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What happens when housing prices go down?

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Re: What happens when housing prices go down?

#271

Post by msgodel »

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…

Normally people deal with this naturally by having fewer children when supplies for basic goods like this are constrained so the population and prices would servo around an equilibrium.

High rates of migration upset this equilibrium. In the past it would normally cause wars and genocide because of that. I'm not convinced the current world is any different but a number of other people seem to be.

Re: What happens when housing prices go down?

#272

Post by [deleted] »

hollywood_court wrote: post #61
octopoc wrote: post #47

Earlier quoted context omitted.

Sounds like an improvement TBH. The quality of life improves for people in Alabama, and the company can pay people less. Sort of like the economic argument for offshoring people. The only people losing are the people in Detroit.

Not exactly. Everyone on the line in Alabama had to have second jobs because the pay was not sustainable for our area. Not to mention the vacations, extra benefits, and other protections the Alabama workers didn't receive compared to their peers in Detroit. So the company makes more money by moving their operations to the south where they exploit their workers without interference from the government.

[deleted]

Re: What happens when housing prices go down?

#273

Post by bwanab »

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…

> So which is it?

It can easily be both statements are true. And a quick look at Zillow's data on Phoenix shows a huge run up in prices from 2015, but a leveling and interesting looking drop happening over the past year. The article certainly could have described this with a bit more elegance than it did.

The logic of the article is that people want more housing up to the point in which existing owners become terrified at the prospect of losing their equity and demand action. The logic is bizarre because the behavior its trying to describe is bizarre. Economy's are extremely complicated feedback loops and housing is part of the economy.

Re: What happens when housing prices go down?

#274

Post by zozbot234 »

indymike wrote: post #155
aprilthird2021 wrote: post #97

Earlier quoted context omitted.

> Bringing prices down is usually a losing idea with existing asset holders Good. They should lose because they abused government policies through NIMBYism to inflate their assets prices. Happy to see them lose

This would be nearly every family in America. I'm not happy seeing my kids, my 80 year old mother lose money they are counting on. This is really the problem - reducing home prices hurts homeowners. And homeowners are litteraly everyone.

Households stand to gain overall from increased supply. House prices per se are a wash; even a homeowner indirectly pays a whole lot of hidden "rent" on local real estate since it's going to enter into the price of anything that's bought locally.

Re: What happens when housing prices go down?

#275

Post by carlosjobim »

Apreche wrote: post #120
carlosjobim wrote: post #96

Earlier quoted context omitted.

> No matter how nice a place people live, they always want it to be nicer. I'm trying to make sense of your argument. No matter how nice a vehicle people have, they always want to have a nicer one. But we don't see normal cars costing 50-80 years of your life to purchase.

Cars are depreciating assets. They can only be maintained and upgraded to a certain extent before they must be replaced. A public park, a street, a school, these also depreciate, but most of them can not be thrown out and replaced like a car. They require constant maintenance. They also have nearly unlimited capacity for upgrades. The school gym can get new equipment. The street can be repaved. The park can get new l…

But under the current global monetary system, buildings increase in monetary value as they physically depreciate. If they are maintained or improved, their value only increases more.

> Nobody ever tells their town to uglify the neighborhood.

Young people move out of towns until they are more or less ghost towns. During this entire process, real estate keeps increasing in value, although demand is steadily and predictably vanishing.

Re: What happens when housing prices go down?

#276

Post by gedy »

kjkjadksj wrote: post #264
bluGill wrote: post #142

Earlier quoted context omitted.

Also no discussion of interest rates - I bought my house just a few years ago at just under 3%, today I would be paying more than 6% - I couldn't afford the payments if I refinanced. I believe that interest rates are the primary driver of less construction: people who want to buy can't afford to unless they downsize.

3% change really breaks your budget? Higher rates generally mean lower home prices anyhow making the effective mortgage rate more similar than anticipated.

> Higher rates generally mean lower home prices

It hasn't so far, though yes it should and eventually will imho.

People I know tend to get ass in deep with debt will little room for error, and doubling interest on a mortgage would certainly push many over the edge of "affordability"

Re: What happens when housing prices go down?

#277

Post by bluGill »

kjkjadksj wrote: post #264
bluGill wrote: post #142

Earlier quoted context omitted.

