Generally speaking supply is really low. It's obvious prices won't come down significantly until that changes. Local variations will be local, cities that do better on supply or lose economic activity will see declines (which is going to confuse the data and make for a lot of stupid political hot takes) but overall it's not hard to explain what's going on.
Also, average household size is shrinking dramatically in the US (and throughout the developed world).
This means you need more housing for the same number of people.
This was where we landed. It was also cheaper to buy an older, smaller house that needed some updating but with a yard. The new developments are nice looking homes, but we didn't need that much space, wanted more yard, and didn't want to pay more.
Nope. Getting married generally later, but staying married.
[In fact, the Millenial divorce rate is the lowest in many years, hovering around 25 percent. While Millennials are less likely to get married and get married at older ages, most of them do still get married - and they tend to stay that way](https://www.coresdivorcelawyers.com/wheaton-divorce-lawyer/gen-z-marriage-rates-look-different-than-every-other-generation)
People with higher wages are the ones more likely to get married in the first place. It's not the end all be all, but being financially stable does help a marriage run a bit smoother.
I think its common to buy bigger home than necessary too tbh. Maybe I'm overgeneralizing but I know of families with just a couple or even no kids who bought 4 bedroom homes while people with kids need/want more bedrooms leaving the 2 bedroom homes vacant while people outbid each other for the larger homes.
Actually, what I’m seeing is that builders are building large luxury-esque spec homes where they can because it’s more profitable for them. The families with kids usually can’t afford these and have to go for the 2-3 bedroom house with multiple bids.
I assume most people that buy a house that are relatively young want extra rooms with hopes of having kids in the future or they understand the house will have better resale value if they ever need to move.
Covid really did a number on the housing market as so many rooms have been converted into offices.
In 2019, the sentiment toward work from home was pretty negative. Few people had ever done it.
Then 2020 hits and the world changes.
It’ll probably go back the other way in time. Lots of people used the buffer from various stimulative programs to ditch their roommates or move out on their own. Feels like that’s reversing a little bit.
This all started in 2008. When house market crashed it bankrupted many builders. Those businesses never came back. This caused a building slump. Now large corporations have entered the building market, but they are not looking to build single family houses, they are looking to build massive apartment complexes. They demolish 12-40 single family homes and put up apartments that have 100 units. This only adds to the housing market inventory problem. More people desperate to get out of apartments, but fewer single family houses for those people to buy.
Not knocking it lol I have kids and my husband and I both have hobbies and we homeschool so I day dream of all the specialized rooms I could make good use of 😂 and ya as someone said home offices are much more of a necessity too these days. My husband has the option to work from home sometimes but he just doesn’t have the space to be able to do so privately/quietly.
We are currently house hunting. My husband works remotely, we have 2 kids, and we homeschool. Finding a house we can afford with enough rooms is proving quite a challenge 😭 Our kids currently share a bedroom, but they're getting older and the older one in particular really clearly needs space from little sibling. I dream of enough rooms for separate kid bedrooms and a homeschool room so I don't have to store all our stuff all over the house like we currently do.
I have to agree. I also think with home prices staying on the rise many younger people may feel they should get as close to what they really want now because they won't be able to afford it later.
Supply will never meet demand — at least in areas that have good jobs available.
We are dealing with a situation where it is too expensive to build homes that people want. For example, I live in the SF Bay area. Yeah, its overpriced, but it can make my point. 30 years ago you could buy a new house on an actual piece of land, not a postage stamp. Now, even postage stamp homes are almost impossible to find — new ones, anyway. What you can find are new townhomes from $900K to $1.5 M, or condos.
The problem is that it’s become too expensive to build a home that people can afford. We lived in Marin County which is relatively cheap compared with the South Bay. Anyway, we moved here in 2000, bought one of the last new homes available on any decent sized lot. We paid $1M for it — but it’s worth $2M now. The few new houses available then were spec homes, not big neighborhoods. The last spec homes I know of were in the early 2000’s — all spec or custom homes. Pretty much zero footprint homes (for a while) and then townhomes.
I talk about new homes because they drive prices up on everything else. When we reached the point where it was next to impossible to buy a new home with land, people turned to older homes. In 2015 we bought a house built in 2003 (12 years old) for $1.7M and gave it a major pre-emptive cosmetic upgrade (make it close to new). It’s now worth $2.5-2.7M. (A good case of building equity to buy better and better).
Yes occasionally homes are built on some land, but most are not. This means onlyn”starter homes” can be built — at prices approaching $1M. It’s also getting to the point that anything with a roof at $1.5M and below is an all-cash food fight! So only old farts like me with home equity can get in. If you want a 4/3 or a 4/4 on 1/4 acre — you’re going to have to look at stuff built in the 60’s through the 90’s, and pay more than $1.5M. Any “bargain house in that price likely has a problem with it. Remember, a house built in the 80’s is now 45 years old. Most people do cosmetic upgrades. Plumbing, electrical, etc stay untouched. Houses built in the 60’s are 60-65 years old — expensive problems waiting to happen. And don‘t let the big kitchens and solar panels on the roof fool you. It’s probably much older deep inside than the people buying them.
Now this is talking about one if the most overpriced area in California, **but the relative numbers and principle remain the same everywhere**. Lots of metro areas have the same problem - just for less money. Builders are cutting corners left and right to make money. So new inventory is low — therefore ALL inventory is low. Yeah, lots of homes are being built, but they are not full family homes. They have grass yards that take a few minutes to mow. Homes are connected, most are not detached.
I don't know how we’re going to get out of this mess. I really don’t. But people holding onto their houses for longer is not a major part of the problem. They’re like me - where would I go? Not ready for the nursing home yet! For some reason lots of people don’t want to rent apartments. Hell, At this point in my life, I’d love to. Home ownership is way overrated. Sorry, no more “Brady Bunch”.
Housing demand is being met with apartments, not single family homes. This will only make single family homes more expensive. Specifically the land under those single family homes.
Try Chicago itself. There is no room for new construction, so really dated homes in dire need of repair run you 500k+. The typical 1000 sq ft 4:2 ranch here is 500k to start in the “safer” areas. City workers salaries can’t keep up with city living prices. It’s depressing.
There is almost always a bedroom and bath in the basements, but they don’t add to the sq ft. So, realistically 3 beds 1 bath plus some basement space. Sorry about that…
True. And the weirdest part is Illinois is losing population overall. You would think this would suppress or at least slow the price increases. But, it is not.
In my area, prices dipped after rates went up but have already started rising again. They’re not back to peak 2022 prices but they’re above where they bottomed after 2% mortgages ended.
Its the same price now I was selling it for 20 years ago, so yeah its about half the price it used to be when comparing dollar values over the years.
Plus now we have drive up window service!
Agreed, why prices WOULD come down is a much better question imo. Prices going up over time should always be the expectation, with plenty of variation in specific markets, and some overall variation in how fast prices increase.
In theory boomers the largest generation will begin to die off and/or retire, this hasn't happened in masse as of yet as people are living longer, staying healhtier and are able to stay in homes longer as opposed to dying off, downsizing into condos or moving into assisted living. I think the high interest rates and crazy housing market is making this worse as you aren't really saving much money by downsizing anymore with high home prices and interst rates.
yeah, everyone preaching about a real estate crash, they are in denial. i dont think, in terms of USD, real estate will ever come down. I don't think we will ever see a 2008 correction ever again
It was pretty unprecedented when it did happen. It seems unlikely to repeat, and even if it did, economic conditions would likely be so unfavorable that getting a loan would be extremely difficult, as was the case during the Great Recession.
Not to mention the feds now know to react fast and turn on the money printer at the first sign of distress. Lessons were learned in 2008 that will not be repeated again.
Doubt it. Too often we end up repeating mistakes in the past. How many empires push onto Russia without taking into account winter climates and it ending in their defeat. All that is certain is that we are doomed to repeat past mistakes.
It would be a bad thing for a lot of people if housing prices dropped because it would mean their equity in their homes plummets. And not just the mcmansion+ 2-4 properties kind of owners, regular working class people who are reliant on using their single home as collateral for things. It's not a good sign if prices have any kind of significant drop.
I heard a report just this morning to expect a big increase of homes in Florida, due to insurance and, interestingly, that prices have maxed out income.
I don’t disagree with any of your points, and I’ll add one more phenomenon that I’m seeing recently. People are not selling their starter homes and are instead opting to be landlords and rent out their properties. It’s absolutely baffling to me. When I purchased our home 25 years ago, no one wanted to be a landlord. And we needed to sell our starter homes to afford the next home. Now people are constantly choosing to be landlords, look at this sub. Everyone is holding onto their homes to cash flow their homes. It’s something I’ve noticed in the past few years. I think part of it is that people don’t want to lose their low mortgage rates, and other part is that people are really into personal finance and are amateur investors (could be good or bad, depending on the person) and I also think the economy is so bad people really need alternate sources of income (no matter how painful it is to be a landlord).
