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I think we have to look at what happens when half or more of the US can't afford a home. Most taxes favor home buyers. Well, renters vote, too, and one day they're going to wake up and find out they're the majority, not home owners. Plus, what happens when we run out of people who can afford to spend a million on a house? Are the houses going to just sit there? And please, don't tell me the prices will go down. You know and I know and everyone knows it will take a major housing crash to lower prices. Without a crash, most people would prefer their house sit empty rather than lower the price and get a sale.
FWIW, inventory in my area is simply sitting there. People are not buying at the current prices. Whereas even a year ago few properties (excepting very large parcels of land) were on the market more than a short time (say a couple weeks max). So I would say it's the beginning of a correction or crash in my area. Which may or may not hold true for other areas.
I think we have to look at what happens when half or more of the US can't afford a home. Most taxes favor home buyers. Well, renters vote, too, and one day they're going to wake up and find out they're the majority, not home owners.
Such momentous transformation is unlikely. In the US, the home ownership rate has been hovering in the mid-60-percent range for many decades, including during the 2008 crisis. The rate may marginally decline, but it won't fall below 50%, even in some hypothetical utter financial collapse.
Renters are not only a much smaller group than owners (about half of the size!), but they're also less likely to vote. Apart from rent-heavy cities such as NYC or LA, it is unreasonable to expect a shift towards renter-favoring policies.
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Originally Posted by rodentraiser
Plus, what happens when we run out of people who can afford to spend a million on a house? Are the houses going to just sit there?
Parents will pass houses down to children. With smaller families, and less emphasis on the traditional nuclear family in coming generations, it is sustainable for multiple adult siblings to share the same house indefinitely. The result will be more of an inter-generational caste system, of homeowners and renters.
This isn't by itself starkly different from the past. But I think that in the past, it was more common to sell the family-home, splitting the proceeds among the siblings... would then use the money to invest elsewhere, or pay down debt, or buy other houses. Going forward, these siblings might be more careful to keep the house within the family, as a long-term appreciating asset.
Quote:
Originally Posted by rodentraiser
Without a crash, most people would prefer their house sit empty rather than lower the price and get a sale.
If prices continue to rise long-term, then it makes sense for prospective sellers to sit on empty houses, covering the carrying-cost, rather than selling, at what they might regard as a discount.
As an outsider looking on, American real estate seems a bargain. Our current median dwelling to median income ratio in Sydney is 13:1, in the main cities overall in Australia it is 10:1.
Much gnashing of teeth here, but basically in Sydney 70% of first home buyers now get parental help. Sometimes grandparental help. It may be more possible here because long term aged care is highly subsidised. But the market is one of supply and demand. One way or another, people are still coming up with the money.
This is an example, https://www.realestate.com.au/sold/p...+bay-143392348, went for $US2,260,000. The area is a middle-class area twenty miles from the city centre. If it was in the Eastern suburbs it would have been worth triple.
Probably everywhere a result of the huge population increase in the world in the past fifty years.
This is what I can't wrap my mind around. People talk about this whole thing as if this has been happening for decades. This happened overnight relatively speaking, during covid. Prices were reasonable through the end of 2020.
I always hear a lot about underbuilding, were houses not underbuilt prior to covid? Why is that $700k house now $1.2 million, in two years? That's insanity. Without very low rates or very low inventory, how can that price possibly be sustainable long term?
It can't.
Eventually, the sellers will have to reduce their prices, because the buyers that could afford those homes, already bought. So, demand has softened, due to affordability. We're seeing this where I am. (You can see where I am, above.)
OAN~ buyers are beginning to "accept" the 7-8% loan rates now. There was resistance at first, because they "remember 2 years ago." Well, it isn't "2 years ago" anymore. There's a new sheriff in town...(and it isn't Sheriff Bart!)
As an outsider looking on, American real estate seems a bargain. Our current median dwelling to median income ratio in Sydney is 13:1, in the main cities overall in Australia it is 10:1.
Much gnashing of teeth here, but basically in Sydney 70% of first home buyers now get parental help. Sometimes grandparental help. It may be more possible here because long term aged care is highly subsidised. But the market is one of supply and demand. One way or another, people are still coming up with the money.
This is an example, https://www.realestate.com.au/sold/p...+bay-143392348, went for $US2,260,000. The area is a middle-class area twenty miles from the city centre. If it was in the Eastern suburbs it would have been worth triple.
Probably everywhere a result of the huge population increase in the world in the past fifty years.
Salaries are way high over there too though. My nephew just moved back from Perth. We never seem to talk about anything practical (you know, family).
Salaries are way high over there too though. My nephew just moved back from Perth. We never seem to talk about anything practical (you know, family).
Perth has the second cheapest housing market in the country, only in front of similarly isolated Darwin. Yet has the highest median income because of the mining industry.
One would think more people would move over there from the east, but the isolation is a turn off for many.
Has the nephew caught the national obsession with the price of real estate?
Perth has the second cheapest housing market in the country, only in front of similarly isolated Darwin. Yet has the highest median income because of the mining industry.
One would think more people would move over there from the east, but the isolation is a turn off for many.
Has the nephew caught the national obsession with the price of real estate?
He was in Darwin first for 3-4 years and then Perth 3-4 years. He bought in Perth. He just sold a couple months ago and moved back to the US. He was there for work and had moved from Japan. He'd been in the middle east with the advent of the great recession (so, he'd been working overseas for a few years). I believe he was highly paid. He got citizenship while he was there...
That is about as relevant as the average waistline-to-IQ ratio.
(Median sale price)/(median household income) is a meaningless ratio.
You can purchase a house with ZERO income when you're just executing an asset class transfer. It isn't always about income; sometimes it is about wealth.
It's not relevant for some share of buyers.
For the typical buyer dependent on wages earned in the local economy, and who doesn't have a lot of preexisting wealth, it is absolutely relevant.
1) demand will increase, as sidelined buyers will re-enter the market
2) supply will increase, as sellers will re-enter the market because of a reduced mortgage interest rate on a replacement home.
What happens to prices when both demand increases and supply increases?
It depends.
It depends on the slopes of the supply and demand curves, aka price elasticity of demand and price elasticity of supply.
I take it you're not a 20 yr old spring chicken. You should be able to recall from the past what happened when the mortgage rate falls
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