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

Re: What happens when housing prices go down?

#81

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

The whole article is a mess of basic misunderstanding and conflation of cause and effect and reasoning from a price change instead of understanding what caused it.

> When prices actually go down, builders get nervous, lenders get cautious, financing dries up, and projects disappear.

No, it depends on the causes that drove the prices down. Some of those will get builders nervous, while others will make them giddy.

> New construction has collapsed not because of a lack of land, permits, or even demand but because the financial risk has become unmanageable. High interest rates, shrinking margins, labor shortages, volatile materials costs… none of these are softened by falling home prices.

They are: if you can build a house in 1 day instead of 1 year waiting for some permit, your costs of capital goes down, so it can offset some of the other costs going up. If your permit doesn't force you to limit the size/number of units, you can spread your fixed costs over more units, raising your margins, which directly softens ... shrinking margins

Re: What happens when housing prices go down?

#82

Post by aprilthird2021 » Mon, Jul 21, 2025, 2:01 PM UTC

roenxi wrote: post #32

> The theory says we should be celebrating and accelerating home production even more to get prices to levels that would actually be affordable. The reality demonstrates otherwise. Reality demonstrates the well known - the people who celebrate house prices going down don't have a loud voice in political circles and are ignored. Almost by definition they're going to be representatives of the world which doesn't have v…

> the people who celebrate house prices going down don't have a loud voice in political circles and are ignored

It's changing though. I'm seeing more people, even homeowners joining this chorus. Insane housing prices make everything expensive, and people are sick of everything being expensive. Even homeowners.

I agree that builders leaving is good. It means the prices have come down and demand / supply is getting better

Re: What happens when housing prices go down?

#83

Post by kiba » Mon, Jul 21, 2025, 2:01 PM UTC

carlosjobim wrote: post #80

Aurornis wrote: post #11

Earlier quoted context omitted.

> 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.

A condo just means the maintenance fee is explicit, rather than implicit.

Re: What happens when housing prices go down?

#84

Post by partypete » Mon, Jul 21, 2025, 2:02 PM UTC

Apreche wrote: post #13

The problem can not be solved by trying to manage supply or demand. We must ban the concept of the landlord entirely. https://www.theguardian.com/lifeandstyle/2024/mar/19/end-of-... A landlord gets a loan from a bank to develop a residential property. That loan is paid by the tenants who live in that property. At the end of the day, the landlord owns the property. This is fundamentally unjust. If the tenant paid off…

The idea that a home loan is risk-free ignores decades of recent history. A quick google search for "2008 GFC" will bring you up to speed.

Given that home loans are not, in fact, risk-free, how do you expect anyone to risk the large up front cost of financing a home if they do not have any expectation of profit? The small profit that landlords make off of these investments is mostly that risk premium. As a tenant, I am not liable to the bank for hundreds of thousand of dollars if any one of hundreds of calamities outside of my control were to occur rendering my home worthless. In exchange for this relative lack of risk, I gladly pay the 2% premium to my landlord. This is not to mention the benefit of mobility, among others.

Home loans are one of the most accessible loans in modern western civilization, so no, banks don't "always choose people who are already wealthy."

I assure you that if we were to remove the profit motive from financing the development of housing stock, there would be far less of it and home prices would certainly increase.

Re: What happens when housing prices go down?

#85

Post by vel0city » Mon, Jul 21, 2025, 2:02 PM UTC

projektfu wrote: post #53

I usually like Chuck Marohn, but it is a glaring problem when you claim that housing prices are falling in Dallas, and then talk about housing prices skyrocketing in Dallas, within a couple of paragraphs.

Both concepts can be true, just at slightly different times. As someone in Dallas, let me share what I've seen in housing prices.

DFW was seen as a pretty affordable place a while ago. In 2015 could get a 2,200sqft 4-bedroom house with a larger lot and a pool for $250k pretty easily. By 2020 that price was $320k, still decently affordable, still seen as a pretty cheap place to buy a home. By 2022 the valuations had exploded. Houses down the street of similar quality were selling days after listing at $550-600k. This then leveled off, settling around $550k. Houses around that price were still seeming to move pretty quickly.

Now I have neighbors cutting prices. A neighbor trying to sell has had their house on the market for months. They've already cut about $70k from their original listing price. Three more houses nearby have also entered the market and have been around for a few weeks. Compared to just a couple of years ago where the average house was on the market for maybe a couple of weeks.

Re: What happens when housing prices go down?

#86

Post by thechao » Mon, Jul 21, 2025, 2:02 PM UTC

PretzelFisch wrote: post #12

kasey_junk wrote: post #4

Earlier quoted context omitted.

It’s not just regulation either. Housing companies are not building as much as they did prior to 2008, which had substantially the same regulatory environment in most places. The idea that we’ve started building enough to bring prices down is a non-starter.

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.

My wife really wants to build a house; we've started by doing some light remodeling using GC's who also build houses to a "get a feel for it". There's a strong incentive for a good GC to truly believe the estimate he gives you. (They're all dudes, around here.) However, that estimate is rarely close — usually the budget goes over 50–100%. Here's the thing: the GC gets paid off the total cost, not the original contact, and he gets a cut of the cost. So, really, there's no incentive at all for him to control costs.

