Secondly- What would it take for prices to change?
In: Economics
[removed]
My area PNW during Covid a lot of people moved to our state. People offering 20-50k over asking price. Prices kept going up and people were still offering over asking. It was just insane. My buddy bought a house 1 year before Covid for 350k. Sold last year for 800k with no improvements. 80k over his asking price.
My realtor said a lot of Californias were moving here after selling their over priced homes. I’m not sure if that is the real cause. Also affected a couple other states Idaho, Oregon, Montana to name a few. Houses in my parent’s neighborhood just went up 150k from what they were listed 6 months ago. Houses are still getting bought up quick as long as they are under 1mil. Bought my house in 2010 after leaving the army, 235k now it’s worth 750k.
Working from home is probably another factor. I’m in Australia but I understand the US is similar – around here there has been a seismic physical shift in where office workers work, with effect on both employers and employees. Until recently, office workers worked in the offices supplied by their employer, and their homes did not need a home office.
Post-Covid, many companies have been caught out with far more office space than they need because – especially if they are hot-desking – their employees’ place of work has shifted from the company office to home. Correspondingly, office workers now want an additional space or spaces at home, to serve as the home office.
This adds even more pressure to the residential housing market.
We need a larger amount of houses as less people are living with parents i.e. kids<18. A boom of millennials hit 30ish and are having kids.
Also we have a perverse scenario where most of the large homes are owned by boomers which makes sense for most assets but is not because this is a more tangible asset.
Also supply responds really slowly. The majority of housing that will exist in 2050 is already here. 2% being built in a year is gangbusters boomtown housing numbers
Over 10 million illegals entered the country since Biden started. That’s more than the entire population of a lot of states…
Digital nomads and wfh has led to more people mobilizing. So they sit on multiple properties and have vacant unused property. Look at Miami. All the condo high rises are sold out, a great portion to foreign nationals laundering money. But they remain unoccupied large parts of the year.
Now is that happening in middle America? No. But an Ohio family with a new found ability to beach in Panama City beach during summer just increased their homes owned by two. Techies moving from Airbnb to Airbnb incentivize airbnbs that aren’t 100% occupied to have unoccupied homes off the market rather than used full time. It happens even at the most miniature two weeks in a rental aspect. Owner can cover monthly rent with two weeks on Airbnb and the space is unused 40% of the year.
In the years after 9/11, the housing market was hot due largely to bad lending practices. People were getting loans for houses they couldn’t really afford. They moved from apartments to houses. Demand for houses goes up, and builders race to meet demand with new houses.
In 2008, the housing market crashed. Like real bad. Like take down the global economy bad. The people who couldn’t really afford their houses default and move back to apartments. The builders finish the houses they were in process on. And now the banks own a ton of houses that they are looking to unload cheap.
But millennials, who just graduated and thought they would get good jobs and buy houses, are living with their parents and working in fast food.
So tons of houses that no one is buying just sit empty and process are plummeting. Builders stop building. Suppliers stop production. Grinding halt.
Fast forward 10 years or so, the economy is booming, millennials have good jobs and a bunch of savings from living with their parents for a decade, and they’re all finally ready to GTFO and start buying houses. (Pent-up demand)
Problem is, no one warned the builders. And before they can build more homes, they have to find land, buy it, get site plans approved, maybe go through the re-zoning process (slow af).
And more importantly, no one warned suppliers. And before they can ramp back up their production, they have to buy more machines, expand their facilities, and in the case of lumber, literally grow trees.
So, basically, there were a bunch of potential home buyers hiding in their parents’ basement and when the housing market, who thought no one was home, went downstairs and turned on the lights, they all jumped out and yelled “surprise!”
There are increased housing needs as population grows, albeit not drastically. Changes in “nuclear family” dynamics also contributes to increased need, but a lot of it has to do with older existing housing not meeting modern needs, along with population migration. We believe in growth for growth’s sake in the U.S., which doesn’t just apply to the stock market and corporate profits. One of the elements of it is that companies migrate and different cities have booms and busts for popularity of economic growth, which drives population migration for jobs. Also, regional boom and bust drives migration by need for jobs as well as sharp changes in local housing values. A lot of people move because it’s suddenly a lot cheaper/more desirable to live in a place that suddenly has more going on or possibly a lower cost of living. Urbanization, as others have noted, is also a factor. Small towns support population growth less and less, in some cases to the extent that more isolated communities effectively become modern ghost towns. Unfortunately all of this often results in surplus housing in some places and supply deficiencies in others, which again impacts cost of living, etc.
We haven’t had enough housing for decades. Boomers are getting more powerful and home owners are incentivized to not allow more housing as we give land owners far too many rights.
This creates a cyclical system where housing as an investment fucks op the economy.
The only solution is home owners to take a L for the rest of us and we end housing as an investment out the government has to step in and not allow them to have the power to be nimbys in local governments. If we don’t find a solution soon I’ll be emigrating out because no one in my pay will ever own a home in my city. It’s not possible.
Not as an answer to your question but context that helps inform what’s going on “around” this topic— The number of immigrants needed to maintain GDP is around 1 to 1.2 million immigrants per year to sustain GDP growth [without factoring in any economic expansion/growth at all].
We need a million new people to move to the US…. *every year* for the US economy to *not* shrink.
Now think of how often you hear about people say “I don’t want those apartments built near where I live— it will bring down my home value” and you’ll start to understand how fucked we really are.
Latest Answers