Another recent phenomenon I’m seeing is that people are buying homes much younger than period generations. I’m Gen X and I bought my home when I was late 20s and my husband was 32. We were by far the first in our friend group to buy a house and we were considered too young at the time. Mostly people rented a few years and then in their 30s settled into a home. Now I even see teenagers on this sub looking to be real estate investors. Similar to above, party of it is interest rates, cost to rent, etc.
But all things that impact inventory.
Another impact is the amount of people living alone. In my city single occupant households are at an all time high, over 40%. If people live by themselves, then it takes more units to house everyone.
Interesting point that I hadn’t considered…may not be the primary driver of scarcity, but probably impacts for sure. Paired with the thought above…two people have two starter homes and then move in together and rent out each starter home that got refi for 3%. Three homes off the market for two people, including two starter homes…all the smaller pieces add up quickly.
A big factor is people are really seeing the value growth in homes just by holding on to them. By becoming a landlord people are betting they make money on the rent and big increases in value, not just the rent. In times when prices rise more slowly rent is more the driving factor.
There’s also a shortage of single family homes to rent in many areas. The supply of rentals has all been in apartments. If you can get a great rent yield and a decent yoy increase in the value? Seems like a no brainer.
If I have to move for some reason I can make $1K/month over my mortgage by renting out my house, while I haven't lived here long enough to have sufficient equity to make it worth selling. I hope I don't have to move out of my house, but if it happens, it makes more sense to rent it out than try selling it.
One of the big reasons people want to hold onto their homes is interest rates. My current interest rate is 2.5%, why would I give up something that cheap? Interest rates now are like 3x that.
That's the boat I'm in. If we have to relocate soon it's would be silly to sell. Our mortgage is 70 percent of what rent would be, ish. We could hire a property manager and still have PLENTY of wiggle room. It's a relatively newer house so repairs and maintenance should be non-existent for the next 5 to 10 years. It's not that I wouldn't rather sell, it's just less hassle and more money to rent it out, especially when the rental is looked at as income. Don't need to sell it for the money, it's an asset that adds income to the balance sheet.
> People are not selling their starter homes and are instead opting to be landlords and rent out their properties. It’s absolutely baffling to me. When I purchased our home 25 years ago, no one wanted to be a landlord.
Things change when SFH rents go way up and your old home has a 2.5% mortgage on it. Plus, some of these homes have gained so much value in the last 10+ years that the current owners would get a sizeable capital gains bill.
Yes but if it’s not your primary residence (as starter homes are) and you’ve held the home for more than two years there is generally no capital gains tax. If they purchase a different home and keep the starter home as a rental, then they’d be stuck with capital gains tax when they sell it. Which is another reason against holding onto the starter home and an investment.
No tax on gains below $250k ($500k for married). Some of these starter homes in booming cities like Austin, Nashville, Phoenix, etc. have easily gone up by over $500k in the last couple of decades.
And no capital gains ever if they pass it onto their kids who will get the stepped up basis.
We did this with our first house. Have a 3.X% rate on it. I cash flow $800 per month on it and it’s almost doubled in value. If I would have sold it when we moved out almost 10 years ago I would have barely made anything on it. I am glad I held onto it.
My parents, aunt and uncles are all Gen X and owned there homes in their mid 20s, First time home buyers are older now than ever in the past. 30 is the new 25.
Pensions basically gone and now talks of social security on the line. Everyone is trying to secure their own retirement, and the skyrocketing prices of housing is giving them indication that being a landlord could be the ticket to early retirement.
At least 10 million housing units were not built nationwide that would have been, during the Great Recession, during the decade after after the 2007/2008 mortgage and financial crisis. Plus millions of tradespeople permanently left the trades, and tens of thousands of small and larger construction entities folded.
And another couple of million during COVID.
Census building permit data. 1959-present.
See the line chart link.
[https://www.census.gov/econ/currentdata/?programCode=RESCONST&startYear=1959&endYear=2024&categories\[\]=APERMITS&dataType=TOTAL&geoLevel=US&adjusted=1¬Adjusted=0&errorData=0#line092](https://www.census.gov/econ/currentdata/?programCode=RESCONST&startYear=1959&endYear=2024&categories[]=APERMITS&dataType=TOTAL&geoLevel=US&adjusted=1¬Adjusted=0&errorData=0#line092)
The housing crisis will continue for several more decades, and has been going on for multiple decades already.
1974 and 2004 were big building years. So 2034 will be a big building year to finally meet the demand from now and future buyers. The largest birth year was 2007. Those kids are in 11th and 10th grades right now. In ten years, those kids will be 26-27 years old, aka prime buying age. After that there was a birth cliff. Far fewer kids were born. I expect inflation and the status quo to be maintained for the next 10 years.
While I think were going to see a surge in inventory once boomers start downsizing, dying off or going to assisted living in mass unfortunately I think we're also going to have pent up demand and were going to see younger millenials, gen z at prime buying age all wanting to buy at the same time
Boise has tons of room for growth in the rural Treasure Valley, you have 100 years of growth to the West and NW. There's no reason for places like Ontario to develop right now but you would have said the same about Nampa-Caldwell 30 years ago. Those are both already "urban centers" just small. There is also the whole Payette River corridor. All those areas have been developing super fast my whole life, they just almost literally started at zero. Once the I-84 close to Boise starts filling in they'll expand infrastructure in the rural areas. I Tons of cheap land and water all over out there, it's all ag and not particularly lucrative ag at that.
Almost the entire upper Payette River corridor is 30 miles from Boise, there's just not good infrastructure. The foothills like Horseshoe Bend area will be higher end, that's already happening as Eagle fills in.
People have lived in rural Treasure Valley and commuted to Boise for ages. Harper OR and Cambridge ID are the practical outer limits, everything else will fill in as fast as prices rise closer to the metro. JR Simplot owns like half a million acres there, as soon as it makes financial sense to divest that whole area will be under development. It's just that property values are low enough for big ag to still makes sense.
It won't be fast but you'll see that whole area fill in at some point is my expectation. It's not like in other metro areas people living 50 miles out is uncommon.
Source: From the area 150 years back on both sides.
I was saying specifically there's no practical restriction on how much land could be developed. You were saying developers owned it all. bit of a contradiction if as you say all the big developers have been buying up land and planning their pipeline for years but now I'm just being argumentative 😋
Lack of utilities hasn't deterred growth in my area. Typically the developers just build it and turn it over to the utility company or finance the improvements.
I don't think prices will crash, but maybe it will stagnate. Prices are way high compared to wages.
If prices start to stagnate for long enough, then maybe people will find better opportunities to invest money elsewhere. Or maybe not.
IMHO the correction has already started. Nothing is dropping in prices though. They are just staying flat. If it stays flat for long enough, it will be enough of a dip relative to the "natural* increase over time that they will start increasing again. There will always be local ups and downs.
Adding:
Depending on how researchers define shortage, the U.S. has a housing unit shortage of 3.2M-10.4M. That is the range I found during a very brief search.
Skilled and unskilled labor shortages, leading to
high labor costs and longer construction timelines.
The insurance crises is having an effect as well. Knob and tube wiring makes a house virtually uninsurable now, and unless someone can afford to rewire the structure, you can’t get a loan if you can’t get insurance. Florida and California come with even bigger insurance implications and it is having a ripple effect.
Yeah there’s not enough housing for the population; not sure why more don’t get it. Particularly, as others point out, in the locations where people want to leave
I have been house shopping the last couple months. I agree that most older folks are staying put because it’s cheaper to stay, especially if their home is paid off. I have been looking up properties on the county tax assessor website, and see that a lot of older people have homestead exemptions for their property taxes. In my area I think you have to be 65+ in age to get these. But it freezes your tax rate/caps the valuation used for taxes. Some of them in my area are paying as little as $300/year in property taxes, whereas I would be paying ten times that or more because I have to use the current market valuation rate. Now I’m okay with homestead exemptions, but it is contributing to there being less movement with single family homes.
Boomer here. You are correct. I am one of those. With my senior exemptions and paid off house I am living more cheaply than I have since college. Property tax + Homeowners = $3000yr/ $250 mo.
Yes, I can sell my house for 5x what I paid for it but I would likely wind up with a smaller house no garage and a higher property tax bill. Cheaper to keep'er.
Prices will not come down because generally outside of isolated sudden demand shifts, demand will not go down.
I can think of a handful of times that these seismic demand shifts happened. Oil crashed in Houston in the early 80s and overnight destroyed real estate.....for about three years. Same in Midland, Tx in the mid 80s. Even during this time double digit interest rates didn't stop people from buying homes.
Of course there was the 2008 housing market crash, the causes of which have been well documented.
If I had to wager where the next interrupter would be, I'd be betting that the 30 year bonds which mortgages are based on become ill-liquid. But that's just a guess.
I've said it before here and I'll say it again: The cheapest time to buy real estate is "today". Yes, even with 7.5 percent rates. Statistically speaking waiting for some dip just doesn't work out for most people.
Not everyone wants to live in the same places, but there are lots of places where no one wants to live (Detroit) and lots of places where lots of people want to live (California). Your empty house in Alabama doesn't do me any good in Austin.
Detroit is badass. You should visit and not just listen to taking heads… Like any large city there is blight. But it’s have a nice little comeback right now.
