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I think corporate investors will continue to buy homes and fewer and fewer families will be able to compete, especially since investors usually pay cash.
Eventually we will see a rise in use of subprime lenders again as families try to get in the market and the cycle will start again. I don't think it will be for a few more years.
Lots of interesting feedback all around in the thread. Many continue to mention low supply and moderated new home construction.
But looking at fundamentals, again, the US population DID not dramatically increase, nor was there a dramatic increase in incomes in the last decade or so. Bitcoin argument is not very convincing. Maybe some profited from that, but those gains are transient. Also, there are plenty of people who lost on bitcoin as well.
Honestly, to me it sounds like the hype has been fueled by investors (including international) and work from home policies, but with the affordability in entry level market at an all time low, there is really nothing to back up those double digit growth numbers in economic terms.
Granted, it may take a little while for the fallout to occur, but eventually there will be plenty of people who will realize that they bit more than they could chew when geography becomes a factor again and/or the living expenses catch up in the long run. Not many people realized the real cost of homeownership that is not factored in in the monthly payments.
Coworker just put a TH up for sale in DC Metro area. He's got multiple offers with no contingencies and so far over 30k above list price during a bidding war. Lots of jobs in the DC Metro area, so people are definitely moving to the area.
Coworker just put a TH up for sale in DC Metro area. He's got multiple offers with no contingencies and so far over 30k above list price during a bidding war. Lots of jobs in the DC Metro area, so people are definitely moving to the area.
Lots of interesting feedback all around in the thread. Many continue to mention low supply and moderated new home construction.
But looking at fundamentals, again, the US population DID not dramatically increase, nor was there a dramatic increase in incomes in the last decade or so. Bitcoin argument is not very convincing. Maybe some profited from that, but those gains are transient. Also, there are plenty of people who lost on bitcoin as well.
Honestly, to me it sounds like the hype has been fueled by investors (including international) and work from home policies, but with the affordability in entry level market at an all time low, there is really nothing to back up those double digit growth numbers in economic terms.
Granted, it may take a little while for the fallout to occur, but eventually there will be plenty of people who will realize that they bit more than they could chew when geography becomes a factor again and/or the living expenses catch up in the long run. Not many people realized the real cost of homeownership that is not factored in in the monthly payments.
It's important to point out the obvious - that all real estate are local.
One common affordability driver is the interest rate, but the Fed has announced they don't expect raising the interest rate until May/June timeframe by 0.25%, then maybe another 0.25% every 3 months or so when the Feds meet. In a "boring market" where Zillow predicts a 20% price increase next year, let's assume an interest rate rise of 1% which equivalent to a 10% affordability drop in home prices, the homes will still appreciate 10% despite the rise in mortgage interest rate.
How's that rise in interest rate dampens the demand for homes remains to be seen and debated, but this gradual rise is by no mean meeting the definition of a "crash".
Then there's the price oscillation for "cyclical markets" such as NYC, Boston, DC, Seattle, SF and LA. People may see the decline of the already outrageous prices in these market and cry that "the crash" is coming. Then there's the boring, yet stable, market in fly-over country like the midwest & the south, where the market enjoys a slower appreciation yet not much of the decline as we see in the cyclical market.
Lots of interesting feedback all around in the thread. Many continue to mention low supply and moderated new home construction.
But looking at fundamentals, again, the US population DID not dramatically increase, nor was there a dramatic increase in incomes in the last decade or so. Bitcoin argument is not very convincing. Maybe some profited from that, but those gains are transient. Also, there are plenty of people who lost on bitcoin as well.
Honestly, to me it sounds like the hype has been fueled by investors (including international) and work from home policies, but with the affordability in entry level market at an all time low, there is really nothing to back up those double digit growth numbers in economic terms.
Granted, it may take a little while for the fallout to occur, but eventually there will be plenty of people who will realize that they bit more than they could chew when geography becomes a factor again and/or the living expenses catch up in the long run. Not many people realized the real cost of homeownership that is not factored in in the monthly payments.
Population growth or decline isn't the key metric housing developers focus on: they look at household formations and given the aging of the millennials this is certainly driving demand for new housing.
Yes, "fundamentals" matter as in supply: there already wasn't enough supply prior to 2020. Large price increases do NOT automatically equate to a bubble. Household incomes haven't kept up with home prices but stock market wealth and inheritance can mitigate this.
Having a significant group of first-time homebuyers enter the market wouldn’t be that big of a deal if the market could accommodate them. A Freddie Mac report found in 2018 that the housing shortage was at 2.5 million housing units; in 2020, that number skyrocketed even further to 3.8 million.
Instead of a “bubble," we had a “housing supply bust” that caused prices to appreciate quickly in places like New York, Los Angeles, San Diego, Boston, and San Francisco prior to Covid 19. This in turn created a migratory phenomenon where households pushed into places in the sunbelt like Arizona and Florida. This was only accelerated by Work From Home in 2020 and 2021.
Last edited by Astral_Weeks; 12-15-2021 at 04:24 AM..
Population growth or decline isn't the key metric housing developers focus on: they look at household formations and given the aging of the millennials this is certainly driving demand for new housing.
Yes, "fundamentals" matter as in supply: there already wasn't enough supply prior to 2020. Large price increases do NOT automatically equate to a bubble. Household incomes haven't kept up with home prices but stock market wealth and inheritance can mitigate this.
Having a significant group of first-time homebuyers enter the market wouldn’t be that big of a deal if the market could accommodate them. A Freddie Mac report found in 2018 that the housing shortage was at 2.5 million housing units; in 2020, that number skyrocketed even further to 3.8 million.
Instead of a “bubble," we had a “housing supply bust” that caused prices to appreciate quickly in places like New York, Los Angeles, San Diego, Boston, and San Francisco prior to Covid 19. This in turn created a migratory phenomenon where households pushed into places in the sunbelt like Arizona and Florida. This was only accelerated by Work From Home in 2020 and 2021.
Also, you have Boomers that could have died from Covid or just dying in general. Boomers either have pensions and retirement plans that can create inheritances for the child(ren). I know a lot of kids in their 20s that went to school on full scholarship and their parents had setup 529 plans for them since birth. Guess what? That money that had been saved for 20+ years is now used as a down payment on a home. When children are receiving likely $100k in funds and no undergraduate debt, they see that money as a big down payment on a house. The increase in housing prices has little to no effect on them when buying a home.
Also, current housing prices are being driven by the amount of demand in the market to purchase real estate. People who are appropriately diversified in their stock market investments are looking for other ways to park cash that will give them at least a 5% return. Sitting on heaps of cash is pointless in this environment, when banks are choking on cash, and paying a tenth of a percent on that cash in interest to the account holders. Hence the overwhelming demand to purchase real estate.
That trend seems to have reversed in certain urban locations. It is hand-to-hand combat to buy an apartment in desirable NYC locations.
NYC is now a total mess - gone completely Tijuana. Of course real estate there has crashed. Nobody with any sense would want to move there. The next "Detroit."
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