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The global housing market is heading for a brutal downturn

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Re: The global housing market is heading for a brutal downturn

#31

Post by benj111 »

ThrowawayTestr wrote: post #25

Contrary to the wording of the title, this is a good thing for people that treat housing as a place to live instead of an ever appreciating asset.

Not necessarily.

If you have an asset worth 100k and a mortgage for 200k, then it isn't very good if you want to move, or change mortgages.

Also, if you're a net seller (downsizing, moving to a care home) you may have been relying on funds locked in the house for other things.

So this is generally good for younger people and bad for older people.

Re: The global housing market is heading for a brutal downturn

#32

Post by cm2187 »

Chirono wrote: post #27
lpapez wrote: post #8

Summary of this article is that we can expect from 0 to 5% year-on-year GROWTH in asset prices, compared to 15% we saw last year. Hardly a brutal downturn in my opinion.

I still find it strange that housing is expected to be an appreciating asset class, rather than a depreciating one that requires continual investment to counteract wear and tear etc. I understand that this is largely by design, but it seems odd to me how much this is accepted as fundamental to properties, rather than something that’s been constructed.

Population growth. The city centre doesn't expand but the demand for it does.

And logically it should also be a hedge against inflation. I am not sure that our modern economies have the stomach for what it takes to rein in inflation (too leveraged).

Re: The global housing market is heading for a brutal downturn

#33

Post by arcticbull »

cm2187 wrote: post #32
Chirono wrote: post #27

Earlier quoted context omitted.

I still find it strange that housing is expected to be an appreciating asset class, rather than a depreciating one that requires continual investment to counteract wear and tear etc. I understand that this is largely by design, but it seems odd to me how much this is accepted as fundamental to properties, rather than something that’s been constructed.

Population growth. The city centre doesn't expand but the demand for it does. And logically it should also be a hedge against inflation. I am not sure that our modern economies have the stomach for what it takes to rein in inflation (too leveraged).

Zoning. The city center is free to expand upward just about as much as we let it, but the problem is we don't let it so that we can enrich the existing landholders (they are the voting class after all).

The city of San Francisco is a prime example. The city makes is utterly impossible to build anything. From 2012 to 2016, SF metro added 373,000 jobs and only 58,000 new houses. The entire western half the city is hard-capped at 4 stories for no reason. There's a whole wikipedia page on it. [1]

If you let supply meet demand, the cost of housing converges around the cost of construction give or take, just like in Japan which has seen ~0% inflation-adjusted housing price growth since the mid-90s. [2]

This is a simple problem to solve. Allow construction, invest in transit.

SF is so obstinate that it's short 82,000 units in its submission of a conforming housing element to the state. [3] The fun part is if they fail to produce a conforming element, the builder's remedy kicks in and the city loses its ability to deny housing (and new builds don't have to go through CEQA). [4]

Really in my opinion the Builder's Remedy should the default state. We should do what Japan did and federalize zoning. The federal government does have precedent. At least according to the "trillion-dollar coin" guy, Carlos Mucha. [5]

[1] https://en.wikipedia.org/wiki/San_Francisco_housing_shortage

[2] https://fred.stlouisfed.org/series/JPNCPIHOUAINMEI

[3] https://www.sfchronicle.com/sf/article/housing-California-co...

[4] https://www.hklaw.com/en/insights/publications/2022/10/build...

[5] https://twitter.com/mucha_carlos/status/1420815462342959105?...

Re: The global housing market is heading for a brutal downturn

#34

Post by benj111 »

bamboozled wrote: post #24
doix wrote: post #3

I've been waiting for a downturn since I missed the one in 08 and it seems to never come. I've resigned to the fact that I'll probably never own property and eventually move into a camper van.

I think one of the issues is this, there are so, so many people waiting to buy in the downturn with money saved that it will create its own boom. I do wonder though, if all this cash in the bank people are hoarding for the downturn will have other effects on the economy, recession ? I'm in the same boat though, I've saved and invested a shirtload of cash waiting for a downturn.

Are people hoarding cash/assets? From what I understand the savings rate has been dropping across the western world.

