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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?

#301

Post by mcv »

itake wrote: post #297
mcv wrote: post #296

Earlier quoted context omitted.

Oh, come on, man. Read the sources he points to before you invent imaginary contradictions. > The Phoenix housing market exploded briefly during the pandemic, when demand skyrocketed amid a housing supply shortage. Remote workers relocating to the relatively cheaper city brought up home prices and values. Between February 2020 and February 2025, home prices were up 53 percent in Phoenix and 56 percent statewide in Ar…

The author says, increasing the supply pushes prices down which results in higher financial risks. But then the author says we should also increase the supply… without addressing the underlying point that increasing supply creates financial instability

He addresses that in the article. In fact, it's the primary thing the article is about. Half the article is about the contradiction between housing as investment and housing as shelter.

Re: What happens when housing prices go down?

#302

Post by 9rx »

ta1243 wrote: post #294
9rx wrote: post #270

Earlier quoted context omitted.

> That doesn't mean there is no unmet demand. Right, it doesn't tell us much of anything, but there does need to be some external mechanism that is getting in the way from transaction completion in order for demand to be unmet. A shortage is one example of such a mechanism, but there clearly isn't a shortage[1] in the housing market. Prices have risen just fine. There is probably some unmet demand in the fact that bu…

There clearly is a shortage. When 98% of available homes are used that is a shortage. I just did a rightmove search for rental in London and checked the first 8 adverts, every single one was added today except for one which isn't available until september. Your definition of shortage seems very different to mine so there's no point in continuing.

> When 98% of available homes are used that is a shortage.

I anticipate that 98% of available jets are used. And I certainly can't afford one. Does that mean there is a shortage of jets? What isn't there a shortage of?

> Your definition of shortage seems very different to mine so there's no point in continuing.

What, then, was the point of continuing earlier? We have been discussing the technical definition since the onset.

I respect your freedom to make up definitions on the spot as you see fit, but there is nothing that can be discussed about such definitions. Clearly you saw value in discussing what surrounds the technical definition earlier, as demonstrated by multiple replies. Why the change of tune now?

Re: What happens when housing prices go down?

#303

Post by itake »

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.

On the surface, I feel the same as you but as someone that bought a house three years ago at 5.5% interest and has only lost money on the property due to significant home repairs it really doesn’t feel great that my capital is just evaporating.

I spent $50,000 replacing the pipes and removing asbestos 1 year after I bought the house. While I don’t expect the down payment and regular mortgage payments to grow and value, it’s very painful when there’s an unexpected repair that requires additional capital that isn’t recaptured in the home value growth.

It’s like driving a new car off the dealership parking lot and immediately getting your doors dinged. I’d feel a lot less about it if the car went up in value…

Re: What happens when housing prices go down?

#304

Post by thiagoharry »

throwaway98797 wrote: post #46
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…

karl marx called he wants his argument back

Adam Smith also would agree with the argument.

Re: What happens when housing prices go down?

#305

Post by thinkingtoilet »

itake wrote: post #303
thinkingtoilet wrote: post #160

Earlier quoted context omitted.

>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.

On the surface, I feel the same as you but as someone that bought a house three years ago at 5.5% interest and has only lost money on the property due to significant home repairs it really doesn’t feel great that my capital is just evaporating. I spent $50,000 replacing the pipes and removing asbestos 1 year after I bought the house. While I don’t expect the down payment and regular mortgage payments to grow and valu…

But even if your house was worth more in value, you would still have to make those repairs and it would still come out of pocket. It only matters if you bought your house to sell it at a profit. Of course, if you hadn't bought it, you'd be paying someone else's mortgage.

Re: What happens when housing prices go down?

#306

Post by msgodel »

tuna74 wrote: post #283
msgodel wrote: post #269

Earlier quoted context omitted.

I'm just building my house myself and ignoring the permitting process. It's extremely rural and there's no one to really report the violation plus the house is so small if I'm forced to tear it down it's no big deal. The expected value of "breaking the law" this way is pretty deeply positive.

That is great until you want to sell it.

It's a small enough portion of my net worth I can consider it a complete write off. Even with that it's cheaper than renting.

Re: What happens when housing prices go down?

#307

Post by inglor_cz »

intalentive wrote: post #256
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…

>Housing is not a standalone crisis, but a symptom of a larger dysfunctional economic engine that simply does not work for the majority. Great point. Healthcare, debt, and housing affordability are interlinked issues that stem from one root: a financialized economy that benefits a tiny minority of rent-seekers at the expense of productive activity and the public at large. Three potential outcomes of this trajectory:…

Here in Czechia housing costs are absolutely terrible, which is at least partly caused by an insane, Byzantine permitting process under which a basic block of flats in Prague can spend a decade in bureaucratic limbo before the construction can begin.

Yet this is not really a problem of financialized economy, the roots are elsewhere:

a. lots of NIMBYs, mostly curmudgeonly old people who want to block any change around them and, being in pension, have a lot of time to throw at thwarting anything. My personal experience is that they aren't really looking for money or profit, they just Simply Hate Anything New, Period,

b. the ease of weaponizing environmental and planning regulations against any building project, by the means of lawsuits,

c. local mayors have de facto (though not de iure) influence on the permitting process and they don't want to lose this tool of power over their constituents. It is an efficient way how to bash your enemies and reward your friends.

From what I know about the US, at least a. and b. apply in many places, too.

Re: What happens when housing prices go down?

#308

Post by CrimsonCape »

Akranazon wrote: post #124

> When prices actually go down, builders get nervous, lenders get cautious, financing dries up, and projects disappear. I think this is putting the cart before the horse. The entire reason that building/lending/etc should exist, it's raison d'être , is to make housing more affordable. If that is achieved - mission accomplished? I don't care about these parties otherwise.

Isn't the point of the article to show that you "don't care" about the other parties, but nevertheless they control the market?

Re: What happens when housing prices go down?

#309

Post by fireflash38 »

epistasis wrote: post #207
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…

> 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 hous…

MUD of commercial/residential are popping up all over in suburban Maryland. I'm all for it - it's both pretty high density for burbs (townhomes/rowhomes), and local to shops and parks. The only thing that is really missing is bike lanes and better train transit. Some of it is nearby transit, but we need more transit faster to track developments.

Re: What happens when housing prices go down?

#310

Post by kasey_junk »

avmich wrote: post #79
pixl97 wrote: post #30

Earlier quoted context omitted.

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?

Most houses are not built 1:1 with the land underneath it. Builders buy larger plots and then use it to make multiple houses. So a builder would need to enter at least the land risk in your scheme still.

Then if they had to wait for each plot and future house sale to occur before pricing the sale they couldn't get economies of scale.

Effectively your scheme turns every house into a more complicated bespoke futures contract with more parties involved.

There maybe benefits to that but it doesn’t seem like a system designed to get more houses built.

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