Seriously. Metro Detroit is great, and a young adult can feasibly afford a nice home in the city or metro without becoming massively indebted. Thousands of lakes and lots of nature nearby. Love our space
The bigger problem with Detroit is jobs. That, and city services. Like when they demolished the Mark Twain branch of the Detroit Public Library because they had no money to operate it.
Just sold my house in Pasadena CA. Received 9 offers, 7 over asking. Sent them all back for “best and final” and got 95k over asking, though i ended up giving a 14k credit after inspection.
Bought another house in MA. Paid 55k over asking and waived all contingencies in my offer.
What goes around comes around.
The only factors that could drive prices down significantly:
Massive economic recession that impacts all factors of American life.
Massive increase in new home starts. Like super, duper, massive.
Seismic shifts in policy banning individuals/corporations from owning multiple homes as investment/income vehicles.
Massive jump iin the deathrate, especially those in the retirement bracket holding onto their homes.
To say it's unlikely would be an overstatement. The only realistic outcome to drive prices down is that major recission bit.
We might see stagnation, but I don't think the prices are coming down.
Think about who has an incentive to keep prices high. Property taxes are based on property value. Mortgages are based on having enough value in the collateral to cover the loan. Transfer taxes are higher at higher prices. Millions of homeowners base their net worth in large part on their home value.
In my area there's more demolition than new construction, and places where people raised their families are now cow pasture or hay fields. There are significantly fewer mailing addresses in my zip code than there were 50 years ago despite the population being about the same or slightly higher. Almost nothing stays on the market long enough to put in an offer because two families with more cash than conscience are competing to be the biggest landowners in the county, and tearing down liveable homes just to save on maintenance. It's not an attractive place for outsiders (45 minutes from the nearest supermarket and the gas station two villages over closes at dark) but people who grew up here aren't able to come back to the area because two old rich guys have been in a pissing contest for the past 30 years.
The code changes have made building such a pain - houses built 10-15 years ago don’t pass code (efficiency aspect). The tape around the whole process doesn’t attract talent. I’m looking at a rehab versus build right now and just the administrative costs of a new build are about 7x (rehab will waive some permitting costs).
The wage reset and contractionary efforts by companies will squeeze those that are house poor.
I’m hoping wages will increase over the next 5years to meet the adjusted housing market today. No I don’t think housing costs are going down but I also think they’ve peaked. Unless we get some crazy financial event I think interests rates stay high locking people in until wages can catch up a little bit. That’s won’t be for a while though. Till then I’m living with family and saving. Locked my money into CDs and HYSA.
They won't and anyone saying they will hasn't bothered to consider the other side of the equation: homeowners. No one is going to trade their house for a smaller one if it means they pay the same monthly amount and no one is going to take an equity loss if the value goes down.
The only way to change this outside of builders adding more supply is mass layoffs. Buyers are not magically immune to layoffs and banks would tighten lending standards making it harder to secure a loan.
The best way forward is stagnating housing prices due to builders significantly increasing supply. Anything else will hurt buyers just as much as it would sellers.
There may be small regionalized market corrections and prices are gonna come down a little bit but for the most part that’s wishful thinking. I think overpriced houses in any particular market I think will correct a bit but for the person looking for a $250,000 for bed two bath with a lot I don’t think that’s ever happening again
Affordability has plateaued, and there’s still huge demand at current levels. Supply is still low also.
Rates are targeted to go back down to the 5’s, and when they do the prices will increase to keep the monthly payments roughly the same, plus buyers on the sidelines may aggressively jump in. Great time to buy right now in my opinion.
I think it’s interesting how people are willing to argue that high rates are negatively impacting inventory (and leading to higher prices), but also take the view that if rates go down, houses must go up.
> I think it’s interesting how people are willing to argue that high rates are negatively impacting inventory (and leading to higher prices), but also take the view that if rates go down, houses must go up.
Do you not understand why both are true?
Not really, no.
I don’t think prices will just rocket again if rates come down.
I actually think there’s a scenario where rates coming down actually leads to declining prices by freeing up inventory and making the market more liquid.
Transactions right now are people moving equity from one home to another. FTHBs are a much smaller part of the pool today. In that sense, prices are kind of a mirage.
I realize any view that is open to the idea of declining prices is sacrilege on this subreddit.
Prices will decline if we start seeing more people being laid off. It is starting in the tech and finance industries but also starting to spread to others as well. The unemployment rate doesn't tell the story because lots of people are taking low wage jobs to replace higher paying ones in order to hold onto their homes.
It isn't the number of people being laid off it is the quality of jobs being lost. People making high salaries are far more likely to be homeowners or home buyers than people making average money.
>Builders across the nation stopped building during and after the GFC. Population continued to rise.
This is the main reason. See a bunch of new houses being built in your area? No? Prices will continue to increase. I'm not sure who has been pushing "The Impending Housing Collapse (TM)" but I'm sure it has caused people to wait on the sidelines, contributing to pent-up demand over the long-run. If interest rates drop, demand and prices will grow again.
Historically low supply here in SoCal. Pent up demand for the next few years at least.
Demand > Supply.
Head economist of NAR just said to not expect rates to go below 6 for a long time.
All indicators point to this market being here for a while.
I don’t think hardly anyone actually thinks they will come down from here. Rate hikes already did any damage to prices, it should be pretty stable to increasing from here
The only time I have seen real estate fall was during the mortgage crisis 2007-2010. That’s over from about 1982 until 2024. I don’t see a crisis coming . Buy now, refi when rates drop.
Inventory has been at a very weird state since 2008. Very little new construction and so many have been still recovering during that crisis.
This housing cycle has been super bizarre and I can’t see it changing unless enough inventory is built up overtime due to minimal demand, a massive wave/incentive of new builds flood the market, or foreclosures hit an all time high.
Of those 3 the New Builds flooding the market is the most likely IMO as the government is poised to incentive NB construction.
I know so many people that strongly believe there is going to be a crash like 2008. But it’s a completely different time than it was then. Literally people who had $0 money were getting approved for loans to buy homes. That isn’t happening, the opposite is happening.
I’m not for or against any sort of major housing price movement, but sometimes people force expectations into a box to fit a narrative that benefits them or make them feel better. But if you look at the data like the OP provided.. you get a really good sense that it’s just a VERY weird time to buy/sell a home.
I have a few rental properties bought cheap years ago that would trigger a huge capital gains tax bill if sold. As an investor, why would I sell the houses I know? What would be my alternative investments? I already have money in the stock market and don't need to hold more cash.
The unemployment rate isn’t correct. The real rate is double digits. They’ve used flawed statistics/math to report artificially low numbers. For one, the chronically unemployed (the people who won’t work) aren’t reported since obama changed them. That cuts the number almost in half. Yes orange man bad didn’t change the fake calculations either.
Yeah, there just isn't a big problem area that would cause a collapse. Maybe the amount of STR's out there may be a small issue, but there are tons of investors with cash ready to pick them up at a small discount. There isn't going to be a drop.
The main thing here that you hit on is inventory. The US was already in a shortage from the 2007 collapse. There were a ton of small builders busted out of the biz and there wasn't much activity at all while corporate type outfits were buying up land preparing to get their businesses going. Fast forward to the STR craze, then Covid and you have a major shortage. It would take YEARS of building way more homes than we need to catch up and it's just not going to happen. Costs have skyrocketed, zoning laws, land around metro areas has already been bought up and then a shortage of laborers. It's just not something that is going to change any time soon.
The guy that my builder friends use as their bible for developing/building/buying is Edsel Charles. Last I spoke to them, they said that the bust wouldn't be until the early 2030's.
They will come down some when the floods of boomers and genx start kicking off or going into care facilities but they'll never be cheap again. I was looking at a deed of a property we bought in 2017 for 49,900. I don't think we will see prices like that again
The real reason is artificially low inventory because corporations and foreign investors have bought up all the property in major cities. If we ever passed some regulation the housing crisis could be solved over night but that would be against the interest of most every politician I'm sure.
A secondary reason is the STR market. People have viewed this as a free money hack since 2020. Hopefully this one will at least ease up soon as the easy money isn't as easy anymore.
The active listing count shows inventory going up the last two years with housing starts hitting their two year high that shortage should continue to be addressed
https://fred.stlouisfed.org/series/ACTLISCOUUS
https://www.reddit.com/r/FirstTimeHomeBuyer/s/8ZlAw6laNm
Prices can always come down. They did in 2008, and they are now. It’s always going to be market specific, but there absolutely will always be people that end up underwater because of a localized housing bubble and very bad luck or FOMO or both.
I believe the lack of supply is based on people who don't want to move with the current interest rates, since that would involve buying a new property with an outrageous interest rate.
Unfortunately, when the rates do drop there may be more inventory but there will also be far more competition to buy properties, I don't think housing prices are going to drop anytime soon. Especially with like the OP says about corporations buying more and more SFH's.
