Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
We all get supply/demand (well some of us do) but I think the deeper question people are asking is what's motivating or driving the demand so friggin much! .
Quote:
Originally Posted by ohio_peasant
One candidate answer is that more people have more money, than what the curmudgeonly-set might suppose. ... There is a lot of money sloshing around, not by Blackstone or Blackrock or Blackguard, but by John and Jane Doe.
A corollary to more money sloshing around is a reallocation of wealth from one asset class - equities - into another asset class - residential real estate. Hold less VTI and SPY, hold more real estate.
Take San Francisco out of the conversation. It has unique circumstances that make it an anomaly. These price hikes happened ALL OVER the country even in small redneck Alabama towns with NO employment driver, no new jobs, no higher salaries - they just shot up for no apparent reason.
My parents home in very small town Alabama went from $500k to $850 (and sold at $850k) from 2020 to 2022. No new companies/industries moved into town.
It's not like Covid made everyone richer, if anything probably poorer overall. I know we lost income and still haven't recouped.
Something happened or triggered in peoples' minds *must buy home now at whatever cost*... Again, there isn't that much more money, not like we all got rich. So what triggered this?? Social Media and keeping up with the Joneses? Why are SO MANY people willing to pay these high prices and high rates? That's what boggles me.
Don't say supply and demand.. That's too simplistic and obvious.
In my area, rents really surged starting with our rent cap bill that passed in 2019 among some other terms and conditions. Landlords became very aggressive in raising rents and it was cheaper to buy a home with the very low interest rates than pay some of the really high rents. Even with the bidding, new homeowners were ahead with the mortgage.
I don't know about crisis, but in my area, houses are sitting top to bottom.
I was selling an inherited house a month ago and while it thankfully went under contract in one week, the buyer paid 10k less than asking at 395k. (as a perk of being all cash, and which I wasn't about to quibble with).
The interest rates and higher prices has definitely put pressure on the local market, and I am sure that is occurring other places that aren't California, Washington State, etc.
Mind you, homes moved in my area even before the covid inflation. Now, it's as stagnant as molasses.
Not great to buy or great to sell. Which makes me sooo glad we got our home choice right the first time 8 years ago.
Our income is solid, but why would we want to spend 5-6k on a house after putting a sizable down payment as well?
I just don't want to pay that.
It's not like Covid made everyone richer, if anything probably poorer overall..
The data suggest otherwise. The data shows a very substantial increase in household savings during the pandemic, and because Savings ≡ Investment, a substantial increase in household wealth.
All it then takes is a shift in asset class from one form of asset such as stocks/bonds/CDs/savings accounts into another form of asset class such as residential real estate.
1. Nearly 2/3 of Americans are already homeowners.
A sizeable fraction of those homeowners have mortgages, and a sizeable fraction of those mortgages are at quite low interest rates.
Remember when Silicon Valley Bank, Signature Bank, and First Republic Bank collapsed in the early months of 2023? The root cause was the loans they had issued at low interest rates (specifically, loaned to the US Treasury by purchasing T-Bills), once marked-to-market, were worth much less; this was an erosion/implosion of those banks balance sheets that ultimately led to their collapse. Well the COUNTERPARTIES to those loans had balance sheets that did the opposite of erode - counted correctly, they ballooned. (And by "counted correctly", I mean from an economic perspective, not from the perspective of Generally Accepted Accounting Principles. )
So the homeowners with mortgages at low interest rates from several years ago see their personal balance sheets - counted correctly - have ballooned. "I'm so much better off now that interest rates are high because some dufus bank loaned me money 5 years ago at near zero interest rates. Let's go out to a 5-Star Restaurant, and head to Vegas for F1!"
There is wealth-a-plenty sloshing around this country, which is at least one explanation for declining labor participation rates (particularly among the 50+ age cohort) and rampant consumption expenditures even in the face of increasing interest rates.
That's a mansion. That's not something for a first time home buyer. I don't understand why you gave this listing as an example. What about a house that's 100-150 sq m?
I guess the question then is, when houses sit without buyers for long periods of time, is it because they're overpriced or is it because we have simply run out of people who can afford them? And how do you tell the difference? Is there a difference?
It's not, however he is irrelevant. Money darkens the heart and conscience and we just witnessed the result of that right here. Moving on...
Quote:
Originally Posted by rodentraiser
I guess the question then is, when houses sit without buyers for long periods of time, is it because they're overpriced or is it because we have simply run out of people who can afford them? And how do you tell the difference? Is there a difference?
Interesting question. We can analyze this historically occurring during former eras and seeing the rise and fall, but it's hard to see when it's happening in front of our eyes in real time. Time will tell. Brand new builds in my area recently dropped their starting price by $100,000 to the "mid $600s". Still sitting empty.
For $100,000 I could build a very comfortable and suitable home for myself in a matter of weeks. It's all the congestion, modern rules & regulations, and bureaucratic BS that is crushing this simple process. People from 150 years ago are probably laughing at us in their graves.
I go back to, we're just bad financially and we love debt.. It seems what when prices skyrocketed, all we did was buy more.
If you price it high, we'll perceive higher value and we want it more. Look at how many people buy an $80k pickup on our $50k salary. How many soccer moms are driving Tahoes and Escalades because that's the "standard" now days. We're NOT making that much more money.
I've seen this with bitcoin too leading up to its collapse. Everyone swore it would only go up forever when it was near $70k and people kept buying in, then the bottom fell out and all those people vanished. If you believed in it at $70k, why wouldn't you then buy even more when it drops to $15k? Instead everyone exits.
Quote:
Originally Posted by bfmx1
Makes sense but I dont think that totally addresses the question. If your response is right (not that I disagree!) but where were these loaded people in 2020? Were these loaded people just sitting on their cash waiting for the price of houses to skyrocket before they buy?
Exactly! I don't know why so many people have such a hard time understanding this. It literally just happened. Instead everyone just acts like this is the new normal and this is how it will be forever.
Quote:
Originally Posted by GearHeadDave
"Just" $364K. That's a fortune for many, many Americans out there.
Yes. $364k is a lot of money, and now suddenly it's considered near the bottom of the market and a starter home price.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