In theory though, savings are countercyclical. People made unemployed can still maintain their spending. So it helps break the feedback loop of redundancies -> falling spending -> redundancies.

Although we seem to be heading for recession, with high inflation and interest rates, so the normal mechanism of decreasing interest rates to get people spending isn't really available currently.

Re: The global housing market is heading for a brutal downturn

#35

Post by cm2187 »

doix wrote: post #3

I've been waiting for a downturn since I missed the one in 08 and it seems to never come. I've resigned to the fact that I'll probably never own property and eventually move into a camper van.

The problem is that it is kind of like the stock market. This year's Nasdaq's bear market has only reversed a couple of years worth of growth. If you have been waiting on the sideline in cash for a sell off to invest for the last 10 years, you are way worse off than having jumped in at the first opportunity and taken the ups and downs of the market.

Re: The global housing market is heading for a brutal downturn

#36

Post by bamboozled »

benj111 wrote: post #34
bamboozled wrote: post #24

Earlier quoted context omitted.

I think one of the issues is this, there are so, so many people waiting to buy in the downturn with money saved that it will create its own boom. I do wonder though, if all this cash in the bank people are hoarding for the downturn will have other effects on the economy, recession ? I'm in the same boat though, I've saved and invested a shirtload of cash waiting for a downturn.

Are people hoarding cash/assets? From what I understand the savings rate has been dropping across the western world. In theory though, savings are countercyclical. People made unemployed can still maintain their spending. So it helps break the feedback loop of redundancies -> falling spending -> redundancies. Although we seem to be heading for recession, with high inflation and interest rates, so the normal mechanism…

I'm not spending my money until house prices come down basically, so maybe I'm the cause of the recession but bad luck I guess.

Re: The global housing market is heading for a brutal downturn

#37

Post by cm2187 »

arcticbull wrote: post #33
cm2187 wrote: post #32

Earlier quoted context omitted.

Population growth. The city centre doesn't expand but the demand for it does. And logically it should also be a hedge against inflation. I am not sure that our modern economies have the stomach for what it takes to rein in inflation (too leveraged).

Zoning. The city center is free to expand upward just about as much as we let it, but the problem is we don't let it so that we can enrich the existing landholders (they are the voting class after all). The city of San Francisco is a prime example. The city makes is utterly impossible to build anything. From 2012 to 2016, SF metro added 373,000 jobs and only 58,000 new houses. The entire western half the city is hard…

Well, Japan hasn't seen population growth.

I have a lot of sympathy for deregulation and think it should be the primary tool, though many cities also have a character and you can't replace every construction with a high rise building without destroying the city. Think of Paris or London.

Re: The global housing market is heading for a brutal downturn

#38

Post by vasco »

benj111 wrote: post #31
ThrowawayTestr wrote: post #25

Contrary to the wording of the title, this is a good thing for people that treat housing as a place to live instead of an ever appreciating asset.

Not necessarily. If you have an asset worth 100k and a mortgage for 200k, then it isn't very good if you want to move, or change mortgages. Also, if you're a net seller (downsizing, moving to a care home) you may have been relying on funds locked in the house for other things. So this is generally good for younger people and bad for older people.

I'd choose a young person getting their first home over an old person moving to Florida, but I'm a young person so I'm biased.

Re: The global housing market is heading for a brutal downturn

#39

Post by benj111 »

hyperbovine wrote: post #22
Beaver117 wrote: post #5

Earlier quoted context omitted.

If the downturn is so short you need to "pounce quickly" it isn't much of a downturn. Some countries have had stagnant real estate markets for years. Anyway interest rates are not going down to 2% anytime soon so don't hold your breath. People who bought/refinanced in 2020-2021 will probably never sell.

This. We refi’d in 2020 and our monthly payment is just stupendously cheap now, like < 1/7 my monthly take home pay. Even though we sort of need a bigger house at this point, the thought of giving this up makes entering the market again a complete non-starter. I feel bad for anyone trying to buy a house in the US right now, particularly their first.

High inflation is good if you've just bought a house though.

Yes it's hard to begin with but compound inflation soon erodes the value of the debt.

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