housing prices go down?

#74

Post by projektfu » Mon, Jul 21, 2025, 1:57 PM UTC

indymike wrote: post #22

billy99k wrote: post #2

"If “build more” was going to bring prices down and stabilize the system, we wouldn’t be seeing these mixed signals." Where have we seen anything close to 'build more'? Regulations in many major cities have prevented building more for decades and I haven't seen any loosening of these regulations (they were only increased during the Biden administration). "Prices are softening. Delinquencies are rising. Builders are w…

> "If “build more” was going to bring prices down and stabilize the system, we wouldn’t be seeing these mixed signals." Bringing prices down is usually a losing idea with existing asset holders. Even a financially strapped homeowner does not want the price of her/his home to go down. Politically, this is a complete non-starter. Also, appreciating home values serve as a very strong way to attract talent to a city. > "…

Perhaps because they signed a contract and want to buy another house sometime.

Re: What happens when housing prices go down?

#75

Post by ajsnigrutin » Mon, Jul 21, 2025, 1:58 PM UTC

As long as people are willing to pay above land cost + government cost (taxes,...) + material cost + labour cost, houses will be built.

Land and government costs are well.. decided by the government, some by regulation (where can you build, what can you build there) some by direct taxation.

Material + labor costs depend on the labour and material markets directly.

Everything else is just excuses not to build more housing, that would bring prices down.

Yes, the financial markets and investors may suffer, but that their problem. Sadly, (at least over here in a small EU country) the government is focused on them.... the solution both banks and parts of our government see is based on getting easier credit and not bringing the prices down... but the problem is not in "It's hard for young people to get loans", but that the apartment that was 120k eur 20 years ago is now 450k eur, and that young people don't need a 70k loan anymore but a 350k loan (with a higher deposit).

Re: What happens when housing prices go down?

#76

Post by yoden » Mon, Jul 21, 2025, 1:58 PM UTC

> Price Drops Don’t Lead to Supply. They Kill It.

It really depends on how much you reduce costs. If you reduce costs enough, you can have increasing supply even in the face of falling prices. This argument sounds like one made by a hedge fund protecting its real estate investments.

The reality is that the housing market in the US (and most countries) is heavily distorted by government NIMBY regulations. Because of this, it's reasonable to expect that there is actually a lot of room to reduce the $/sqft if the market can build housing in general. Current costs are inflated by being forced into specifically prescribed solutions designed to grow the wealth of developers and landowners.

Re: What happens when housing prices go down?

#77

Post by rwarfield » Mon, Jul 21, 2025, 1:59 PM UTC

This article is a mess. From the third paragraph:

> What happens when prices actually start to fall? Because that’s not just a hypothetical. It’s already happening in places like Phoenix, Atlanta, Miami, Dallas...

Then two paragraphs later

> In The Atlantic, Rogé Karma recently pointed out that housing prices are rising fastest in the very cities once seen as escapes from high-cost coasts, places like Phoenix and Dallas...

So which is it?

There is truth to the fact that the way the housing market is intertwined with the financial markets creates some risk, but those risks are manageable - a nationwide downturn in housing prices is exactly the kind of scenario addressed by the Fed's stress tests for banks.

The article is full of bizarre logic. An increase in housing supply leads to a fall in prices, which leads to a fall in supply? No, in fact the conclusion contradicts the premise. The author is making the classic econ 101 mistake of confusing the supply curve (which is supply as a function of price) and quantity supplied.

And finally the author explains his own solution which is... an increase in supply! But only the kind of supply he approves of ("small scale, incremental development"). Left unexplained is why this type of supply, if carried out on sufficient scale, wouldn't have the negative financial effects he worries about.

Re: What happens when housing prices go down?

#78

Post by aprilthird2021 » Mon, Jul 21, 2025, 1:59 PM UTC

spicybbq wrote: post #63

> Price Drops Don’t Lead to Supply. They Kill It. Is anyone arguing that price drops "lead to" (i.e. happen before) increases in supply? It seems to me that it's the other way around: supply increases "lead to" price drops. This is what supply advocates hope to see in HCOL cities with expensive housing. The author is concerned that builders will stop building when prices fall, but that's rational. Suppliers should re…

100%, supply leads to price drops. If it's not profitable to build anymore because housing costs have sunk, then there's much less demand for housing that needs to be met.

The biggest political issue is that Americans have been led to believe their homes are assets which appreciate in value. The abundance mindset threatens the net worth of many such people, but they are not the landed gentry of a democratic society. And the people who have nothing and can barely afford rent outnumber them and should vote for their interests.

Re: What happens when housing prices go down?

#79

Post by avmich » Mon, Jul 21, 2025, 2:00 PM UTC

pixl97 wrote: post #30

PretzelFisch wrote: post #12

Earlier quoted context omitted.

Why would the builder want to build enough to let prices drop? They seem to play a lot of games to give buyers incentives that do not lower the sales price.

Well because they hold inventory. If homes didn't have a year long build pipeline with another 6 months+ holding for sale buffer they'd probably care a lot less. Otherwise a 10% drop in prices can lead to their bankruptcy.

Oh, that's good. Those are institutionalized builders who hold inventory. Let them go. Let builders who are paid workers to do the job, whose income doesn't depend on house price but is described in contract between owner, bank and the builder. What's wrong with such a schema?

Re: What happens when housing prices go down?

#80

Post by carlosjobim » Mon, Jul 21, 2025, 2:00 PM UTC

Aurornis wrote: post #11

billy99k wrote: post #2

"If “build more” was going to bring prices down and stabilize the system, we wouldn’t be seeing these mixed signals." Where have we seen anything close to 'build more'? Regulations in many major cities have prevented building more for decades and I haven't seen any loosening of these regulations (they were only increased during the Biden administration). "Prices are softening. Delinquencies are rising. Builders are w…

> Where have we seen anything close to 'build more'? Regulations in many major cities have prevented building more for decades and I haven't seen any loosening of these regulations (they were only increased during the Biden administration). Housing prices are high everywhere, not just major cities. Interestingly, in my state we have a lot of land for building houses if you drive to nearby cities. Some people uproot t…

> Even condo complexes are having a hard time selling units.

Because instead of purchasing a house, you're just purchasing the right to continue being a renter. Meaning that the only reason to buy is that you expect an even bigger sucker to buy it from you later. And with rapidly declining population and widespread poverty among the young generation, there aren't that many bigger suckers around anymore.