Also no discussion of interest rates - I bought my house just a few years ago at just under 3%, today I would be paying more than 6% - I couldn't afford the payments if I refinanced. I believe that interest rates are the primary driver of less construction: people who want to buy can't afford to unless they downsize.

3% change really breaks your budget? Higher rates generally mean lower home prices anyhow making the effective mortgage rate more similar than anticipated.

Percentages don't work like this. It isn't a 3% change in rate, it is a doubling of the rate, and that will break the budget. You can find mortgage calculators to run whatever numbers you want, but it is hard to find any realistic scenario where it is less than $500/month, and for many over $1000/month. That amount of money will break any budget.

I expect home prices to go down long term if interest rates remain as they are. However home prices are a lagging indicator and so it will take years for the interest rate changes to cause that change. (and over those years other things will happen meaning we will never be able to figure out how much change is because of rates and how much because of other factors)

Re: What happens when housing prices go down?

#278

Post by AnimalMuppet »

avmich wrote: post #239
AnimalMuppet wrote: post #110

Earlier quoted context omitted.

If you buy a plot of land, go to a builder and ask them to build a house on it, sure, they'll do it. That's not what most builders do most of the time, though. Most of the time, most builders buy a piece of land, build a house on it, and then find a buyer (or at least while they're in the process of building the house). If they're having trouble selling houses, then they're left with a bunch of houses on their hands,…

> They don't want to be in that position. Then where are the builders which do what they're asked to? Is the problem with the banks which don't do this operation? Then it looks like a financial opportunity. You're effectively saying "this business model doesn't work". This doesn't mean there are no other business models which work in this case. Where they are?

> Then where are the builders which do what they're asked to?

These are independent companies. Who do you think is supposed to be asking them to do something? When a customer asks, they do it. What more do you want?

> This doesn't mean there are no other business models which work in this case. Where they are?

They made less money than this model over the last decade or two. So they are nonexistent, not in the sense that they are impossible, but in the sense that nobody uses them.

Could companies start using them? Sure. But probably, first some homebuilders who use the current model have to go bankrupt. (A side benefit is that some already-built homes would go on the market at bankruptcy sale prices.)

Re: What happens when housing prices go down?

#279

Post by jstimpfle »

doctorpangloss wrote: post #241
sokoloff wrote: post #230

Earlier quoted context omitted.

Price controls work to ensure scarcity. Flooding the market with new construction (at any price level, though ideally at all sizes and quality of housing) will do more to sustainably lower prices while leaving a functioning market.

a dreary part of this conversation is, nobody wants to play the game, what does random HN user sokoloff mean by the words "functioning market," "sustainably," "flooding", "ideally", "quality", and even "scarcity"? I don't know what you are saying, because you are leaning so deeply on an internal glossary known only to you, made worse by hijacking real words that everyone can look up in a dictionary.

Funny that GP whas one of the comments that made immediate intuitive sense to me. By the simple principle of demand / supply ~ price, price controls (in a time of high prices, which is because of scarcity), should inhibit creation of more supply. Leaving prices to their natural forces should allow creation of more supply, which, regardless of the price level, should relax the market and lead to lower prices.

While price controls might keep the supply affordable to a larger share of the population, that doesn't help the fact that there isn't enough supply, so instead of money, other mechanisms influence who gets to buy the goods. This could be: Who is most willing to invest an unhealthy amount of time and energy, who is eligible to maybe acquire state funding, or simply who is the lucky one. Is any of this better than letting money decide? I tend to think no and think it would be better to have a functioning market with reasonable prices.

Re: What happens when housing prices go down?

#280

Post by jstimpfle »

stego-tech wrote: post #237
epistasis wrote: post #198

Earlier quoted context omitted.

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.

That’s not entirely true, for a number of reasons. * Low-density housing that’s rented instead of sold drives up rent for the tenant and property values for neighbors, resulting in increased costs for everyone but the landlord (who offsets costs by raising rent) * Investors are predominantly buying affordable homes, not luxury ones. Cheaper prices (even when paying cash to outbuy other bidders) means higher margins.…

> We have enough houses at present.

If we have, why doesn't the market do its thing and bring back prices to a level affordable to the majority of citizens?

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