Quote:
Originally Posted by WVNomad
... If the cost for something goes up and nothing else changes, why wouldn’t the demand for that thing (and hence the price) go down?
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But LOT of conditions affect home sales and availability, and with REAL inflation across the board... The cost of housing cannot go down if sellers must replace the house they are selling. - and increased demand (from less homes on market) causing prices to remain high, and actually raise. (Some previously overpriced markets will adjust down, but only to balance average $/sf. Market conditions)
The actual way this is currently panning out.
1) homeowners (clients) have become overly conditioned to 20+ yrs of abnormally low mortgage rates (for a USA type market condition economy). And also WAS...very low inflation= less expensive to build homes.
2) existing owners are staying put, so as to reap the advantage of low rates (equals fewer available homes on the market, = inventory contraction)
3) builders require use of loans for operating capital = inventory contraction
4) fewer buyers qualify for higher interest loans, + costs of labor and materials is much higher, so no one (only cash builders) is building starter homes. (Which is huge volume in the construction industry) = inventory contraction
Results = fewer available homes, for a growing population.
Younger people had been growing a trend of non- ownership, but COVID/ WFH gave rise to desire for individual ownership.
There are many pressures on housing market, that are not like a non-discretionary commodity (take it or leave it)
A). Housing is an essential for most families.
B). Nomads are returning off the road (fuel/ travel costs + return to the office mandates)
C). Increasing % of aging population is looking to change locations and homes. (Wrong climate, too big, tax increases make existing home unaffordable, grandkids too far away...). But... They are not selling if they can't find a replacement home.
D) Very large, and increasing immigrant population need homes.
E). There is lots of money out there. (Some people can afford to buy with cash)
F). Building supply chain remains restricted and very expensive, if you can even find it available.(inflation+ availability) (windows, transformers, HVAC still has Yrs long waiting list in some regions.
Thus the real estate market is more complex than "everything else stays the same".
Regions within the USA (and within regions) are very different real estate markets, and have unique market pressures.
Lower inventory is not allowing the higher costs to drive down housing costs.
Eventually, the seller likely needs to replace their sold home. And that will not be cheap.
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