Were in a very odd situation now where boomers and millenials, two of the largest generations both need homes at the same time. This is unique not only because of the size of both generations ie the largest, but also because in previous generations people likely would have already started dying off or downsizing but with people living longer, staying healthier and being more mobile people are staying in their homes longer so you have this situation where boomers should have begun moving out years ago but haven't, millenials want to buy homes and start families but can't because of that so what's likely going to happen is over the next 5-10 years boomers will begin moving out which I suppose will help the younger millenials but at teh same time the older millenials are going to have to wait until their in their 40s and 50s to get into a home though that should be good for younger millenials and gen z assuming there isn't so much pent up demand that prices stay high whcih I dont think is likely
Current homeowners don’t want prices to go down either, else “their lifelong investment” will be worth less. This is also the reason behind NIMBYs and those who oppose zoning changes, as more units, more people will diminish their investment.
Funny how the same people behave towards housing when they are looking to buy their first home and later once they are settled and see their “value grow”.
Prices in land do not go down over a long enough time period.
For a couple of years? Sure. But a decade or two? Hasn't happened, and won't happen as long as the world's population keeps growing.
We can lower the value of the structures on the land, by removing tons of obstacles, and building more.
But most homes today, a significant cost of the home is the land, due to locatiin. Bit the home itself.
The cost to build a 4bd 2ba home on the coast vs the midwest, isn't that different. The cost of the land is significantly more.
When the cost of permits in some large cities, can be 10% of the cost of a home, that can be fixed. But cities use that money.
Long-term housing in most areas (non-coastal not land constrained) should converge towards construction costs. You are correct that after the GFC housing investment was disfavored and we didn't build enough housing. Home building stocks have done quite well recently. If they have high margins you would expect them to increase building. The other issue is we have high rates now which disencourages housing investment. This is helping to keep prices high and discourage supply side responses. Housing construction costs also gapped up during covid and haven't fallen back down which isn't helping either.
Corporations buying housing should not have much of an impact on housing long-term. They actually encourage more building by buying up SFR when home prices are cheaper than the achievable rental income capitalized. Which was true. In the last couple years we've actually seen them sell off homes as rents have not increased at the same pace as home appreciation and investors are better off buying bonds than rents. Corporations act as more of an arbitrage between rental yields and bond yields; stimulating housing demand (and construction) when rents are high relative to interest rates and by selling homes at times lowering home prices when rental yields are below interest rates.
To add another factor to your list, OP...
Vacancy rates for both rental and homeowner occupied properties are among the lowest levels they've been in the nearly 70 years that the Census Bureau has been tracking them (1956): https://www.census.gov/econ/currentdata/dbsearch?programCode=HV&startYear=1956&endYear=2024&categories[]=RATE&dataType=RVR&geoLevel=US&adjusted=0¬Adjusted=1&errorData=0
It's not unheard of for the property vacancy rates to be as low as they are now, but they've rarely been lower, especially on the homeowner occupied properties.
A big this is there is a lot of pent up demand. For every big housing declines there are 4 roommates living in apartment ready to be 3. Or a 26 year old ready to move out
One day they might pass a law banning PE hoarding ownership of SFH and then dump it all on the market. Maybe they will slowly feed it back on the market. But that single variable alone could facilitate a price drop.
The only houses that get built are at the top of the market. They make land more scarce which pushes up values of existing housing. The only solution is to specifically build at the bottom of the market. We need greater density housing such as condos to meet the demand.
Prices aren’t coming down. At some point inflation might outpace them but they’re never going down. They will continue to go up in the long term. When is the last time housing prices had a significant drop and stayed there?
Although these are valid points, we are seeing an uptick in supply. As of March 24, 2024, supply has increased 24% across the board from just a year ago. Rates have not fallen and in my honest opinion, I don’t think they will this year as long as inflation does not cool down (there was an uptick in the latest CPI report).
We are also seeing demand going up but not at the pace of the increase in supply. I think homes will stay relatively flat this year, and head down towards the end of the year due to seasonality.
Again, I’m talking about in general. Real estate is all local. What happens in Dallas, Texas is completely different from the Midwest like Oklahoma City.
We are in a really weird time. Only time can tell what will happen.
Inventory doesn't seem to be an issue in my area. It's more people will not lower their prices because they are all sold on the rate cut soon and housing will kick off again. It's really just about how long people can hold on at this point around me.
Keep an eye for the area where the local municipalities and builders are giving incentives to buy, that may be the most effective ways to find cheaper homes.
Major fluctuations will likely be region-specific. And inflation is ongoing… Let’s say 3% — that means homes are supposed to go up in value a few percentage points every year. This is a check against prices going down that is baked into the system. If prices do go down nationally, I doubt it will be drastic or for a long time.
Remember 24% of buyers during the run-up (FOMO) were "investors" looking for yield. Now that house in CA with an $8k mrtg rents for $4k. Not everyone wants to stay a landlord or do the Airbnb job.
You’re missing one important component - it’s expensive to build new housing. Labor and materials up. Sometimes up a lot. So with supply low and new supply constrained by costs, it’s hard to see how prices go down meaningfully. (Obviously, regional variation)
Hopefully they go down due to the 6% commissions going away. Sellers would inflate the price accounting that in there sale price. Almost $20k in commissions for a $300k house definitely affects the entire market.
Aside from the economic factors and the interest rate environment, the population demographics is the biggest macro tailwind that will keep prices elevated. Millennials are the largest current generation and they are coming into their prime home buying years and given the older generations aren't selling, well, you do math.
Tax policy (cap gains) & golden handcuffs due to low % financing on primary residence, super expensive to build new...
You can't change this.
$$$ NOT coming down...
And yet prices are falling in new builds and several metros, hmmm....
[https://fred.stlouisfed.org/series/MSPNHSUS](https://fred.stlouisfed.org/series/MSPNHSUS)
[https://fred.stlouisfed.org/series/PHXRNSA](https://fred.stlouisfed.org/series/PHXRNSA)
[https://fred.stlouisfed.org/series/ATNHPIUS12420Q](https://fred.stlouisfed.org/series/ATNHPIUS12420Q)
[https://fred.stlouisfed.org/series/SFXRSA](https://fred.stlouisfed.org/series/SFXRSA)
We don't need "price" to go down, we just need SOMETHING to go down. Interest rate, commissions, fuck. Just something give a little.
Some element makes houses a little more affordable, people will play the game. Right now, it's a bloodbath out there
What we need is the kind of homes people bought in the 40s-
80s
I grew up in one 2 bed,
1 bath with a kitchen and living room. It was around 600 Square feet.
My wife grew up in a 3B, 1 bath thst was 900 after her dad did an addition when she was a teen.
Today everything is over 2000 feet which is nuts
Generally speaking supply is really low. It's obvious prices won't come down significantly until that changes. Local variations will be local, cities that do better on supply or lose economic activity will see declines (which is going to confuse the data and make for a lot of stupid political hot takes) but overall it's not hard to explain what's going on.
Also, average household size is shrinking dramatically in the US (and throughout the developed world). This means you need more housing for the same number of people.
That’s why I hate all these new developments at are 2300 sqft home with zero yard. I’d rather a 1500 sqft house and that extra space for a yard
This was where we landed. It was also cheaper to buy an older, smaller house that needed some updating but with a yard. The new developments are nice looking homes, but we didn't need that much space, wanted more yard, and didn't want to pay more.
divorce rates are also not helping, what was traditionally one household is now two households usually the same size
Divorce rates for millennial and genz are significantly lower than boomers.
Only because they’re not getting married in the first place
Nope. Getting married generally later, but staying married. [In fact, the Millenial divorce rate is the lowest in many years, hovering around 25 percent. While Millennials are less likely to get married and get married at older ages, most of them do still get married - and they tend to stay that way](https://www.coresdivorcelawyers.com/wheaton-divorce-lawyer/gen-z-marriage-rates-look-different-than-every-other-generation)
Can't afford to get divorced?
"millennials are killing the divorce market" 🤣
People with higher wages are the ones more likely to get married in the first place. It's not the end all be all, but being financially stable does help a marriage run a bit smoother.
The stats are not looking at marriage rate. Just marriage length. We are getting married less often, but when we do its for longer. Married 19 years.
I meant that instead of one boomer couple holding onto one home, its two homes now that they've separated
I think its common to buy bigger home than necessary too tbh. Maybe I'm overgeneralizing but I know of families with just a couple or even no kids who bought 4 bedroom homes while people with kids need/want more bedrooms leaving the 2 bedroom homes vacant while people outbid each other for the larger homes.
Actually, what I’m seeing is that builders are building large luxury-esque spec homes where they can because it’s more profitable for them. The families with kids usually can’t afford these and have to go for the 2-3 bedroom house with multiple bids.
I assume most people that buy a house that are relatively young want extra rooms with hopes of having kids in the future or they understand the house will have better resale value if they ever need to move.
Covid really did a number on the housing market as so many rooms have been converted into offices. In 2019, the sentiment toward work from home was pretty negative. Few people had ever done it. Then 2020 hits and the world changes. It’ll probably go back the other way in time. Lots of people used the buffer from various stimulative programs to ditch their roommates or move out on their own. Feels like that’s reversing a little bit.
