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What happens when housing prices go down?

clmarohn.substack.com

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Re: What happens when housing prices go down?

#191

Post by have-a-break »

rwarfield wrote: post #77

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 Dal…

A huge portion of why home prices dont fall is because most people dont pay for their homes up front, the actual cost of the home after the interest is 2x the total loan amount. So people dont want to sell for what they feel like is a loss.

I'd argue building more supply just makes the problem worse, since the builders almost always try to extract as much money from the potential buyers. With the internet and everyone reporting salaries most sellers price houses to extract as much money as possible included possibly expected "crypto" or other hidden sources of income.

The reality being we likely won't see a dip in home prices until the population holding homes ages out, saying there's a "housing crisis" is just spreading fear uncertainty and doubt to trick buys into unsatisfactory houses.

Re: What happens when housing prices go down?

#192

Post by bandofthehawk »

crazygringo wrote: post #129
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…

> The author is concerned that builders will stop building when prices fall, but that's rational. Suppliers should respond to changes in prices. Exactly this. Once you've built enough new housing and so the price has dropped to the point where it's not economical to build anymore, you're done . It's mission accomplished. The goal was achieved. But the whole point is that you have to actually build all that housing to…

That doesn't solve the issue of housing being unaffordable to new buyers. How do you address affordability if the prices stop dropping before they reach a price at which an average young worker can afford to buy a starter home?

Re: What happens when housing prices go down?

#193

Post by AlexandrB »

ta1243 wrote: post #93
rcxdude wrote: post #58

Earlier quoted context omitted.

There's two factors that have driven an increase in demand for housing above population growth: fewer people per household and a strong bias towards living in a city. Some of this is cultural: a stigma against living with your parents, for example, and higher expextations for what someone just starting their career should be able to afford, but it's also economic: cities are where the jobs are and they're often not w…

There are many reasons demand is increasing, all good. In the past a typical housing unit would be husband, wife, two kids. A 3 bed house. Divorce rates are higher now (better to be divorced than in an unhappy marriage - so that's good), so you instead you have divorced husband and one or two bedrooms for shared custody of kids, and divorced wife and one or two bedrooms for shared custody of kids Thus what used to be…

You're forgetting AirBnB: turning housing inventory into hotel inventory since 2008.

Re: What happens when housing prices go down?

#194

Post by bluGill »

api wrote: post #157
Workaccount2 wrote: post #90

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 b…

I concluded long ago that the only solution to unaffordable housing is geographic diversification. You can only cram so many people into one city before costs spiral for a myriad of reasons. The root of today's housing unaffordability is geographic consolidation of opportunity into a handful of places. There's a ton of affordable housing outside the top ten cities. For the most expensive places I'd advise young peopl…

Nearly every city in the world has plenty of room for more. Most cities in the US dedicate more than half of their space to just cars, a great transit system could nearly double the density of the city while increasing the quality of life. Even in cities with good transit, they all have a lot of space dedicated to cars for people who don't find transit good enough (most of that isn't about snobs not wanting to mix with poor people, it is quality of service)

Re: What happens when housing prices go down?

#195

Post by epistasis »

thinkingtoilet wrote: post #160
stego-tech wrote: post #89

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 pric…

>Existing asset owners will be angry at losing (illusory/on-paper-only) money I wouldn't be. I bought my house to live in it, not as a financial vehicle. I would be thrilled if prices came down and others in my generation could afford a house because I had the dumb luck of purchasing one in 2018 before the shit hit the fan. I couldn't even afford my own house now.

Same for me, but that's not how most people view the housing market, especially those who take the time to influence local politicians.

Re: What happens when housing prices go down?

#196

Post by electriclove »

vel0city wrote: post #177
electriclove wrote: post #153

Earlier quoted context omitted.

Let them rent. There are many good reasons why someone would want to rent. Limiting the number of homes one can own spreads it out.

How can they rent when there is practically zero supply of rental units because we've now made it illegal to own multiple properties?

Think shades instead of black/white. Our current rules can be tweaked. For example:

1-2 properties can be considered primary homes and get all tax benefits

3-4 properties allowed but no tax benefits

5+ properties not allowed

Re: What happens when housing prices go down?

#197

Post by freejazz »

sim7c00 wrote: post #51
freejazz wrote: post #29

Earlier quoted context omitted.

> prevented building more for decades What planet do people live on? Go to any neighborhood in NYC and you are going to see tons of construction.

i am sure lots of ppl on this planet dont have the option to go around NYC to check out the construction. for various reasons.... also, lots of construction does not equal fixing lack of housing. it has to keep up with and overtake new ppl moving into the region, which often times it does not (so it has no impact on prices or availability, just population growth...). idk about NYC specifics ofc. but thats how it work…

People are building plenty here. The poster said building was being prevented. That's not the case.

Re: What happens when housing prices go down?

#198

Post by epistasis »

almosthere wrote: post #144
stego-tech wrote: post #89

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 pric…

Simple to make people sell, make property tax near Infinity if you rent it out in the first 5 years of property purchase. Old rentals stay rentals, new construction is for people.

Still doesn't solve the problem of having enough houses.

Rented houses are still housing people. The problem isn't renting, the problem isn't loans, the problem is there's not enough houses where people want them.

Re: What happens when housing prices go down?

#199

Post by bandofthehawk »

TrackerFF wrote: post #181

Monotonically increasing housing prices is a privilege not everyone has. TONS of people, even in the rich western world, own houses that essentially lose their value due to inflation. Me and my siblings inherited a house in a rural town, which sold for less than what it was purchased for 30 years ago. Most houses in that town have seen stagnating prices, even brand new ones. People still pour money into them every 10…

That doesn't sound like a problem of inflation. I think it's related to people migrating out of rural areas and into big cities. When you have a decreasing local population, home prices tend to fall.

Re: What happens when housing prices go down?

#200

Post by dismalaf »

Prices going down doesn't automatically mean building stops, and prices going up doesn't mean building automatically happens...

Whether or not a homebuilder builds homes depends on whether or not there's enough demand at a price point that's profitable. And markets aren't entirely localized, people will move for affordable housing if there's also enough jobs.

So lots of things affect whether or not homes get built: cost of building supplies, cost of land, cost of labour, growth rate of the municipality, demand for the specific unit type, zoning laws (which affect a bunch of the above), etc...

Remember, a house can cost as little as $100k to build, but nowadays costs $500k-$1M+. Price of land is a huge determining factor, cost to hook up utilities (if a new neighborhood, the builder often pays for it), interest rates (the homebuilder incurs a bunch of expenses before homes are sold and whole projects are financed, then it also affects the price buyers will pay), insurance, regulatory costs (the whole permitting process is $$$) etc...

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