A buddy of mine works for a large grocer down here (HEB). The way HEB builds is that they get a build contract and a bunch of lawyers, and the GC has to demonstrate that they have enough assets that HEB can go after to make them (HEB) whole. If the GC goes over estimate, then that's on the GC, not on HEB. HEB gets a building or they take the money back.

As an individual, you can "act like HEB" by going with a major builder. Down here that'd be Pulte or someone like that; alternately, there's a lot of high quality factory-built custom homes. I'm trying to convince my wife that we should build a metal building on post-and-beam with a crawl space. We can build a minimum viable house for 25¢/$ compared to a custom, and the quality is straight-up an order-of-magnitude better. The rest of the house can be finished out using off-the-shelf components.

Re: What happens when housing prices go down?

#87

Post by spicybbq » Mon, Jul 21, 2025, 2:03 PM UTC

nemomarx wrote: post #36

Aurornis wrote: post #11

Earlier quoted context omitted.

> 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…

If the condos aren't selling, shouldn't we see the prices go down? There's gotta be an equilibrium at some very cheap rent for them

In the long run, yeah. In the short run, owners can carry unsold inventory for quite a while, hoping conditions improve, before there is pressure to do something (e.g. a balloon payment).

Re: What happens when housing prices go down?

#88

Post by gota » Mon, Jul 21, 2025, 2:03 PM UTC

projektfu wrote: post #53

I usually like Chuck Marohn, but it is a glaring problem when you claim that housing prices are falling in Dallas, and then talk about housing prices skyrocketing in Dallas, within a couple of paragraphs.

Yes, that read weird to me, too, but it's because the 'lowering prices' are a snapshot, or recent trend (evidenced by the source being an index for April 2025 [1])

The 'sharpest rises' are from a long-term trend of a decade [2]:

> Over the past decade, the median home price has increased by 134 percent in Phoenix, 133 percent in Miami, 129 percent in Atlanta, and 99 percent in Dallas. (Over that same stretch, prices in New York, San Francisco, and Los Angeles have increased by about 75 percent, 76 percent, and 97 percent, respectively).

Here's my pictorial illustration of the curve because I like drawing silly plots in txt

  |
  |              ____
  |          ___/    \ } Jan-April 2025
  |      ___/
  |  ___/
  |_/____________________
  |        |        |
  2015.....2020.....2025

[1] https://www.realtor.com/news/trends/dallas-home-prices-case-...

[2]https://www.theatlantic.com/economy/archive/2025/06/zoning-s...

Re: What happens when housing prices go down?

#89

Post by stego-tech » Mon, Jul 21, 2025, 2:03 PM UTC

Ultimately, there is no solution in which the core groups will all be appeased:

* If prices keep going up, then home ownership remains a luxury of the wealthy and an exploitation of the poor. Asset holders will be thrilled with returns, but the majority struggling to get or stay on the proverbial property ladder will grow increasingly angry at sky-high rents and prices with stagnant wages

* On the other hand, if prices come down then the broader economic engine will grow ornery and stagnate. Large home builders will cut back on builds, purchases, and labor, in an effort to push margins back up. Existing asset owners will be angry at losing (illusory/on-paper-only) money, and cut back on spending, purchases, or renovations until they see their valuations rise again. Only a small subset of prepared buyers will be able to take advantage of these lower prices before investors snatch most of them up and raise prices again anyway.

Housing is not a standalone crisis, but a symptom of a larger dysfunctional economic engine that simply does not work for the majority. Higher prices on core necessities should be met with a mixture of rising wages and price controls to reflect broader economic growth or support, but neither happens because of monied interests: if wages rise, companies will outsource and the problem perpetuates, while price controls prevent asset holders from maximizing their return on investment, a sin equivalent to murder in the eyes of the propertied class.

And so we have a group who benefits from nothing changing (asset holders, mega-builders, financiers), and a group that benefits from an all new engine design built for modern problems (the working classes, smaller employers, and - increasingly - insurance companies), fighting for the next century of housing policy.

I’m hoping the latter wins, despite the pain it would cause the former. Housing is a necessity first, and an asset class last.

Re: What happens when housing prices go down?

#90

Post by Workaccount2 » Mon, Jul 21, 2025, 2:04 PM UTC

Transpose the problem into a Taylor Swift concert and the problem becomes clearer:

Everyone* wants to go see Taylor Swift. She comes to a stadium and the sell out is instant, the aftermarket is bloody and ruthless. The stadium has 90,000 seats, 2,000 floor spots, and they are gone before you can reload the ticket page.

Taylor Swift is the embodiment of "good jobs". The stadium is the local housing market. Those VIP booths side stage with room to move around? The mega mansions. The lower tier seats? Upper-middle class. Nose bleeds? Upper lower class/bottom middle class.

Now solve the problem of the true value of these seats being so expensive. You can add more seats (this stadium happens to be extremely modular) but the experience for everyone becomes worse in a multitude of ways. You can add seats above the nosebleed, but it doesn't really do much to affect the closer seats.

So how do you solve this? How do you handle people who want to sell their ticket? Is it even possible to give people who can hardly afford nosebleed a shot at mid tier seats?

*Yes, I know you have no interest in seeing Taylor Swift.