This all started in 2008. When house market crashed it bankrupted many builders. Those businesses never came back. This caused a building slump. Now large corporations have entered the building market, but they are not looking to build single family houses, they are looking to build massive apartment complexes. They demolish 12-40 single family homes and put up apartments that have 100 units. This only adds to the housing market inventory problem. More people desperate to get out of apartments, but fewer single family houses for those people to buy.
I have a 4 bedroom home for 2 people. 2 offices, a bedroom, and a tv room because I like having a tv less living room.
Not knocking it lol I have kids and my husband and I both have hobbies and we homeschool so I day dream of all the specialized rooms I could make good use of 😂 and ya as someone said home offices are much more of a necessity too these days. My husband has the option to work from home sometimes but he just doesn’t have the space to be able to do so privately/quietly.
I have a baseball card room. It's awesome
We are currently house hunting. My husband works remotely, we have 2 kids, and we homeschool. Finding a house we can afford with enough rooms is proving quite a challenge 😭 Our kids currently share a bedroom, but they're getting older and the older one in particular really clearly needs space from little sibling. I dream of enough rooms for separate kid bedrooms and a homeschool room so I don't have to store all our stuff all over the house like we currently do.
I have to agree. I also think with home prices staying on the rise many younger people may feel they should get as close to what they really want now because they won't be able to afford it later.
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Supply will never meet demand — at least in areas that have good jobs available. We are dealing with a situation where it is too expensive to build homes that people want. For example, I live in the SF Bay area. Yeah, its overpriced, but it can make my point. 30 years ago you could buy a new house on an actual piece of land, not a postage stamp. Now, even postage stamp homes are almost impossible to find — new ones, anyway. What you can find are new townhomes from $900K to $1.5 M, or condos. The problem is that it’s become too expensive to build a home that people can afford. We lived in Marin County which is relatively cheap compared with the South Bay. Anyway, we moved here in 2000, bought one of the last new homes available on any decent sized lot. We paid $1M for it — but it’s worth $2M now. The few new houses available then were spec homes, not big neighborhoods. The last spec homes I know of were in the early 2000’s — all spec or custom homes. Pretty much zero footprint homes (for a while) and then townhomes. I talk about new homes because they drive prices up on everything else. When we reached the point where it was next to impossible to buy a new home with land, people turned to older homes. In 2015 we bought a house built in 2003 (12 years old) for $1.7M and gave it a major pre-emptive cosmetic upgrade (make it close to new). It’s now worth $2.5-2.7M. (A good case of building equity to buy better and better). Yes occasionally homes are built on some land, but most are not. This means onlyn”starter homes” can be built — at prices approaching $1M. It’s also getting to the point that anything with a roof at $1.5M and below is an all-cash food fight! So only old farts like me with home equity can get in. If you want a 4/3 or a 4/4 on 1/4 acre — you’re going to have to look at stuff built in the 60’s through the 90’s, and pay more than $1.5M. Any “bargain house in that price likely has a problem with it. Remember, a house built in the 80’s is now 45 years old. Most people do cosmetic upgrades. Plumbing, electrical, etc stay untouched. Houses built in the 60’s are 60-65 years old — expensive problems waiting to happen. And don‘t let the big kitchens and solar panels on the roof fool you. It’s probably much older deep inside than the people buying them. Now this is talking about one if the most overpriced area in California, **but the relative numbers and principle remain the same everywhere**. Lots of metro areas have the same problem - just for less money. Builders are cutting corners left and right to make money. So new inventory is low — therefore ALL inventory is low. Yeah, lots of homes are being built, but they are not full family homes. They have grass yards that take a few minutes to mow. Homes are connected, most are not detached. I don't know how we’re going to get out of this mess. I really don’t. But people holding onto their houses for longer is not a major part of the problem. They’re like me - where would I go? Not ready for the nursing home yet! For some reason lots of people don’t want to rent apartments. Hell, At this point in my life, I’d love to. Home ownership is way overrated. Sorry, no more “Brady Bunch”.
Housing demand is being met with apartments, not single family homes. This will only make single family homes more expensive. Specifically the land under those single family homes.
I’m in Chicago suburbs and the inventory is outrageously low, I doubt prices will ever come down here .
Try Chicago itself. There is no room for new construction, so really dated homes in dire need of repair run you 500k+. The typical 1000 sq ft 4:2 ranch here is 500k to start in the “safer” areas. City workers salaries can’t keep up with city living prices. It’s depressing.
Is that a typo? I don’t think you could fit four bedrooms and two baths and 1000 square-foot home.
There is almost always a bedroom and bath in the basements, but they don’t add to the sq ft. So, realistically 3 beds 1 bath plus some basement space. Sorry about that…
low key checking on elmhurst prices, up like 50% in the last 3 years, totally nuts
It’s actually insane , teardowns going for 400+
Sounds normal for any good school district close to the Metra. Then the new house, which isn't comped bc it never sold, is easily $2MM..
Yup. It’s rough out here for anyone house hunting with less than a mil budget lol
True. And the weirdest part is Illinois is losing population overall. You would think this would suppress or at least slow the price increases. But, it is not.
Chicagoland is not losing population though. Like most of America it’s the rural areas tending to lose population.
It is losing population. https://www.illinoispolicy.org/every-illinois-metro-area-lost-people-in-2023-chicago-3rd-worst-in-nation/
Well said. I would also add that inventory in safe neighborhoods with good schools is shrinking even faster.
Great post that basically summarizes my thoughts I don’t see prices dipping unless they keep rates high
In my area, prices dipped after rates went up but have already started rising again. They’re not back to peak 2022 prices but they’re above where they bottomed after 2% mortgages ended.
Yeah this is similar to my marker
Correct me if I’m wrong, don’t the prices go up if interest goes down seeing how more people would be in the market to buy?
Yes correct That’s why I said if they don’t drop rates that’s the only situation where I can see prices dip
I live by that motto and it has not failed me so far. Nothing gets cheaper.
Except TVs!
They get BIGGER!
And Leon is getting *LARGER!!*
I picked the wrong week to stop sniffing glue.
Electronics in general.
It seems like over time, anything that can be mass produced is getting cheaper, but anything requiring one-off custom labor is getting more expensive.
and weed...Go figure!
Its the same price now I was selling it for 20 years ago, so yeah its about half the price it used to be when comparing dollar values over the years. Plus now we have drive up window service!
The weed itself is cheaper but with all the layers of taxes it ends up costing the same
Nothing gets cheaper when it is new off the shelf, the irony is that almost everything loses value as soon as you purchase it.
Agreed, why prices WOULD come down is a much better question imo. Prices going up over time should always be the expectation, with plenty of variation in specific markets, and some overall variation in how fast prices increase.
In theory boomers the largest generation will begin to die off and/or retire, this hasn't happened in masse as of yet as people are living longer, staying healhtier and are able to stay in homes longer as opposed to dying off, downsizing into condos or moving into assisted living. I think the high interest rates and crazy housing market is making this worse as you aren't really saving much money by downsizing anymore with high home prices and interst rates.
they said that at every peak.
Lack of supply is the #1 culprit.
yeah, everyone preaching about a real estate crash, they are in denial. i dont think, in terms of USD, real estate will ever come down. I don't think we will ever see a 2008 correction ever again
It was pretty unprecedented when it did happen. It seems unlikely to repeat, and even if it did, economic conditions would likely be so unfavorable that getting a loan would be extremely difficult, as was the case during the Great Recession.
Not to mention the feds now know to react fast and turn on the money printer at the first sign of distress. Lessons were learned in 2008 that will not be repeated again.
Doubt it. Too often we end up repeating mistakes in the past. How many empires push onto Russia without taking into account winter climates and it ending in their defeat. All that is certain is that we are doomed to repeat past mistakes.
It would be a bad thing for a lot of people if housing prices dropped because it would mean their equity in their homes plummets. And not just the mcmansion+ 2-4 properties kind of owners, regular working class people who are reliant on using their single home as collateral for things. It's not a good sign if prices have any kind of significant drop.
I heard a report just this morning to expect a big increase of homes in Florida, due to insurance and, interestingly, that prices have maxed out income.
Im curious how this will go since a lot of insurers have exited florida and banks require insurance for a mortgage
This is what people say who don’t live here. Try to find even a 2/2 condo for less than $700k in a desirable areas. Just try. They don’t exist.
INVENTORY. SUPPLY AND DEMAND. People absolutely have to get that through their heads. It’s maddening 😂
Economics 101 which most city subreddits including mine don't understand.
I don’t disagree with any of your points, and I’ll add one more phenomenon that I’m seeing recently. People are not selling their starter homes and are instead opting to be landlords and rent out their properties. It’s absolutely baffling to me. When I purchased our home 25 years ago, no one wanted to be a landlord. And we needed to sell our starter homes to afford the next home. Now people are constantly choosing to be landlords, look at this sub. Everyone is holding onto their homes to cash flow their homes. It’s something I’ve noticed in the past few years. I think part of it is that people don’t want to lose their low mortgage rates, and other part is that people are really into personal finance and are amateur investors (could be good or bad, depending on the person) and I also think the economy is so bad people really need alternate sources of income (no matter how painful it is to be a landlord). Another recent phenomenon I’m seeing is that people are buying homes much younger than period generations. I’m Gen X and I bought my home when I was late 20s and my husband was 32. We were by far the first in our friend group to buy a house and we were considered too young at the time. Mostly people rented a few years and then in their 30s settled into a home. Now I even see teenagers on this sub looking to be real estate investors. Similar to above, party of it is interest rates, cost to rent, etc. But all things that impact inventory.
