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I think the poster has asked a really good question. All I can give are my thoughts, right or wrong.
Money can only be loaned into existance. Loans must happen for the M3 money supply to expand and for their to be inflation.
Now interest rates are different. If interest rates rise because people think the USA cannot pay back it's debt and there is no demand for our bonds, rates rise irrespective of inflation. This will destory the banks and home prices.
If inflation hits and money is being loaned out, bonds holders will require higher interest rates to get a real return above the rate of inflation and interest rates chase the inflation higher. which I think will be just fine for homes because money is being loaned into existance.
The bond market and stock markets will crash when interest rates rise and put them into bear markets most likely while commodities will go higher and even wages should go higher.
so I guess it depends on how this all plays out. either way I see pain for bonds and stocks, housing is one area I am really unsure of.
Depends on where you are. Here too, big companies are expanding and hiring, and we continue to get an influx of new immigrants from other states and countries. They all need places to live so home prices and rents go up. We are at about 85% of 2006 peak prices and rent is higher than back then. Homes are still selling in a day or two with multiple cash offers over asking.
The one factor that is slowing home building is the tightening of credit ;so I look for renting to rise and have shortages .I have seen the growth in rental building clearly for last few years. Getting from 65% historical homeownership from low 70% at peak means rentals will rise. that is a clearly stated goal of treasury has stated by Geithner on national television when he was head of treasury and continues.Mnay do not realize that the so called consumer protections are really rising the lending standard. I think its April when lenders become on the hook for mortgages they make if they go bad.
I was reading an article this morning that stated:
Nonetheless, continued job growth stimulating the creation of new households along with pent-up demand from years of historically low housing production, should keep both home values and rental rates on the upswing for the second half of the year.
Is this guy correct when he says there is strong job growth and I am assuming strong income growth as well (that's necessary right, I mean strong job growth can be more burger flippers which is pointless - I am assuming strong growth in highly compensated jobs)
Rents will also be on the upswing? Aren't rents exceptionally high in Southern California as it is? This guy states rents are also going to be on the upswing? Maybe that is also tied into his statement that there is very strong job and income growth?
Unfortunately, I can neither see job growth or income growth... all I see is people complaining about stagnant wages, difficulty finding stable employment etc. Where are all these people who are exhibiting strong job and income growth?
So, it comes down to this...either most people are getting huge raises and high paying job offers left and right and then lying about being poor OR this "economist", Mr. Marco Sessa, chairman of the Building Industry Association of San Diego County and senior vice president of Sudberry Properties, is full of crap...which is it?
this is why people should just live in their own cars if rent and property keeps rising done in by the speculators and scammers of wall street.
let them take it to their graves if they want.
the best way to fight them is to not even do business with them.
By the way, if you want to limit how much your monthly hosing costs you, buy now with a fixed rate mortgage.
Your taxes and insurance will still go up, and your repairs will cost more and more, but still, that mortgage payment stays the same and isn't going up like your rent is going to do.
15/30 year fixed rate mortgages really are the best for most people seeing as how most people refinance or sell within the first 6-9 years. If you are disciplined and understand finance 5/1 7/1 10/1 5/5 arms are actually a better way to go. This is assuming you do not overbuy ie purchase that same house on a 5/1 as you would on a 30/15 year fixed and you either use the delta to pay down prin or put it into a savings account
Basically to get back to original question one only has to look at the fact that treasury announced long ago that policy was to get back near historical average of 65% homeownership from the low 70% ownership of recent years. That means a lot more renting/leasing and not getting loans .Looking at the Fannie and Freddie it is clear that loans will tighten if they even survive being Federally insured . In most countries a 30 fixed rate mortgage is a unknown thing.
Regardless what you think about job growth last I heard there is 1.1 million shortage of housing. Since the state intent of changes is to get back to 65% historical levels of homeownership ;it stands to reason ; more demand for rentals. Just has many will be getting a raise with ACA subsidy and others will be getting the bill directly and indirectly. In 2017 when states take over a portion of the increased Medicaid then anther bill. If it where not for unions and government employees objecting to eliminate ing their healthcare system private insurance might disappear. IRS objecting ;unions objecting exemptions and delays. As Baucus (D) called it a "Train wreck" in speaking of the ACA.
You aren't really trying to associate the ACA with rising housing prices, are you? You've got to be kidding.
Basically to get back to original question one only has to look at the fact that treasury announced long ago that policy was to get back near historical average of 65% homeownership from the low 70% ownership of recent years. That means a lot more renting/leasing and not getting loans .Looking at the Fannie and Freddie it is clear that loans will tighten if they even survive being Federally insured . In most countries a 30 fixed rate mortgage is a unknown thing.
The regulator who oversees Fannie Freddie just loosened the terms about their mortgage buybacks clause to banks and reaffirmed the twos needed existence in the housing market
Looks like you are incorrect at the current ownership %s too peak was under 70% 10 years ago
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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Quote:
Originally Posted by johnmanners
So, if rents are constantly rising along with other items as well and incomes are not then what is the end result? Ultimately there will be a point where nobody can afford to rent, or even live really...
That's why there are so many more homeless people lately, and people with very long commutes who are forced to live far from where they work to afford a home.
It's interesting when people talk about home prices being "almost up to the 2006 peak" only in absolute terms. According to the CPI Inflation Calculator, there has been 18% inflation since 2006. So if prices get back to the 2006 peak, it's still an 18% net loss of real value.
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