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What happens when housing prices go down?

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Re: What happens when housing prices go down?

#201

Post by khaoohs »

thechao wrote: post #86
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.

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…

I'd be interested in any details/links you can share about a metal building post-and-beam.

Re: What happens when housing prices go down?

#202

Post by bluGill »

bandofthehawk wrote: post #192
crazygringo wrote: post #129

Earlier quoted context omitted.

> 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?

We need to allow smaller houses such that people can afford to buy them then. Or we need to build apartments of all sizes so people can afford to rent them. The above is not an exclusive or - buying a house is a great choice for some and a terrible choice for others.

Affordable housing used to include a room where you share a bathroom and kitchen with the entire hallway. Affordable housing used to include tiny shacks. Air conditioning used to be something not even the rich had.

Re: What happens when housing prices go down?

#203

Post by [deleted] »

bandofthehawk wrote: post #192
crazygringo wrote: post #129

Earlier quoted context omitted.

> 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?

[deleted]

Re: What happens when housing prices go down?

#204

Post by ch4s3 »

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…

> On the other hand, if prices come down then the broader economic engine will grow ornery and stagnate

A rather small part of the economy relies on high long term returns on housing. You can build homes and sell them for rather small margins and that's good business. Many types of businesses happily run on profit margins that are single digit percentages.

> 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.

In 2024 87% of homes in the US were bought by people who intended to live in them or use them as a second home. If you only want to count primary homes the number is still close to 80%.

> but a symptom of a larger dysfunctional economic engine that simply does not work for the majority.

Factually the majority of US families live in homes they own, about [65% of US families own their homes])https://fred.stlouisfed.org/series/RSAHORUSQ156S) that is not only a majority but nearly 2/3.

Re: What happens when housing prices go down?

#205

Post by psunavy03 »

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…

It's amazing the difference between different areas. I grew up in a single-family home in Ohio. Parents moved to New York when I went to college. I ended up in Puget Sound.

They bought their NY house by selling the Ohio one. Price was roughly equal, maybe a little higher. Now the NY one is double what the OH one is worth, and I couldn't afford to buy my own house today. Conversely, I could pay cash to buy the house I grew up in, despite the lot being 4 times the size of mine.

There's definitely haves and have nots real-estate wise in different parts of the country.

Re: What happens when housing prices go down?

#206

Post by aurizon »

Any buffer vanishes as prices fall = buyers pull back and wait for the dust to settle = a downwards cascade that can consume all equity= underwater, and buyer does not want to bail out a sunken ship. Lenders have recourse to whatever other assets the buyer has(depends on fine print, LLC etc) and some lenders sell at auction right away, some set a reserve below which they rent the home and the banks usually have management departments to manage that, but each case differs.

Re: What happens when housing prices go down?

#207

Post by epistasis »

foobarian wrote: post #113
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…

Nice analogy. So it seems the solution would be to create more Taylor Swifts then, by investing in music schools and programs, talent shows, scouting, etc., where the analogous thing would be to create more "nice places to live" with all the desirable attributes like walkability, jobs, public transport, etc. It's a tall order since land and climate are the ultimate scarce resources, but there are probably some underu…

> where the analogous thing would be to create more "nice places to live" with all the desirable attributes like walkability, jobs, public transport, etc. It's a tall order since land and climate are the ultimate scarce resources

We actually ban nice places to live with walkability in the vast majority of the country. Our urban planning in the US been entirely focused on keeping out mixed uses, keeping out dense housing, the things that enable public transport to function at all.

Land and climate are much easier to manage if we were to simple legalize density and mixed uses. We are reaping decades of bad planning for car-centric lives, without planning ahead for future generations and their ability to find a home.

Re: What happens when housing prices go down?

#208

Post by have-a-break »

postflopclarity wrote: post #106
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…

> the experience for everyone becomes worse in a multitude of ways. your analogy requires the assumption that the stadium is already "at capacity" for the maximum comfortable number of seats 99% of American municipalities are nowhere even close to this capacity.

Even worse, a lot of municipalities are losing population. But no-one wants to drop everything in their lives and move to a dying city, specially not high intelligence individuals who tend to gather causing home prices to skyrocket. Worse, those individuals tend not to buy into the types of housing typically seen by large developers building "relief" housing.

Re: What happens when housing prices go down?

#209

Post by lesuorac »

bluGill wrote: post #190
foobarian wrote: post #113

Earlier quoted context omitted.

Nice analogy. So it seems the solution would be to create more Taylor Swifts then, by investing in music schools and programs, talent shows, scouting, etc., where the analogous thing would be to create more "nice places to live" with all the desirable attributes like walkability, jobs, public transport, etc. It's a tall order since land and climate are the ultimate scarce resources, but there are probably some underu…

You cannot do that. Taylor Swift is what she is not because she it better at music, dancing, or looking sexy, or sleeping with the record label executives (I don't know anything about her: the above list are the common things done to get positions like her, but not necessarily what she has done). What Taylor Swift is that is special is that nearly everybody knows about her (I'm a rare exception) - you can talk about…

But there's tons of places where the cost of housing is going up. If everybody was uprooting from Philadelphia to go to NYC then only NYC's prices would go up.

It seems to me that we already have multiple Taylor Swifts so having even more shouldn't be a problem. For many people, the school system is the reason why they own the house they do.

In my experience, many of the schools self-report having pretty bad math/reading comprehension amongst their students. I'm not picking a house based on it being "the best" or the one "I hear about the most". I picked it based on it actually having good outcomes. If other districts had that too I would've considered theirs.

Re: What happens when housing prices go down?

#210

Post by foobarian »

bluGill wrote: post #190
foobarian wrote: post #113

Earlier quoted context omitted.

Nice analogy. So it seems the solution would be to create more Taylor Swifts then, by investing in music schools and programs, talent shows, scouting, etc., where the analogous thing would be to create more "nice places to live" with all the desirable attributes like walkability, jobs, public transport, etc. It's a tall order since land and climate are the ultimate scarce resources, but there are probably some underu…

You cannot do that. Taylor Swift is what she is not because she it better at music, dancing, or looking sexy, or sleeping with the record label executives (I don't know anything about her: the above list are the common things done to get positions like her, but not necessarily what she has done). What Taylor Swift is that is special is that nearly everybody knows about her (I'm a rare exception) - you can talk about…

It may not be a perfect analogy but I disagree that it's completely invalid. Use some imagination to make it work, e.g. with institutional support instead of having just local acts now there is Taylor, and Beyonce, and a few dozen other famous musicians.

Not everyone can live in San Francisco, but there exist other equivalent "nice places" of which there are too few.

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