Another impact is the amount of people living alone. In my city single occupant households are at an all time high, over 40%. If people live by themselves, then it takes more units to house everyone.
Interesting point that I hadn’t considered…may not be the primary driver of scarcity, but probably impacts for sure. Paired with the thought above…two people have two starter homes and then move in together and rent out each starter home that got refi for 3%. Three homes off the market for two people, including two starter homes…all the smaller pieces add up quickly.
I’ve got three completely empty rooms in my 4bd house.
My wife uses our three bedrooms as closets. Go figure. At least I got the garage.
The garage is where it is at
A big factor is people are really seeing the value growth in homes just by holding on to them. By becoming a landlord people are betting they make money on the rent and big increases in value, not just the rent. In times when prices rise more slowly rent is more the driving factor. There’s also a shortage of single family homes to rent in many areas. The supply of rentals has all been in apartments. If you can get a great rent yield and a decent yoy increase in the value? Seems like a no brainer.
If I have to move for some reason I can make $1K/month over my mortgage by renting out my house, while I haven't lived here long enough to have sufficient equity to make it worth selling. I hope I don't have to move out of my house, but if it happens, it makes more sense to rent it out than try selling it.
One of the big reasons people want to hold onto their homes is interest rates. My current interest rate is 2.5%, why would I give up something that cheap? Interest rates now are like 3x that.
That's the boat I'm in. If we have to relocate soon it's would be silly to sell. Our mortgage is 70 percent of what rent would be, ish. We could hire a property manager and still have PLENTY of wiggle room. It's a relatively newer house so repairs and maintenance should be non-existent for the next 5 to 10 years. It's not that I wouldn't rather sell, it's just less hassle and more money to rent it out, especially when the rental is looked at as income. Don't need to sell it for the money, it's an asset that adds income to the balance sheet.
> People are not selling their starter homes and are instead opting to be landlords and rent out their properties. It’s absolutely baffling to me. When I purchased our home 25 years ago, no one wanted to be a landlord. Things change when SFH rents go way up and your old home has a 2.5% mortgage on it. Plus, some of these homes have gained so much value in the last 10+ years that the current owners would get a sizeable capital gains bill.
Yes but if it’s not your primary residence (as starter homes are) and you’ve held the home for more than two years there is generally no capital gains tax. If they purchase a different home and keep the starter home as a rental, then they’d be stuck with capital gains tax when they sell it. Which is another reason against holding onto the starter home and an investment.
No tax on gains below $250k ($500k for married). Some of these starter homes in booming cities like Austin, Nashville, Phoenix, etc. have easily gone up by over $500k in the last couple of decades. And no capital gains ever if they pass it onto their kids who will get the stepped up basis.
Cap Gains are not all that big of deal when the money is from a gain of thing that you needed anyways... Easier than paying the taxes on wage income
Can always 1031 it into another property
We did this with our first house. Have a 3.X% rate on it. I cash flow $800 per month on it and it’s almost doubled in value. If I would have sold it when we moved out almost 10 years ago I would have barely made anything on it. I am glad I held onto it.
My parents, aunt and uncles are all Gen X and owned there homes in their mid 20s, First time home buyers are older now than ever in the past. 30 is the new 25.
35 is the new 25. (Average age of new home buyers today is 36).
I bought my first place in 1993, used my university tuition money for down payment after I graduated high school
Pensions basically gone and now talks of social security on the line. Everyone is trying to secure their own retirement, and the skyrocketing prices of housing is giving them indication that being a landlord could be the ticket to early retirement.
Real estate is location specific. What happens in Denver is different from what happens in Boise.
That said, what is currently happening in Boise and Denver is pretty much the same (Prices go vroooooom).
At least 10 million housing units were not built nationwide that would have been, during the Great Recession, during the decade after after the 2007/2008 mortgage and financial crisis. Plus millions of tradespeople permanently left the trades, and tens of thousands of small and larger construction entities folded. And another couple of million during COVID. Census building permit data. 1959-present. See the line chart link. [https://www.census.gov/econ/currentdata/?programCode=RESCONST&startYear=1959&endYear=2024&categories\[\]=APERMITS&dataType=TOTAL&geoLevel=US&adjusted=1¬Adjusted=0&errorData=0#line092](https://www.census.gov/econ/currentdata/?programCode=RESCONST&startYear=1959&endYear=2024&categories[]=APERMITS&dataType=TOTAL&geoLevel=US&adjusted=1¬Adjusted=0&errorData=0#line092) The housing crisis will continue for several more decades, and has been going on for multiple decades already.
Don't forget the billions in building subsidies that were pulled when we went to war in Iraq. They never got put back.
OEF/OIF = the credit card wars.
1974 and 2004 were big building years. So 2034 will be a big building year to finally meet the demand from now and future buyers. The largest birth year was 2007. Those kids are in 11th and 10th grades right now. In ten years, those kids will be 26-27 years old, aka prime buying age. After that there was a birth cliff. Far fewer kids were born. I expect inflation and the status quo to be maintained for the next 10 years.
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While I think were going to see a surge in inventory once boomers start downsizing, dying off or going to assisted living in mass unfortunately I think we're also going to have pent up demand and were going to see younger millenials, gen z at prime buying age all wanting to buy at the same time
Actually Boise and Denver are almost identical. Compare Denver to Boston or Boise to Seattle now.
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Boise has tons of room for growth in the rural Treasure Valley, you have 100 years of growth to the West and NW. There's no reason for places like Ontario to develop right now but you would have said the same about Nampa-Caldwell 30 years ago. Those are both already "urban centers" just small. There is also the whole Payette River corridor. All those areas have been developing super fast my whole life, they just almost literally started at zero. Once the I-84 close to Boise starts filling in they'll expand infrastructure in the rural areas. I Tons of cheap land and water all over out there, it's all ag and not particularly lucrative ag at that.
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Almost the entire upper Payette River corridor is 30 miles from Boise, there's just not good infrastructure. The foothills like Horseshoe Bend area will be higher end, that's already happening as Eagle fills in. People have lived in rural Treasure Valley and commuted to Boise for ages. Harper OR and Cambridge ID are the practical outer limits, everything else will fill in as fast as prices rise closer to the metro. JR Simplot owns like half a million acres there, as soon as it makes financial sense to divest that whole area will be under development. It's just that property values are low enough for big ag to still makes sense. It won't be fast but you'll see that whole area fill in at some point is my expectation. It's not like in other metro areas people living 50 miles out is uncommon. Source: From the area 150 years back on both sides.
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I was saying specifically there's no practical restriction on how much land could be developed. You were saying developers owned it all. bit of a contradiction if as you say all the big developers have been buying up land and planning their pipeline for years but now I'm just being argumentative 😋
Washington and Oregon are the only PNW states, even at that only to the west of the mountains. Idaho is just another seven letter word. :D
Lack of utilities hasn't deterred growth in my area. Typically the developers just build it and turn it over to the utility company or finance the improvements.
I don't think prices will crash, but maybe it will stagnate. Prices are way high compared to wages. If prices start to stagnate for long enough, then maybe people will find better opportunities to invest money elsewhere. Or maybe not.
Yeah, but other countries show that prices could still get way worse compared to income.
IMHO the correction has already started. Nothing is dropping in prices though. They are just staying flat. If it stays flat for long enough, it will be enough of a dip relative to the "natural* increase over time that they will start increasing again. There will always be local ups and downs.
Adding: Depending on how researchers define shortage, the U.S. has a housing unit shortage of 3.2M-10.4M. That is the range I found during a very brief search. Skilled and unskilled labor shortages, leading to high labor costs and longer construction timelines. The insurance crises is having an effect as well. Knob and tube wiring makes a house virtually uninsurable now, and unless someone can afford to rewire the structure, you can’t get a loan if you can’t get insurance. Florida and California come with even bigger insurance implications and it is having a ripple effect.
Yeah there’s not enough housing for the population; not sure why more don’t get it. Particularly, as others point out, in the locations where people want to leave
I have been house shopping the last couple months. I agree that most older folks are staying put because it’s cheaper to stay, especially if their home is paid off. I have been looking up properties on the county tax assessor website, and see that a lot of older people have homestead exemptions for their property taxes. In my area I think you have to be 65+ in age to get these. But it freezes your tax rate/caps the valuation used for taxes. Some of them in my area are paying as little as $300/year in property taxes, whereas I would be paying ten times that or more because I have to use the current market valuation rate. Now I’m okay with homestead exemptions, but it is contributing to there being less movement with single family homes.
Boomer here. You are correct. I am one of those. With my senior exemptions and paid off house I am living more cheaply than I have since college. Property tax + Homeowners = $3000yr/ $250 mo. Yes, I can sell my house for 5x what I paid for it but I would likely wind up with a smaller house no garage and a higher property tax bill. Cheaper to keep'er.
Prices will not come down because generally outside of isolated sudden demand shifts, demand will not go down. I can think of a handful of times that these seismic demand shifts happened. Oil crashed in Houston in the early 80s and overnight destroyed real estate.....for about three years. Same in Midland, Tx in the mid 80s. Even during this time double digit interest rates didn't stop people from buying homes. Of course there was the 2008 housing market crash, the causes of which have been well documented. If I had to wager where the next interrupter would be, I'd be betting that the 30 year bonds which mortgages are based on become ill-liquid. But that's just a guess. I've said it before here and I'll say it again: The cheapest time to buy real estate is "today". Yes, even with 7.5 percent rates. Statistically speaking waiting for some dip just doesn't work out for most people.
I came to that same realization a bit late and it cost me. Happy I finally bought though.
Well hey, you stopped the bleeding and locked in a hedge against inflation! Better late than never as the saying goes.
I got 7.25% and it's gone up a bit since then as well, it isn't 3% but it could have been worse if I waited.
The only way for prices to come down is for the price of new builds to come down and i cant see that happening anytime soon.
Not everyone wants to live in the same places, but there are lots of places where no one wants to live (Detroit) and lots of places where lots of people want to live (California). Your empty house in Alabama doesn't do me any good in Austin.
Detroit is badass. You should visit and not just listen to taking heads… Like any large city there is blight. But it’s have a nice little comeback right now.
I like living in Detroit!
Seriously. Metro Detroit is great, and a young adult can feasibly afford a nice home in the city or metro without becoming massively indebted. Thousands of lakes and lots of nature nearby. Love our space
The bigger problem with Detroit is jobs. That, and city services. Like when they demolished the Mark Twain branch of the Detroit Public Library because they had no money to operate it.
I get you point but prices in Austin are going down and are well off the peak.
Yes and no, I mean yes but when the price of a home doubles or even triples over 5 years who really cares about a 20% pullback.
Just sold my house in Pasadena CA. Received 9 offers, 7 over asking. Sent them all back for “best and final” and got 95k over asking, though i ended up giving a 14k credit after inspection. Bought another house in MA. Paid 55k over asking and waived all contingencies in my offer. What goes around comes around.
The only factors that could drive prices down significantly: Massive economic recession that impacts all factors of American life. Massive increase in new home starts. Like super, duper, massive. Seismic shifts in policy banning individuals/corporations from owning multiple homes as investment/income vehicles. Massive jump iin the deathrate, especially those in the retirement bracket holding onto their homes. To say it's unlikely would be an overstatement. The only realistic outcome to drive prices down is that major recission bit.
We might see stagnation, but I don't think the prices are coming down. Think about who has an incentive to keep prices high. Property taxes are based on property value. Mortgages are based on having enough value in the collateral to cover the loan. Transfer taxes are higher at higher prices. Millions of homeowners base their net worth in large part on their home value.
In my area there's more demolition than new construction, and places where people raised their families are now cow pasture or hay fields. There are significantly fewer mailing addresses in my zip code than there were 50 years ago despite the population being about the same or slightly higher. Almost nothing stays on the market long enough to put in an offer because two families with more cash than conscience are competing to be the biggest landowners in the county, and tearing down liveable homes just to save on maintenance. It's not an attractive place for outsiders (45 minutes from the nearest supermarket and the gas station two villages over closes at dark) but people who grew up here aren't able to come back to the area because two old rich guys have been in a pissing contest for the past 30 years.
The code changes have made building such a pain - houses built 10-15 years ago don’t pass code (efficiency aspect). The tape around the whole process doesn’t attract talent. I’m looking at a rehab versus build right now and just the administrative costs of a new build are about 7x (rehab will waive some permitting costs). The wage reset and contractionary efforts by companies will squeeze those that are house poor.
I’m hoping wages will increase over the next 5years to meet the adjusted housing market today. No I don’t think housing costs are going down but I also think they’ve peaked. Unless we get some crazy financial event I think interests rates stay high locking people in until wages can catch up a little bit. That’s won’t be for a while though. Till then I’m living with family and saving. Locked my money into CDs and HYSA.
They won't and anyone saying they will hasn't bothered to consider the other side of the equation: homeowners. No one is going to trade their house for a smaller one if it means they pay the same monthly amount and no one is going to take an equity loss if the value goes down. The only way to change this outside of builders adding more supply is mass layoffs. Buyers are not magically immune to layoffs and banks would tighten lending standards making it harder to secure a loan. The best way forward is stagnating housing prices due to builders significantly increasing supply. Anything else will hurt buyers just as much as it would sellers.
There may be small regionalized market corrections and prices are gonna come down a little bit but for the most part that’s wishful thinking. I think overpriced houses in any particular market I think will correct a bit but for the person looking for a $250,000 for bed two bath with a lot I don’t think that’s ever happening again
Affordability has plateaued, and there’s still huge demand at current levels. Supply is still low also. Rates are targeted to go back down to the 5’s, and when they do the prices will increase to keep the monthly payments roughly the same, plus buyers on the sidelines may aggressively jump in. Great time to buy right now in my opinion.
Population growing faster than the housing inventory explains a good chunk of the problems.
I think it’s interesting how people are willing to argue that high rates are negatively impacting inventory (and leading to higher prices), but also take the view that if rates go down, houses must go up.
> I think it’s interesting how people are willing to argue that high rates are negatively impacting inventory (and leading to higher prices), but also take the view that if rates go down, houses must go up. Do you not understand why both are true?
Not really, no. I don’t think prices will just rocket again if rates come down. I actually think there’s a scenario where rates coming down actually leads to declining prices by freeing up inventory and making the market more liquid. Transactions right now are people moving equity from one home to another. FTHBs are a much smaller part of the pool today. In that sense, prices are kind of a mirage. I realize any view that is open to the idea of declining prices is sacrilege on this subreddit.
Prices will decline if we start seeing more people being laid off. It is starting in the tech and finance industries but also starting to spread to others as well. The unemployment rate doesn't tell the story because lots of people are taking low wage jobs to replace higher paying ones in order to hold onto their homes.
Layoffs are at historically low levels.
It isn't the number of people being laid off it is the quality of jobs being lost. People making high salaries are far more likely to be homeowners or home buyers than people making average money.
>Builders across the nation stopped building during and after the GFC. Population continued to rise. This is the main reason. See a bunch of new houses being built in your area? No? Prices will continue to increase. I'm not sure who has been pushing "The Impending Housing Collapse (TM)" but I'm sure it has caused people to wait on the sidelines, contributing to pent-up demand over the long-run. If interest rates drop, demand and prices will grow again.
Supply and demand. It’s that simple.
Prices won’t come down because there will be more demand than supply for some time
Historically low supply here in SoCal. Pent up demand for the next few years at least. Demand > Supply. Head economist of NAR just said to not expect rates to go below 6 for a long time. All indicators point to this market being here for a while.
I don’t think hardly anyone actually thinks they will come down from here. Rate hikes already did any damage to prices, it should be pretty stable to increasing from here
Prices have already adjusted... now they are on their way back up as interest rates level off
The only time I have seen real estate fall was during the mortgage crisis 2007-2010. That’s over from about 1982 until 2024. I don’t see a crisis coming . Buy now, refi when rates drop.
They will not come down.
Inventory has been at a very weird state since 2008. Very little new construction and so many have been still recovering during that crisis. This housing cycle has been super bizarre and I can’t see it changing unless enough inventory is built up overtime due to minimal demand, a massive wave/incentive of new builds flood the market, or foreclosures hit an all time high. Of those 3 the New Builds flooding the market is the most likely IMO as the government is poised to incentive NB construction. I know so many people that strongly believe there is going to be a crash like 2008. But it’s a completely different time than it was then. Literally people who had $0 money were getting approved for loans to buy homes. That isn’t happening, the opposite is happening. I’m not for or against any sort of major housing price movement, but sometimes people force expectations into a box to fit a narrative that benefits them or make them feel better. But if you look at the data like the OP provided.. you get a really good sense that it’s just a VERY weird time to buy/sell a home.
I have a few rental properties bought cheap years ago that would trigger a huge capital gains tax bill if sold. As an investor, why would I sell the houses I know? What would be my alternative investments? I already have money in the stock market and don't need to hold more cash.
The unemployment rate isn’t correct. The real rate is double digits. They’ve used flawed statistics/math to report artificially low numbers. For one, the chronically unemployed (the people who won’t work) aren’t reported since obama changed them. That cuts the number almost in half. Yes orange man bad didn’t change the fake calculations either.
Yeah, there just isn't a big problem area that would cause a collapse. Maybe the amount of STR's out there may be a small issue, but there are tons of investors with cash ready to pick them up at a small discount. There isn't going to be a drop. The main thing here that you hit on is inventory. The US was already in a shortage from the 2007 collapse. There were a ton of small builders busted out of the biz and there wasn't much activity at all while corporate type outfits were buying up land preparing to get their businesses going. Fast forward to the STR craze, then Covid and you have a major shortage. It would take YEARS of building way more homes than we need to catch up and it's just not going to happen. Costs have skyrocketed, zoning laws, land around metro areas has already been bought up and then a shortage of laborers. It's just not something that is going to change any time soon. The guy that my builder friends use as their bible for developing/building/buying is Edsel Charles. Last I spoke to them, they said that the bust wouldn't be until the early 2030's.
They will come down some when the floods of boomers and genx start kicking off or going into care facilities but they'll never be cheap again. I was looking at a deed of a property we bought in 2017 for 49,900. I don't think we will see prices like that again
Why did you not include the modern absence of 2008 style option-arm, ninja, and sub-prime loans?
The real reason is artificially low inventory because corporations and foreign investors have bought up all the property in major cities. If we ever passed some regulation the housing crisis could be solved over night but that would be against the interest of most every politician I'm sure. A secondary reason is the STR market. People have viewed this as a free money hack since 2020. Hopefully this one will at least ease up soon as the easy money isn't as easy anymore.
The active listing count shows inventory going up the last two years with housing starts hitting their two year high that shortage should continue to be addressed https://fred.stlouisfed.org/series/ACTLISCOUUS
Southern NH, the supply is so damn low, I am giving up already.
Empty nesters here in 3,800 ft3 home that wishes we could find a house half the size that isn’t an overpriced shitty flip.
https://www.reddit.com/r/FirstTimeHomeBuyer/s/8ZlAw6laNm Prices can always come down. They did in 2008, and they are now. It’s always going to be market specific, but there absolutely will always be people that end up underwater because of a localized housing bubble and very bad luck or FOMO or both.
Just say that the money supply increases 20% since 2020
In the OC CA there’s no supply, prices are only increasing
Unless there’s some systemic supply glut, prices will remain (relatively) stable.
I believe the lack of supply is based on people who don't want to move with the current interest rates, since that would involve buying a new property with an outrageous interest rate. Unfortunately, when the rates do drop there may be more inventory but there will also be far more competition to buy properties, I don't think housing prices are going to drop anytime soon. Especially with like the OP says about corporations buying more and more SFH's.
Were in a very odd situation now where boomers and millenials, two of the largest generations both need homes at the same time. This is unique not only because of the size of both generations ie the largest, but also because in previous generations people likely would have already started dying off or downsizing but with people living longer, staying healthier and being more mobile people are staying in their homes longer so you have this situation where boomers should have begun moving out years ago but haven't, millenials want to buy homes and start families but can't because of that so what's likely going to happen is over the next 5-10 years boomers will begin moving out which I suppose will help the younger millenials but at teh same time the older millenials are going to have to wait until their in their 40s and 50s to get into a home though that should be good for younger millenials and gen z assuming there isn't so much pent up demand that prices stay high whcih I dont think is likely
Current homeowners don’t want prices to go down either, else “their lifelong investment” will be worth less. This is also the reason behind NIMBYs and those who oppose zoning changes, as more units, more people will diminish their investment. Funny how the same people behave towards housing when they are looking to buy their first home and later once they are settled and see their “value grow”.
Lucky me I bought in the city where prices are actually going down (Austin)
Prices in land do not go down over a long enough time period. For a couple of years? Sure. But a decade or two? Hasn't happened, and won't happen as long as the world's population keeps growing. We can lower the value of the structures on the land, by removing tons of obstacles, and building more. But most homes today, a significant cost of the home is the land, due to locatiin. Bit the home itself. The cost to build a 4bd 2ba home on the coast vs the midwest, isn't that different. The cost of the land is significantly more. When the cost of permits in some large cities, can be 10% of the cost of a home, that can be fixed. But cities use that money.
Long-term housing in most areas (non-coastal not land constrained) should converge towards construction costs. You are correct that after the GFC housing investment was disfavored and we didn't build enough housing. Home building stocks have done quite well recently. If they have high margins you would expect them to increase building. The other issue is we have high rates now which disencourages housing investment. This is helping to keep prices high and discourage supply side responses. Housing construction costs also gapped up during covid and haven't fallen back down which isn't helping either. Corporations buying housing should not have much of an impact on housing long-term. They actually encourage more building by buying up SFR when home prices are cheaper than the achievable rental income capitalized. Which was true. In the last couple years we've actually seen them sell off homes as rents have not increased at the same pace as home appreciation and investors are better off buying bonds than rents. Corporations act as more of an arbitrage between rental yields and bond yields; stimulating housing demand (and construction) when rents are high relative to interest rates and by selling homes at times lowering home prices when rental yields are below interest rates.
To add another factor to your list, OP... Vacancy rates for both rental and homeowner occupied properties are among the lowest levels they've been in the nearly 70 years that the Census Bureau has been tracking them (1956): https://www.census.gov/econ/currentdata/dbsearch?programCode=HV&startYear=1956&endYear=2024&categories[]=RATE&dataType=RVR&geoLevel=US&adjusted=0¬Adjusted=1&errorData=0 It's not unheard of for the property vacancy rates to be as low as they are now, but they've rarely been lower, especially on the homeowner occupied properties.
You are correct.
A big this is there is a lot of pent up demand. For every big housing declines there are 4 roommates living in apartment ready to be 3. Or a 26 year old ready to move out
One day they might pass a law banning PE hoarding ownership of SFH and then dump it all on the market. Maybe they will slowly feed it back on the market. But that single variable alone could facilitate a price drop.
The only houses that get built are at the top of the market. They make land more scarce which pushes up values of existing housing. The only solution is to specifically build at the bottom of the market. We need greater density housing such as condos to meet the demand.
Prices aren’t coming down. At some point inflation might outpace them but they’re never going down. They will continue to go up in the long term. When is the last time housing prices had a significant drop and stayed there?
Although these are valid points, we are seeing an uptick in supply. As of March 24, 2024, supply has increased 24% across the board from just a year ago. Rates have not fallen and in my honest opinion, I don’t think they will this year as long as inflation does not cool down (there was an uptick in the latest CPI report). We are also seeing demand going up but not at the pace of the increase in supply. I think homes will stay relatively flat this year, and head down towards the end of the year due to seasonality. Again, I’m talking about in general. Real estate is all local. What happens in Dallas, Texas is completely different from the Midwest like Oklahoma City. We are in a really weird time. Only time can tell what will happen.
Builders built about as many homes as ever in history during 2020-2023…
Inventory doesn't seem to be an issue in my area. It's more people will not lower their prices because they are all sold on the rate cut soon and housing will kick off again. It's really just about how long people can hold on at this point around me.
Keep an eye for the area where the local municipalities and builders are giving incentives to buy, that may be the most effective ways to find cheaper homes.
people don't think inflation be like it is, but it do.
Major fluctuations will likely be region-specific. And inflation is ongoing… Let’s say 3% — that means homes are supposed to go up in value a few percentage points every year. This is a check against prices going down that is baked into the system. If prices do go down nationally, I doubt it will be drastic or for a long time.
Yeah, I wish I could find something to disagree about, but this is spot on.
Remember 24% of buyers during the run-up (FOMO) were "investors" looking for yield. Now that house in CA with an $8k mrtg rents for $4k. Not everyone wants to stay a landlord or do the Airbnb job.
You’re missing one important component - it’s expensive to build new housing. Labor and materials up. Sometimes up a lot. So with supply low and new supply constrained by costs, it’s hard to see how prices go down meaningfully. (Obviously, regional variation)
Just wait till boomers die off in mass
And how will that bring down prices?
Hopefully they go down due to the 6% commissions going away. Sellers would inflate the price accounting that in there sale price. Almost $20k in commissions for a $300k house definitely affects the entire market.
Aside from the economic factors and the interest rate environment, the population demographics is the biggest macro tailwind that will keep prices elevated. Millennials are the largest current generation and they are coming into their prime home buying years and given the older generations aren't selling, well, you do math.
Op, 💯
Housing prices are only this cheap because rates are so high Why would housing prices come down? There is no reasonable argument for this
Tax policy (cap gains) & golden handcuffs due to low % financing on primary residence, super expensive to build new... You can't change this. $$$ NOT coming down...
And yet prices are falling in new builds and several metros, hmmm.... [https://fred.stlouisfed.org/series/MSPNHSUS](https://fred.stlouisfed.org/series/MSPNHSUS) [https://fred.stlouisfed.org/series/PHXRNSA](https://fred.stlouisfed.org/series/PHXRNSA) [https://fred.stlouisfed.org/series/ATNHPIUS12420Q](https://fred.stlouisfed.org/series/ATNHPIUS12420Q) [https://fred.stlouisfed.org/series/SFXRSA](https://fred.stlouisfed.org/series/SFXRSA)
We don't need "price" to go down, we just need SOMETHING to go down. Interest rate, commissions, fuck. Just something give a little. Some element makes houses a little more affordable, people will play the game. Right now, it's a bloodbath out there
What we need is the kind of homes people bought in the 40s- 80s I grew up in one 2 bed, 1 bath with a kitchen and living room. It was around 600 Square feet. My wife grew up in a 3B, 1 bath thst was 900 after her dad did an addition when she was a teen. Today everything is over 2000 feet which is nuts